Examination of witnesses (Questions 280
- 299)
TUESDAY 30 JUNE 1998
MR JOHN
BALLARD, MR
PHILIP WOOD
and MR PAUL
EVANS
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.
Chairman
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.
Chairman
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.
Chairman
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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