Examination of Witness (Questions 1-51)
Q1 Chair: Good afternoon. Welcome
to this hearing, Mr Ashby. You will understand its purpose; you
have been informed of the areas that we are likely to want to
explore with you. The aim of the hearing is to look at the recommendation
that has been made for your appointment as chair of the Homes
and Communities Agency Regulation Committee. That is rather a
mouthful—it does not trip off the tongue easily—but
I am sure you understand what the job is all about. Thank you
for coming to the Committee this afternoon to answer our questions.
Clearly, you have had quite a lot of experience in this world.
Did you instinctively apply for the position or did someone come
along and say, "Have you seen this advert? How about applying?
You must be in with a good chance."?
Julian Ashby: I knew that there
was going to be the post and I decided to apply shortly after
the chairman of the TSA announced that he would not be interested
in applying for the post himself. That crystallised in my mind
that I would apply, but I was not searched out, head-hunted or
anything like that. I just decided I would apply.
Q2 Chair: What made your mind
up? Was it just a natural decision because you were deputy chair
of the previous authority?
Julian Ashby: I got really closely
involved in regulation about four years ago when I was the independent
social housing adviser to Professor Cave's review of regulation.
That got me really interested in it. Having done that, when it
came to implementing that report, which was largely done through
the Housing and Regeneration Act 2008, I thought, "I really
want to see whether this can be made a success." That was
the point at which I decided to join the board of the TSA and
applied for that. I am now thoroughly infected with regulation
enthusiasm and want this to be successful in its new format, which
is quite significantly changed from the one envisaged by the 2008
Act.
Q3 Chair: I have never heard the
words "regulation" and "enthusiasm" used in
the same sentence before.
Julian Ashby: Yes, I have spent
most of my working career not being very enthusiastic about regulation,
so in that sense I suppose you could say I am a poacher turned
gamekeeper, but I think regulation can be well done and how it
is done is very important. You have to keep your feet on the ground.
It is very important that you are not captured by those whom you
seek to regulate. I suppose you also need to avoid the temptation
to believe that you know how to run their businesses better than
they do. But done well, regulation can contribute a great deal
to the social housing sector.
Q4 Simon Danczuk: How will the
Regulation Committee's role differ from that of the Tenant Services
Authority?
Julian Ashby: The institutional
arrangements, of course, are very different, but I do not know
whether that was the main thrust of your question or whether it
was in terms of the scope. The scope changes primarily because
the new focus will be on economic regulation. That covers issues
such as governance, financial viability, rents and value for money.
Whereas the consumer element was quite strong with the TSA, which
covers issues such as the home standard tenant involvement and
empowerment, tenure, and neighbourhoods and community issues.
It will set standards in those areas, but it will not proactively
regulate them. So that is quite a big change of emphasis. I can
go more into the institutional arrangements if you want me to—I
was not sure of the thrust of the question.
Q5 Simon Danczuk: That is okay.
The Government have said that, "In practice the TSA made
little difference on the ground" in overseeing the financial
viability of social housing and protecting tenants. Do you share
that view?
Julian Ashby: Within three months
of the TSA starting, there was the Lehman Brothers collapse and
the huge resulting stresses in the financial markets. That led
to a lot of financial turbulence and it threatened a number of
housing associations at a number of points. Over the course of
the next year, we were unobtrusively involved in making sure that
no housing associations got into serious financial trouble. So,
in spite of it being a really exceptionally difficult financial
period, in fact, none did get into trouble. In terms of ensuring
that housing associations remain viable, the last three years
have actually been among the most successful in the regulation
of the sector. Before that, it was done by the Housing Corporation,
but it has actually been pretty successful in that area in the
last three years. I think his remarks are more aimed at consumer
regulation and inspections by the Audit Commission and things
like that, rather than our focus on economic regulation.
Q6 Simon Danczuk: In terms of
the Government's proposals to move from one model to the new model,
while you were involved in the TSA did you ever suggest such a
change, or not?
Julian Ashby: We were moving in
the direction of not having such intrusive inspection. Inspection
was not, in fact, part of our function; it was the Audit Commission's
responsibility. The standards that we set, which were actually
very well received by both tenants and providers—and, indeed,
praised by the Minister—laid an emphasis on local relationships
between landlords and their tenants, and local offers.
We made it clear that it was not our intention
to be policing those local offers; they were for landlords and
tenants to manage locally. That direction of travel was then clearly
strongly reinforced by the new Minister's proposals in that area,
but there was an extent to which he was pushing at a door that
was not closed.
Q7 Simon Danczuk: So, in summary,
do you support the Government's change or not?
Julian Ashby: I would say that
it is not for a regulator to take a view. Everything we should
be doing as a regulator is effectively governed by statute—we
are a creature of statute. There are areas where the Government
are entitled to give us directions, and they have been consulting
on those in the last few months.
But for the most part it is important that,
once directions are set and the statute is passed, regulation
is then carried out in an independent fashion. It is not for the
regulator to sell or disagree with Government policy. If we have
concerns or wish to offer advice, we would do that through officials
and privately, not in the public arena, because that is not what
a regulator ought to be doing.
Q8 George Hollingbery: I am going
to probe you a little further on what you did at the TSA in the
post-Lehman stage. I am not quite sure what you did at the TSA.
Was it exploitation of relationships? Was it negotiation with
Government Departments? Was it behind-the-scenes advice to housing
associations? How will the skills you used in that situation—they
clearly worked well, in that none of those associations went down—be
useful somewhere where, as you describe it, you do not have an
opinion, you are bound by a rulebook and there are straightforward
avenues to go down?
Julian Ashby: In that particular
situation, we were gathering a lot of intelligence from housing
associations on a regular basis about their financial status.
In the nature of the questions we asked them, we were also helping
them to come to terms with some of the issues. One of the most
serious of those to arise, which took them substantially by surprise—I
have to say it took us by surprise as well—was something
called mark-to-market calls.
If you insure, as it were, your loan book against
rises in interest rates, you enter into a swap arrangement with
a financial institution. If rates then drop, you can be required
to put up quite large sums of money as surety, and a number of
associations had cash calls made on them at very short notice
for very substantial sums of money. Once we realised that problem
was beginning to emerge, we quickly advised all associations and
gathered information on who was potentially exposed. There were
a small number of instances where we had to help the organisation
through that period, but that was done pretty successfully.
Q9 George Hollingbery: Can I just
draw you back to the question? How does the way you acted in that
particular circumstance suit you for this new job of regulation?
Julian Ashby: Economic regulation,
going forward, is the principal focus for the regulator, and the
skills involved in managing associations, in particular, through
volatile financial markets are going to be much needed over the
next three years. I think the likelihood is that there will be
further turbulence in the financial markets. That has a potential
to impact on housing associations in a variety of ways; it is
already having an impact on how they are rated and on the margins
on new lending. I have quite a lot of experience of those sorts
of issues and how they can affect associations, and that will
be very relevant in the coming period.
Q10 James Morris: I notice from
your CV that you have a range of non-executive positions. Are
you concerned at all about potential conflicts between those roles
and the role you are going to take up? How might you deal with
perceived or actual conflict?
Julian Ashby: I had all those
roles prior to be being appointed to the TSA. Obviously, they
were looked at at that time, and in this recruitment, by the—I
cannot remember their title—independent appointments assessor.
There have not, in practice, been any problems, but I am happy
to explain briefly what the roles involve.
Q11 James Morris: There are a
couple. You are a chair of a financial information company, which
publishes Social Housing Magazine. Do you think there is
a potential conflict in your being a non-executive director of
an organisation that is producing commentary on the sector you
are regulating?
Julian Ashby: It is not actually
that kind of publication. It is a technical, monthly-subscription
journal and it does analyses. Recent issues have done analyses
on things like housing revenue accounts and pension deficits.
It is quite a technical journal, and I have absolutely no editorial
involvement whatsoever.
Q12 James Morris: What is your
role?
Julian Ashby: I chair the company.
I am the only non-executive on its board; the staff are the other
directors.
Q13 James Morris: Do you have
a financial interest in it?
Julian Ashby: I have a financial
interest. I and two other colleagues bought the magazine at a
point when the previous owners had lost interest in it and it
looked as if it was going to close. We had always been admirers
of it, so we bought it. Last year we gave 50% of the equity in
the company to its staff and stepped right back from any day-to-day
involvement, other than the fact that any company has to hold
proper board meetings and so on. That is the role I play. It is
a business role, not an editorial role. If it was a significant
concern to you I would give it up, because this is clearly the
prime role.
Q14 James Morris:
Can you also explain what your roles are with the other three
organisations that you are a non-executive of, and how they might
or might not relate to your new role?
Julian Ashby: There are four.
James Morris: Apologies.
Julian Ashby: The Institute for
Voluntary Action Research is a charity that does—
James Morris: I was
more interested in Housing Securities, HSL40 and HALOS.
Julian Ashby: They are what would
in simple terms be described as borrowing clubs. They are not-for-profit
organisations, in which a group of housing associations get together
to issue a bond in the capital markets because individually they
do not have enough demand for a bond to be able to issue on their
own. You cannot really go to the capital markets for much less
than £100 million, and a medium-sized association would not
want to borrow that, but by grouping together with others they
can. What the three groups did some time ago was to form a not-for-profit
company and issue a bond. The money is then on-lent to the associations,
and the associations pay the interest and repay the bond.
All those types of company—there are many
more than the three I am involved with—have non-executive
directors who must not have any relationship with the associations.
Their job is to ensure, in effect, that the associations meet
their obligations to the bond investors.
Q15 James Morris: So you do not
have any specific financial interest in them?
Julian Ashby: None whatsoever.
Q16 Chair: Is there no potential
for any conflict, in that you are regulating the associations
that are using bonds that are effectively raised through organisations
you are involved with?
Julian Ashby: I don't think so,
and that is basically because all housing association borrowing
tends to have cross-default clauses. In that sense, from a regulator
standpoint, you do not want any housing association as a borrower
defaulting on any of its obligations to anyone, because the moment
it does they all get triggered together.
In these particular structures, if a housing
association gets into trouble it is carved out of the structure
and the relationship is then directly between the defaulting association
and the bond holders. The intermediary bit has nothing further
to do with it. I was trying to think of how there could be a conflict
of interest in this situation and I struggled, but should one
arise I would have to withdraw.
Q17 George Hollingbery: Why do
you have directorships?
Julian Ashby: As I said a little
earlier, it is quite important to keep in touch with what is happening
on the ground in as many different ways as you can. For me, it
keeps me in touch with the financial markets. The companies each
commission regular due diligence on the borrowing members. It
is interesting to see how commercial managers do that as opposed
to how we, when we wear the regulator's hat, do it in relation
to those whom we regulate. I have found it quite helpful, but
I would not make too much of it. It is just one of the ways in
which I try to keep in touch.
Q18 George Hollingbery: Are you
confident that this will never cause you a lack of sleep? On this
Committee, we all come from a world where every single thing you
do has to be ironed, cleaned, washed, hung out to dry and looked
at six times. Are you quite sure that this will never be an embarrassment
for you in any way, shape or form or a difficulty that you will
have to deal with?
Julian Ashby: I would clearly
be embarrassed if any organisation I was involved with got into
financial difficulties, no question about it, but as not-for-profit
organisations, it is part of my role to ensure that they do not
get into trouble. Frankly, I would be embarrassed if any housing
association got into trouble with paying its debts over whatever
period of time I was involved in their regulation. It is my job
to try to prevent that from happening. Should it arise—you
can never be absolutely sure about what is going to happen—it
has to be dealt with in the most competent way possible. My professional
career before getting involved with regulation was heavily oriented
towards troubleshooting organisations, particularly housing associations,
that got into trouble. I have quite a lot of experience in that
area.
Q19 Simon Danczuk: What remuneration
do you receive from these companies?
Julian Ashby: None from the charity.
The remuneration from the other four is certainly less than £20,000.
Q20 Simon Danczuk: In total?
Julian Ashby: In total, yes.
Q21 Simon Danczuk: Per annum?
Julian Ashby: Yes.
Q22 David Heyes: Clearly, the
members of the Committee have some anxieties about this and are
looking for the best reassurance they can get from you. If these
conflicts should arise, unlikely as that may seem to you, where
would you take advice from? How would you know? Is it entirely
down to your personal judgment or is there someone whom you can
look to? Is there someone who would give you a steer on what ought
to be done, or point out to you when a problem had arisen that
you perhaps had not spotted?
Julian Ashby: I did have a discussion
on both occasions with the independent public appointments assessor
about the roles and was probed by them and took advice from them.
Obviously, I was very open about the matter at the time of the
application in the same way that I am being with you. At that
time, they considered that they could not see circumstances under
which there would be a conflict. I understand your anxiety. If
it continued to be an issue that worried you, then I would obviously
want to extricate myself from those roles. I would not want to
leave them in the lurch too suddenly, but I would be willing to
do that if you felt that that was a concern you had in the long
term.
Q23 David Heyes: I don't think
that that quite answers the question, though. Who would it be
that you would either take advice from or expect to point out
to you that things were not going right and that you needed to
deal with them? Would that be the chief executive of the HCA or
the chair of the HCA?
Julian Ashby: It could be either.
Q24 David Heyes: Anybody else?
Julian Ashby: Whenever I have
had a problem of that sort, I would seek advice from whatever
seemed to be the best source at the time. One of my co-directors
on two of those is Adrian Coles, who is the chief executive of
the Building Societies Association. I guess he feels quite acutely
about the same issues as me in terms of those sorts of things.
I would probably seek his advice, too.
Q25 Stephen Gilbert: To be fair,
Mr Ashby, the Building Societies Association is not a public regulator
in the same sense that this organisation is. There is a concern
about this. I wonder whether in your job description there is
a process that allows you to seek recourse to an independent person—maybe
the chief executive—to identify what to do in the event
of a perceived conflict of interest. Because, in public life,
you will be aware that it is not just about doing the right thing;
it is about being seen to do the right thing, too. I would be
quite concerned if that line management issue is not clear in
the job description.
Julian Ashby: I would be very
happy to take that advice.
Q26 Stephen Gilbert: You said,
Mr Ashby, that you have developed an enthusiasm for regulation
over the last four years—well done, you. I wonder if you
can tell us what your finest hour in terms of regulation has been
over that period.
Julian Ashby: That is quite a
difficult question to answer. I think we are a board rather than
an individual, so almost all the important decisions we have come
to have been collective decisions. I suppose there are a couple
of things. I chair a group called the Regulation Strategy Group,
which we set up in order to involve the board more in the development
of regulation policy. Given the substantial changes that we are
making as a result of the impending legislation, it was really
important that the board had an opportunity to think through how
those changes would take place. Through using the Regulation Strategy
Group, we have made a significantly better fist of it than we
might have if it had just been papers coming to the board. That
is certainly one thing.
The other thing—this may open up an area
of questioning you will be coming to in due course—is the
relationship of the Regulation Committee to the HCA, in which
it sits in a somewhat unusual fashion. We realised that it had
the potential for ambiguity or differences at a number of points.
I chaired a meeting with a number of board members, representatives
from the HCA and some officials from the Department. We concluded
that it would be a good idea to develop a protocol well in advance.
Rather than waiting for problems to arise, we decided that we
should look at the areas that might be difficult in the new relationship
and seek to pre-empt them. Basically discussing how we are going
to develop strategy, how we are going to ensure proper resourcing,
what will be the relationship with the accounting officer, what
would happen if we were judicially reviewed and that sort of issue.
I am happy to say that we now have a draft protocol that goes
into considerable detail about that. I feel fairly instrumental
in getting that process off to a good start.
Q27 Stephen Gilbert: I only asked
for one and you have given us two. That speaks for itself. Obviously,
at the TSA, you have had experience of managing competing demands
and relationships, particularly externally, from different providers.
What kinds of challenge in that field do you expect going forward?
Julian Ashby: There are different
areas of challenge. There are likely to be difficulties in our
role in consumer regulation, because it is new. Therefore, the
new arrangements that will be in place to resolve tenant-landlord
problems at local level will be ones being established, so tenants
will not necessarily get to hear about them that quickly. It gives
new roles to both councillors and MPs in that connection.
Basically, wherever you introduce significant
change, people adapt to it and come to learn about it and understand
it at different paces. I think we can probably expect people to
turn to us as the regulator in the expectation that we can deal
with a range of consumer issues, when in practice we will not
be able to, because we will no longer have that authority. That
is likely to be an area of difficulty.
I think welfare reform has quite a substantial
potential impact on tenants, housing associations and lenders.
It is an area where there are still significant unresolved issues,
but they will play out over the next few years. Different stakeholders
take strong and different positions on that, which is something
we will have to manage.
Q28 Heidi Alexander: I want to
pick up on some of the things that you were talking about in the
relationship between the Regulation Committee and the HCA, particularly
how you will safeguard the independence of the Regulation Committee
in respect of the HCA's investment decisions. You touched on the
protocol. Do you see that as doing the job of safeguarding independence?
Julian Ashby: I think that is
core, but the legislation is very specific. It makes it clear
that regulatory powers can only be exercised by the Regulation
Committee and those to whom it delegates; they cannot be exercised
by the HCA board. It puts a duty on the HCA not only to resource
regulation but also to maintain its independence. It is helpful
to have it framed that way. As I was describing earlier, I think
we are satisfactorily addressing the areas of potential friction
through having a protocol. I am confident that conflicts of interest
should not arise. There are potential synergies by having regulation
and investment effectively co-located.
Q29 Heidi Alexander: Do you see
any problem with the fact that the director of regulation will,
as I understand it, report to the chief executive of the HCA,
while also having a line of accountability to you? Perhaps you
might consider that question—[Interruption.]
Sitting suspended for a Division in the House.
On resuming—
Chair: We will press on. I am sorry
for the interruption. It is a bit disconcerting, but Heidi, will
you pick up your question?
Q30 Heidi Alexander: I think I
have forgotten most of my question.
Julian Ashby: I think I can remember
it.
Q31 Heidi Alexander: It was to
do with the fact that the director of regulation reports to the
chief executive but also has a line of accountability to you,
and whether you see any potential problems with that.
Julian Ashby: I think it is unlikely
to cause a problem. It is part of the unusual nature of having
a regulatory organisation within an organisation that has wider
objectives; but I think it is entirely reasonable that the director
of regulation reports to the chief executive of the whole organisation
and the chief executive is the accounting officer for all aspects
of the work of the HCA, including regulation, but she is not entitled
to be directly involved in regulatory decisions. So she cannot
direct her director; that is for the Regulation Committee to do.
I think that she understands that distinction
and it is one of the issues that I think is covered sufficiently
in the protocol we have developed. As the accounting officer,
she has to come here, if required, or to the Public Accounts Committee,
to account for the way that all the functions of the HCA are being
carried out, and that could include regulation as well. It is
inevitable under the circumstances, but I also think that we have
put in place sufficient arrangements to make sure that it is not
a problem.
Q32 Chair: Just explain to me
how you can account for something that you are not allowed to
be involved in.
Julian Ashby: You will be much
more experienced in how accounting officers work than I am, but
my understanding is that they are particularly concerned—clearly—about
proper use of financial resources and regularity, in terms of
things being done in the right way; it is possible for the regulation
department to be fully accountable for that kind of thing without
there being any improper exercise of regulatory powers.
It is regulatory decision making that has to
be kept separate from the investment part of the HCA, but on the
regulation side we are not big spenders of resources, unlike the
investment side, which obviously spends very substantial sums
of money. For us, it is just the resource of providing office
space and services, and the staff who regulate. We do not otherwise
have an externally facing budget, as the rest of the HCA would
have.
Q33 Chair: Would you accept that the
structure makes the job you are applying for slightly less easy
to define, certainly to the public, than it was before?
Julian Ashby: That is probably
true. It is sometimes harder to explain, but there are some advantages
from being co-located. It is helpful that we are able to share
corporate services. That will probably save money. It will probably
be a more economical solution than if you had two completely independent
organisations. But the decision has been taken.
The important thing is that where you have that
unusual arrangement, you need to have good working relationships
with all those concerned. So my relationship with the chair of
the HCA and with other HCA board members, and my relationship
and the director of regulation's relationship with the chief executive,
are important. We can try to pre-empt problems by drawing up protocols
and things like that, but at the end of the day you need to be
able to get on with people and make arrangements work. I am confident
that we can do that.
Q34 Heather Wheeler: In fairness,
you have addressed a couple of the points that I was going to
ask you about, so I am going to focus on one particular point.
What do you consider to be the top two economic and financial
issues facing the social housing sector?
Julian Ashby: I would have to
say that welfare reform is probably one of them. That is quite
an overarching issue. Within that, there are a number of sub-issues.
Welfare reform will have an impact because approximately two thirds
of the sector's tenants are in receipt of housing benefits. When
the system changes to universal credit, that will have an impact
in a number of ways.
The proposals relating to under-occupation could
potentially affect over 200,000 tenants, and the arrangements
for direct payment, and to what extent that is continued, will
impact on the security of cash flows, which in turn is one of
the issues that causes anxiety for lenders. Those issues will
affect associations, tenants and lenders, and they will play out
over the phased period of the implementation of the reforms. We
are still thinking about exactly what their impact will be, and
how we will guard against any adverse impacts, and that will certainly
be one of the major issues going forward.
Q35 Heather Wheeler: So it is
not lack of money.
Julian Ashby: That was going to
be my second point. We are entering a period in which significantly
fewer grant resources will be provided, in particular for housing
associations. There is no lack of need for more homes to be built—new
homes remain much needed—and that puts additional stresses
on the system. If the grant is smaller, associations are required
to borrow more and/or charge higher rents. The new affordable
housing product involves less grant, higher rents and more borrowing.
Those things have an impact on associations,
and potentially, the more highly geared they are, the less future
capacity they may have. Managing that situation and pushing hard
to achieve good value for money becomes very important in that
context, and we clearly have a role in that. We also have to be
careful not to push organisations to a point of financial vulnerability,
because that will not be to anybody's benefit. Some important
judgments will have to be made, refined and remade over the next
few years.
Q36 Mark Pawsey: So the Regulation
Committee has a number of duties and obligations. What is the
key activity that you could undertake as leader of this organisation
to ensure that the supply of social housing is of "appropriate
quality" and "sufficient to meet the needs"? What
can you do to influence that? How can you make it happen?
Julian Ashby: The quality issue
continues to be set by the decent homes standard.
Q37 Mark Pawsey: That is probably
the easier of the two, isn't it?
Julian Ashby: It is. On the issue
of supply, it is about developing the points I was just making,
and the approach to value for money will clearly be a very important
part of that. Another issue is looking at ways in which offering
housing associations greater flexibility in the way they use their
assets may allow them to free up resources in order to develop
new homes.
Historically, the assumption has always been
that housing associations are organisations that build and refurbish
homes, and then hold on to them and manage them in perpetuity.
Commercial companies that manage property do not look at their
assets in that way; they look at their assets in terms of, "What
is giving us a yield and what is not giving us a yield?"
This is an area where, looking at value for money, you take a
broad view; you do not just say, "How much are you spending
on this? How much are you spending on that?" You are looking
at yields and asset values. I suspect that that will lead both
us as regulators and housing associations into thinking quite
creatively about how new supply can be funded.
Q38 Mark Pawsey: What creative
ideas have you got? The challenge is to get more money into the
sector, isn't it? How can that be done creatively? What experiences
have you had that you can bring to bear to make things happen?
Julian Ashby: I have been involved
in a number of groups that have been thinking about these issues
over the last year or two. There is a group that has produced
a series of booklets called "Hard Times", which have
looked at this issue, and I have been a member of that group.
This is about looking at better use of assets and at how different
models of development can work.
There is perhaps still some scope for supply
chain efficiencies, although that area has been much better developed
in recent years. There are still quite wide differences in the
overall costs of managing and maintaining properties at different
organisations. There are good reasons for some of those differences—it
all depends when the properties were built, what standard they
were initially and so on—but some seem to indicate that
some people are simply better at these things than others. So
that is certainly another line we will be looking at quite carefully.
But much the biggest amount of value is locked up in the housing
assets themselves.
Some providers have become much more aware of
where they are spending money. I was certainly very surprised
to learn the results of some of their analyses. It is not uncommon
for perhaps 60% or 70% of a housing association's maintenance
expenditure to go on only 30% or 40% of its properties. The implication
is that some are extremely expensive to maintain. Then you think
that if they are holding on to an asset that is actually losing
them money hand over fist, selling it and building new properties
may be a better way forward. It is about taking a much broader
approach than has been the case in the past.
Q39 Mark Pawsey: You mentioned
unlocking the value in the existing estate. Do you have any ideas
how that can be done to fund new build? That is what we are looking
for, isn't it?
Julian Ashby: This is something
that plays out very differently in different parts of the country.
In London and the south-east, where there is probably the biggest
pressure for more homes, there can be substantial equity in the
homes owned by housing associations. A combination of things like
a partial release of some of that equity, allied to housing associations'
borrowing capacity and greater efficiency enabling them to make
surpluses that they can also plough in, can produce the funding
for more homes.
Q40 Bob Blackman: Just cast yourself
forward a number of years. Given all these challenges, what would
you regard as the greatest success you could achieve?
Julian Ashby: It may sound rather
unambitious, but it would be a considerable achievement if we
managed to get through the next three years without any serious
problems arising with registered providers. There is a kind of
day job of making sure that problems do not arise and that, in
so far as they do, you nip them in the bud, and that you get alongside
and are helpful, rather than wait until things get really bad
and then throw your weight around by using the more draconian
powers. Early recognition of problems and early intervention tend
to be much more satisfactory. I would hope that we get to the
end of that period without any major problems, but, if there are,
that we are seen to have handled them very competently. That,
I guess, would be one hope.
Another hope would be that the standards we
set in relation to consumer regulation, which apply across the
whole domain—they apply to local authorities as well as
housing associations—have been clear enough to help tenants
establish effective local scrutiny and problem-solving arrangements.
It is best if, as far as possible, problems can be solved locally.
But I think that tenants need to be empowered by having clear
standards that landlords are expected to meet. I hope that the
standards we set will achieve that outcome.
This may again seem obvious, but I think it
is very important to arrive at the end of that period having maintained
the private sector status of housing associations. I am sure that
the regulator will, from time to time, come under pressure from
Government to make housing associations do this, that or the other.
That has been a historic pattern that is unlikely to go away.
They are, however, private bodies, and that private status confers
huge benefits on the public purse.
Q41 Bob Blackman: Do you see yourself
acting as a light-touch regulator, monitoring and seeing how things
are going and making sure that nothing goes wrong, or are you
going to intervene actively to make people do what you think they
should do?
Julian Ashby: When it comes to
economic regulation, we are expected to be proactive. We remain
constrained by the legislation, because it requires us to minimise
interference and, as far as possible—I think I am quoting
more or less exactly—to leave providers free to determine
how best to manage their business. We have to operate within those
constraints, but, in my view, being active is not necessarily
the same as using intervention powers. I think that a regulator
is generally most successful by actually persuading people. That
would certainly be our starting point, but if you are talking
about the consumer side, yes, that is intended to be a back-stop
role and we would not intervene there, except in extremis.
Q42 David Heyes: Some of the earlier
questions were based on a concern that there was a difficulty
with the separation of powers, with you being located within the
HCA and in terms of assessing your ability to do a good job in
this role. That has given rise to many of the questions we have
asked. You said that you are not going to be big spenders of resources
and that it will just be office space and staff. How are you going
to make sure that you get sufficient resources out of the HCA
so that you can do a decent job?
Julian Ashby: We have to be clear
and justify the resources we use. At the moment, we are operating
within a sort of CSR expenditure line that has been set aside
for regulation and rolled forward for another two years. That
is not an obligation on the HCA, but it is a clear indication,
in terms of how the budgets have been constructed, that money
has been set aside.
Q43 David Heyes: Do you have any
say in that?
Julian Ashby: It is probably fair
to say that that has been done to us more than requested, but
I would be quite positive about that. We started with a budget
close to £40 million per year and we have succeeded in reducing
that significantly over the last three years. Our budget total
spend for the current year will, I think, be in the order of £26
million, and next year—the year for which I become responsible
if you confirm the appointment—it will be about £20
million. That is a substantial reduction in resources and it has
been achieved in two ways.
First, we've become much more efficient as an
organisation. There have been genuine efficiency savings. For
example, about 30% of our staff are now home based, so we are
not providing expensive office accommodation for them. We make
extensive use of IT. We use videoconferencing rather than sending
people on expensive train journeys and so on.
So we have become leaner, but the biggest change
has been a contraction of our consumer regulation role. A substantial
part of the establishment has effectively been reorganised and
there have been significant voluntary redundancies to shrink the
organisation. I think we have adequate resources for our economic
role going forward. If we were suddenly told to be proactive consumer
regulators as well, we would not have sufficient resources to
do both.
Q44 David Heyes: You predicted
earlier that it would be hard to get through the next three years
without problems arising. If that's true—if your fear is
realised—you will need more resources to deal with it. How
will you go about that, given your role within the HCA, which
has lots of other competing demands on its very limited and much
reduced resources? How will you tackle that?
Julian Ashby: First, we have to
be economic in our own use of resources and very focused in what
we do. My experience in this area is that it is the quality of
staff, rather than the numbers of staff, that is crucial for regulation.
Q45 David Heyes: How many will
there be, by the way?
Julian Ashby: I think our current
establishment is in the order of 120—between 120 and 130.
The core regulation staff are now organised in a way that I think
will transfer seamlessly to the HCA on 1 April. The posts that
are still not fully resolved—they will TUPE transfer across,
but there will be further changes—are in the area that I
would describe as central services, where there's clearly overlap
between the two organisations. But in terms of the outward-facing
regulation staff, we have successfully reduced our establishment
to the level that will transfer and continue.
Q46 David Heyes: But will you
and your director of regulation have complete power over the recruitment
and management of those staff in the future? You inherit a team,
but you're saying that there could be a need for more. Also, of
course, you are dependent on central services. Do you have any
say in the recruitment of the central services people?
Julian Ashby: We certainly don't
have a free hand, but we don't have a free hand at the moment.
Q47 David Heyes: Should you have
a free hand? It is absolutely crucial, it would seem to me, that
you demonstrate your independence. That surely means a free hand
in things like improvements and deployments of staff.
Julian Ashby: If we wished to
change the structure of regulation—change posts—that
is something we would have to negotiate with the HCA and convince
it, particularly if it had increased budgetary implications. I
am sure you will be aware that all NDPBs are subject to constraints
over things like recruitment at the moment, and that continues.
That is an important issue to us, but at the moment we are making
things work; but it would be my responsibility, if I thought we
had insufficient resources, to make a case for more, and I would
not hesitate to do that if I felt it was necessary.
Q48 David Heyes: What we need
to be convinced of, Mr Ashby, is how robust you would be in relation
to the HCA and the boss of the HCA, if you found yourself in that
position. That is the key issue, I think, for us here today.
Julian Ashby: I would be robust,
but I would have to be first satisfied of the case myself. The
trade-offs here are always ultimately matters of judgment. It
is always nice to have more staff to do things. Ultimately, the
trade-off is between the level of assurance you can give that
there will not be problems or that problems can be dealt with
satisfactorily, against the cost of doing it. Ultimately, that
is a judgment that Government rather than the regulator makes.
The regulator can apply for additional resources and either will
or will not get them.
I would certainly be robust in stating what
I felt was needed to carry out the job. If, for example, economic
issues put us under a lot of regulatory pressure and we needed
more resources, I would be very robust in saying so. If it turned
out that a succession of consumer issues arose, that led to second
thoughts about us being quite so back-stop, and we needed to be
more proactive, then again I would be very robust in saying, "Well,
we aren't resourced to do that at the moment. If you want us
to take on additional roles then we will require additional resources."
Q49 David Heyes: What about the
director of regulation? I am sure he will do a good job, but what
if things went wrong with him and targets were not being achieved,
and in general terms the director was not performing satisfactorily?
What would you do about that?
Julian Ashby: Effectively, the
director of regulation suffers from having two line managers:
the chief executive and myself, and the Committee. I think if
I had concerns about his—in this case—performance,
I would clearly be raising it with him on a regular basis anyway.
If matters were not improving to my satisfaction then I would
be raising it with the chief executive and we would be determining
the appropriate course of action.
Q50 Chair: Your CV clearly shows
that you have been around in the housing world. You probably
know everybody and anybody in the housing world today, which could
be a great advantage in terms of knowing people and organisations,
but might it be seen from the outside that you are one of the
cosy club of the housing élite? You know all these people
and have worked with them and been for a drink with them; you
are not really going to be too hard on them, are you? You are
going to think the best of them, and probably not see problems
coming, because old so-and-so would not get into that sort of
problem, would they?
Julian Ashby: There are two answers
to that. The first is that most of my professional life has been
given over to troubleshooting housing associations, so I have
relatively few illusions about the range of things that can go
wrong. For example, when I used to visit an association for a
perfectly acceptable, non-problem-related reason, they would jokingly
say, "We can't have you staying in our reception area because
somebody will think that there is something wrong with us."
I don't have any illusions about it, and I am known for being
pretty intolerant of poor performance.
The other part of the issue is that the relationships
that I have are across all of the stakeholders. For example, in
relation to my role at the TSA at the moment, we take relationships
with all the stakeholders very seriously indeed. I am talking
about at board level; we don't just leave it to officers. I have
been the board liaison member for national tenant organisations
such as the Tenants and Residents Organisations of England. I
go to regular meetings with them and with the Council of Mortgage
Lenders. I go with other board members to meetings with the National
Housing Federation, the Chartered Institute of Housing and different
groupings of housing associations. In London, it is G15, in the
north it is the Northern Housing Consortium, and in the midlands
it is another grouping. Their interests are all different.
It is important to me to be talking to people
who have the full range of interests. In some cases, there are
strong disagreements between them. Issues that affect associations
in London in one way will have a completely different impact on
those in the north-east or the north-west. It is not cosy at all,
but there is an important sense in which a regulator is holding
a ring between groupings that have very different interests on
some issues. It is just not appropriate to get too close to any
of them.
Q51 Chair: Is there anything that
you would like to say to us that we haven't asked you about so
far?
Julian Ashby: You have covered
quite a lot of ground.
Chair: Thank you very much for covering
all that ground in your answers to us.
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