Examination of witnesses (Questions 160
- 179)
TUESDAY 9 MAY 2000
MR JOHN
BALLARD, MR
HENRY DERWENT,
MR MICHAEL
GAHAGAN and MR
MARK LAMBIRTH
160. When do you think you will be in a position
to discuss this matter in some detail and have some statistics
and some words of guidance?
(Mr Gahagan) We will be issuing guidance pretty soon,
in the summer. We have got to negotiate and agree the detail with
the LGA.
161. Is it the case of the Minister just plucking
something out of the atmosphere?
(Mr Gahagan) No. The Green Paper clearly set out what
the general direction is but equally clearly the sums of money
of that and all the other sums of money have to be negotiated
through the spending review. The principle is there but not the
sums of money.
162. What happens to the scheme if the sums
of money are not there?
(Mr Gahagan) It will be of relatively—
163. It is work having been done, district councils
having applied themselves to firms of consultants, what are the
costs involved?
(Mr Gahagan) I do not think anybody is going to apply
themselves in great detail until they know what sums of money
are available.
164. It is being done now.
(Mr Gahagan) I doubt whether they would go very far
down the route.
165. I think you might wish to make some inquiries
about this. It is the flavour of the month, everybody seems to
be jumping on the bandwagon to appease Ministers and to appear
in a good light with the Department. I am just wondering what
costs have been incurred within the course of the last month.
(Mr Gahagan) I would not advise local authorities
to spend vast sums of money.
166. When you say "vast sums of money",
can you quantify that?
(Mr Gahagan) No, it is down to them. Again, I would
stress I think a local authority should not be too casual about
this, it does have to look at the hurdles that it has got to jump,
it has to look at the tests it has got to pass, and say "are
we in with a realistic chance of passing those tests?" That
is the first question. It has got to decide that. Then, as I say,
following the comprehensive spending review it will need to look
at the detailed envelope and decide what sort of chance it is
in for.
Chairman
167. In this exercise of wading through cold
porridge, can you tell us anything about rent levels?
(Mr Gahagan) Yes. What Ministers announced in the
Green Paper on a consultative basis was that rent levels will
remain broadly where they are after the current period of rent
increases apply. This is for social housing of course, not for
private housing. Within that there would be rent restructuring
according to different methods of restructuring, some options
of which are set out in the Green Paper for consultation. Ministers
are proposing greater consistency of rents across the country
according to value and other features but the overall picture
is that RSL rents certainly will stay constant.
168. So social housing rents are going to stay
constant. How would you guarantee that you get an investment in
their stock, particularly those houses that are perhaps ten or
15 years old and need some expenditure? How do you make sure that
the Registered Social Landlords do actually carry out some investment
in that stock if they have got no extra income coming in?
(Mr Gahagan) They have got no extra income coming
in but they have got a jolly healthy income coming in in most
cases.
169. But the problem is they have been used
to the income for perhaps many years and the need to expend on
that housing stock being fairly small because it is new housing,
nothing starts to wear out. Now they are reaching the point at
which things are beginning to wear out, they need replacing, where
is the money coming from?
(Mr Gahagan) The rents should be sufficient. First
of all, it is very difficult to generalise because RSLs are such
a broad church, there are more than 2,000 of them, so it will
differ hugely according to the nature of the RSL stock. After
all, all Ministers have said is that future increases will be
foregone, so any efficiency gains or whatever that they make can
be invested. They do have a very healthy rent income in most parts
of the country on which to base their investment. Ministers have
also said that where an RSL is in really significant financial
difficulty they would be prepared to make allowances in that case.
That is said a number of times in the Green Paper.
170. Do you think that the overheads that these
social landlords have are all reasonable?
(Mr Gahagan) I think it varies hugely from RSL to
RSL. The best ones keep their overheads very low. Some are not
so good and a lot of emphasis is going into the best value regime
which is being extended from local authority to RSLs to get them
to focus on improving the quality of the service and, insofar
as they have got overheads, getting good value from them.
171. Is the Housing Corporation making a vigorous
effort in this area?
(Mr Gahagan) Yes. It has developed the national performance
indicators which look at RSLs across a range of indicators and
it has recently published some figures on the performance of different
RSLs against those both by region and RSL.
172. Who is the worst?
(Mr Gahagan) I cannot remember. I can send you the
material if you like.
173. Can we move on to local authorities. Is
the situation any better there?
(Mr Gahagan) In what regard? I do not think it is
bad for RSLs.
174. As far as the rent levels are concerned,
one of the arguments for transferring stock was the fact that
council tenants had to subsidise each other. As far as the local
authorities are concerned as soon as you transfer it into the
private sector subsidy ceases between tenants, so an in authority
like Tameside there is a very substantial gain to the housing
expenditure as a result of stock transfer. Is that situation going
to continue?
(Mr Gahagan) The introduction of resource accounting
includes the major repairs allowance and that will reduce the
surpluses that an authority has. It puts more money into their
pockets to manage their stock on an on-going basis, but the basis
of using of the surplus that remains to fund rent rebates and
to fund Housing Benefit does remain, yes.
175. I think the Deputy Prime Minister said
to this Committee that Housing Benefit was a "shambles".
Is that shambles being sorted out at all?
(Mr Gahagan) That is for the DSS more than me but
let me give you my—
176. It is alright saying that it is for them
but that is if you go to the theory that the subsidy goes to the
tenant but if you go to the theory of the subsidy to the bricks
and mortar, which is the traditional way of doing it, surely it
is you?
(Mr Gahagan) Yes it is.
177. So how are we getting it sorted out?
(Mr Gahagan) As far as Housing Benefit is concerned,
the Green Paper makes a number of proposals for improving it in
the short term, improving the delivery of Housing Benefit, which
is one of the cash flow problems that a lot of the small RSLs
and other landlords suffer from, and the difficulty a number of
tenants face from the complexity of it is also being addressed
and there are proposals in the Green Paper for dealing with that.
There are also proposals for dealing with the problem of losing
benefit when going into work and the fear of not regaining it,
which is often greater than the reality actually. A lot of commentators
outside have argued that that does not go far enough, I have to
say, but there are proposals in the Green Paper for sorting that
out.
178. So this problem in a constituency like
mine where if you rent a council house and perhaps you are on
between £30 and £40 a week and for the equivalent social
housing you are probably on £50 to £60 means that in
social housing with the housing associations there is a very substantial
poverty trap, is there not?
(Mr Gahagan) There is an element of a poverty trap
there, yes, which, as I say, Ministers have looked at. The aim
is to bring the rents on to a much more consistent basis so that
while there might be a difference which reflects the quality of
the housing between RSL and local authority those differences
would be justified by quality, not by the fact one happens to
be RSL and one happens to be a local authority house.
179. We have just gone over the fact that rent
levels for both groups are only supposed to be going up in line
with inflation.
(Mr Gahagan) That is overall but they can go up or
down according to the national restructuring that is proposed
to take place over ten years.
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