Examination of Witnesses (Questions 140
- 159)
MONDAY 30 OCTOBER 2000
MR KEVIN
TEBBIT, CMG, AIR
MARSHAL MALCOLM
PLEDGER AND
MR JOHN
WILSON
140. On this security point—this is the
key—we know that some Service commanders are reluctant to
declare properties as surplus, even though they lack requirement
for them. There is no financial incentive on the Services to assist
with the release of surplus houses. What I sense here is a culture
of particular base commanders seeing this whole debate about vacancy
and releasing properties as not primarily what they are about?
(Mr Tebbit) They are held to account for broader responsibilities.
One of the reason we created the DHE in the first place in 1996
was to create an organisation which would challenge those judgments.
There is an active process underway and these people go and visit
regularly, as well as have formal quarterly reviews. There is
a fairly healthy track record, which has the final say, not the
Services, of Service requirements being overridden by the DHE
who judge that they can manage that risk and release more than
the military commander is willing to do.
141. I would like to know Mr Wilson's instinct
about Service culture. I understand their job is to defend the
country. This must all be a crashing bore for them.
(Mr Wilson) In a lot of our locations we are not dealing
with a single unit or a single station, we are dealing with a
catchment area which embraces a number of units. It is DHE which
has the overview of the situation. It is up to us to negotiate
with the units and stations. Going back to the issue I mentioned
earlier, of agreeing with them what should be the future core
stock, the type of houses and the location that we want the people
to be in, the other side of that same coin is to dispose of the
properties they do not see as being required in the medium or
longer term. I have a team of Service officers who work for me,
headed by a serving brigadier, and one of his main functions,
and that of his team, is to travel the country, to talk to units
and commands and to ensure that that process of determining core
stock and disposal of surplus property is pursued vigorously.
I believe that the progress we are making this year demonstrates
that that has been quite successful over the last 18 months.
(Air Marshal Pledger) As we said earlier, the incentive
here is the recognition we have achieved over the last year that
there is a linkage between the upgrade programme, which is vital,
for the reasons I described earlier, and the need to release these
houses so we have a cost-effective solution. The real success
has been to break down the cultural unit in order to show that
relationship and that value.
142. 632 houses are set for demolition in 2000,
is that right?
(Mr Tebbit) That sounds about right.
143. Why are they to be demolished? Can they
not be used for anything else? Can we lease them out to Annington
Homes? What is going on?
(Mr Tebbit) I am sure if they could be made use of
elsewhere, they would have been.
(Mr Wilson) Many of the houses we have are in such
poor condition or they are, perhaps, too small to meet Service
requirements. A lot of the housing is also at too great a density.
There were a lot of terraced properties built in the 1950s and
1960s which had no green space around them, so we are also trying
to create a better environment for Service families living on
certain estates, particularly in Scotland. At Helensburgh we are
thinning out the estates to provide a better living environment
for the families.
(Mr Tebbit) We are talking about 1 per cent of total
stock.
144. Misappropriation houses. Am I right in
thinking 1,079 houses were being used for non-housing purposes
in 2000?
(Mr Tebbit) Yes.
145. Should this be allowed? What is going on?
Should there be purpose-built offices, messes, et cetera?
(Mr Tebbit) I knew I would have trouble with this
"misappropriation". This is when the house is being
used for things such as crèches or welfare offices or indeed
offices for Mr Wilson's staff. It is misappropriated in relation
to actual Service accommodation but, as I say, it is not misappropriated
in the sense of not being cost effective for defence functions.
There is a requirement now placed on DHE, the Services and Air
Marshal Pledger, to make sure that only property which can be
justified as being in the core of our requirements can be used
in this way.
146. Area managers often only have two weeks'
notice that a house will be vacant in the case of an individual
move. Can anything be done to ensure they are given more notice?
(Mr Tebbit) Two weeks is very tight. I had hoped my
colleagues would tell me about this Portsmouth experiment to try
and improve matters but they obviously do not want to. There are
various studies going on trying to improve notice. There will
always be short notice emergency issues in the Armed Forces because
it is like that, but I do not think two weeks is the norm.
(Mr Wilson) It is not the norm, it is the exception.
147. Can I ask one last question which I hope
is not too naughty a question? It relates to my own experiences
of former RAF married quarters in Lincolnshire, of which there
are many. The constant complaint is that when these properties
are disposed of the MoD seems to have no concern for the future,
people are moved out, they often rip everything out, given to
fly-by-night developers, no proper contracts in terms of service
provided to the tenants, and whole thing in the view of many people
in Lincolnshire is a disaster. I know this is a slightly naughty
question but this is a big issue for us.
(Mr Tebbit) One of the benefits, if you like, in this
context, of the Annington Homes agreement is that that does not
happen any more because they are released to Annington Homes who
then sell them on as fast as they can in good condition to people
who want to buy them.
148. So the disasters we have had in places
like Brookenby and Hemswell and other sites in Lincolnshire you
think under the new system are not going to happen?
(Mr Tebbit) It cannot happen because it would be totally
against Annington Home's interest to let it happen. It is in their
interests in selling houses to people who want to buy them in
the dilapidations process to make sure it does not happen.
Mr Leigh: Thank you very much.
Mr Williams
149. Gentlemen, you will be delighted to know
that we are so much enjoying your presence here that nearly everyone
has asked to ask a supplementary question. Can I kick off with
a question of my own? You said that £1.6 billion was paid
by the company for these properties. You said that rent is £109
million a year, so already in four years, £440 million has
been paid back in rent. I note that that leaves a gap of about
£60 million a year which must be being paid in maintenance,
which is another £240 million. So really of this £1.6
billion, £700 million in four years has already been paid
out by you either in the form of maintenance on their behalf or
in the form of rent. At this rate your £1.6 billion is not
going to last very long.
(Mr Tebbit) I am not sure I follow your mathematics,
Mr Chairman. I wish we did not have to go back over the details
of this deal but I quite understand why you want to. Maintenance
on the property is in our own interests because we want good quality
housing for our people. It is a very long-term lease from Annington.
For properties we do not offer for disposal, the tenancy agreements
are for 999 years, so it is in our interests that we maintain
these houses not Annington Homes, so I would not put that in the
context of the agreement with Anningtons. We would have needed
to maintain them anyway whether we sold the owner-interest to
Annington or not, so I do not think you can hold that cost against
Anningtons.
150. But in the space of about 12 years you
will almost have paid the full amount back in rent.
(Mr Tebbit) It depends how quickly of course we run
down numbers, how much the rent increases by. It is very difficult
to say how quickly one could say one would have paid the amount
back in rent, but the value of the capital sum in 1996 also has
to be taken account of in terms of discounted cash flow and that
sort of thing; net present value is the phrase.
151. The value of residual capital assets also
has to be taken into account on the side of the company. They
have a very, very good deal.
(Mr Tebbit) I recognise the thrust of your questioning.
You know I can never satisfy you, Mr Williams.
Mr Rendel
152. I wanted to come back to the point which
Mr Wilson agreed with very clearly, because I challenged him on
it, that the dilapidation work could not usefully be speeded up
because of the agreement that was made with Annington Homes originally.
There is, however, in the original Report from the NAO, a recommendation
which, because it is in the agreed Report, one assumes that the
MoD also agreed, amongst other places, on page 8 of the Report
in paragraph 19, where it says: "The Department should investigate
the possibility of simplifying the dilapidations process prior
to release of houses to Annington Homes—for example, by
devoting further resources to inspections—to speed disposals".
One wonders why you agreed to devote further resources to speed
up this process, if today you were very firm in saying that it
would not speed disposals in any way. They cannot both increase
the speed of disposal and spend more resources.
(Mr Wilson) A suggestion that has been made in the
past is that each side should not employ its own surveyors, but
there should be some kind of neutral surveyors. What we have done
is to simplify the process in terms of introducing the Scott schedules,
which I referred to earlier, which make it a much more measurable
process.
153. Will that speed disposals?
(Mr Wilson) Not directly.
154. How will it indirectly speed disposals?
(Mr Wilson) What we need to do is make sure we pay
the minimum in dilapidations to Annington Homes that is justifiable.
What I would not wish to do is to short-circuit the procedures
to such an extent that the taxpayer gets bad value-for-money.
155. Are you now firm in what you said to me
earlier, which was that simplifying the dilapidations process
will not speed disposals? You both agreed that a few moments ago.
You may withdraw it if you wish to. I want to know if you are
going to withdraw it.
(Mr Tebbit) I did not say that.
156. You certainly appeared to me to say it.
(Mr Tebbit) I did not say that. I am concerned to
ensure that we do not pay more in dilapidations than we need to
pay before we pass something over to Annington Homes. My concern
is to make sure that I protect that interest. If Annington said
that they would do it tomorrow, "Here is our price",
and charge more than we need to pay, then that would be bad value
for the taxpayer. I want to make sure we take as much time as
we need to ensure that the dilapidations are no more than we should
pay, to move as fast as we can over getting utilities, rights
of way and freehold tenure agreed, and then to proceed on that
basis. Once we have that, the thing happens. It may not happen
for six months, but we are certain that it will go to Annington's
at the end of that period. That is the best way I wish to proceed.
I am not keen on speeding up the process which costs the taxpayer
more money.
157. Are you now saying that simplifying dilapidation
would speed disposals?
(Mr Tebbit) I honestly do not know whether it would
speed disposals. I am worried about what is meant by simplifying.
158. You did agree a recommendation that you
should try to simplify the application and should pay further
money towards that.
(Mr Tebbit) The agreement was to investigate. I would
like Mr Wilson to tell me what the investigation showed.
(Mr Wilson) It is still feasible to discuss and agree
dilapidations after the notice of termination has ended and the
property has been returned to Annington Homes. It is in both parties'
interests to simplify the process by using schedules to ensure
that there is a clean break and, as far as the Ministry of Defence
is concerned, to be clear that we have got good value-for-money.
It would be much more difficult for us to argue that after Annington
Homes has sold the houses on to owner-occupiers and so on.
159. Mr Wilson, like Mr Tebbit I would like
you to answer the question as to what this investigation showed.
(Mr Tebbit) As accounting officer, I have to tell
you this was not agreed as a process because we did not feel that
it was going to work; that the MoD needs to negotiate and agree
detail—
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