Delivering the defence estate Contents

1Service Family Accommodation

1.We reported on service family accommodation in July 2016, highlighting that the Ministry of Defence (the Department) and its contractor CarillionAmey were badly letting down service families by providing them with poor accommodation, and often leaving them for too long without basic living requirements such as heating, hot water or cooking facilities.1 On the basis of an update memorandum from the Comptroller and Auditor General, in January 2017 we took further evidence from the Department and also from Annington Homes, to whom the Department sold four-fifths of its service family accommodation in 1996.2 We also received written evidence from Annington Homes on the deal it entered into with the Department in that year.3

2.Because of the requirement that service personnel are mobile and the remote nature of many of the locations in which they serve, all regular service personnel are entitled to subsidised accommodation. Those meeting specific criteria, relating primarily to marital status and number of dependent children, are entitled to Service Family Accommodation. There are some 50,000 Service Family Accommodation units in the UK, of which around 39,000 are owned by Annington Homes and leased back to the Department. CarillionAmey is the private sector provider with responsibility for maintaining Service Family Accommodation, through the National Housing Prime contract.4

Performance on the National Housing Prime contract

3.In our previous report on Service Family Accommodation we highlighted the poor performance of CarillionAmey against the National Housing Prime contract.5 We therefore welcome the fact that, since that time, CarillionAmey has worked hard to improve how it operates and that its teams have responded better when errors or omissions have taken place. There are however some improvements which still need to be made, including meeting the 100% emergency response rate key performance indicator, and reducing the level of complaints regarding property maintenance. In particular, there is a lack of clarity about what “meeting the response” against key performance indicators means, and whether this means just turning up and fixing the immediate problem or whether it means completing the necessary repairs.6 We raised the example of a mother with three children under five whose problem was apparently fixed by an engineer attending the property and addressing the immediate emergency. However, as a result the gas at the property had to be turned off and the family was still left for a weekend without any heating or cooking facilities. The Department agreed to follow up on this case and consider how to improve the clarity of its communication with service families regarding response levels.7

The Future Accommodation Model

4.The Department has concluded that the current model of directly providing accommodation to service personnel is becoming less attractive to service personnel and their families, increasingly unaffordable, and less effective at meeting the Department’s operational and business needs. In September 2016 the Department launched a survey of service personnel to inform the development of its policy regarding the provision of accommodation in the future.8 We are concerned about the distressing effect that the uncertainty around the future provision of accommodation is having on service families and asked the Department to commit to making available to us the full details of the survey, to which it agreed.9

5.The Department told us that it was seeking to extend provision of accommodation in a fairer way to better reflect the way people live their lives today. It acknowledged however that to extend the existing model for providing accommodation to everybody who wishes to live as a family would probably be unaffordable and that inevitably some groups would be disadvantaged as a result of the changes.10 We encouraged the Department to find a way of assessing the likely impact of its plans on the recruitment and retention of personnel because, if it does not get this right, the security of the nation could be impaired.11

Annington Homes

6.In 1996 the Department sold four-fifths of its Service Family Accommodation to Annington Homes for £1.7 billion and rented the properties back on a 200 year lease. The lease allows for a rent review every 25 years, with the first occurring in 2021. Until now the Department has benefited from a 58% reduction on the rent and the review in 2021 is the first opportunity for both parties to negotiate an alternative discount rate.12

7.The Department told us that the deal done in 1996 was a bad one for the taxpayer and that, while it could not alter the fact that the Department had signed a 200-year contract, it certainly wanted to negotiate a better deal for Defence, its people, and the taxpayer.13 In 2015–16 it paid Annington Homes £167 million in rent and wanted to see this come down substantially in the future because every extra pound paid to Annington is a pound that cannot be spent on the estate and the people that live on it.14 Annington Homes told us that it had sympathy for the Department’s situation and was very happy to have discussions in the wider context, but noted that it had gone through a competitive process at the time and submitted the highest bid to buy an asset from the Department. The Department noted that the negotiations would take some time but agreed to provide the Committee with an estimate of the likely timeframe for the negotiations.15

1 Committee of Public Accounts, Ninth Report of Session 2016–17, Service Family Accommodation, HC 77, July 2016

2 C&AG’s Memorandum, Service Family Accommodation update, 16 January 2017; Annington Homes was represented at our evidence session by Mr James Hopkins, Chief Executive of Annington Limited.

3 Annington Limited (TDE0007)

4 C&AG’s Report, Service Family Accommodation, June 2016, paras 1.3, 2.1 and Figure 2

5 Committee of Public Accounts, Ninth Report of Session 2016–17, Service Family Accommodation, HC 77, July 2016

8 C&AG’s Memorandum, para 3.5, 3.8

12 C&AG’s Report, Delivering the defence estate, Session 2016–17, HC 782, 15 November 2016

20 March 2017