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



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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