Select Committee on Deregulation and Regulatory Reform Sixth Report


PROPOSAL FOR THE REGULATORY REFORM (HOUSING ASSISTANCE) (ENGLAND AND WALES) ORDER 2002

Burdens in respect of general power to give assistance: proportionality

Published policy

  35. The publication by authorities of a policy on housing renewal assistance would, the Department argues, encourage transparency and fairness in the granting of assistance under the new general power. It would also help to ensure that authorities were spending public money in the most appropriate way. The production of such a policy is a fairly substantial burden to place on local authorities. However, given the sums of money which are involved, and the necessity of ensuring that authorities exercise the power conferred in an open and transparent fashion, it does not appear disproportionate.[25] We note that authorities will be provided with guidance on what should be included in their policies in the Government guidance accompanying the Order referred to above.[26]

36. Whilst the proposed Order would prevent an authority from using its power to give assistance (under article 3) unless it was exercised in accordance with a policy on the provision of assistance, we note that there is no requirement on the face of the Order for an authority to publish such a policy. We asked the Department whether the Order should provide for a requirement for all authorities to publish a policy (within 12 months of the Order coming into force).[27]

37. The Department noted in response that it would be open to an authority to adopt a policy of offering no financial assistance for housing renewal; and that in some authorities this might be an appropriate course to follow - if, for example, the authority felt that it did not have a serious problem with private sector conditions and preferred to focus on advice and preventive measures. In that case, it would be reasonable not to require an authority to publish a policy. Although it expected such cases to be "very few indeed", it concluded that, on balance, and furthering the objective of giving local authorities maximum discretion to determine their own policies and priorities, the proposal to link the requirement to publish a policy to the use the power was the best way forward. We are satisfied that this is an appropriate way to proceed.

38. We note, however, the concern of our colleagues on the Transport, Local Government and the Regions Committee regarding the plethora of plans and strategies which local authorities are now expected to produce.[28] The explanatory memorandum notes that the Government envisages that the published policies will form part of the wider housing strategy for each authority. We recommend that the Government make clear in their guidance to authorities the desirability of incorporating their policy on private sector housing renewal into their overall housing strategy, and publishing it as a single document.

Other burdens

  39. The benefits expected to result from the imposition of the other burdens in respect of the general power to give assistance set out above are the creation or maintenance of adequate safeguards against the inappropriate use of that power. We are satisfied that the burdens are proportionate to those benefits.

40. The Government also notes the argument that someone who might previously have been offered assistance in the form of a grant might, under the new powers, be offered a loan instead; and that this could be seen as imposing a financial burden on that person. It argues, however, that this should on balance not be considered a burden, because those who are deemed to be able to afford a loan may not have been eligible for grant assistance under the current regime; and because provision of repayable loans rather than grants could make authority resources go further and help more people than under the current regime, so those who were previously not eligible for help could be eligible under the new system. We are satisfied that, insofar as the Order may result in such a burden being imposed, that burden is proportionate to the benefit which is expected to result from its creation.

Necessary protection

  41. The current legislation contains a number of detailed provisions which were originally considered to be necessary to ensure that public money was properly spent. The Department argues, in the explanatory memorandum, that most of these provisions date from a time when the grants concerned were mandatory, and that they are unnecessary in the current discretionary regime. Furthermore, the Department argues, local authorities are "responsible statutory bodies", and many of the detailed provisions of current legislation, far from providing any necessary protection, in fact hamper their ability to provide assistance for housing renewal in the most efficient and effective manner.

42. Nevertheless, certain safeguards are necessary. The explanatory memorandum identifies the following alternative safeguards, in approximate order of importance, to protect the individual and the public purse in the absence of the current detailed legislation.

PROVISION TO ALLOW AUTHORITIES TO PLACE A CHARGE ON A PROPERTY AS SECURITY FOR ASSISTANCE GIVEN

  43. We were concerned to examine further the provision of the Order which would allow authorities to place a charge on a property as security for assistance given (see (a) in paragraph 42 above). The current legislation enables an authority to place a charge on a property higher than an existing charge. For example, if the recipient of assistance had both a mortgage, as the first charge on a property, and a secured personal loan, as the second charge on that property, an authority would currently be able to place its charge above that relating to the secured personal loan. However, the form in which the provision would be translated into the proposed Order would remove this ability: an authority's charge would be placed after any existing charges. We asked the Department whether it considered that the provision in its current form offered any necessary protection to authorities.[32]

44. The Department replied to the effect that it did not believe that the drafting of this article would remove any necessary protection from local authorities. The intention of the original wording appears to have been to ensure that the local authority's charge in relation to a relocation grant is placed after the mortgage lender's charge, so as not to jeopardise the recipient's chances of getting a mortgage on their new property, rather than to enable the authority to place its charge higher than another lender's. Furthermore, the Department argues, if an authority were to exercise the power in this way, "[it] could jeopardise not just the individual's ability to obtain a mortgage but also wider regeneration initiatives which often rely on lenders' willingness to lend in that area."[33] We are thus satisfied that it is not necessary to retain the ability of an authority to place its charge on a property above that relating to an existing charge; and that the Order would maintain all protection necessary to ensure that an authority was able, where appropriate, to recover any assistance given.

AUTHORSHIP OF REPORT INFORMING DECLARATION OF A RENEWAL AREA

  45. We also considered further the issue of maintenance of necessary protection in respect of authorship of the report that informs the declaration of a renewal area (the legislative requirements governing which would be removed by the proposed Order - see "Imposition of burdens" above). One of the current requirements is that "the report [be] prepared, at the request of the local housing authority, by a person appearing to the authority to be suitably qualified (who may be an officer of the authority)".[34] Justifying the removal of this requirement, the explanatory memorandum states, "The authority will still need to go through a formal declaration process and they will have to satisfy themselves that the evidence presented in recommending that a renewal area is declared is of an approved source."[35]

46. It was not clear to us, however, how the latter part of this sentence applied. There is no such requirement on the face of the Order, nor is it referred to in the outline guidance included at Annex G of the explanatory memorandum. We therefore asked the Department, firstly, why it proposed to remove the requirements concerned, and, secondly, how it was intended to ensure that the evidence presented was "of an approved source".[36]

47. In reply, the Department argued that the proposal to remove the requirement in question from existing legislation was a matter of "streamlining the legislation and removing over-prescriptive provisions," adding, "We believe that this provision does not offer any substantive protective value as it is at the discretion of the local authority as to who is 'suitably qualified'. We would expect the authority to ensure, in declaring a renewal area, that the report is prepared by someone who is appropriately qualified. The housing renewal guidance will include advice on this as necessary". It also noted that the revised 1989 Act would retain the power for the Secretary of State to issue separate statutory guidance on the declaration or extension of renewal areas, including who prepares the report, should the need arise.[37] We are thus satisfied that the removal of this requirement does not remove any necessary protection.

Rights and freedoms; fair balance; desirability

  48. We are satisfied that the Order would not prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise. As noted under "Imposition of Burdens" above, it may be the case that someone who might previously have been offered assistance in the form of a grant might, under the new powers, be offered a repayable loan instead. However, with the exception of the right to mandatory Disabled Facilities Grant, which is unaffected by this proposal, there is no existing "right" to any assistance for improving living accommodation. Under current legislation, grants are offered at the discretion of the authority, and this would continue to be the case should this proposal become law.

49. We are also satisfied that the provisions of the order, taken as a whole, strike a fair balance between the public interest and the interests of the persons affected by the burdens being created. In this case, we consider that the public interest is in the appropriate use of public funds. The Order appears to strike a fair balance between this interest and the interests of, on the one hand, local authorities, who will wish to serve their population in the most appropriate fashion and with the minimum of bureaucratic or other constraints, and on the other hand, applicants for grant, who will wish to ensure that they have the opportunity to secure decent living accommodation.

50. Finally, we consider that the removal of burdens, and the other benefits resulting from this proposal, described elsewhere in this Report make it desirable that this Order be made.

Financial Impact

  51. The Department expects that, overall, the reforms will allow local authority resources to be used more effectively and go further. By having more discretion to give loans instead of grants, for example, authorities would be able to recycle some of their original investment; by being able to provide funding support to another body to provide affordable loans, they would be able to lever in private finance to support expenditure on home improvement. The costs and savings falling to authorities and individual householders will depend mainly on the extent to which authorities make use of their new powers, and on the social and economic conditions in an area. For example, there is likely to be more scope to use 'equity release' loans in areas where levels of available equity are high, or to assist homeowners who have already paid off substantial amounts of their mortgages.

52. No respondents to the consultation attempted to quantify the potential costs or savings associated with the new legislation. However, half of the respondents thought that there would be some additional costs, mainly in relation to local authority administration. Although most did not comment on potential savings, 20% acknowledged the scope for more efficient use of resources, through loan-recycling and better targeting of help. Some recognised that there could be a balancing of new costs through a less administratively-burdensome legislative regime.

SUMMARY OF COSTS AND SAVINGS

  53. Summaries of the Department's estimates of the potential costs and savings are shown in the tables below:

To whom Costs
Local authoritiesStart-up costs (particularly in first 2 years), relating to the formulation of the published policy and associated consultation, setting up new systems and processes to administer grants and loans under the new legislation.
IndividualsCost to individuals who would have otherwise received grants, but who are no longer eligible, or eligible for loan assistance only.
BusinessNone



To whomSavings
Local authoritiesSavings could be made through the greater use of loans instead of grants, and by using grant assistance to lever-in private loans.
IndividualsThere could be savings for those people who would benefit from more widespread availability of assistance, due to local policy or better use of resources.
BusinessCould create business opportunities through more housing renewal activity and greater use of commercial loans to support it.

A full consideration of the costs and savings associated with the proposals is contained within the Regulatory Impact Assessment, which may be found at Annex A of the explanatory memorandum.

RESOURCES REQUIRED FOR LOCAL AUTHORITIES

  54. We are required to consider the extent to which the proposal has been the subject of, and takes appropriate account of, estimates of increases or reductions in costs or other benefits which may result from its implementation.

55. We recognise the potential which these reforms have for enabling authorities to make better use of the resources available to them. However, the extent to which the new power, and the flexibility which authorities will have to use that power, will result in real improvements to the living standards of people in poor quality housing will depend very much on the level of funding which the Government is prepared to pass on to authorities to carry out the necessary work. We welcome the Government's confirmation that it does not intend to recoup the savings made by local authorities from the giving of loans instead of non-repayable grants.[38] Nevertheless, there is a danger that the greater discretion which this proposal will allow local authorities will be of only limited value because they have so little money to spend on the exercise of the powers it confers.

56. In particular, we are concerned that the Department may not have taken appropriate account of the effect on authorities' resources of 'start-up' costs relating to the introduction of the new power. Such costs might include, for example, comprehensive surveys of the state of private sector housing in an authority's area; costs associated with consultation on the policy which has to be prepared, including publicity; the establishment of new systems and processes in local authority administration; and possibly the recruitment of consultants to take on work not able to be absorbed within an authority's existing staff structure.[39] This would be in addition to the costs of setting up schemes for the provision of the assistance itself such as Birmingham City Council's "HouseProud" scheme, to which the Department refers in its supplementary memorandum.[40]

57. When we asked representatives of local government, in the form of the Local Government Association and Welsh Local Government Association, to comment on this issue, they noted (as did the Department[41]) that such costs were very difficult to quantify, and could vary considerably from authority to authority depending on that authority's particular circumstances. They also accepted that any costs incurred were likely to be proportionate to the long-term benefit of increased flexibility in the giving of assistance which the Order would confer.[42]

58. Nevertheless, as the LGA added, "the strategic and policy value that the Government's core commitments will derive from this initiative would amply justify assistance with the initial costs of getting the changes under way".[43] The Department's confirmation that it does not intend to offer local authorities any additional help with start-up costs connected with the introduction of this proposal is therefore disappointing.[44] The fact that the Regulatory Impact Assessment makes no reference to the costs to local authorities of preparing for the new regime reinforces our conclusion that the Government has not taken appropriate account of the costs involved. We recommend that the Department look again at the level of resources which will be required to ensure that local authorities are able to make the most effective transition from the current arrangements to the exercise of the new power.

ABILITY OF LOCAL AUTHORITIES TO EXERCISE DISCRETION

  59. We are also concerned that local authorities' ability to exercise discretion over the most appropriate way to offer assistance for housing renewal should not be fettered, as we believe has been the case in the past, by central Government direction regarding how money provided to authorities should be spent. We are concerned here not with the proper legislative controls set by Parliament, but rather with more or less explicit "understandings" that money will only be provided to local authorities if it is spent on certain projects, or kinds of project, thus undermining authorities' freedom to address the needs of their communities in the way they consider most appropriate.

60. We asked the Department for assurances that allocations of funding to local authorities for housing renewal would be made available solely on the basis that it was to be spent entirely as the authority concerned saw fit (within the appropriate legislative constraints). The Government responded by drawing attention to the introduction, from April this year, of the "single capital pot", which will give authorities much more discretion over the allocation of capital resources than has previously been the case. It also stated that it had "no plans" to restrict the discretion of local authorities over the choice of policy to be adopted and the amount of resources allocated, within overall budgetary limits. It added, however, that it would continue to monitor local authority policies and have regard to local authorities Housing Investment Programmes and reports from the Housing Inspectorate on their performance.

61. We welcome the Government's commitment, in principle, to greater discretion for authorities over their spending on private sector housing renewal. We trust that that commitment will not be undermined in practice by an inappropriate exercise of central Government control over the allocation of resources for this, or any other, local authority function.

CHANGES TO THE DISCRETIONARY DISABLED FACILITIES GRANT REGIME

  62. Although not specified on the face of the Order, the proposal will have implications for the way in which the current Disabled Facilities Grant (DFG) regime is funded in England.[45] As noted above, DFG is available both on a mandatory and on a discretionary basis. The Government meets 60% of the cost of both mandatory and discretionary DFG from a ring-fenced 'pot' (worth £87m in 2001-02); the rest being funded from authorities' general Housing Investment Programme capital allocation. Discretionary DFG accounts for about £3m of this £87m.

63. Mandatory DFG will be unaffected by the proposal. However, the Order will effectively abolish discretionary DFG, and assistance which would have been available by this means will be available under the new general power. The implication of this change is that discretionary DFG (under the new general power) will have to be funded from authorities' general Housing Investment Programme capital allocation, as is all other assistance. This effectively represents a redistribution of resources from discretionary DFG (or rather, from the funds available for all kinds of assistance under the new general power) to mandatory DFG - since the £3m of the DFG 'pot' currently spent on discretionary DFG will now be available only for mandatory DFG.

64. The Department argues, "In practice we believe this will make little or no practical difference. Overall the level of resources available to authorities for DFGs and private sector renewal will be unaffected. In particular the size of the ring-fenced DFG pot will be the same as now. As most authorities run with a backlog of mandatory DFG applications they can easily use the full ring-fenced pot on mandatory grants (as they should). [Funds] will be available from the single pot, as now, to provide additional top-up expenditure, as now, for discretionary grants over and above what the DFG pot provides. We will continue to redistribute authorities' underspending on DFGs to those overspending as at present".[46]

65. We considered whether we ought to recommend that the Government reduce the DFG pot by £3m and add this amount to that available for authorities to distribute under the new general power to give assistance. In view of the substantial backlog of mandatory DFG applications across the country, we do not believe that such a redistribution would be appropriate. However, we note the - relatively small, but nevertheless significant - reduction in the level of resources available for authorities for other private sector housing renewal which this change represents, and suggest that it adds further weight to the concerns about those resources which we express above.

Report under Standing Order No. 141

  66. We recommend that a draft Order in the same terms as the proposal should be laid before the House.


25   But see para 58 below. Back

26   Para 13. Back

27   Appendix 1, para 2. Back

28   Appendix 4. Back

29   See article 3(6) and (7) of the proposed Order. See also paras 43-44 below. Back

30   See para 12 above. Back

31   Explanatory memorandum, p.43. Back

32   Appendix 1, para 5. Back

33   Appendix 8 Back

34   1989 Act, s.89(3). Back

35   Explanatory memorandum, para 29 Back

36   Appendix 1, para 6. Back

37   Appendix 2, s.6. Back

38   Appendix 2, s.10. We note also that article 8 of the proposed Order, "Recovery of contributions", is intended for cases of fraud or misuses of the grant power, and not for the reclaiming of funds routinely allocated to local authorities for the exercise of their powers under the Order. Back

39   See Appendix 6. Back

40   Appendix 2, s.8. Back

41   ibidBack

42   Appendices 6 and 7. Back

43   Appendix 6. Back

44   Appendix 2, s.8. Back

45   But not in Wales (see Appendix 2, s.11) Back

46   Explanatory memorandum, pp. 36-37 Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 4 March 2002