Examination of Witnesses(Questions 40-59)
MR TONY
MCNULTY
MP, MR DAVID
GREEN AND
MS SARAH
MILLINGTON
WEDNESDAY 8 JANUARY 2003
Chairman
40. Tenants' groups in the areas which are not
involved with PFI where there might be potential for PFI.
(Mr McNulty) Some at least were involved in the process.
We spoke to the Federation of Tenants' and Residents' Associations
in Plymouth, Bradford, Bristol, none of whom were involved in
PFI.
Mr Cummings
41. These are organisations, Minister, and I
am talking about tenants' groups.
(Mr McNulty) If you are talking about small, ad hoc
tenants' groups up and down the country, then I am—
Mr Bercow
42. Mr Green, you said a moment ago when you
were answering a question from Mr Cummings that the Ardwick tenants
are "supportive of the proposals". My concern, not dissimilar
to what Mr Cummings is trying to do, is to try to identify the
specifics, so what I would like to know is was that support unanimous
or was it merely a majority? Was it verbal or was it written and
was it formal or was it informal? What I think we want to try
to establish is the robustness of the procedure which leads you
to make a claim. That is really what we want to do. When we have
got that information, we can all reach our own assessments about
the merits of the Government's proposals as a whole, but I am
concerned about the specifics and, as I say, the robustness of
the procedure.
(Mr Green) It was written and it was formal. We were
not given any indication as to whether it was unanimous or majority,
but I assume it was a majority view.
43. How many people are we talking about?
(Mr Green) We are talking of about a thousand residents
affected by the scheme.
Chairman
44. On this, the key on the consultation is
that with a shortened period of consultation from the normal period
that we would have expected from twelve to eight weeks, it affects
not only tenants' groups, but everybody else. Do you feel that
everything possible was done to make sure that those who wanted
to respond were able to respond in that period? You have had a
shorter period to be able to come forward with this proposal and
not for the convenience of those you were consulting with.
(Mr Green) Yes, I am convinced that we gave them sufficient
time to respond effectively and I think that is borne out by the
fact that we did get responses from tenants' groups and also leaseholder
groups, so I do not think there was any problem there.
45. Do you see any other ways, other than the
existing PFIs, in which these changes could be used by local housing
authorities?
(Mr McNulty) The way it has been drawn, it has been
quite specific to be as broad and as flexible as possible, so
I would not foresee at the moment quite any way in which, for
example, ALMOs or tenant management organisations would necessarily
want to use this particular provision now, but they may well do
in the future, which is why it is drawn in those broadest terms
rather than just drawn very, very narrowly just as a reaction
to the difficulties encountered with these specific contracts.
So the short answer is that given the flexibility, it can be drawn
far, far wider and be utilised by ALMOs, TMOs and perhaps other
vehicles, but I would not foresee that in the very near future,
plus these are very early days in terms of those particular models.
46. As a quick point following on from that,
if you see that there might be potential with the position as
you see it, how can you be sure that all the necessary protection
will be maintained in the future? Is there not a danger that some
people might think that you are using this regulatory reform procedure
to slip through the potential for PFI, recognising that some people
are opposed to PFI and others welcome it?
(Mr Green) I think it is unfortunate that the proposals
we are talking about are proposals to legislation which have been
in place for quite some considerable time. It was really the last
amendment formulated to enable two specific contracts. It is probably
long overdue for change itself so that it fits more with government
policy and with more modern-day procurement methods and it is
unfortunate that it has got tied in with the PFI aspect in that
respect. It is not just about PFI, but it should also help authorities
on different levels. For instance, if they want to engage a registered
social landlord to manage their housing and a registered social
landlord or housing association wants to call on the expertise
of specialists in, for instance, sheltered housing, that sort
of arrangement would not be able to go ahead without these changes
in place, so we are not just talking about big PFI contracts here,
but it should help on the smaller issues for local authorities.
Dr Naysmith
47. Some of these things have been going on
for a while, other organisations' management of a particular part
of the housing stock, so why should we get into problems now which
this legislation will sort out?
(Mr Green) Probably the official answer is presumably
because they have not involved a sub-contractor for delegating
their housing management function. The more realistic answer is
probably that they may now be doing it already where they are
acting illegally, but we do not know.[3]
(Mr McNulty) When he says "illegally",
that worries me, so I'll bring the lawyer in.
(Ms Millington) The intention of the
proposed reform is to widen the way in which the powers of the
local housing authority can be delegated to enable the person
to whom it is delegated to further delegate. Now, that is constrained
by the requirement that they will consult the tenants who are
most affected and they will take that person into account and
the Secretary of State would in giving approval. It is envisaged
that the contracts would contain a lot of elements and because
of this, it is necessary for other persons to be involved in carrying
out the exercise of these functions.
48. But it is not delegating things to other
organisations, but it is delegating to organisations which can
then delegate to other organisations?
(Ms Millington) Yes, but there are limitations within
the structure of the proposed reform to section 27, so there is
a requirement for the Secretary of State's approval to further
sub-agreements, so it is not a change which is enabled simply
by the first approval. There is also a means by which approval
is not required to every change or variation of the agreement,
so it is a change to enable policy to develop further and for
the local authority to enable more complicated agreements to be
carried out.[4]
(Mr McNulty) And bearing in mind that
this is still ultimately a local government contract, so it still
sits under the internal auditing regimes local government has
to abide by and it still sits under the District Auditor regime
and the District Auditor is more than aware of the regulations
that prevail and the-back-stop of the Secretary of State having
the last word in approval, not in every case, but in many cases.
Also in terms of any shift or change, I go back to Mr Pike's point
about protection under the revised section 27 where any number
of key decisions which are made which will impact most directly
on tenants, there will be provision for that ongoing tenant consultation,
so in terms of protection, we are back to your earlier point,
Mr Pike, and I think, if anything, it is enhanced by the Order
and the changes to section 27 rather than denigrated or degraded
in any way.
Chairman
49. It is an issue that we have to be concerned
about.
(Mr McNulty) Yes, absolutely.
Mr Havard
50. If you did not get these changes, how would
the current schemes which are running be affected and why would
they be affected because when I read the original section 27,
there seems plenty of discretion for the Minister to do a number
of things? I am not fully understanding how they would be affected
and why they would be affected if you did not have it.
(Mr McNulty) They would be affected because in many
cases, like a whole range of normal contracts let by local government,
rather than the delegation being once removed and that contractor
doing absolutely everything, there is scope for subsequent delegation.
Now, as I understand it, the way things are at the moment, as
I think Dr Naysmith said, that happens, but it happens in an extremely
rigid fashion and a fashion which does not bring much flexibility
to the game for either the local authority, the tenants who are
most directly affected or the contractor, so, as Dr Naysmith has
already said, there may well be a subsequent sub-let for the windows,
but that is part of an overall refurbishment and management contract
and if that refurbishment and management contract says, ".
. . and the windows will be done three months into the contract",
and then you will move on to something else, the sub-contractor
has to conform with that specific requirement in the overall housing
management contract laid down as a slab and that is it whether
it is convenient for the tenants to have their windows done within
that three-month window at the start of the contract or otherwise.
That is the only extent of any real delegation and rigidity and
flexibility thus far. That is kind of over-egged for effect, but
it is not that simplistic, having done it myself for many years,
not put the windows in, but controlled the contract. That degree
of flexibility is far more robust post the Order than it was previously.
I think the points about what happens to these extant contracts
or contracts which are being developed now if the Order does not
get through, as David has already said, they will probably still
happen, but in a far less satisfactory fashion certainly for local
authorities and probably the contractors than if this Order is
secured.
Mr O'Brien
51. On the question of tenant consultations,
the question-and-answer exercise so far has always referred to
the consultation with tenants on the future programme, but what
about the future consultation for tenants? Is there not a risk
that under the arrangements put in place tenants could be bombarded
with constant consultation on the management of their homes and,
therefore, if we do not explain to the tenants in the first place
that there will be continuing consultation, we could find that
there will be a loss of interest for our tenants after the contract
and that is too late because we cannot do anything about it afterwards,
so what about future consultation? Has this been made clear to
tenants?
(Mr Green) I think, in my view, perhaps "consultation"
is the wrong word and I would prefer to use the word "involvement".
We proceed on the guidance we have issued in these instances on
consultation terms. We are more concerned that tenants become
involved in the whole process.
52. So why is that not written in the Order
then to start with?
(Mr McNulty) It is and it says in the Explanatory
Document basically how, if the Order is secured, the various range
of ways in which consultation becomes a key and central part of
the future contracts, but it leaves it to the contractors and
the tenants and the local authority to devise how they best seek
the way, given their circumstances, to consult and that consultation
programme, for future reference, is part of the process—
53. Is it consultation or is it involvement?
Mr Green is saying "involvement" and you are saying
"consultation". Now, if it is involvement, then it is
not written into the Order. Why?
(Mr Green) There are several parts to section 27,
one of which does enable the Secretary of State to issue statutory
guidance.
54. That is the old one, but we are talking
now of a new approach. If we are saying that there will be tenant
involvement and the contracts will contain a lot of elements and
there are elements along the way which hopefully the tenants will
be involved in, therefore, if there is going to be all this pressure
applied to tenants after the contract, why is that not put in
the Order?
(Mr McNulty) Well, as Mr Green said, the Order is
dealing with only part of section 27, but the part of section
27 which talks about the issuing of guidance on consultation remains.
It is not affected by whether the Order is secured or otherwise,
as I understand it, and the Explanatory Document, as I say, sets
out very, very clearly, number one, the importance of consultation
and how within the process that consultation should be achieved.
I think there is a kind of continuum, is there not, between involvement
and what is more a day-to-day issue and broader consultation which
impacts on the wider strategic programme issue. If consultation
is devolved down to a proposal for a change in the housing management,
you would expect some degree of involvement from the tenants in
that process. Whether you are talking about some elaborate consultation
process just as to whether you are going to change your housing
manager or not, so it is full-blown consultation, would not stop
it from being very, very serious involvement and participation
for tenants.
55. The real concern is that if we have all
these elements in the contract and you said, Minister, that the
local authority contracts will be involved with audit and everything
else, so the tenants are going to be responsible, but they are
not going to have the authority over the elements in the contract
or the local government involvement with the auditors, so all
they are meant to do is to consult with the tenants that a decision
will be made by the Secretary of State or the contractors themselves
or the local authority. Now, all that impact upon the involvement
of tenants will derive a situation where the tenants say, "Right,
we can't handle this because there is too much involved".
Would it not be better to leave it with the local authorities,
the elected councillors, the people who have been involved, the
back-up services that they have? Would it not be far better to
leave it with the elected members and the local authorities than
to have all this mismatch of involvement and consultation by which
the tenants will be mystified because of the amount of consultation
that will be involved?
(Mr McNulty) If I could be ever so slightly provocative,
I would say that would assume that if you did leave it there,
every single local authority in the country to an extent, a significant
housing authority, would have a wonderfully good record because
of their political control in terms of consulting and involving
their tenants in housing matters and that is not the case at all.
There are very, very good examples of housing participation involving
the tenants in processes. It is outside the scope of this Order,
but I think there is a good case for saying that in any of the
four examples of how we are trying to up the decency standard
that there should be more and more education and training to ensure
that there is proper and detailed tenant involvement, so they
are not just simply being befuddled, as you say, because I think
if consultation, as you say, Mr O'Brien, is simply bombarding
them, then it is not going to be terribly effective. If there
is not some mechanism for developing the local residents' and
tenants' organisation and getting them involved in the process
and allowing individuals to get involved in the process, then
it is not going to be terribly effective.
56. Why did you not put that on the face of
the Order, this question where you said just now that the tenants
will be part of the exercise, but we are relying on the old legislation
and then the Secretary of State will decide?
(Ms Millington) Well, there is power to make regulations
to provide consultation.
57. Well, the fact that the tenants will be
involved or whether it is involvement in consultation, I think
that it would be much better if there was something specific in
the Order which the tenants could refer to either to the contractor
or to the local authority or to whomever that they would be involved,
but as it is now, it is left to the Secretary of State.
(Ms Millington) You want something saying that they
are involved?
58. Something saying that the tenants will have
this right. If that is not going to be there then I think you
ought to leave it with the elected members and the local authorities.
The Minister says they are not all excellent, but in another forum
we are saying that where people are not excellent at it we will
give them an opportunity to improve; if not, we will send people
in to show them how to do it. Why can that not apply to housing?
(Mr McNulty) What is left to the Secretary of State
is approval of the consultation mechanisms that the contractor
and the local authority put in place.
59. And agreements and sub-agreements.
(Mr McNulty) Absolutely, especially in the case where,
as the guidance suggests, the consultation will come in a number
of forms. Where consultation is a delegated function then the
SPV, the special purpose vehicle, will consult with tenants about
the appointment of a manager and all that and they would then
have to put forward proposals together with details of consultations
with tenants, the whole lot, to the authority and then they[5]
would have to apply for agreement to the Secretary of State. It
is more than simply the Secretary of State rubber-stamping if
there has been consultation or not, there are stronger processes
in place than that and the points about guidance still prevail.
The way I see it, we are taking the best of the guidance and everything
else from the previous regime and putting it in the body of the
new Order and it still has a significant importance in the nature
and style of the consultation. What I was saying about the other
point, which I think is outside the scope of both the original
Bill and the Order, is putting on the face of it that somehow
councils should facilitate the education and training of their
tenants to get properly engaged in the consultation process. Personally,
I think they should, but it is outside the scope of the Order.
3 The suggestion here was meant to be that some housing
management work may be being subcontractual at the moment by authorities
unaware of the constraints of Section 27. Back
4
This is a reference to the proposed subsection (7)(b). Back
5
i.e. the authority. Back
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