Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 280 - 299)



  280.  I did not ask you that. I ask you for the last time: What assessment has been made of how much of these funds will be utilised by the RDAs in carrying out their functions?
  (Mr Wood)  None will be utilised by the RDAs because it will not be the RDAs' money.

  281.  None will be utilised to enable the RDAs to enable them to carry out their functions in, let us say, investment in businesses?
  (Mr Wood)  I thought that your question was related to the funds which would be utilised by the RDA in these areas. The answer is none because the moneys concerned are not those of the RDAs. However, those who disburse the money will be in the closest possible association and partnership with them in order to take account of the RDAs' responsibilities. The RDAs' responsibilities and their statutory functions and objectives are not narrow ones; they are very broadly expressed in terms of economic regeneration, sustainable development and so on. If I understand what you are driving at, for example I do not think that you can take out selective regional assistance and allocate a particular proportion of the funds being disbursed by DTI under that heading and say that that bit relates to RDA functions and responsibilities but this bit does not. The RDAs have such an overarching responsibility for regional economic matters that that sort of distinction is not feasible.

Mrs Dunwoody

  282.  Mr Wood, putting it simply the DTI regains control of the money that will have an effect in the regions. The matter will still be decided centrally and it will remain within the DTI budget?
  (Mr Wood)  All those points are correct. If I may say so, they must be put in the context of the undertakings that have been properly referred to about the way in which those decisions are taken.

  283.  But there is nothing new or unusual about the DTI taking advice from the regions because the structure is already there; nor will it change in any way. The reality is that within your department there is no estimate of any such facilities because it remains a DTI responsibility centrally administered and controlled?
  (Mr Wood)  That is correct. Perhaps I may give an example of the way in which matters will change. The DTI in taking decisions on regional selective assistance has the benefit of regional competitiveness plans which are essentially generated by the government offices in the regions in association with other regional partners. The RDAs will take over that function. Those plans which before were generated within the government offices, or in partnership, and informed the DTI's decisions on regional activities will now become an RDA function. The DTI intends to look to the RDAs and their economic strategies and views of priorities in reaching the decisions which, as you correctly say, the DTI will continue to make.


  284.  Since we do not know the result of the spending review, when it is completed perhaps you can tell us exactly what the budget will be for each of the regional development agencies and over how much of the budget of the Department of Trade and Industry the RDAs will have an influence?
  (Mr Wood)  When that material is available that will be provided.

Dr Whitehead

  285.  I should like to refer to paragraph 3.8 on page 18 of the annual report. In that paragraph it is suggested that the additional capital receipts and expenditure will arise in three areas. Are the three areas set out in the report pretty much what local authorities are doing, or have you come up with significant other areas on which local authorities spend this money?
  (Mr Ballard)  We have more or less finished analysing the returns from local authorities that set out their plans for the years 1997-98 and 1998-99. Broadly, the distribution is in those categories. The bulk of the expenditure will go on refurbishing local authority stock. The cost of refurbishment in the first year is £138 million and for the second year it is £404 million. As to the number of dwellings, in each year it is 90,000[3] and 200,000. The nature of the work that falls under that category will range from complete renovation to perhaps refurbishment of doorways, entrance halls and so on. That is where the bulk of the money under this initiative is going. The second major category is related to expenditure that is put through local authorities into registered social housing. That is the second category in paragraph 3.8. As to that, in the first year the figure is £26 million; in the second year it is £92 million. That will produce three sorts of output. In the first year we expect 200 new homes to be constructed, 200 other properties in the marketplace being acquired for occupation and 200 existing housing association properties being refurbished. That is a total of 600 new properties. In 1988-99 we expect the figures to be: 1,100 new properties, 550 existing properties being bought and repaired and 300 existing housing association properties being refurbished. That gives a total of just under 2,000 in 1998-99. The third category is private sector housing stock where the amount of money in 1997-98 is quite small: £8 million. In 1998-99 the figure is £50 million. For that we expect to get about 500 house renovation grants in the first year and about 900 dwellings repaired. In the second year that will go up quite considerably: about 3,000 home improvement grants 7,500 dwellings repaired. In the light of what authorities say to us they want to do, there will be some small expenditure of about £2 million and £23 million in the two respective years on small housing-related regeneration work. It makes sense to get better value out of the two housing expenditures if you do something that is not strictly housing improvement.

  286.  Are you referring to matters such as improvements to open spaces?
  (Mr Ballard)  Yes.

  287.  The conclusion to be drawn from those figures is that overwhelmingly local authorities have spent their money on stopping the existing housing stock falling to bits?
  (Mr Ballard)  Yes, that is right, and that in part reflects the fact that when one announces a new initiative local authorities will ask themselves how they can spend the money most effectively and quickly. That is why proportionately more money is being spent in the first year on refurbishing local authority stock, as opposed to putting it out through registered social landlords. Overall, you are correct.

  288.  Do you anticipate that there will continue to be close earmarking of this money in future, or do you consider that that really stops in the first two years' allocations?
  (Mr Ballard)  The whole question is being looked at in the context of the comprehensive spending review. I cannot anticipate the conclusions of that. However, I make two points. First, clearly there is an ongoing need for investment of this kind in existing stock; and, secondly, to reflect some of the comments made by the Sub-Committee, the Government will be concerned that the money is being spent effectively and efficiently. Any future regime will have built into it sufficient measures to satisfy us that that money is being spent effectively.

  289.  I understand that. My concern is the extent to which it may be considered that this particular resource may be used on a wider basis in future for things other than the three and a half areas (as it were) that you have identified this morning?
  (Mr Ballard)  I should very much like to be clearer in my response but, pending the outcome of the CSR, I would ask you to wait for a few weeks.


  290.  Let us move on to the Estates Renewal Challenge Fund. How many properties have had a negative valuation when they have been transferred?
  (Mr Ballard)  Perhaps I may give you some figures for 1996-97 and 1998-99. The whole of the scheme is predicated on the need to spend money to bring properties up to a decent standard. In the first year the number of local authorities were three with 383 dwellings. The grant was about £7.8 million. The amount of private finance that came in as a consequence was £8.2 million. In the next year there were 12 authorities and 9,175 dwellings. The grant was £132 million and private finance accounted for £154 million. For 1998-99 there are 18 authorities with 25,000 dwellings. The grant is £217 million and £393 million comes from private finance.

  291.  Do those figures relate solely to the Estates Renewal Challenge Fund or at some point does it come under New Deal for Communities?
  (Mr Ballard)  That is all ERCF. Obviously, its future is being examined in the context of the CSR. Clearly, one option will be to subsume it within the New Deal, but that subject to the review.

Christine Butler

  292.  Will the rate increases of RPI plus 1 per cent for registered social landlords be enough to fund the major new repairs that are needed in that sector?
  (Mr Ballard)  The Housing Corporation has introduced this ceiling for the first time. Obviously, there is always a trade off between wanting to make sure that rents, and thus housing benefits costs, are not higher than they need to be and ensuring that there is a flow back of funds to enable properties to be properly maintained. So far the indications are that housing associations feel comfortable about complying with this. They are not coming back and saying that it will not work and that it jeopardises their long-term financial credibility, which would obviously be of concern to the Housing Corporation and the department. At the moment, the assessment is that this has been a well judged scheme. You will know that housing association rents are already substantially in excess of local authority rents.


  293.  The Deputy Prime Minister told the full Committee that the area of rents was (in his words) a total mess.
  (Mr Ballard)  The Deputy Prime Minister has strong views in this area. The question of rents across social housing, local authority and housing association, is being looked at again through the CSR. We start from the policy position that both are funded in different ways and therefore have built into them different requirements.

Christine Butler

  294.  From the responses from registered social landlords and housing associations, do they think that this is just right or that it could be set at just RPI and they still would not squeak?
  (Mr Ballard)  The action by the Housing Corporation this time round is not a sudden one out of the blue; it is on a continuing path. They have always taken rents into account in the bidding process and the allocation of funds by the corporation. It has always asked housing associations what their rent regimes are expected to be. There is no indication at this stage that they would want to go any further.

  295.  Are you allowed to have a view on that?
  (Mr Ballard)  I am allowed to have a view on most things but not always to express it. The fundamental question that will have to be addressed over time is how to bring together the relatively higher housing association rents and the lower local authority rents.

  296.  That brings us to the matter of convergence. There has been a lot of hoo-ha about this over time. We have been heading in that direction and many have not liked it. What do you see as the main problems?
  (Mr Ballard)  On the housing association side, as you have hinted there is a regime where individual associations have borrowed money against a forecast revenue stream that has been within their control. Consequently, they have been able to give assurances to lenders. They may have made their financial plans over a 10-year period or longer which are predicated on certain assumptions about rent levels. Because they are building into that the total cost of maintaining those properties they will ensure that rent levels are sufficient to cover all the forecast costs including borrowing costs. On the other hand, local authority stock has not been financed on that basis; it has been financed through the housing revenue account. That has not had built into it the same financial regime or disciplines. Whether one can do anything about that, and over what sort of period, is a question that has been considered under the CSR. The cost of moving either way is very substantial. If one is to bring down housing association rents unless one breaks contractual arrangements, which will be very difficult, one will be looking at quite substantial subsidies. On the other hand, if one is to raise local authority rents one immediately puts up housing benefit costs, because about 70 per cent of that feeds through, and that carries a very substantial cost. How one breaks out of this conundrum is not easy. That is why it has been looked at so exhaustively in the CSR.

  297.  How are you minded to advise Ministers on feasibility? I was fascinated by your lack of definition of "feasibility" earlier when you spoke about raising tax revenue. Perhaps you could apply a stricter criterion this time. How will you advise Ministers on the feasibility of the implementation of convergence?
  (Mr Ballard)  I think that the factors that you take into account are, first, how much it will cost. To move in either direction does not come free. One will also be concerned about the long-term stability of any regime that one moves towards. In an ideal world what one wants is a system that is in effect self-financing to the maximum degree. There are a number of other factors to be taken into account, such as the social mix of the people you want in social housing. Do you want to provide social housing purely for those who are on housing benefit?

Mrs Ellman

  298.  Why has there been such a reduction in the official number of households accepted as homeless by local authorities? Is it to do purely with the change in the guidance as to who should be accepted as homeless?
  (Mr Ballard)  You are right that there has been a reduction from about 145,000 in 1991 to about 103,000 in 1997. The latest figures for the first quarter of 1998 show a slight increase—about 2 per cent over the corresponding quarter of 1997. There are a number of other interrelated reasons why there has been such a sharp drop over the past six years. One is the relatively buoyant private rented sector as compared with the previous decade. Over the past few years there has been a decreasing level of repossessions. Although they are more than one would wish they have been coming down quite considerably. There has also been a more rigorous assessment of applications by local authorities. In addition, some people would be deterred by the sort of property that they would be getting through this route. Earlier on there was probably a feeling that the homelessness legislation provided something of a fast track to social housing. Clearly, that is no longer quite the case. It is the combination of those factors that has led to the reduction.

  299.  Is there a concern in the department that the figures do not reflect real need?
  (Mr Ballard)  There is always a concern as to whether the numbers are going down because the need is reducing or one has set up a regime which leaves people stranded and they have to go elsewhere. Our present feeling is that overall this is not leading to a number of people being denied decent accommodation that they need.

3   Witness correction: 140,000. Back

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