Examination of Witnesses (Questions 180
- 193)
MONDAY 30 OCTOBER 2000
MR KEVIN
TEBBIT, CMG, AIR
MARSHAL MALCOLM
PLEDGER AND
MR JOHN
WILSON
180. Let me pursue the interesting question
you just raised. That is, that once the property has been demolished,
if another property has been put in its place are you still paying
a ghost rent on the demolished property?
(Mr Wilson) No.
181. Could you give us your projection of, if
I might put it this way, dead ghosts rather than to-be-resuscitated
ghosts? Presumably when this contract was entered into, somebody
took a view as to the number of ghost properties that there would
be during the life of the contract. At £2,500 per ghost property,
as the Chairman worked out earlier, for 650 properties, which
I understand is the current ghost level, that is £1.625 million
per annum. What I think we want to find out is how long do you
keep on paying that £2,500 per property? Is it for 30 years?
Is it for 99 years? Is it for the 999 years of the lease? A quarter
of a million pounds for a 99-year lease is expensive if you are
buying a property in central London.
(Mr Tebbit) I do not think it is going to be £2,500.
That would include the maintenance and there will be no maintenance.
182. That was the figure you gave earlier.
(Mr Tebbit) That was including maintenance charges
as well as rent to Annington Homes. When there is nothing on the
site, you deduct the maintenance charges, so it would not be £2,500.
As I understand it, it lasts for 25 years.
183. Right. Could I ask for a very full note
to be provided to the Committee on the projections of ghost properties
and the payments that will evolve over the life of the contract
as a whole?
(Mr Tebbit) I am happy to do the best we can. It will
require judgments about the future, not just clear facts about
the costs of upgrading something[12].
Mr Gardiner: I am sure the MoD assessments will
be as accurate as they always are.
Mr Love
184. I am looking for some reassurance. Can
I make the assumption, which I think is implicit in the Report,
that the uncertainty of the Defence Review is now coming to an
end. Thinking of your argument so far, with these 6,500 properties
you now have ready for sale—and I choose your words rather
than my own—"the radical reduction", as you call
it, the number of empty properties standing vacant for half a
year or a year, that you have produced as of August this year,
should it give this Committee some reassurance that the chart
in Figure 6 shows a continuing increase in the gross numbers and
that the percentage of vacant properties will be coming to an
end?
(Mr Tebbit) Yes.
185. I have to say, certainly as one of the
Committee members, I need more reassurance as to why we should
accept that is likely to happen.
(Mr Tebbit) The reason I think you should accept it
is likely to happen is because our disposals are currently running
at twice or three times previous levels; that we have a much better
system in place for establishing our core requirements as opposed
to our surplus requirements; that this is shown by the sharp reduction
in the number of properties which are vacant and sitting on our
hands for a long period of time; that we have every interest in
minimising vacant and unused properties because it is bad for
defence not just, as it were, for the Committee's interests. The
future that I gave of a figure of around 40,000 with about 4,000
as a management margin is the best I can give the Committee as
a target, but it is better than previous targets in that it is
built up from individual area forecasts, not given as a top-down
general statement. It was right that the first thing for DHE to
do was to work on this disposal question and get down the number
of unnecessary vacant properties. They are now moving to the next
stage of managing the whole thing more efficiently and there is
a lot of work in there, implementing the NAO recommendations which
will do that. Apart from the odd discussion we had about an area
which has not been agreed in terms of simplifying dilapidations,
we have basically agreed and accepted the recommendations in this
report—some of them were things we were doing as well—and
they do provide a much more effective system of managing the estate
in the future. We have no interest whatsoever in hanging on to
property.
186. I accept that, however, if we look back
to the previous reports in the 1990s, Figure 6, on each of the
occasions in the past, even the occasion when we were discussing
the disposal and we were given the assurance there was no interest
in the Department to keep this level of vacancies, it has continued
to increase. It does seem to me you have given us figures which
predict what you will sell to the end of 2001, that is the 6,500
properties. Could I ask that we as a Committee receive a report,
a very brief report, on both the level of vacancies and the percentage
of vacancies, the number of sales and the number of disposals
to the Defence Agency, so we can be kept abreast of how these
figures are developing over that period when you suggest it is
likely to reduce? I am only suggesting we do that up to the end
of 2001 because that is the timescale in which you are suggesting
to us these improvements will be made.
(Mr Tebbit) I said that those were the targets. I
am happy to let you know how well we have done on that point.
Some of the information I have given you has been a moving picture.
There is reassurance in the data I have given you and the data
I up-dated the Committee with before this meeting. There is continuous
evidence of progress. You are looking sceptical but some of these
are facts.
187. No. I accept that having 6,500 properties
available for sale is an improvement. I accept that reducing the
number of properties standing vacant for very long periods of
time, as you have done, or as the figures show, is a very big
improvement. What I am looking for is significant improvement
in the number of properties vacant and the percentage of the estate.
Mr Rendel made it clear earlier on that you could actually sell
those properties but still find yourself with an increasing percentage.
(Mr Tebbit) If demand fell through the floor.
188. I do think we need reassurance. Members
of this Committee have a very great deal to read but I do think
they would find it of some interest to have some figures up to
the end of 2001 so we could see what you have said you will achieve
at this Committee today actually comes about.
(Mr Tebbit) I would be happy to give you an account
of progress against targets. As you will appreciate, this is a
risk management business and if demand falls more sharply then
the figures will not be achieved as I have said. What I would
like to do is give you the figures in some detail so you can see
the different categories we are dealing with, because it is also
modernisation which is in a growth area as well so we are expecting
to improve on that too. I would be very happy to give you a progress
report.
Mr Love: I would only stress brief again.
189. If you were starting afresh, would you
want to correct the flow in the original contract and bring in
a cost-effective speedy arbitration system for resolving disputes
on dilapidations?
(Mr Tebbit) That is a wife-beating question, is it
not? I do not know the answer to that. Provided we can get through
the six-month period, I am perfectly content with that as protecting
the taxpayers' interest. What bothers me is when we run into real
difficulties about separating utilities from the Service base,
as it were, and making them available for the private sale, and
problems about access and roads. When we get into those difficulties,
that means a disposal can take longer. That is why I am not absolutely
certain that we will achieve targets exactly to the timescale
we are setting ourselves. They will be achieved; the question
is how quickly.
Mr Williams
190. I have a slight confusion. This is my final
question, and I do not want an immediate answer, but perhaps you
could put it in writing for us. In answer to Mr Love, you slightly
amended the answer you had given me of 79 million as being rent,
you said that is rent and maintenance.
(Mr Tebbit) We were talking about a different figure
of dilapidation. Let me just say, the rent paid to Annington's
last year was £109 million.
191. Can I ask you then, were you told by the
NAO that it is costing the Department £175 million a year
net and the income you receive from Service families? Can we have
the gross figure, the £175 million costs plus the actual
income you receive from the Service families, so we can see what
your outgoings are? That money is used to pay rent from you to
the company, management costs, maintenance costs and upgrade costs.
Can you break the new gross figure down into those four constituent
parts, please?
(Mr Tebbit) The rent to Annington was
£110 million. This is financial year 1998-9912. The receipts
from the people in the houses were £79 million. There were
other receipts from other people of £5 million. There was
a net expenditure of £175 million. Work that we put as the
maintenance cost was 149. We had a receipt for £79 million
and another receipt for £5 million, which was the net expenditure
of £175 million.
13 Note by Witness: As noted earlier, the
rent paid to Annington was £109 million financial year 1999-2000.
192. Can you break those down?
(Mr Tebbit) We do not seek to break even on this,
because there was a valid cost of being able to move our people
around.
193. It is purely a matter of us having all
of the figures so there can be no confusion.
(Mr Tebbit) In 1999-2000 the rent was £109 million,
the work on the properties was £158 million, there were £79
million receipts from Service men and £5.5 million other
receipts, which was a net expenditure of £182 million.
Mr Williams: Thank you very much, gentlemen.
It has dragged on slightly longer than any of us anticipated.
It has been rather interesting. We appreciate the evidence you
have given. Thank you very much.
12 Note by Witness: See Appendix 1, p 23. Back
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