Examination of Witnesses (Questions 80
- 99)
MONDAY 30 OCTOBER 2000
MR KEVIN
TEBBIT, CMG, AIR
MARSHAL MALCOLM
PLEDGER AND
MR JOHN
WILSON
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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