Taken before the Office of the Deputy
Prime Minister Committee
Memorandum by Austin Mitchell MP on behalf
of the Parliamentary Council Housing Group (DEC 50)
— The role of tenant choice; and
— The link between the decent homes
target and other parts of the Government's sustainable communities
agenda.
1. SUMMARY
1.1 We welcome the committee's investigation
and hope this will expose how the decent homes target is being
used to distort local debate and push local authorities and council
tenants out of council housing.
1.2 The definition of decent homes is not
responsive to local needs and conditions. It distorts real priorities—what
tenants want—and instead imposes a bureaucratic "tick-box"
regime. Tenants with clear and defined priorities for their homes
and estates are effectively told that civil servants know best
about what is required.
1.3 "Meeting decent homes" as
an imperative for local authorities has in some cases put them
at loggerheads with tenants who have different priorities for
investment and improvement work. At another extreme it leads to
demolition of much-needed council housing in areas with long waiting
lists and homelessness.
1.4 The lack of investment in council housing
repairs and improvements over 25 years has undermined the condition
of most council housing. Short-term neglect of repairs creates
longer-term problems. Neglect of estate environment, cutting back
on estate-based caretaking and management and other staff has
worsened services and demoralised council housing workers.
1.5 This is despite the £13 million
"surplus" extracted from Housing Revenue Accounts and
used to subsidise other areas of government spending. In 2002-03
tenants on average paid £2,500 in rent but only received
£1,500 in services. That leaves £1,000 per tenant (£3.6
billion per year) that could be used to fund a massive investment
programme.
Privatisation drives up rents resulting in the
Treasury paying out more in Housing Benefit. UNISON estimates
that stock transfers since 1997 have cost the Exchequer £249
million a year in additional housing benefit support.
1.6 The quickest, most reliable and best
value for money way for local authorities to meet a locally-agreed
set of priorities for improving council housing is through direct
investment in council housing.
1.7 Government is still seeking, however,
to insist that any new investment needed to make good the backlog
of repairs and improvements must come via stock transfer, PEI
or Arms Length Management Organisations.
1.8 Real choice for tenants requires a level
playing field for investment opportunities. Tenants must be free
to choose the option that best meets their needs and preferences—including
the choice of remaining as council tenants with investment available
to improve their homes. Without this, tenants are justified in
calling the process "blackmail" not choice.
1.9 If money is available to subsidise costly
and time-consuming privatisation and half-way privatisation measures,
we would ask the committee to consider and put to government the
question council tenants all over Britain are asking: why can
that money not be spent directly on improving council housing?
2. EVIDENCE
2.1 Decent homes—what tenants want
Tenants and many others want to see first class,
modern council housing available for all who need it. But at local
level tenants who pay for council housing have no say over priorities
for improvement works, despite all the talk of tenant-led change.
Of course tenants want new kitchens and bathrooms. But there may
be other needs which are higher priorities locally. On some estates
new lifts, smoke alarms, concierge services and youth clubs are
the most pressing need and decent homes targets need to be flexible
enough to include these. In areas of high overcrowding and homelessness
tenants and local electors may regard development of more council
housing as the most urgent priority. As research by Ambrose and
others in Stepney and elsewhere shows, for tenants health, housing
and education are inextricably linked. But in many areas councils
are in danger of narrow-mindedly pursuing a government target
defined by civil servants instead of responding to tenants' local
priorities.
2.2 Targets used to break up council housing
The Sustainable Communities Plan attempts to
impose stock transfer, PEI or ALMO as the only sources of new
investment in existing council housing. This is not based on any
sound financial case (as the NAO and PAC reports show—see
below). Instead we are offered two justifications: that these
changes will increase tenants' involvement, and that housing services
benefit by separating strategy from day to day management. No
evidence is offered to support either justification, and much
existing evidence challenges and contradicts these arguments.
So achieving decent homes targets has become another stick to
beat councils and tenants into accepting a change of landlord,
the remortgaging of council housing at exhorbitant cost/risk through
PEI, or the costly half-way privatisation of Arms Length Management.
2.3 Local impact: arbitrary and regressive
The impact of decent homes targets is not producing
consistent progress in areas of most need. Instead we currently
have:
— Liverpool and Birmingham City Councils,
among others, making clear that they cannot meet and are not served
by the decent homes target.
— These and other councils considering
or planning the demolition of council homes as the only means
of meeting decent homes standard—despite local demand for
more council housing.
— Reports of London authorities which
cannot meet decent homes targets even if they pursue stock transfer,
PEI or ALMO.
— The leader of Halton Borough Council
and others saying they want to continue managing good quality
council housing but need investment to make this possible.
— Sir Jeremy Beecham of the Local Government
Association highlighting "the pressure on councils to transfer
housing stock".
— "3 star" council housing
departments in Hammersmith & Fulham, Bolton, Camden where
tenants have expressed the preference for staying with the council
with investment for improvements, being forced instead towards
ALMOs.
— Grimsby, Macclesfield and other councils
which can meet decent homes targets but are intent on pursuing
stock transfer despite the resistance of local tenant organisations.
So the decent homes PSA target, as implemented
through the Sustainable Communities Plan, has an arbitrary impact
which does not direct public or other investment to areas of greatest
need. Indeed in some areas of the most acute need, such as Birmingham,
Liverpool and parts of inner London it is leading directly to
the demolition of council housing despite acute need for this
housing locally. These perverse outcomes of the policy as implemented
are the result of a dogmatic refusal to invest directly in council
housing.
2.4 Decent homes need investment
With an estimated £20 billion backlog in
council housing repairs and improvements, the decent homes focus
on improving condition highlights the need for significant sustained
investment. In the context of the Sustainable Communities Plan,
the decent homes target is highjacked to rule out any real choice
for councils and tenants. The SCP attempts to rule out the option
of council housing staying under local authority control and management,
with sustained direct investment to address the backlog of repairs
and improvements and more. The principles of publicly-funded investment
in publicly-owned council housing are not discredited—council
housing is the most efficient and equitable way to develop the
homes we need, to the standard we need, at affordable rents, providing
quality housing for all who need it including all essential service
providers. The problems affecting council housing are the direct
result of under-funding, as the decent homes target and SCP effectively
show: with investment council housing can again become good quality
housing of choice.
2.5 Council housing—the money is there
but the rules are rigged
A Level Playing Field needed. Council housing
generates more income than is spent on its management, maintenance
and improvement. The inequitable treatment of council housing
compared to other forms of housing has caused and perpetuated
the problems of underinvestment which are now being exploited
to undermine council housing and abolish it.
Daylight Robbery for Council tenants only £13
billion has been siphoned out of council Housing Revenue Accounts
in recent years and used to subsidise other areas of government
spending. Outcry at what tenants call this "Daylight Robbery"
of their rents has led the government to change the mechanism
by which so-called "surpluses" are extracted from HRAs.
However government has retained the power to claw back from council
HRAs what it regards as "unnecessary" funds—even
where these funds are needed to meet decent homes or other local
improvement targets. Money taken from the HRA in this way is not
even ring-fenced to pay for council housing improvements. In 2002-03
tenants on average paid £2,500 in rent but only received
£1,500 in services. This left £1,000 per tenant (£3.6
billion per year) that could be used to fund a massive investment
programme. For 2003-04 the figure is slightly lower but the effect
and potential is the same.
Through LSVT this £1,000 is immediately
released to the new landlord. This is a major disparity and a
financial driver of stock transfer. It creates "unfair competition".
We cannot see how it can be justified. The release of this £1,000
pa per council home would provide funding for the much-needed
investment in existing council stock to create financial parity
and real "choice" for tenants.
Debt
Public money is being diverted into wasteful
subsidies which are a further incentive to stock transfer. £800
million is budged for 2003-4 to write off debt to make sell-offs
profitable. This is almost as much as the total £842 million
budget for housing credits to fund investment in all council homes.
If a national programme of debt relief was applied
to council housing, with government taking responsibility for
HRA debt in the same way as it does for stock transfer RSLs, councils
would be in a "fair competition" with RSLs and would
be more efficient at improving council housing, thereby maximising
value for money. Backlog repairs could all be addressed rapidly,
and funds released to finance a programme of new and improved
housing. Other subsidies to privatisation
Last year £65 million was spent on "fees
of the army of consultants, surveyors, solicitors and advisers"
involved in promoting stock transfer, PEI and ALMO (Social Housing
July 2003). This is often supported by the work of local authority
staff paid from other budgets. This huge physical and financial
resource is directed to present one side of the case in the "choice"
facing council tenants.
Long term cost
Privatisation drives up rents resulting in the
Treasury paying out more in Housing Benefit. UNISON estimates
that stock transfers since 1997 have cost the Exchequer £249
million a year in additional housing benefit support. This money
could be used instead to fund a new "investment allowance"
to provide a revenue stream enabling councils to borrow to fund
investment themselves. It would make the new "right to borrow
in the Local Government Bill" a practical solution to give
tenants real choice in how "decent homes" which meet
local priorities might be achieved.
2.6 Direct investment is best value for money
The report by the Commons Public Accounts Committee
on stock transfer endorses and adds to the National Audit Office's
critical report on the subject. Calculating the extra cost to
the public purse of achieving decent homes and other improvement
targets via stock transfer, the PAC report says "the additional
cost of transfer is likely to be larger than the £1300 per
home calculated by the Office [NAOII". The committee concludes
that stock transfer is bad value for money, pointing out that
"cost neutrality will not have been achieved in practice",
that transfer has "led to the undervaluation of the homes
transferred so far, resulting in a great contribution from the
taxpayer than was necessary to deal with, for example, the backlog
of repair." It is also sceptical of the government's non
financial justification for stock transfer, questioning any improved
tenant choice, participation or increased satisfaction. If the
decent homes targets are to be achieved while respecting the right
of council tenants and local authorities to democratic choice
in this process, we need to reassert and make real the option
of investment in directly-managed council housing, as tenants
are demanding.
2.7 The alternatives and their problems
Transfer, PEI and ALMO all attempt to break
up and/or replace council housing with new models more dependent
on private funding in the short or long term. The costs and risks
associated are borne by the public sector and by tenants. Decent
homes is being used as a mechanism to pursue this end.
Stock transfer: Tenants lose security
"The Council of Mortgage Lenders this week
said the plan to do away with mandatory grounds for eviction would
be a `bad move'. Housing Associations currently have the power
to obtain possession orders where tenants have run up two months'
rent arrears." Housing Today 7 October 2003. Costs
higher, RSLs have higher rents and other charges, evictions, borrowing
and management costs are higher and one in four homes do not meet
decent homes standard. Transfer RSLs are an inefficient drain
on public funds. Accountability lost RSLs are not accountable
to local or national government. There is no effective mechanism
for directing them "strategically", despite significant
public funding to them. Their costs (including senior executive
pay) are not controllable. Transfer RSLs can and do fail to deliver
on promises. Transfer delivers investment relatively randomly—RSLs
not accountable to tenants. Even where tenant board members—governed
by company law act as directors. Not usually elected by tenants.
Few RSLs have representative tenant organization Pressure on RSLs:
to compete with private sector developers for funding, for paid
board members, to merge and rationalise (leaving 150 large RSLs
doing all new housing development), to respond directly to demands
of lenders.
PFI
PFI is new in housing, but has an appalling
record in schools and hospitals. The National Audit Office says
claims that PFI is value for money are based on "errors,
irrelevant or unrealistic analysis and pseudo-scientific mumbo-jumbo."
Costs escalate between bid and final contract: reportedly by over
60% in Sandwell. Financial risks are effectively underwritten
by government with yet more public money. Tenants are more directly
exposed to other risks, as when major subcontractor goes bust
and all work is suspended (as in many current school PFI contracts
including Wigan and Tower Hamlets). Tenants have no right to a
ballot on PFI proposals. Public land is often "gifted"
to developers with homes demolished to increase profits.
ALMO
Arms Length Management Organisations is the
government's latest proposed way of breaking up council housing,
introduced in face of tenants' growing resistance to stock transfer
and PFI. A separate company is set up to run homes which remain
at this stage council owned. The carrot is an uncertain amount
of extra funding for five years. They involve large set up costs,
undermine democratic control and accountability (with a board
on which tenant reps are outvoted and bound by corporate responsibility).
ALMO could be privatised by the "levering
in" of private finance (high interest loans from banks) with
no transfer of stock and no requirement for a ballot.
The best-managed council housing with 3-star
audit rating is being forced to become ALMO (in Bolton, Camden,
Hammersmith&Fulham) despite the wish of tenants to remain
in directly-managed council housing.
Opposite of "joined up thinking"—separating
housing completely from other council services (social services,
education, youth etc). The flies in the face of all research pointing
to need to connect services better repairs, improvement and support
services are more likely to be outsourced (privatised): Hounslow
ALMO has privatised its grounds maintenance; Barnsley ALMO its
repairs service, Kensington & Chelsea ALMO its legal services.
ALMO expenditure is money taken from council housing as a whole.
It is "on balance sheet" public expenditure. If this
money is available to help achieve decent council housing standards,
why can't it go into council housing directly?
The Office of the Deputy Prime Minister managed
to find an extra £250 million a year to fund arm's-length
management organisations by a clever "switch of resources".
Local authorities are required to set aside 75% of capital receipts
and further money as part of their housing revenue account to
cover debt to the government. This latter "minimum revenue
provision"—around 2% of an authority's "credit
ceiling"—is what the Treasury has agreed to allow to
be freed up for capital investment. This has been possible because
of the introduction of the £1.59 billion major repairs allowance
two years ago to allow councils to invest in housing. The ODPM
argued to the Treasury that this funding stream meant that the
minimum revenue provision was no longer required.
2.8 Tenants choice requires Fair competition
The "Decent Homes" public service
agreement target is being implemented in a way which overrules
the ongoing government commitment to "tenants' choice".
This results from the unfair financial competition against council
housing. In this context the "decent homes" targets
risk being discredited in tenants' eyes as a cynically manipulated
manoeuvre to end council housing. This situation is not justified
financially—the fair funding of council housing would be
a prudent use of public funding. To achieve locally-agreed decent
homes standards for all council housing requires measures to create
a level playing field and give substance to the fourth option
tenants and many local authorities want: council homes remaining
under direct council management with substantial investment available
directly without strings attached. This will give tenants real
choice in implementing decent homes targets.
— What precise budget is used to meet
the additional costs to government of "overhanging debt"
transferred from local authorities due to transfer? [what funding
available for PFI credits, and how much made available to underwrite
PEI schemes in housing and other sectors including health, education?
How much does this amount to and is it an equitable and justified
use of public funds?
— What is the total cost to local and
national government of stock transfer so far?
— What is the total "Daylight
Robbery" difference between council rental income and allocated
expenditure on management and maintenance and MRA? Why is this
not used to fund direct investment in council housing? How does
government justify transferring these so-called "surpluses"
to transfer landlords?
Liverpool Council's stock options survey estimated
that it would cost around £117 million to carry out the necessary
repairs to bring 13,000 of its homes up to the decency standard.
Cabinet member for housing Flo Clucas said neither arm's-length
management nor the private finance initiative looked like viable
options, and the lack of alternatives available meant councils
had their "hands tied behind their backs". "We
certainly do not have enough money to bring the properties up
to the standard," she said. "It's highly unlikely that
we'll be able to do so. We believe there needs to be some flexibility
from government."
Birmingham Council's chief executive Lin Homer
told Inside Housing there was no quick fix for the city's housing
service. Ms Homer said: "I do not think we are going to turn
around housing in the city overnight.
"My focus is not particularly on what we
do in the star rating this year, it's on what we do in the city
over the next few years," she said. "We do not think
we are in it for quick wins."
Frances O'Grady deputy general secretary, TUC
"The TUC wants to see a level playing field
for housing investment. Sadly the Local Government Bill will encourage
precisely the opposite. Councils that transfer their stock will
have debts wiped out. Councils that do not transfer will continue
to service their housing debt. Good quality housing is central
to ensuring a decent quality of life. Government must deal with
the backlog in all public housing repairs, much sooner than 2010.
There are twice as many families live in council housing as in
housing association housing. So it's pretty obvious that to solve
the problem the government has got to invest in council housing."
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