Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  80. My colleague tells me the figures are 2,400 and 1,800.
  (Mr Tebbit) The actual numbers we disposed of in the last financial year?
  (Mr Wilson) 2,193.

  81. Paragraph 3.7, 2,400 and 1,800. I raise that point because it strikes me as slightly worrying that you have continued over many years to aim to dispose of property, which is wonderful, but you never dispose of as much as you aim to. You are currently aiming to dispose of 6,500 in the next year or two. During that period you expect more property to become surplus, at the rate of 2,000 a year, so if you do not dispose of all the 6,500, the actual number of rented properties may not be very much lower at the end of that period, which is precisely what has happened for the last five years in a row. You have always aimed to dispose of more properties than have come on the market, but actually you have not ever achieved that.
  (Mr Tebbit) That is a perfectly fair point. I have to say, there is no inhibition to the disposal in that Annington's have to take it. There are no two ways about it. They have no voluntary mechanism of saying they are not going to, they have to take it. The only delays are to do with the difficulties sometimes of getting all of the requirements met. There is nothing we can do about that. We are going to have to make sure we have the utilities separated, access road agreements for all freehold entitlements. That sometimes takes more than six months. The certainty is still there. It is just a question of whether it happens in one month or another month or whether it lapses into the next financial year, and so on.

  82. Why do dilapidation negotiations take so long?
  (Mr Tebbit) It is a complex area, as Mr Wilson will explain. It would be easy to say, "Let us do it fast and strike a deal". We have to protect the taxpayer's interest to make sure we do not pay more than we need to, and that does sometimes take time.
  (Mr Wilson) On the issue of the flow of properties toward disposal, I checked position the other day and we had well over 4,500 notices of termination issued to Annington Homes. At the end of the six months there is no doubt that those will be released to Annington Homes.

  83. Are you saying that so long as you finish all of the dilapidation and negotiations within six months, you do not have any extra delay?
  (Mr Wilson) One can even finalise and agree dilapidations after the houses are released to Annington Homes. That is not something that one would want to do, because if Annington sold the houses to owner occupiers then one would not still want to be in a position of negotiating about dilapidations. What we try to do is to discuss and agree the dilapidations much earlier in the process. One of the mechanisms which the Defence Estates Agency are using on our behalf is to introduce a system called the Scott schedules, which actually lay out the dilapidations by individual elements of the house in a schedule, to speed up the process of agreeing dilapidation.

  84. If you can get your dilapidation agreement within one month, would that speed up the process by which you could get rid of the housing?
  (Mr Wilson) No, because we still have to give six months of termination to Annington Homes.

  85. Really? It is the original agreement which is causing the problem, it is nothing to do with dilapidation negotiations; you can usually fit in dilapidation negotiations within that six months anyway, they are not really a problem?
  (Mr Wilson) That is correct.

  86. I must say, the tenor of the Report is that you are using dilapidations as an excuse for not getting rid of the property more quickly.
  (Mr Tebbit) There is a formal agreement with Annington Homes which requires six months.

  87. Whatever the Report says, dilapidation is not part of the reason?
  (Mr Wilson) That is correct.

  88. Right. How much of the stock when it was taken over in 1995 was in poor condition?
  (Mr Wilson) The large majority of the stock was in poor condition.

  89. Do you have a percentage figure for it?
  (Mr Wilson) We set an ideal standard for properties, which is what we call standard one condition, which lists a number of elements which are required to be met in order for a property to be standard one. Against the very, very strict criteria for standard one, there were probably fewer than 1,000 properties which actually met the complete criteria, not least because building regulations and so on have improved over the years and set more demanding standards for things like insulation. By the time we got to 1996, a year or so after DHE was formed, about 3,000 were at or very close to standard one condition.

  90. The report mentions, and I am not sure how this is defined, stock in poor condition. Are you using the same definition when you are talking about standard one?
  (Mr Wilson) There is a definition of standard one condition which was set out in the PAC report on the sale; it is a table at the back of the report. A property which meets all those criteria is deemed to be at standard one condition. The properties which have got a few minor defects or one major element, such as a kitchen or a bathroom which needs to be done, would typically be at standard two. A property which requires a complete refurbishment, or a kitchen and a bathroom, would be typically at standard three, but standard three is the sort of level at which generally speaking families would have to move out in order to have the house refurbished.

  91. Let me take you to the Executive Summary, paragraph 3. At the end of that paragraph it says, "Around half the stock is in poor condition and needs upgrading, disposal or demolition." Under that definition of "poor condition", what percentage was in poor condition in 1995?
  (Mr Wilson) We did not undertake a full stock condition survey until 1997 and the result of that was not analysed until 1998. So we do not have the same indepth statistics on the quality of the property before 1998 that we had after that date.
  (Mr Tebbit) I think we are trying to get at the issue of how well we are doing in improving the quality of our housing stock.

  92. That is right.
  (Mr Tebbit) Since 1996 we have up-graded 11,000 properties to category one. The target we have given the Agency is that by next spring they will have 40 per cent of the stock at category one and 40 per cent at category two. The amount of money being spent on it is rising each year. There is a total plan across the years of around £600 million from the beginning, but to be very precise we are putting £68 million into up-grade this year. Last year we had £47million, £48 million in the up-grade programme. So a lot of resources are being devoted to bringing up to scratch what was a relatively poor estate but we are putting a lot of work into that[8].

Mr Williams

  93. Following up the point about up-grading disposals for demolition, in the event of demolition, Annington have paid you on average £30,000 a house, where demolition is decided on, what compensation do they receive or what do they receive in lieu of not receiving a house?
  (Mr Wilson) Throughout the initial period of the lease, if we demolish a house and do not rebuild it, under the terms of the sale agreement we would continue to pay a ghost rent for that property.

  94. A ghost rent being?
  (Mr Wilson) A rent assuming that the house were there.
  (Mr Tebbit) At the moment we have about 600 properties in that demolition category.

  Mr Williams: Thank you very much. That is useful.

Mr Griffiths

  95. I used to chair a housing authority which had over 50,000 houses, so I am aware of the scale of this issue. Following the comment from Mr Wilson, I just want to get clear in my mind where we are. You are now saying that you started with a stock of 53,000 Annington homes of which only a thousand were of standard one. Is that right?
  (Mr Wilson) Approximately, but we did not have the detailed stock condition survey to get that information. I am looking at my stock as the total stock, not just the Annington Homes stock. That includes stock in Scotland.

  96. Which of course is outside Annington. So when Annington were buying these properties, it was not known that only a thousand of them really came up to standard one?
  (Mr Wilson) Annington Homes investigated the estate and they employed their own surveyors and advisers. They knew the condition of the estate but they also knew that under the terms of the sale agreement, properties which were returned to them had to be returned to them in good and tenantable repair. Therefore they would be compensated if the property were below that standard, and that would have been taken into account in the price they offered.

  97. The Department's assessment was that about half the houses were not up to standard.
  (Mr Tebbit) Are you taking that from the actual report?

  98. I am taking it from what was said a few minutes ago.
  (Mr Tebbit) I think that is a description of how it was when the NAO did their report last year.

  99. So what we appear to have is the sale price of £1.7 billion and then the taxpayer having to up-grade a colossal number of houses which almost no one was aware of until today.
  (Mr Tebbit) No, the taxpayer up-graded it because it was reasonable for Service men to be living in decent accommodation.

8   Note by Witness: The target of 40 per cent at Standard 1 and 40 per cent at Standard 2 by the end of this financial year relates to long-term core stock, ie those propoerties for which there is an identified requirement beyond 2005-06. Back

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