Examination of Witnesses (Questions 220
- 239)
WEDNESDAY 28 JANUARY 1998
SIR RICHARD
MOTTRAM, KCB
220. There is obviously a benefit to the
purchaser of you surrendering them early.
(Sir Richard Mottram) There is a benefit to me
if I surrender them early if I do not need them any more and over
the first 15 years I get clawback on whatever he does with them.
I am sharing the benefit from him taking them and I am not paying
rent on them. I have transferred all those risks to him and I
am merely renting those properties which I need when I have my
voids correct, which seems to me to be a reasonable deal for me.
221. Surely he is getting a greater benefit
of you surrendering them earlier than you by not paying rent because
he is going to get his earlier capital value.
(Sir Richard Mottram) If he knew the rate at which
I would surrender them. He knows that he is getting his share
of the clawback and after 15 years there would be no clawback.
Actually we have slightly incentivised the thing to ensure that
he is not rushing around trying to get out of the deal, onsell
it, etcetera. Yes, he could have a potential benefit, but he would
have built this into his calculation, would he not?
222. So his worst scenario is that you do
not actually surrender any of the properties until 15 years are
up.
(Sir Richard Mottram) No, his worst scenario is
I only surrender those I have to surrender.
223. What is that?
(Sir Richard Mottram) It is somewhere in the report.
224. Can you tell us?
(Sir Richard Mottram) By the year 2005 I have
to surrender 13,220. [16]It
is shown graphically in Figure 12 on page 39. In Figure 12 on
page 39 I must surrender those shown by the top line.
225. There is no clawback for you if you
surrender the properties early.
(Sir Richard Mottram) No, if I am surrendering
the properties early and he is redeveloping those properties over
the first 15 years I will have clawback on the gain he gets.
226. Forget the redevelopment because that
is the only business you can have clawback on. We all know you
have clawback if you get redevelopment but if you surrender the
properties early he is getting an earlier capital receipt than
he would otherwise have done and there is no clawback.
(Sir Richard Mottram) For all those that we surrender
in the first 15 years, we are entitled to a share of clawback
if he onsells them for more than the assumed price plus 15 per
cent and a bit of detail, as is set out in the report. We have
a share of that process. We both do not have the obligation to
pay the rent and we have a share of the benefit from him having
disposed of the surplus property. That is a declining share.
227. Why did the Treasury require payment
in two tranches and how much extra value was that worth to the
purchaser?
(Sir Richard Mottram) That is a matter for the
Treasury but the extra value for the purchaser was notionally
£27 million. As we gave them notice that this was the basis
on which we intended to proceed with the sale, we can assume they
built this into their bids. Why we were asked to do it was a matter
not for me but for the Treasury.
228. Can I ask the Treasury why it was required
in two tranches when it seems to have cost the taxpayer an extra
£27 million?
(Mr Mortimer) I am not sure I agree that it did
cost the taxpayer an extra £27 million because this would
have been taken into account in the amount they were willing to
pay. It is true that the Treasury wanted to smooth the impact
of the sale on public expenditure and we also wanted to avoid
showing an up and down line for defence expenditure. It was against
the background of the Government's objectives for public expenditure
at the time, which included an objective to reduce public expenditure
as a share of GDP to below 40 per cent and to set the path of
the control total at a level to grow over time more slowly than
the economy as a whole.
Mr Clifton-Brown: That is a wonderful
answer.
Chairman: A beautiful answer and
very elegant.
Mr Campbell
229. Clarification of a couple of points.
There has been some dispute over the figure you have given, at
least in our minds, of the cost of keeping properties vacant.
You quoted £2,739.
(Sir Richard Mottram) Yes.
230. Is that not a somewhat conservative
estimate, given that the Department of the Environment reported
in March 1995 that if you take into account hidden extras on vacant
properties the minimum amount of cost is £3,000 and it could
actually be as high as £10,000?
(Sir Richard Mottram) I do not know the basis
on which they made that calculation. The calculation I am giving
you is based upon what we know we are going to pay to Annington
for the rent of each property plus our assessed maintenance cost
which we are paying.
231. Have you made any assessment of any
other costs apart from rent and maintenance?
(Sir Richard Mottram) There would not be any other
costs. The reason why the number is going to be low is because
we are paying rents to Annington which are discounted by 58 per
cent.
232. Jane Griffiths made a point about the
way in which houses are allocated and there was some discussion
about whether or not sergeants can live in officers houses. How
many Service families are currently billeted in the private sector?
(Sir Richard Mottram) I do not know. May I send
you that answer?[17]
233. Yes. Could you also add to that the
total cost.
(Sir Richard Mottram) Yes, I could.
234. Going back to the point about social
housing, you have explained that from time to time you look at
the transfer of housing to housing associations. I want to explore
a little further the idea of short-term lets, not least because
if we do not just take into consideration the cost of keeping
a house empty, but the cost of keeping a family in bed and breakfast,
which I understand is currently about £960 per week per family,
the Government used to recognise, did it not, that it was a good
idea to put homeless families into empty Government property?
(Sir Richard Mottram) Yes.
235. As late as the summer of 1994 they
endorsed the policy.
(Sir Richard Mottram) Yes.
236. Then the policy changed.
(Sir Richard Mottram) I am not an expert on the
Government's social housing policy, I am afraid.
237. It changed permanently for you though,
did it not, because it would not be possible after the sell-off
because the houses do not belong to you?
(Sir Richard Mottram) We are still a landlord.
We do still own other houses, so there is a consideration about
our policy in relation to houses we own. In relation to the Annington
homes, yes, we do not own them so it would not be a policy we
could apply. They could of course decide that it was in their
interest to sell them to housing associations or they could decide
it was in their interests to let them to housing associations.
238. I was thinking more in terms of vacant
properties. You need a certain number of properties to be vacant
at various times and we have explored the possibility of whether
or not short-term lets could bring back some money into that.
(Sir Richard Mottram) In that particular case,
in relation to that part of our estate that we are holding against
a need for future deployments, that is just the sort of area where
we would want to look at whether we could let that to housing
associations for example. It is not our policy not to do this.
It is our policy to do this where it makes sense and is considered
to be appropriate.
239. Do you pursue that with sufficient
vigour?
(Sir Richard Mottram) Yes, we are pursuing it
with vigour. I certainly think it should be pursued with vigour.
16 Note by Witness: The sentence should read as follows:
By the year 25 I have to surrender 13,213. Back
17 Note:
See Evidence, Appendix 1, page 30 (PAC 172). Back
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