Examination of Witnesses (Question Numbers
20-39)
JOHN HEALEY
MP, PETER RUBACK
AND KEN
SWAN
13 JULY 2009
Q20 John Cummings: What evidence
do you have that councils support your proposed changes?
John Healey: Local government,
having been Local Government Minister for two years, I am in a
quite happy position to know how strongly local government feel
about the operation of this system as it stands. I am in quite
a strong position to know that actually local government is in
much fitter shape than it may have been ten years ago to take
on these sorts of responsibilities.
Q21 John Cummings: What soundings
have you taken to support what you are saying, Minister?
John Healey: I could point you
to the response of Councillor Paul Bettison, who chairs the Environmental
Board at the Local Government Association, a leading Conservative
councillor. He responded to the announcement that I made on 30
June by saying: "It is good news that the Government will
consult on major reform of council housing finance. We have campaigned
hard for town halls to keep control of proceeds from council house
rents and sales." That is precisely what I will do.
Q22 John Cummings: Have your changes
been discussed in any detail by the LGA?
John Healey: Yes, it was one of
my predecessors, as Housing Minister, who I think in 2007 announced
what has been a joint review that my department, with the Treasury,
has led. That has involved not just the commissioning of specialist
reviews and assessments of work, but a great deal of discussion
including, and of course with, local government, the LGA.
Q23 John Cummings: So you do not
think it is necessary to have a plan B in case some councils do
not support the proposed changes?
John Healey: It is necessary,
I think, to have legislation in place to require some that may
not wish to accept the changes to do so. I think there is a widespread
general support for this sort of move, including from local government,
and I will set out to work—and the team of officials working
with me on this will set out to work very closely with local government
and others that are involved.
Mr Betts: How long will it take to bring
in the new system?
Chairman: We seem to have another division!
We are going to have to adjourn it and come back with the answer
in ten minutes.
The Committee suspended from 5.24 pm to 5.35
pm for a division in the House
Q24 Mr Betts: I was asking about the
length of time it might take to bring a new system in. Have you
got a time frame for it?
John Healey: It is hard to say
precisely for this reason: it will depend, I think, on the extent
to which we would need to fall back on legal powers in the legislation
in order to complete the change. That would be the end point.
It may well be that we are able to move sooner with some authorities,
and there are also steps that we can take immediately towards
the ultimate aim. That is why from 30 June I announced, as part
of the Statement, that all rent, all receipts from sales on the
new-build properties that councils put in place, will be held
outside the HRA account and kept in full by the council. It may
also be that we are able, in advance of the full dismantling of
the HRA system to move to allow councils to retain all capital
receipts, whether or not they are from new-build properties.
Q25 Sir Paul Beresford: So you are
going to have the two systems running together!
John Healey: No, it would be one
system in transition, which is—it is one system being dismantled
in bits, but with the aim of totally dismantling it.
Q26 Sir Paul Beresford: So some councils
will be using the old system and some using the new. What happens
to the debt?
John Healey: Whilst the HRA subsidy
system is in place it is hard to see how you could get away from
that annual application of essentially a formula and a subsidy
or a retention of certain rental income. I am saying that we can
free aspects of this up in advance of its total removal, and that
is what I am setting out to do where it is possible to do so.
Q27 Sir Paul Beresford: You mentioned
primary legislation.
John Healey: Yes.
Q28 Sir Paul Beresford: What will
you need that for?
John Healey: It may be when you
were out of the room, Sir Paul, but what I explained was that
I see this as a backstop. This may be required to ensure that
all authorities accept an independent self-financing sort of baseline
to work from. I would like to think we could move in negotiation
and agreement with all 202 authorities. In practice it may be
wishful thinking, and I think legislation will be required in
order for us to do that.
Q29 Mr Betts: Would you be able to
move for those authorities that are willing in advance of legislation?
John Healey: That is perfectly
possible to consider and may well be a view that comes up strongly
in the next consultation period.
Q30 Chairman: Will it be made clear
in the consultation that were local authorities able to come to
an agreement amongst themselves, maybe brokered by the LGA, then
the system could be introduced more quickly for everybody?
John Healey: Yes.
Q31 Sir Paul Beresford: Tell us why
the tenants might like it, especially those that are going to
be carrying debt they would not expect?
John Healey: It is a very good
question because with a policy argument like this, it is often
tenants that we lose sight of. Where this is an institutional
argument between local and central government—as I said
to the Committee earlier, the purpose of doing this is that it
is clearer to tenants who is responsible for what and it is clearer
for tenants who they can hold to account if they are not getting
the level of housing service or homes that they think they need
or are entitled to; or indeed if the wider housing needs are not
being met properly in that area. The combination of these changes
and the introduction of the Tenants' Services Authority, that
will regulate the housing service standards for all social landlords
not just housing associations, will help produce what I hope will
be a ratchet for improving standards of housing services that
all tenants, whoever their landlord happens to be, in the public
sector, will benefit from.
Q32 Sir Paul Beresford: In this age
of joined-up government is this going to help building houses,
and what is the DWP reaction?
John Healey: What, particularly
during the recession, is helping build houses is that the Government
is prepared to put investment into building houses, because at
a time when we have seen private sector house-building fall through
the floor—
Q33 Sir Paul Beresford: Is this system
you are introducing going to make any difference?
John Healey: Well, this system
should give local councils first of all greater freedom if they
choose to build or commission building of new homes in their area.
If we set it up in the right way, it should allow them to use
the proceeds of any efficiencies, and potentially a greater borrowing
freedom, to be able to make those moves if that is what they choose
to do.
Q34 Sir Paul Beresford: So they could
choose to build swimming pools if they wanted to, even—
John Healey: Do you know, I had
not really contemplated that!
Q35 Sir Paul Beresford: For the benefit
of the tenants, not the council!
John Healey: I am sorry, I beg
your pardon! I am sorry, for some reason I was thinking of homes
with swimming pools.
Q36 Sir Paul Beresford: No!
John Healey: In the council estates
in Rotherham it is quite a big leap. No. Part of the principal
reform needs to be to strengthen rather than weaken the ring fence
that is around housing. In other words, if tenants are paying
rent, in order to sustain the housing services and the quality
of houses that are needed it is reasonable that that is an income
stream that is used for that purpose rather than potentially diverted
to other things that the councils might wish to do.
Q37 Mr Betts: It is something that
worries me a bit at present, that there is guidance about what
HRA money can be spent on, but we see a lot of councils now that
are starting to provide services for council taxpayers in general
out of HRA funds, and I just wondered whether that was an issue
that you intended to address when you get the new system in place.
There may be an issue about clearer guidance, stricter guidance
about the fact that the tax should be used for the benefit of
tenants and not for the population as a whole?
John Healey: To be fair to you,
Mr Betts, it is one of the quite complicated areas, which, if
I am honest with the Committee—and you will see this in
the consultation paper—we have quite a bit of further work
to do. That is essentially to work with local authorities to see
how in practice we can set this up in a way that can take account
of those sorts of concerns.
Q38 Chairman: Are you suggesting
that in the consultation you are setting out the kind of principle
on what the HRA funding should be on, and then hoping to get guidance
through the consultation as to how to do it?
John Healey: I expect to be able
to set out a number of things in the consultation. First of all,
the review looked at five different approaches to reforming the
HRA subsidy system. I aim to be able to confirm the approach that
we think is the one we want to adopt. Secondly, I want to be able
to give an indication of the sort of timescales and steps we can
take towards that, and how quickly. Third, there are at least
three areas where immediately after the consultation we know we
are going to have to do some detailed work, including with local
government, as the next stage. I expect and aim for the consultation
to set out those three areas and how we are going to tackle the
sorts of questions that Mr Betts has raised.
Q39 Chairman: When do you expect
the consultation to be completed?
John Healey: Three months.
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