Examination of Witnesses (Questions 40
- 59)
MONDAY 30 OCTOBER 2000
MR KEVIN
TEBBIT, CMG, AIR
MARSHAL MALCOLM
PLEDGER AND
MR JOHN
WILSON
40. Exactly—and that you had this amount
of £39 million being spent, do you accept that that was too
much and that the targets were not properly based and that that
represents a mistake by the Department?
(Mr Tebbit) I am not sure it represents a mistake
by the Department. It certainly represented an imperfect system.
We created our Housing Executive in 1996. Previously the individual
Services managed these things separately. We brought them together.
The first thing to be done was—
41. Forgive me, I am short of time, I am being
urged by the Chairman—
(Mr Tebbit) I do not accept it was a mistake by the
Department.
42. You are trying to improve the situation
from one which you found less acceptable?
(Mr Tebbit) Absolutely right.
43. Who was responsible for that situation?
(Mr Tebbit) As I say, it was the three separate Services
who managed their properties independently with devolved budgets,
and once these were brought together into one agency it was much
easier to see the scale of the problem and begin to put into place
the processes necessary to deal with it. The first thing to deal
with, you are quite right, was the surplus properties, get the
disposal systems working, the next phase is to manage the totality
of the estate more effectively.
(Air Marshal Pledger) I think there is almost an attempt
to apportion blame. What has been said is that there were the
uncertainties of the planning system associated with Defence Reviews
and the reallocation of our units around the UK on their return
from overseas. We had to deal with that, we are still having to
deal with that uncertainty. I would ask you also to remember the
very purpose of SFA, which is to contribute to operational effectiveness,
and that is a risk balancing act that we clearly need to improve
in the future as some of those uncertainties start to be removed
and we can put together some much more robust plans
Mr Williams
44. Following on that point, you have to give
six months' notice, do you not, to Annington that you are going
to make a property available for disposal?
(Mr Tebbit) Yes.
45. So with the 6,000 this year, on an average
annual rental of £2,700 a year, if you have to give them
six months' notice, in effect they are getting a rent bonus of
£8 million in terms of notice, though the property might
be readily marketable much sooner than that. Why is such a long
time allowed?
(Mr Tebbit) I do not think it is a rent bonus, Mr
Chairman, it was the arrangements built into the agreement from
the start, so this was understood. It is necessary in order to
agree all the various factors. Dilapidations, firstly, the extent
to which we should be bringing them up to a better standard as
we dispose of them; that takes time. Sometimes there are other
very complicated issues about utilities, because often it is necessary
to separate, as the report says, the houses being disposed of
from infrastructure which is often provided by the Services, by
the local station or whatever. Similarly, sometimes road access
needs to be granted and achieved. We have to hand these things
over to Annington as freehold properties and they have to have
free and full title, and that does take a while. Six months is
basically the minimum to achieve all of that, but that was known
and understood right at the beginning of the process.
(Mr Wilson) Also it may be necessary to ask families
to move in order to free up a site for release to Annington Homes
as a whole, and it is of course necessary to give our families
a reasonable period of a notice of a move.
46. But that is a different figure, is it not?
We are also told in the report that it takes about five months
for you to agree with the Service which homes are to go. That
would be in that section. It is not in the six months' section.
It has already been achieved by the time we get the package for
the six months' section.
(Mr Tebbit) That has also been streamlined, and I
know it is boring saying, "We have got better". Firstly,
those two things can overlap. Secondly, the period for agreeing
with the Services is now being reduced and the average target
now is 90 days rather than 140 days, so we are getting faster
there as well, but you are perfectly right, the minimum period
for release to Annington is six months and that is provided for
in the agreement.
Mr Love
47. Mr Tebbit, this Government has given some
priority to the achievement of joined-up government. Do you think
this report reflects good, joined-up departmental working?
(Mr Tebbit) I think what you may be referring to is
why have we got these empty properties when there is a lot of
need for housing in the country. I think you are absolutely right.
It is a problem which is why we are trying to release as many
as we can, which is why we are now getting disposed of 6,500 this
year. We only keep the number of houses we need to meet our remit
and our priority is to release homes for which there is no forecast
demand. Most of the returned properties which we do have vacant
are vacant for a short period of time for short-term lets, and
therefore our opportunity for allowing local authority or housing
associations or social housing to take place is limited; usually
they want a longer period for us to be able to make it interesting
for them. I agree with you that social housing is a priority but,
as I say, the best way we can help that is by releasing surplus
housing as quickly as we possibly can.
48. Can I go on to that and refer you to two
figures—figure 14 on page 50 and figure 15 on page 54—which
indicate the processes and the timescales under which you, first
of all, identify such properties, and then, in the case of Annington
Homes, how you sign them over. It seems to me that that is about
the most difficult, complex and time-consuming process that you
could go through, and that is commented on by the National Audit
Office in their Report. How do you respond to that?
(Mr Tebbit) Firstly, to comment, as I did before,
that the approximate total of 140 days on page 50 we have now
brought down to 90 days by cutting out a lot of the middle management
processes here between the Housing Executive and the Services.
That is some improvement. The second point I would make is that
we are commenting, as it were, on the policies of the previous
Government, when they decided it was a good deal to go into. The
terms under which we release properties to Annington Homes do
involve some complexities. When we release properties, they are
often pepper-potted around estates. We have to group them together
and pass them on to Annington in blocks and that can take some
time. The proof of the pudding is in the eating. 6,500 properties
by next April from the beginning of this year is twice or three
times the rate that we have ever achieved before, so we are getting
these on the market very quickly.
49. That may be the case, but the number of
vacant houses is still going up at a time when the number of properties
is coming down. Can I go on to the Defence Estates Agency. Although
there is not a figure to illustrate this, in the case of a recent
sale of properties in Aberdeen it took over two years. Are you
confident that there is adequate working between the two agencies
to ensure that these properties are sold as quickly as possible?
(Mr Tebbit) Between the two agencies of what?
50. The Housing Agency and the Defence Estates
Agency. It seems rather strange that you should have two agencies
dealing with this matter. I understand the complexity of your
services, are you sure they are working closely enough together
to minimise the delays that are clearly illustrated in this Report?
(Mr Tebbit) I take the point. That point is very well
made. What we have done is changed the incentives. When Defence
Estates are selling properties now, as they do in some of the
cases—mostly it is Annington Homes but there is a proportion
done by Defence Estates—we transfer the risk to their budget
immediately the thing becomes available, so they bear the maintenance
charges and they bear the capital charge on their budget under
resource accounting. That speeds up the incentive on Defence Estates
to market the property quickly. Defence Estates only come in when
we are dealing with selling. When we are dealing with reducing
properties under the six-month notice to Anningtons, we use the
Valuations Agency Office which is nationally recognised and good
at that valuation process, and that also helps to speed it up[6].
51. Can I move on to comment on something that
appears in our last Report, although it is not the direct issue
that we were addressing. Some of the management practices carried
out in your Department must reflect in some way the attitude expressed
by it. I was shocked in the last Report, I am again shocked to
discover, that someone has to have a marriage certificate to qualify
them; they may well have been living together and indeed have
had a family for some considerable period of time, but they do
not hold that certificate. Is that still the common practice?
I suspect the person I should address this to is Air Marshal Pledger.
Can you explain why it is the common practice?
(Mr Tebbit) Ministers are still responsible for the
policy of the Department, and the policy is that family quarters
or married quarters are only available to people who are married
and not to people who happen to be living together and not married.
We have no plans to change that at present.
52. This has been brought before Ministers who
sanctioned that no-change policy. Can I move on to Figure 2 on
page 13? There has been some comment in the Report about the complex
entitlement criterion which is laid out in Figure 2 and the fact
that that complicates very considerably the management. Indeed,
it is reflected in Appendix 3 of the Report. Has there been any
discussion of simplifying the criterion and making it a little
easier to be able to manage the property portfolio?
(Mr Tebbit) Firstly, this does look a little out of
perspective. 80 per cent of the housing is for other ranks rather
than officers, therefore 80 per cent of the houses are based on
family size, allocated according to family size, rather than rank.
This is only dealing with the 20 per cent of officers. That said,
I take your point, we have looked at injecting some more flexibility
into the system. There is at least one other factor, other than
rank, which affects officers, whether it is command appointment,
or size of family, that is also taken into account, or whether
there was an entertainment obligation with the job. There is also
now something called a "one down mechanism", which is
if there are no quarters to meet one's entitlement, one is obliged
to take a rank down. This used to apply only to the Army and the
Navy, but I am sure Air Marshal Pledger will explain it is now
being extended to the RAF as well, who were previously exempt
from the "one down" rule. That makes it easier to get
more flexibility in. There is some ability to change the margin
between senior officer quarters and junior officer quarters, where
we can move people between properties, to some extent. In our
new builds there will be houses to make that more possible. People
can also pay extra to be over-housed, as it were, in relation
to their entitlement, if those houses happen to be available,
again to reduce the vacancies. There is a lot of flexibility in
the system. Some single and married, unaccompanied people, married
people without children, can also occupy houses under the eligibility
rules rather than the entitlement rules, which helps ensure that
we reduce empty properties to a minimum.
53. Thank you for that full explanation. Can
I ask Mr Wilson whether he has ever recommended to the Accounting
Officer that there be a change in those criteria?
(Mr Wilson) I do not set the policy in my seat.
54. I never asked you to set the policy. I asked
whether you ever issued a report that recommended that there may
be a change to the entitlement rules under the service?
(Mr Wilson) I have not made that recommendation. If
one looks at the other side of the coin, the SSFA, the substitute
accommodation, there is very little of this. It is mainly provided
because there is no accommodation at all available in that location,
rather than because an officer is not entitled to a particular
type of property as opposed to another type of property.
55. Can I move on to mixed estates, another
issue that seems to be very central to the Department? This seems
to be frowned on entirely. Both previous questions mentioned pepper-potting
and the difficulties you face. Would it not make a significant
improvement in efficiency if you allowed mixed estates? Why do
you continue not to allow them?
(Mr Tebbit) It is not that we do not allow them, it
is they can be quite tricky to manage. A year ago we did create
a post of a Mixed Estates Strategy Co-ordinator, who we now have
in the Ministry of Defence. That has been going since August 1999
specifically to overcome difficulties that can arise in mixed
estates, perceptions of families who are concerned—particularly
if their spouses are off on deployment, as they were, for example,
in Kosovo—about who might move in next door. Human consideration
is a real point. We are seeking to manage it and to reassure people.
We do have efforts in place to improve that. Mixed estates are
there. We do have quite a number of houses which are taken up
under that arrangement, so we do have this happening, not so much
with housing associations where they are looking for blocks but
we have mixed estates and they are not, as it were, a problem
in principle but in practice we have to make sure we can run them.
(Air Marshal Pledger) Could I add a perspective of
practicality here for both your last question and this one? We
are dealing with an inheritance of a certain number and type of
houses and what we are trying to do is make best use of them.
If we had a complete free rein to go and pick and choose in the
future, some of your previous questions would be much easier to
answer, but there are a certain number of these and, like it or
not, when you are living in a two bed-roomed house and you have
another child you are entitled to move, and that makes good sense.
If in future we were to completely re-provide the estate, we might
do so differently to give the kind of flexibility you are arguing
for. The second point is on the mixed estates, yes, they happen,
we can take you to quite a few of them, but again the practicalities
are that some of these are behind the wire and I have to say not
too many people would enjoy the process of getting into those
estates which the military family actually goes through because
they recognise the need. So there are huge practicalities which
have to be borne in mind in responding to your question.
56. I take your point and I do not want to continue
on this particular line, but I did note that in terms of other
Services in other countries where they use almost entirely the
private sector, none of these mixing problems seem to occur, but
I shall move on. I want to speak to Mr Wilson in relation to the
management margin that was hinted at in this report. As I understand
it, local authorities get berated for having a vacancy factor
of 2 to 3 per cent, housing associations similarly. You are talking
about reaching 13 per cent and you are nowhere near it. Tell me
what figure you should be reaching for if you were an efficient
housing organisation?
(Mr Wilson) We have 22,000 moves a year, our long-term
target is a margin of around 10 per cent.
(Mr Tebbit) If I may say so, we are not in the same
position as housing associations or local authorities.
57. I do accept that, I was just using it as
an illustrative figure.
(Mr Tebbit) We queue houses for people, rather than
people for houses, so it is a different role. Therefore, the view
the Services have come to with the Executive is that about 10
per cent on top of core requirements, once they are clearly defined,
would be about right. I have accepted that as a reasonable figure.
It is a different function from a housing association or a local
authority.
58. Was that done as a result of the report
we are looking at? If you have done that work, can you give us
some idea of the variation there is between each of the different
regions? What tolerances are you talking about? From which per
cent to which per cent makes up the overall 10 per cent figure?
(Mr Wilson) It could vary between, at the bottom end,
some 3½ per cent up to around 20 per cent at the top end
of the range. For example, we would need to allow an additional
margin for where we have properties awaiting modernisation, because
our consultation with the Service families has shown that on balance
where there is a major modernisation they would prefer to be moved
rather than to have the modernisation conducted around them. So
we have a margin of 1,700 or 1,800 properties awaiting modernisation.
At the upper end of the spectrum, where we are talking of the
20 per cent figure, in most cases this is where we are also expecting
incoming unit moves over the next two or three years ahead; places
like Aldershot for example.
59. I am up against the time constraint we have
here but my final question follows on two previous inquiries and
it is really about the risk that is borne between the Department
and Annington Homes, and it relates to the combination of the
constraints you are working under, under pepper-potting, as you
have already mentioned, and indeed the dilapidations charges and
the very onerous manpower requirements of looking through and
evaluating whatever repairs need to be carried out. On balance,
looking back on that agreement, do you think there has been a
fair balance of risk taken by both parties?
(Mr Tebbit) Clearly I cannot look back with that luxury.
We have to move on and manage what we have most effectively. Remember,
the rent charges we pay to Annington are very low, they are 58
per cent discounted on what would otherwise be a commercial valuation.
We simply have to make the most cost-effective use of the agreement
which we have reached and it is not for us to judge whether it
was a good or bad one.
6 Note by Witness: Defence Estates undertake
a range of technical and contractual functions for DHE relating
to properties to be returned to Annington Homes, including dilapidation
valuations, work they have largely contracted to the Valuations
Agency. Back
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