Examination of Wintesses (Questions 40-59)
VICE ADMIRAL
TIMOTHY LAURENCE
MVO, ADC, MR DAVID
OLNEY, MR
BILL CLARK
OBE AND MR
MIKE MARTINDALE
15 MAY 2007
Q40 Mr Jenkins: So the Government
shares. In the early release of the lease the Government has a
share?
Vice Admiral Laurence: Yes, they
benefit from the sale of the land if Annington sells it on.
Q41 Mr Jenkins: That is outside your
jurisdiction and we would have to ask the Treasury for that?
Vice Admiral Laurence: Indeed.
Q42 Chairman: The Treasury has got
more of a hold over the Ministry of Defence?
Vice Admiral Laurence: That was
the deal.
Q43 Willie Rennie: This deal, by
way of the share going back to the Treasury in 2012, does that
mean there is an incentive to ship off the houses before 2012?
Is there a rush before that period in order for you to get a share
of the value?
Vice Admiral Laurence: We have
not regarded it as being an incentive for us to sell. Certainly
though it does not hold us back from selling, if you like. If
it was the opposite arrangement we might be discouraged from selling,
but we are not. As I said earlier, when we discover we have got
houses that are in the wrong place, are in a poor condition and
are not right for our people then we are quite happy to sell them.
Q44 Willie Rennie: There is no pressure
at all? You would not find that round about 2011 a whole lot of
houses get shipped off?
Vice Admiral Laurence: I would
hope not, but I think the pressure to give our people the best
accommodation is much stronger. The balance is really how much
accommodation we need. The Germany factor we talked about earlier
is probably the biggest determinant in that.
Q45 Willie Rennie: Could you see
after 2012 a few houses being sold off?
Vice Admiral Laurence: Again,
the calculation for us is essentially: do we want them; and do
we want to pay the rent on them, and the cost of maintaining them?
If we do need them we will go on doing those things, but as soon
as we do not need them and we cannot foresee a future use them
there is absolutely no point in us maintaining them.
Q46 Willie Rennie: Does the Treasury
put any pressure on you?
Vice Admiral Laurence: I have
not received any pressure from the Treasury.
Mr Clark: There are not targets.
Q47 Mr Jones: Apart from wanting
to provide good accommodation, what is the incentive to improve
these properties if you do not actually own them or, as Willie
Rennie said, would not be able to sell them at a future date?
Vice Admiral Laurence: There is
one incentive. Over and above the incentive of doing the right
thing for our people which is by far the strongest, the other
incentive is that when we hand houses back to Annington for disposal
they have to be at a minimum agreed standard of condition. If
we allow them to drop below that it costs us to put them right
before we can release them.
Q48 Mr Jones: Would it not be cheaper,
even at this point, to actually buy this contract back, because
it is going to be a bad deal in the long-term, is it not, after
2012 when you do not get any sale asset?
Vice Admiral Laurence: I know
what my answer to that would be, but I will ask my Finance Director
to answer that.
Mr Martindale: I think we have
not done an investment appraisal to decide whether the price that
Annington would ask is the right price compared with the long-term
liabilities we may have. I think Annington's price would be massively
in excess of the cash they paid the Ministry of Defence in 1996.
I think affordability might be a bigger challenge rather than
anything else. Could the Ministry of Defence find that sort of
sum of money? In essence, however, Annington can place no pressure
upon us to release houses for any other reason. It is entirely
our decision to release any houses to them. We only release houses
which have no defence purpose. It would strike us as perhaps not
a deal we would have done now, in that we maintain maintenance
responsibility; if we were doing the deal today we would probably
transfer that to the landlord. In a sense, the transaction was
in 1996 for very good reasons.
Q49 Mr Jenkins: When you said you
handed back the property and it must be to a minimum standard,
is that minimum standard higher than Service personnel are living
in in some other parts of the Estate? Are you spending money to
get rid of property, rather than spending it on the living conditions?
Vice Admiral Laurence: I do not
think so.
Mr Olney: I think it would be
fair to say that is possibly the case for those living in the
very lowest accommodation, which are very few. We have to bring
it up to what is called "good tenantable repair". That
means that the heating systems work; the wiring systems work;
that the decoration is there. It is as though someone could move
into a house.
Q50 Mr Jenkins: We are spending money
on bringing accommodation up to a decent standard to hand over
and out of the Estate, and this is probably a better standard
than people are living in on the Estate. I find that perverse.
I understand your problem.
Mr Olney: I cannot say hand on
heart that every single Service person is living in accommodation
which is better than that which we would hand over. I cannot say
that hand on heart. The vast majority will be living in accommodation
which is as good as accommodation we hand over.
Q51 Chairman: Can you say what proportion
of Service personnel is living in accommodation which is not in
as good tenantable repair?
Vice Admiral Laurence: That is
a difficult question to answer. If you would like us to have a
think about that, we can certainly do that and come back to you
on that.[4]
Chairman: I think it would be helpful
to know, because if the second largest landowner in the country
has a proportion of people living in accommodation which is, by
that definition, substandard we need to know about it, particularly
if it is people who are fighting and dying for us.
Q52 Mr Holloway: Returning to Robert
Key's list of things which were cancelled or deferred, are we
seriously saying we are spending money bringing up to the required
standard properties to be handed back to Ferrari-driving residents,
like the residents of Sevenoaks, and yet we have got people coming
back from Iraq and Afghanistan, in some cases staying in stuff
that is deeply substandard? I find that quite bizarre.
Vice Admiral Laurence: Let me
just try and bring some rationality to this. The situation is
that if we discover that there are properties we no longer need,
and they may well have been properties that have been empty for
three or four years, perhaps longer, and we want to get rid of
them, there is a balance of investment to be taken. On the one
hand at the moment we are paying rent for them; and, secondly,
we are paying money to maintain them. So there is an outgoing
attached to it. We might reach a judgment that that is no longer
required and we want to get rid of them, but before we hand them
back to Annington we have to spend a certain amount of money dealing
with perhaps some defects that would not meet the contract. That
is a relatively small amount of money and it is an investment
we have to make in order to reduce the liability of having these
houses.
Q53 Mr Holloway: Do we leave properties
empty that belong to the taxpayer without realising any money
for them?
Vice Admiral Laurence: In some
cases it might happen, because the site might have been earmarked
for a unit returning from Germany. The Army might have been asking
us to, "Hang on to that for the moment because we want it".
Our instincts in Defence Estates are that whenever a site is vacated
to dispose of it; but there are occasions where the customers
say, "No, please hang on to it. We might need it", and
there is a difficult balance there.
Q54 Mr Jones: One of the big incentives
when I was a councillor was the figure you had to look at every
month for the number voids you had. Could you provide us with
a figure, because I think it is an important point, where you
are paying rent on empty properties? Could you provide us with
a detailed breakdown; that would be helpful?[5]
Vice Admiral Laurence: The number
of voids is an issue we track very, very closely indeed. In fact,
we answer questions on that quite regularly. It is a figure which,
in my view, is too high; I would like to reduce it. One of the
factors in this difficulty of reducing it is the uncertainty about
future accommodation and trying to balance whether we want to
hang on to accommodation because we might need it, or sell it
and then find in five years' time we need it.
Q55 Mr Jones: The committee could
perhaps meet every month. It used to be a very telling fact in
the city council, when they had the voids figure before the housing
committee every month, to have public exposure to this. It might
be an idea to keep publishing this on a monthly basis, which might
then concentrate people's minds to get the void levels down—it
certainly did on most councils.
Mr Clark: We actually have a key
target to hold something around the 10% mark. That is what is
called a management margin, which is a void, which we are above
and reported that in the annual accounts when we were an Agency,
and will report in the 2006-2007 Accounts. There are reasons for
being above some of which, as the Chief Executive has said, are
because we are holding them at the customers' request and holding
sites for possible future deployments; and some are also classed
as voids, for example awaiting modernisation, awaiting allocation,
or awaiting disposal. We can provide that information quite readily.
Mr Hamilton: I find it rather difficult,
there are three MPs sitting here who used to be on local authority
councils and therefore know about housing issues, and Kevan is
quite right it is one you have got to keep on top of all the time.
Chairman: I was once a chairman of a
housing committee.
Mr Hamilton: I am sorry, Chairman. I
am not used to knowing about many Tories, that is the problem!
Q56 Chairman: In your comparison,
Mr Clark, could say how that voids figure compares with the average
of local authorities in the country, because it sounds a very,
very high figure?
Mr Martindale: If I could just
help the Committee's understanding. Part of the reason we have
this 10% margin as Bill explained is that we have 20,000 move-outs
and move-ins every year due to the transferring military forces
around the country, which I think you will find in most local
authorities the number is much smaller in terms of the number
of people who move. The Army occupancy of a house is only, say,
six months on average, which is why we need so many "voids"
as a standard minimum requirement, just to accommodate the move-ins
and move-outs as we move the Armed Forces around.
Q57 Mr Holloway: With hindsight do
you think that what has happened here has been unsatisfactory
and, if so, what lessons have you learned for the future?
Vice Admiral Laurence: In what
respect?
Q58 Mr Holloway: The whole Annington
Homes thing we have been discussing for the last half an hour.
Vice Admiral Laurence: As I say,
as a financial deal I think with the benefit of hindsight we probably
would have done it in a different way; but I do not think the
way we managed the housing stock is unsatisfactory. I think it
is a perfectly satisfactory arrangement albeit I would like to
do it better.
Q59 Mr Holloway: How did you find
the financial deal unsatisfactory?
Vice Admiral Laurence: I just
think with the benefit of hindsight had we held on to the property
and gone down the route we have gone down for contractual management
we might have found, in the longer term for the public benefit,
we would have financially benefited; again, with the benefit of
hindsight. At the time the deal looked a good one. We put it on
the market; the highest bidder won the deal and there were plenty
of bidders for it; and it looked the right thing to do.
4 See Ev 30 Back
5
See Ev 30 Back
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