Examination of Witnesses (Questions 1-19)
MINISTRY OF
DEFENCE & DEFENCE
ESTATES
MONDAY 14 MAY
2007
Q1 Chairman: Good afternoon, and
welcome to the Public Accounts Committee. Today, we are considering
the Comptroller and Auditor General's Report, Managing the
Defence Estate: Quality and Sustainability. We welcome back
to the Committee Bill Jeffrey, who is the Permanent Under-Secretary
of the Ministry of Defence, Sir Ian Andrews, who is the Second
Permanent Under-Secretary and former Chief Executive of Defence
Estates, and Vice Admiral Tim Laurence, the Chief Executive of
Defence Estates.
Mr Jeffrey, how have you got into a situation
in which 40%. of your accommodation is substandard?
Bill Jeffrey: I take it, Chairman,
that you are referring to the—
Q2 Chairman: If you want the reference,
I am referring to paragraph 1.25 on page 15 and paragraph 12 on
page 6. Nearly 40% of family accommodation and more than half
of single accommodation is substandard. How have you got us into
that situation?
Bill Jeffrey: First, we do not
underestimate what still needs to be done on the service family
accommodation estate; we would not seek to defend the worst of
it for a moment. However, it is worth looking at the appendix
to the National Audit Office's Report that describes what constitutes
standards 1 and 2—standard 1 accommodation is of the highest
quality. The Report reads, "A property assessed as standard
2 achieves a standard of 1 or 2 in each category, with a standard
of 1"—out of eight—"usually reached in at
least five categories." So it is stretching it a bit to say
that properties requiring improvements are substandard.
Q3 Chairman: The NAO briefed me along
those lines. I asked it whether it was fair to say that, as I
put it to you, 40% of family accommodation and more than half
of single accommodations is substandard. Was that a fair question?
Mark Andrews: Certainly, it is
true to say that 40% of accommodation is below the standard at
which that department wishes it to be. Of course, a lower proportion
and number of single accommodation units and, in particular, houses
meet only the lowest conditions in the categories.
Q4 Chairman: So, I shall ask my question
again. Would you like to answer it this time Mr Jeffrey?
Bill Jeffrey: I answered it in
one respect. As Mark Andrews said, we have increased the number
of service family accommodation units at standard 1 from 41% in
2001-02 to 59% at the moment. Then we have standard 2 accommodation,
which is not as good as we would like. It is mostly older property
and comprises another 36%. Of the remaining 5%, only 0.5% are
standard 4. It is that 5% that we feel we must do something about.
The answer to your question is that this part
of the estate has been subject to years of under-investment. Until
1995, it was managed by the services and was often an early casualty
when savings were required. We have upgraded 12,000 properties
in the past five years and have plans for further investment in
the estate in the next few years. We would like to spend more
and we accept that that is important, but we are undoing some
years of neglect.
Q5 Chairman: Can you guarantee to
me, Mr Jeffrey, that when we have our next defence squeeze this
will not be the first bit of your empire to be squeezed, because
it is below the public radar and not very exciting politically?
As you have intimated has happened in the past, it is the poor
old squaddies' accommodation that gets squeezed.
Bill Jeffrey: I can guarantee
that we have got money earmarked this year—£17 million—for
upgrades. I can guarantee that there is a further £35 million
in the budget this year for such things as replacing boilers and
redecoration. I can also guarantee that both our Ministers and
the Defence Management Board, which I chair, regard it as a very
high priority for when we have our spending review settlement
later this year.
Q6 Chairman: So you can guarantee
for one year. You have mentioned some quite large figures, but
it is important that you tell us how much of that is to do with
upgrading and improvement rather than simple maintenance.
Bill Jeffrey: The figures that
I mentioned are entirely to do with upgrading and improvement.
Q7 Chairman: Right, that is very
fair. Thank you.
So, Admiral, from your personal knowledge of
the armed services, how much of a role does substandard accommodation
play in the recruitment and retention of our armed forces?
Vice Admiral Tim Laurence: The
standard of accommodation plays a significant role in recruitment
and retention. We would very much like our people to have the
best, and that is why we set pretty high standards for accommodation.
Q8 Chairman: I think that I am right
in saying that 40% of those who left were quoted in a recent report
as saying that accommodation was a factor. Is that a figure that
you recognise—that around 40% of people who leave the armed
forces early cite poor, substandard accommodation as a reason
for leaving?
Vice Admiral Tim Laurence: I had
not heard that figure, but I am not surprised that poor accommodation
is a factor when people leave.
Q9 Chairman: You are the Chief Executive
of Defence Estates, so this is your baby, as it were. Presumably
you are trying to push it up the agenda to try to convince those
around you in the Department that it is a major factor in keeping
people in the armed forces.
Vice Admiral Tim Laurence: I do
not think that I need to convince the Department. I think that
it is very clear about that. I am certainly ensuring that we make
absolutely the best of the money that we spend on the estate.
Of course, in my current role I will always advocate spending
more.
Q10 Chairman: Okay. Sir Ian, perhaps
I will give you a chance. Figure 7, on page 18, shows the different
levels that the Permanent Secretary referred to. You are planning
to upgrade 900 service families' houses each year, so I assume
that next year's outlay will include all 140 houses currently
at the lower standard.
Sir Ian Andrews: There are currently
138 houses at standard 4 for condition, and we are working closely
with our customers in the armed services to examine the priorities.
I have a particular responsibility for that as the Chairman of
the Defence Estates Committee, which is a sub-committee of Mr
Jeffrey's Defence Management Board (DMB). It brings together the
customer areas in the armed forces and the suppliers in Defence
Estates. We are working closely to consider how to target those
upgrades in the most effective way. It is certainly a high priority
to tackle those properties first, but there are often things that
get in the way of that. I am clear that the Defence Estates Committee's
intention is that they should be targeted, and that as many as
possible of those at standard 3 for condition should be targeted
as well.
Q11 Chairman: So all 2,000 homes
in the lowest two categories will have been upgraded within two
years. Are you giving us that guarantee?
Sir Ian Andrews: No, I am not,
because it is not quite that simple. They can usually be upgraded
at the level of investment that is required for properties at
that level only when they are available—not being lived
in—and it is appropriate to do so. I am also clear that
we have a programme of disposing of quarters, and again, some
of them would go down that route. However, I can absolutely give
you the assurance that we will get rid of the standard 4 as soon
as we can, and we will make inroads in standard 3 as soon as we
can.
Q12 Chairman: Sir Ian, Mr Jeffrey
or Vice Admiral, if you look at paragraphs 9 and 10, you will
see that in paragraph 9, you have cut £13.5 million of essential
work out of regional prime contracts, but you have obliged the
same contractors to do £45 million on other projects, including
resurfacing tennis courts and building all-weather pitches. It
is a bit unclear why you have done that. Can somebody explain
why it has been done in that way?
Bill Jeffrey: May I say something
about the savings? I remember very well the position that we faced
in the early part of the financial year just finished. Quite early
in the year, we discovered that we would have difficulties keeping
within our budget unless we took some steps to reduce the pressures
on it. The reason for that was a mixture of factors, but in particular,
the escalating cost of fuel, of which we consume quite a lot.
The Defence Management Board therefore decided
on a package of measures, which we put to Ministers, to take about
£70 million out of the planned expenditure for the year.
We thought that that would be sufficient to get things on to an
even keel. Within that, there was a figure of £15 million
from Defence Estates, of which £13.5 million was from the
regional prime contracts. The Board was clear that it needed to
be done in a way that did not touch living accommodation, and
I believe that Defence Estates managed to make the saving without
affecting living accommodation at all.
Our system involves the main budget holders,
including those in the armed forces, and we then had an injection
of money from the single services in particular, which amounted
to £45 million. It was there to be spent on estates purposes,
and we had to balance the saving that we had already decided to
make in order to manage within our means in that financial year
with the available funds from that source. Vice Admiral Laurence
may want to say something about the process that was gone through.
Q13 Chairman: Vice Admiral, while
you are answering that, you might also explain what, when you
talk to your men, they think is more important—poor standards
of accommodation or sports pitches.
Vice Admiral Tim Laurence: I was
not in charge of Defence Estates at the time, but when the cut
was imposed, Defence Estates gathered together the representatives
from each of the six customer estate organisations, and they had
a debate, effectively, about whether the cuts would be appropriately
imposed on the regional prime contractors, as the DMB had indicated,
or whether it would be better to take the cuts out of the injected
minor new works. In all but about £1.5 million of those,
the view was taken that it would be preferable from the customer's
point of view to take the cuts from deferrals in the regional
prime contracts rather than cut some of the high priority minor
new works that the customers wanted. With the benefit of hindsight,
we might look back at one or two of those decisions and think
that they look questionable, but at the time it was what the customers
wanted.
Q14 Chairman: All right. My last
question to Mr Jeffrey relates to paragraph 2.19 on page 25, which
is headed, "The Department does not fully understand the
overall cost of its estate", which is a fairly telling phrase.
Why did you tell the NAO that you do not need to know the full
cost of your estate, as it is: "only one of the necessary
components of the delivery of military capability"? I would
have thought that it was an essential first step. Is it not?
Bill Jeffrey: It is true that
expenditure on the estate is found in a number of different budgets.
That is inevitable, and we have tended not to draw that together
in a single budget. I do not think that the NAO would argue that
we should. As a matter of fact, Defence Estates does have visibility
over most of the relevant costs, including capital costs and costs
of depreciation. We accept the NAO's general point that in management
information terms, we need a fuller understanding of the whole
of our estate's costs. We are never going to get an absolutely
complete picture, because if you get out into the budget areas,
there are parts of jobs that may contribute to estates, and it
is not worth the effort to separate them out. But I certainly
accept the NAO's general point that we could do with a fuller
picture. We are working on that, and we should have it quite soon.
Q15 Chairman: So you accept recommendation
7 on page 7?
Bill Jeffrey: Yes, we do.
Chairman: Thank you, that is fine.
Q16 Mr Dunne: May I understand a
little more about your prioritisation of substandard property?
Will you explain what distinguishes a section 4 from a section
3 property, for example?
Bill Jeffrey: That distinction
is found in Appendix 6 of the Report—the shaded bit on the
right-hand side. I referred to it earlier. It explains that a
property assessed as standard 3 usually reaches standard 1 or
2 in about half of the various categories under which it is measured,
but that it will require improvements such as a complete rewire,
a new kitchen and bathroom, a change of plumbing and that sort
of thing. The Appendix goes on, "A property at standard 4
is typically assessed as standard 4 in five or fewer categories.
standard 4 properties will typically require a new bathroom, electrical
system, kitchen, insulation upgrade"—the works, in
effect. We are keen to get both those categories of property off
the estate as quickly as we can.
Q17 Mr Dunne: So, Mr Jeffrey, if
a serviceman told you that he had been stationed in a barracks
where the kitbag could not be put in the locker for fear of vermin—probably
rats—gnawing through the straps, would you regard that property
to be standard 4 or standard 3, and what would you do if you heard
such an allegation?
Bill Jeffrey: The first point
to make, for the avoidance of doubt, is that I would regard that
as completely unsatisfactory. We take such things extremely seriously.
Obviously, one would need to look at the property to find out
whether its physical fabric fell within standard 3 or 4. But clearly,
the position that you have described would not be satisfactory.
Q18 Mr Dunne: I did not make that
comment lightly. One of my constituents, currently serving in
active theatre, was sent for pre-mobilisation training to a barracks,
and that was the state of affairs. If I tell you that that barracks
was at Chilwell, will you confirm whether you have heard similar
stories from there?
Bill Jeffrey: I think that there
is single-living accommodation at Chilwell.
Mr Dunne: Yes.
Bill Jeffrey: I do not have personal
knowledge of the state of the accommodation there, but I can certainly
look into it.[1]
Q19 Mr Dunne: Could you look at the
situation and send us a note on it, please?
Bill Jeffrey: We will certainly
do so.
Mr Dunne: Thank you.
Bill Jeffrey: Unless either of
my colleagues knows. I have been to Chilwell, but I could not
speak for every detail of the estate.
Sir Ian Andrews: I should
like to answer your question on the issue of vermin control, which
is clearly a responsibility placed on our regional prime contractors
as part of the service. Chilwell falls within the central region
and that is what I would expect the response to be to that particular
problem on the ground.
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