Examination of Witnesses (Questions 360-379)
MR NICK
NOLAN, MS
LIZ MILLET,
MR PETER
ROGERS AND
MR MIKE
WILLIAMS
THURSDAY 11 JULY 2002
Mr Betts
360. Some of the proposals in the Bill will
require primary legislation, but for other measures we will have
to wait for regulation and probably guidance, which may not come
through until after the Bill has gone through Parliament. Are
you concerned in any way about the balance between primary and
secondary legislation, in terms of the proposals?
(Mr Rogers) Yes. It is always much better to get things
in primary legislation first. We have a history of lobbying for
changes, particularly on powers to trade and charge, and have
been doing so for more than ten years. We now appear to be seeing
a glimmer through the White Paper of that opportunity, admittedly
with restrictions through CPA—and my views are clear on
that. It would be much better if those freedoms were defined and
available now so that they could be implemented quickly, rather
than waiting for further consultation downstream on regulations
and orders.
(Mr Nolan) If I could just put a word in for politicians,
in Coventry, particularly because the city was bombed and re-built
in the fifties it was aging and falling apart and we needed something
to revitalise it. It was the politicians who did that. If there
is something I would look for in the Bill, it would be an entrenched
form of bill of rights of politicians to do what they believe
is best for their city and their constituency—and that will
be tested in the most severe inspection of all, in the ballot
box.
(Mr Williams) If I could draw attention to three aspects
where regulations will be made that are of concern to Wolverhampton,
they relate to financial issues. The first is on capital finance,
where there are reserve powers for the Secretary of State to set
limits for individual authorities, which seems to be taking us
back to the old credit regime limits. The second is in respect
of financial administration. There are powers for the Secretary
of State to determine minimum reserve levels for individual authorities.
This is viewed with great concern in Wolverhampton. We believe
that we are a well-run financial authority; we have no record
of overspending against budgets; and we regularly take monitoring
reports to members. If the Secretary of State were to use this
power in a fairly casual way, without a full assessment of local
circumstances, I could envisage a situation where Wolverhampton's
minimum reserve level would have to be increased. At the moment,
we are quite confident that we can maintain a contingency reserve
of £2 million. If that had to be increased, the council would
be faced with the difficult choice of either cutting services
or increasing the council tax. The third issue relates to housing
finance.
Chairman
361. How do your reserves compare to other authorities
around Wolverhampton? Are you more reserve conscious, or less?
(Mr Williams) I think we are a well-run, prudent authority;
but if you were to look simply at balance sheets or budgets, you
may well conclude that the level of our contingency reserve compared
to some other authorities seems low. In fact, the Audit Commission
statistics would show that. I repeat that we have no record of
overspending against budgets; we have had no adverse comments
from our external auditors, and we believe that £2 million
for Wolverhampton is a prudent level.
362. Presumably, it would be fairly difficult
for the councillors to convince the electorate that they should
have cuts in the library service in order that you should have
higher reserves?
(Mr Williams) That would be an impossible task for
the electorate. In such a situation, clearly, there would be a
mechanism for the authority to appeal, should any authority ever
get to that position, but if the Secretary of State's will prevailed,
it would be a difficult decision between reducing expenditure
or increasing council tax.
Sir Paul Beresford
363. You are satisfied in Westminster that the
finance officer and the auditor annually look at your balances,
and that if they felt it was out of line, you would be told.
(Mr Rogers) Yes.
(Mr Williams) The next one is housing finance, which
is the most important from Wolverhampton's perspective. There
are two issues. Part 7 of the draft Bill would allow the Secretary
of State to adopt a highly subjective regime to determine each
local authority's annual subsidy for council housing. It mixes
the present formula approach with subjective assessments of HRA
business plans and authorities' performances, and "assumptions
as to any other matter". Clearly, this would give extremely
wide powers to the Secretary of State with which to determine
subsidy, and the Government has determined the general fund services
that plan-based grant decisions are not appropriate, but for housing
finance apparently a different approach is being taken. The other
issue on housing finance is the requirement that housing revenue
account surpluses can be paid to the Government for re-distribution
to other services. This has been an issue in an exchange of letters
between Wolverhampton and government ministers for many years.
Chairman
364. Do you anticipate Wolverhampton being a
winner or a loser on this?
(Mr Williams) The Government's view is that Wolverhampton's
housing revenue account makes a £10 million surplus this
year. Clearly, we do not believe that that is a reasonable assumption
to make. When rebates are transferred from the housing revenue
account to the general fund, that will not improve the finances
of the housing revenue account. We believe that it will be financially
neutral.
Chris Grayling
365. This begs the interesting point that an
easy perception to draw from the proposals is that this is an
excuse to relocate finance from rich areas to poor areas, and
the natural instinct is that effectively the Home Counties will
be losing and places like Wolverhampton will gain. Therefore,
your comment that Wolverhampton might not necessarily be a gainer
suggests a much muddier picture than one might otherwise have
thought.
(Mr Williams) In respect of housing finance, I believe
there are far more housing authorities that have got surpluses
in the Government's view and are required to pay sums of money
over to the Government, so I want to ask the Committee to recommend
that if this approach has to continue, that the Secretary of State
should quite clearly show for each housing authority the surplus
that is being paid to the Government as well as any subsidy that
is received by other housing authorities, and then go on to show
if there is an overall net surplus nationally, and to further
indicate to what purposes and to which services those surpluses
are being applied. Are they being used to repay overhanging debt
of authorities that transferred to other social landlords, or
are they being used to help finance other government priorities?
Chairman
366. How would it go down in Wolverhampton if
money was being paid over to help them out in Birmingham or in
Sandwell?
(Mr Nolan) Or West Bromwich?
(Mr Williams) If we could see that there were clearly
other authorities that were in a worse position than Wolverhampton,
there could be a case which the Government and officers could
try to address, but given that Wolverhampton is the 29th most
deprived area out of the 355 metropolitan districts, and 63 per
cent of tenants in Wolverhampton are in receipt of rent rebate,
it is very difficult for local tenants to understand why £10
million worth of subsidy is being foregone and paid back to the
Government. It is equivalent to £1 per tenant per day.
Mr Betts
367. On the issue of accountability of officers
and politicians to their electorate and to the tenants and council
tax payers, is there any chance that you could explain to a council
tenant or a council tax payer in your borough exactly how the
housing finance system is going to operate?
(Mr Williams) I think it is possible to explain. It
is not a particularly difficult calculation. If you take Wolverhampton
as an example, on the face of it this year, we are going to receive
£39.8 million of subsidy. £35 million of that is to
reimburse us for the cost of rent rebates, so that leaves £4.8
million once the rebates are removed. But out of that £4.8
million, £15.5 million is the major repairs allowance. This
is a capital grant and can only be spent for capital purposes
on HRA property. It cannot be used on HRA revenue expenditure.
If you take the £15.5 million away from £4.8 million,
you are left with a deficit.
Sir Paul Beresford
368. You are effectively saying that you have
a stealth tax through the rents and through subsidies, where Government
is setting the rents, and in addition to that, if you have capital
receipts you are likely to lose those as well, including retrospective
capital receipts. You are doing really well.
(Mr Williams) This has been a matter of contention
between Wolverhampton and the Government for some time now because
this subsidy first arose in 1993 at £1million, and it has
been rising steadily ever since. Under the new arrangements, when
it becomes more transparent that there is this surplus being paid
to the Government, at that stage it would be far more difficult
for the Government and local councils generally because it would
be far more obvious to tenants as to the extent of the position.
Mrs Dunwoody
369. If you sent out a little note to everybody,
saying, "£1 from every one of you is going to somebody
else" do you think you would be terribly popular?
(Mr Williams) No.
Chris Grayling
370. You are exactly the profile of council
that I was expecting to be the beneficiary. Maybe the three councils
could give a sense of this. If you are not winners, who is?
(Mr Williams) When it comes to housing finance, there
are many, many councils that are winning. In terms of general
funds and the replacement of standard spending assessments, we
are all waiting to see what the system is going to be. The Government
issued the consultation paper a few days ago. On the face of it,
the proposals seem very similar to the new arrangements. There
are potential winners and gainers, but until firm decisions are
made, no-one really knows.
Mr O'Brien
371. How does the index of multiple deprivation
apply in your area?
(Mr Williams) That would be reflected in terms of
the Government's standard spending assessment approach.
372. Does it impact upon your tenants?
(Mr Williams) In terms of the housing revenue account,
it is more likely to have an impact on the Government's calculation
of what it considers to be the average rent.
373. How do you think we should present a report
on how the index of multiple deprivation should apply in your
particular case?
(Mr Williams) Far greater attention should be given
to stock condition surveys and the repairs backlog, and trying
to make additional resources available to target and address those
issues.
374. A general environment situation on your
housing estates.
(Mr Williams) It should more accurately reflect the
stock condition and surveys and a need for investment.
Chairman: I get the impression that as far as
the regulations are concerned, Wolverhampton is voting them down.
Chris Grayling
375. Sir Paul was joking about you subsidising
Sandwell and so forth, but in conversations you have had with
your neighbours, how do you think they have been affected by the
arrangement?
(Mr Williams) Obviously, the Government can provide
figures if you need to see them, but my recollection is that there
are very few housing authorities in England that are net receivers
of subsidies; there are more in the Wolverhampton position.
Christine Russell
376. Mr Rogers, you indicated dissatisfaction
on the part of Westminster that there is nothing in the draft
Bill to streamline Best Value. Can you spell out what you would
have liked to have seen in the Bill?
(Mr Rogers) We would certainly have liked to have
seen specific proposals where there has been good performance
to define what "light touch" means. It is a very precise
term, but it is very difficult to pin anybody down on what it
means to the authority. Where we have good performance our experience
is that the light touch is not very light, and actually it demands
the same sort of rigour that the old system does. I would welcome
inspectors getting together to simplify the entire inspection
process, rather than have multiple interviews with multiple inspectors
talking about corporate priorities and corporate resource allocation,
and essentially how we ration resources to meet the needs in our
communities. A simple streamlining of the existing inspection
regime would give us everything we want, without resorting to
CPA. I think that Best Value has had its role. The important point
is that process has taken over—
377. Do you have anything to add on Coventry?
(Mr Nolan) Westminster might differ from us. We are
glad to see the back of CCT and the introduction of Best Value,
which was a welcome innovation. We are working at it, but there
is always the difficulty about who inspects the inspectors. In
the main, it has worked well for us.
(Mr Williams) We have similar comments to Coventry.
Clearly, compulsive competitive tendering was not very popular.
As regards best value, there are concerns about whether authorities
are all working to the same standards and the same performance
levels. In Wolverhampton we have carried out a number of Best
Value reviews, which the inspectors have said they are not going
to inspect because there are not enough inspectors available across
the country to keep on top of all the Best Value reviews that
authorities have been required to do. In Wolverhampton they are
targeting the Best Value reviews that relate to front-line services,
as opposed to other services.
378. Back to Westminster: in your introduction
you mentioned that you would have liked to have seen the Bill
going further in regard to discretionary fees and charges. Would
you like to amplify that point?
(Mr Rogers) If local authorities have no obligation
to provide services, it is totally illogical that if they do provide
those services they should not be allowed to charge for them,
and that they should not be allowed to charge the cost that could
be borne for those services. At the present that is not the case,
and despite repeated requests and lobbying to try and achieve
amendments through regulation, we appear to be making very little
progress. That is a major issue for us. Similarly, on the question
of scale charges, the costs of some of our services are vastly
over the level of fees that we can charge, and that is particularly
so in planning. If you take an areas such as Westminster, where
a significant part of the city is a conservation area or contains
listed buildings, where fees are not payable, or Paddington Special
Area Development, where again £1 million costs have gone
in, we are constrained by the maximum fee scale. Those are the
sorts of illogicalities that we see in the current charges.
379. Are there any big omissions that you believe
should have been included by the Government in the Bill?
(Mr Rogers) There is one concern and I am afraid that
it comes back to housing finance. The effect of the subsidy regime
if rent rebates come out, will be perhaps to move with it the
element of costs that is currently constrained within the HRA
for the residual subsidy element. We would like to see an assurance
that there will be no impact on the general fund from that switch
from the housing revenue account.
(Mr Nolan) I keep reading about freedoms and flexibilities,
and I just hope I am going to live long enough to see them—and
the power of well-being. All local authorities are different.
We think that Coventry is unique rather than distinctive. I am
really scared that whether deliberately or otherwise party politics
will be squeezed out of local government, and that would be an
enormous mistake for the constitution of this country because
if you are not getting people active in politics at a local level,
making a real contribution to their local community, that would
be really dangerous for politics nationally. You need to trust
and respect the integrity and goodwill of local politicians right
across the board.
(Mr Williams) I would not suggest additions to the
Bill particularly but there are two items that will be included
in the Bill that we would like more information on. One is that
the Bill gives the Secretary of State powers to make revenue or
capital grants, with a very wide power; and we would like to know
more about the detail of it. The second issue is also important,
and that is the one about staff transferring to other employers
and protecting their employment terms and conditions, particularly
pensions. We have all noticed over recent months the difficulties
that are arising in a number of pension funds, and from the local
authority perspective we would wish to ensure that local authority
employees, if they transfer, will receive comparable pensions
with the high-quality schemes that local government operates.
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