Examination of Witnesses (Questions 80-99)
MS ANNE
KIRKHAM AND
MR SIMON
LLEWELLYN
5 MARCH 2007
Q80 Chair: Can I clarify your title,
Mr Llewellyn: are you responsible for renting and leasehold from
private landlords?
Mr Llewellyn: Yes, that is right.
Chair: And Ms Kirkham from the social
sector, just to be clear. So the Decent Homes initiative is nothing
to do with your remit but with Ms Kirkham's—
Anne Main: Nobody has had discussions.
Q81 Mr Betts: It is probably quite
clear in the end that there is a responsibility on the leaseholder
for matters to do with the property itself—the roof, the
lifts and those sorts of issues. There is another problem area,
which is probably more common, on right-to-buy issues outside
London, and that is the open spaces, the playgrounds, sometimes
an adopted road or footpaths; and there are arguments about whether
these should be funded out of the council's general fund or out
of the housing revenue account, and if it is funded out of the
housing revenue account how do you get people who have bought
their houses to pay a share towards it? It is something that the
Department ought to help with by clarifying where it thinks these
various amenities should be charged to in the council's finances.
Ms Kirkham: As the legislation
currently stands under the Local Government 1989 Act, local authorities
can already identify what amenities are shared by the whole community;
and when they have done so they can make a contribution from other
funds into the Housing Revenue Account to pay for those works.
The provision is already in the legislation. The legislation also
permits for government to make a direction as to what might be
covered by that type of work, but to date we have chosen not to
do that, feeling that it is more a subject for local decision-making
as to what in a particular circumstance would be considered to
be appropriately classified as public works as opposed to works
that were appropriate to either the tenants or the leaseholders
themselves to bear a share of the costs.
Q82 Mr Betts: Do you give any guidance
on that?
Ms Kirkham: No, we have not currently
given any guidance as to what those works are. That may be something
that Ministers can look at in the review they are currently engaged
in on leaseholders generally.
Q83 Mr Betts: If the houses are run
by the council and the communal areas are probably inside the
housing revenue account, what happens if you get stock transfer
and you suddenly get a different arrangement of ownership, whether
it be stock transfer or even interim, where the ownership remains
with the council and there are management changes. Does not the
whole issue of backwards and forwards seem a lot more complicated?
Mr Llewellyn: Quite often those
common areas will transfer with the housing, and therefore the
RSL then becomes responsible for those public areas, in the same
way the local authority was as part of the housing revenue account.
Q84 Mr Betts: And they would then
continue to try and collect from the leaseholder.
Mr Llewellyn: Yes.
Q85 David Wright: What would be the
capacity then for a contribution from a general fund? Zero presumably!
Mr Llewellyn: That is right, because
the land would no longer be in ownership of the local authority;
it would be private land owned by the RSL. But in each transfer
there will be clear negotiations and sometimes re-definitions
between the local authority and the RSL as to what land does transfer
across; and quite often transfer is an opportunity to re-visit
what is held within the HRA on particular estates or whatever,
because, as you say, roads or whatever may not always transfer.
Q86 David Wright: So theoretically
you can have people in the same block who purchase at different
times, who have a different contribution to make because there
may have been a general fund contribution on their previous agreement
or not. Am I right? We could have a variation, could we not, in
the amount being paid?
Mr Llewellyn: I would doubt that
the general fund was specific to an individual's contribution.
I think it is more likely that the general fund will just be a
general contribution into the costs of works at some particular
time.
Q87 Mr Betts: You could get a situation
then when there was a general fund contribution to the maintenance
of open areas that remained in the housing revenue account; that
land was then transferred to the housing association and you suddenly
found that the leaseholders in that area had no obligation to
pay for the maintenance of the open space—is that right?
Mr Llewellyn: No, I think it is
more likely that if a general fund contribution had been made,
and it was felt appropriate to be made, that might be a reason
why the local authority would consider what land was transferring
and may not transfer all of that land, because it might be more
likely that it should come within the general fund.
Q88 Mr Betts: Is this an issue that
you do give guidance on and look at in terms of stock transfers?
Mr Llewellyn: It is an issue that
is flagged up. There is a detailed guidance on a point-by-point
basis.
Q89 Mr Betts: So you could get that
situation I have just described, and that is something the Department
would be quite happy about, would it?
Mr Llewellyn: It is possible.
I would stop at saying the Department would be happy because we
do not actually know whether that has happened. As I say, in each
individual transfer the RSL will negotiate with the local authority
what land is taken on, and the transfer price will be based on
those obligations, that transfer across.
Q90 Mr Betts: It strikes me that
the Department is writing off a substantial amount of the debt
on those properties when it sanctions a transfer, so it is writing
off that debt, as a government department, without scrutinising
the terms under which transfer takes place.
Mr Llewellyn: They will scrutinise
the terms of the transfer—and of course not all transfers
have their debt written off; some are positive value transfer.
Anne Main: The scrutiny will be on a
case-by-case basis, rather than making some general rule as to
what should be in and what should be out of that particular transfer
because circumstances will vary depending on the nature of the
estate that had been transferred across.
Chair: I have been passed a note by our
adviser which says that the lease would specify what a leaseholder's
service charge would cover, and that would not change with the
change of landlord. That is the advice I have been given.
Q91 Mr Betts: I am sorry, but the
point I was trying to get at is that it might well be that the
initial lease did not require a contribution from the leaseholder,
and the general fund was effectively picking it up and saying
"on behalf of everybody we are putting money into this communal
area"; but if the land was still in the housing revenue account
and then transferred to a housing association, there would be
no ability for the general fund to put money in, and therefore
the total burden on that particular open space area will fall
back on the tenants, with no obligation on the leaseholder to
pay. That would be the situation.
Mr Llewellyn: That might be reflected
in the valuation at the time.
Q92 Emily Thornberry: You have told
us about the estimate you have at the moment in relation to the
number of bills over 10,000, but do you also have an account—because
council's have some discretion to help ameliorate difficulties
that leaseholders have, and I wondered whether you monitored the
exercise about discretion in any way. Which councils are helping
out their leaseholders, and which are not? If a council does not
help out its leaseholder, what power, if any, do you have to make
them help out leaseholders?
Mr Llewellyn: At the moment, the
information we have on that is only based on surveys by London
councils. We do not collect information from local authorities
on the use of the discretionary provisions. As suggested, they
are discretionary, and it is for the local authority to decide
whether or not to make use of those. The Department has put in
place, as part of the discretionary provisions, a set of criteria
that a local authority can use in deciding whether or not to give
additional support or capping. It does not proscribe particular
circumstances when they must or must not be used because they
are ultimately discretionary, not mandatory.
Q93 Emily Thornberry: Obviously with
the various reviews that have been going on, we have heard suggestions
from witnesses today and all sorts of different bodies, not least
the Social Sector Working Party, that there should be changes
in the law. Are there planned changes to the law in the pipeline,
and will you be looking at such things as how leaseholders can
satisfactorily challenge whether or not we are all getting value
for money when leaseholders' money is spent on doing up social
housing? Will you be looking at the difficulties in relation to
land valuation tribunals? Will you be looking at ensuring that
councils exercise their discretion as opposed to simply giving
them a power and then them not exercising it? Are these the sort
of things that you will be looking at?
Mr Llewellyn: The report by the
Social Sector Working Party was a report to government and was
sent to Baroness Andrews. She acknowledged the report on 22 February
and wrote to Peter, thanking him for it and saying that the recommendations
within it would be considered. The report itself does not give
a unanimous view; it recognises that there are a range of opinions,
both from leaseholders and landlords, so in looking at the report
ministers are considering, as part of the review, what actions
they may wish to take. They have yet to come to that view. As
you say, those things are set out in the Social Sector Working
Party report, so they are things that ministers will reflect on.
Q94 Chair: Do you have any indication
when they will come to a decision?
Mr Llewellyn: My understanding
was that the Secretary of State said before Easter.
Q95 Martin Horwood: In terms of your
different roles, one with the private sector and the other with
the social housing sector, is there more or less pressure from
one section of the civil service for legislative improvements,
to put it like that, than from the other?
Mr Llewellyn: Our advice is to
ministers. We like to think we work as a team and not particularly
with conflicting objectives.
Q96 Martin Horwood: You want a level
playing field though, do you not?
Mr Llewellyn: You want a level
playing field. Certainly the intention behind the 2002 legislation
was that there should be a level playing field for social sector
and private sector leaseholders. The legislation does not as such
differentiate between the type of leaseholder. What we have found
subsequent to the 2002 Act is that applying the legislation requires
different treatment because of the different nature of the landlords,
and the regulations that govern local authorities as opposed to
private sector.
Q97 Anne Main: This obviously is
relevant to both private and social landlords: I wondered what
discussions you had had with the Treasury about reducing the tax
rate on sinking funds, which some see as a strong disincentive
to leaseholders and landlords.
Mr Llewellyn: The Finance Act
2006 did make changes to the rate of tax payable on interest earned
on moneys held in social sector sinking funds, so that now these
are taxed at basic rate.
Q98 Anne Main: I just wanted to know
what discussions you had had with them about reducing the tax
rate.
Mr Llewellyn: We did. That was
the outcome of our discussion in terms of social sector.
Q99 Chair: The basic rate is 22,
is it?
Mr Llewellyn: My understanding
is that it is going to be set at basic rate. [3]
Ms Kirkham: It was the same discussion,
so we wouldn't have had separate discussions; it would have covered
both sectors.
3 We could confirm that this was 22%. We could also
inform the Committee that in the Budget of 21 March 2007 the Government
announced that it will extend this relief to the income on service
charges and sinking funds held by private sector landlords on
trust. Back
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