Examination of Witnesses (Questions 20
- 39)
MONDAY 30 OCTOBER 2000
MR KEVIN
TEBBIT, CMG, AIR
MARSHAL MALCOLM
PLEDGER AND
MR JOHN
WILSON
20. As the Financial Officer, would you expect
that degree of flexibility in other budgets? Would you say that
if for some accounting reason, because it was just maintaining
existing practice, funds were used to fund a particular missile
out of this budget rather than out of the missiles budget, that
would be an acceptable way to proceed? What this is doing is obfuscating
a process which you as the Accounting Officer are responsible
to make as clear as possible.
(Mr Tebbit) Firstly it is. It exists as a fact. It
is our job to make sure we use it as effectively as we can. I
agree that there are surpluses which we need to get rid of, and
we are reducing. In using them as effectively as we can, surely
it is perfectly sensible to use houses that we cannot use for
any other purpose for things that would otherwise need to be re-provided
more expensively. This is, surely, a sensible thing to do.
21. Would you be happy to use houses for warehouses—
(Mr Tebbit) No.
22. —if that were a cost-effective way
of achieving warehousing? What would the difference be?
(Mr Tebbit) I am trying to be more in line with your
comment about relative function. The difference is that housing
is a means to deliver operational effectiveness through retention
and recruitment purposes. We have Service houses because it helps
to sustain morale, retain personnel and keep them through their
Service life. Welfare offices and cre"ches similarly serve
the same purpose.
23. I will go down another avenue. Let me see
if we can meet more happily along that line. It is always a difficulty
this Committee faces when, as you said, a year has expired since
the Report was produced and you can come here and say, "Many
of the recommendations that are contained in this Report are things
we were actioning a year ago", so we get the good news in
that sense. Can you actually, therefore, give us what you would
regard as the up-to-date figures for 1999-2000? Instead of it
costing £39 million in 1998-99 you can presumably tell us
what the current figure is?
(Mr Tebbit) Yes, I can. As you know, the cost of rent
and maintenance of the empty homes we had at the end of the last
financial year that you are talking about was, in fact, £41
million rather than £39 million. The reason why it goes up
is because of the way in which figures were assembled, which is
why I was offering the Chairman a clarification. I would only
regard a small proportion of that as genuinely being money which
is not cost-effective, the genuine surplus there. A lot of that
costing is in disposals, but some of it is held for future unit
deployments, where we know the units are coming though they are
not there yet, but it is much better to hold the accommodation
for them. Some of them are empty and being modernised. We have
a major upgrade programme. They are in the figures; they are part
of this £41 million or £39 million. They are empty,
but they are being worked on cost-effectively. Some of them are
in the course of disposal and some of them are under offer. Homes
are under offer to new families as they move around the system.
24. We all accept that. What, I must say, is
surprising, at any rate, is for you to have said to the Chairman
that a year ago we were putting these changes through because
we found that £39 million was an unacceptable price to be
paying for empty houses and yet a year later, after we have implemented
those changes, we are now spending £41 million on the same
thing.
(Mr Tebbit) You are misunderstanding me. I must make
this clear, the key bits of comfort, let us put it like that,
that I take from this, and I offer the Committee, are firstly
that we now have 6,500 properties in disposal that are going back
to Annington Homes[5].
That is double the previous target. A year ago the target would
have been about 3,000.
25. What proportion of the 41 relates to those
6,000 houses?
(Mr Tebbit) It will not be like that. It is the £41
million with the cost up to the beginning of the financial year.
These 6,500 will cover until next March.
26. You cannot give me a section of the £41
million that is accounted for by those 6,000 houses?
(Mr Tebbit) What I am seeking to give you is the evidence
before we do costing—the evidence of why things are getting
better. The first is there is a much larger number of houses in
disposal. The second is the sharp reduction in the number of houses
that are on our hands for a long period of time. When the Report
was written there were 3,800 homes that had been empty for more
than six months. The figure today is 632.
27. We have all read the Report and we are aware
of the good things. I appreciate the difficulties, but it is always
the job of this Committee to probe the bad things as best we can.
(Mr Tebbit) I expect 6,500 homes would represent something
like £14 million. I am thinking of the rental that we otherwise
pay Annington Homes, plus the maintenance cost of those homes.
I would guess—we could give you a more precise figure—that
the value of 6,500 on that basis would be something like £13
million or £14 million.
28. Thank you, that is helpful. If one subtracts
the 6,000 homes out of the 41 million and says 41 less 14, my
maths would give me that as £27 million. How much would you
similarly have to take out of the £13 million for the homes
that were in a similar position the year before? Then we can do
a like-for-like evaluation.
(Mr Tebbit) I suspect at that stage the equivalent
figure would have been closer to 2 or 3,000, but I would have
to ask my colleagues.
29. On that basis it would be £7 million
off that, £6 or £7 million off the £39—
(Mr Tebbit) That does not seem unreasonable.
30. —which would be £32 million.
So what we are comparing is £27 million against £32
million. In other words, what you are saying here is that the
net achievement, once you exclude the progress that the Department
has made which we all recognise, is actually only down to £5
million?
(Mr Tebbit) No, I would not put it like that. That
is one aspect of it. You also have to take into account that when
we have houses which are on offer to Service people, which have
been vacant for less than six months, only a short period of time—somebody
is moving and we make an offer and they have so many days to accept—I
would not regard those houses at any stage as being part of a
non-cost-effective figure; it is part of the necessary management
margin that we move Service people around with.
31. I do understand what you are saying and
I take it on board, but why should we suppose that that overhead
cost, if I can put it that way, has changed year on year? For
example, Service personnel are constantly being redeployed and
moved around and, indeed, given the Strategic Defence Review and
the implications of that, one would have suspected that in fact
that might have been a larger proportion than in previous years.
(Mr Tebbit) Your point is well made. I was trying
to make two points. Firstly, I was trying to say I would not expect
that £39 million or £41 million was a waste of money
in relation to the purpose, because it is part of the purpose,
but you are quite right that the real change has been in the number
and value of the disposals. There is one other element which does
affect this as well, the number of properties being modernised
and up-graded and that also has risen over the period.
32. Could you put a figure on that for us?
(Mr Tebbit) I could not precisely compare, I do not
think, but the number awaiting modernisation has definitely grown
from around 1,300 to around 1,800.
33. So we are talking about an increase of just
under 50 per cent?
(Mr Tebbit) Yes.
34. And the value of the 1,300 in the previous
year was what?
(Mr Tebbit) Again, you apply a rule of thumb of around
2,400 or so per house and come out with a figure of—help
me colleagues, my mental arithmetic is under the strain of two
exercises in ten minutes.
35. It strikes me it is not going to be a substantial
figure, it will be in low units of millions?
(Mr Tebbit) Yes.
36. 1 or 2 at most?
(Mr Tebbit) Yes.
37. Can I now ask you, which is a fairly blunt
question, do you accept that the previous figures and the previous
targets which are admitted in the report—as the Chairman
said, being pragmatic rather than solidly based—represent
a mistake by the Department?
(Mr Tebbit) No, they are accurate figures.
38. No, sorry, I am not saying the figures were
a mistake.
(Mr Tebbit) The value of the empty property.
39. What I am saying is that the fact that that
situation was as it was, that you had simply pragmatic targets
rather than properly—
(Mr Tebbit) I see, for disposal.
5 Note by Witness: Of the planned 6,500 properties
in disposal this year, 4,784 will be returned to Annington Homes.
The remainder are MOD-owned and will be disposed of on the open
market via Defence Estates or will be demolished. Back
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