Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. Exactly—and that you had this amount of £39 million being spent, do you accept that that was too much and that the targets were not properly based and that that represents a mistake by the Department?
  (Mr Tebbit) I am not sure it represents a mistake by the Department. It certainly represented an imperfect system. We created our Housing Executive in 1996. Previously the individual Services managed these things separately. We brought them together. The first thing to be done was—

  41. Forgive me, I am short of time, I am being urged by the Chairman—
  (Mr Tebbit) I do not accept it was a mistake by the Department.

  42. You are trying to improve the situation from one which you found less acceptable?
  (Mr Tebbit) Absolutely right.

  43. Who was responsible for that situation?
  (Mr Tebbit) As I say, it was the three separate Services who managed their properties independently with devolved budgets, and once these were brought together into one agency it was much easier to see the scale of the problem and begin to put into place the processes necessary to deal with it. The first thing to deal with, you are quite right, was the surplus properties, get the disposal systems working, the next phase is to manage the totality of the estate more effectively.
  (Air Marshal Pledger) I think there is almost an attempt to apportion blame. What has been said is that there were the uncertainties of the planning system associated with Defence Reviews and the reallocation of our units around the UK on their return from overseas. We had to deal with that, we are still having to deal with that uncertainty. I would ask you also to remember the very purpose of SFA, which is to contribute to operational effectiveness, and that is a risk balancing act that we clearly need to improve in the future as some of those uncertainties start to be removed and we can put together some much more robust plans

Mr Williams

  44. Following on that point, you have to give six months' notice, do you not, to Annington that you are going to make a property available for disposal?
  (Mr Tebbit) Yes.

  45. So with the 6,000 this year, on an average annual rental of £2,700 a year, if you have to give them six months' notice, in effect they are getting a rent bonus of £8 million in terms of notice, though the property might be readily marketable much sooner than that. Why is such a long time allowed?
  (Mr Tebbit) I do not think it is a rent bonus, Mr Chairman, it was the arrangements built into the agreement from the start, so this was understood. It is necessary in order to agree all the various factors. Dilapidations, firstly, the extent to which we should be bringing them up to a better standard as we dispose of them; that takes time. Sometimes there are other very complicated issues about utilities, because often it is necessary to separate, as the report says, the houses being disposed of from infrastructure which is often provided by the Services, by the local station or whatever. Similarly, sometimes road access needs to be granted and achieved. We have to hand these things over to Annington as freehold properties and they have to have free and full title, and that does take a while. Six months is basically the minimum to achieve all of that, but that was known and understood right at the beginning of the process.
  (Mr Wilson) Also it may be necessary to ask families to move in order to free up a site for release to Annington Homes as a whole, and it is of course necessary to give our families a reasonable period of a notice of a move.

  46. But that is a different figure, is it not? We are also told in the report that it takes about five months for you to agree with the Service which homes are to go. That would be in that section. It is not in the six months' section. It has already been achieved by the time we get the package for the six months' section.
  (Mr Tebbit) That has also been streamlined, and I know it is boring saying, "We have got better". Firstly, those two things can overlap. Secondly, the period for agreeing with the Services is now being reduced and the average target now is 90 days rather than 140 days, so we are getting faster there as well, but you are perfectly right, the minimum period for release to Annington is six months and that is provided for in the agreement.

Mr Love

  47. Mr Tebbit, this Government has given some priority to the achievement of joined-up government. Do you think this report reflects good, joined-up departmental working?
  (Mr Tebbit) I think what you may be referring to is why have we got these empty properties when there is a lot of need for housing in the country. I think you are absolutely right. It is a problem which is why we are trying to release as many as we can, which is why we are now getting disposed of 6,500 this year. We only keep the number of houses we need to meet our remit and our priority is to release homes for which there is no forecast demand. Most of the returned properties which we do have vacant are vacant for a short period of time for short-term lets, and therefore our opportunity for allowing local authority or housing associations or social housing to take place is limited; usually they want a longer period for us to be able to make it interesting for them. I agree with you that social housing is a priority but, as I say, the best way we can help that is by releasing surplus housing as quickly as we possibly can.

  48. Can I go on to that and refer you to two figures—figure 14 on page 50 and figure 15 on page 54—which indicate the processes and the timescales under which you, first of all, identify such properties, and then, in the case of Annington Homes, how you sign them over. It seems to me that that is about the most difficult, complex and time-consuming process that you could go through, and that is commented on by the National Audit Office in their Report. How do you respond to that?
  (Mr Tebbit) Firstly, to comment, as I did before, that the approximate total of 140 days on page 50 we have now brought down to 90 days by cutting out a lot of the middle management processes here between the Housing Executive and the Services. That is some improvement. The second point I would make is that we are commenting, as it were, on the policies of the previous Government, when they decided it was a good deal to go into. The terms under which we release properties to Annington Homes do involve some complexities. When we release properties, they are often pepper-potted around estates. We have to group them together and pass them on to Annington in blocks and that can take some time. The proof of the pudding is in the eating. 6,500 properties by next April from the beginning of this year is twice or three times the rate that we have ever achieved before, so we are getting these on the market very quickly.

  49. That may be the case, but the number of vacant houses is still going up at a time when the number of properties is coming down. Can I go on to the Defence Estates Agency. Although there is not a figure to illustrate this, in the case of a recent sale of properties in Aberdeen it took over two years. Are you confident that there is adequate working between the two agencies to ensure that these properties are sold as quickly as possible?
  (Mr Tebbit) Between the two agencies of what?

  50. The Housing Agency and the Defence Estates Agency. It seems rather strange that you should have two agencies dealing with this matter. I understand the complexity of your services, are you sure they are working closely enough together to minimise the delays that are clearly illustrated in this Report?
  (Mr Tebbit) I take the point. That point is very well made. What we have done is changed the incentives. When Defence Estates are selling properties now, as they do in some of the cases—mostly it is Annington Homes but there is a proportion done by Defence Estates—we transfer the risk to their budget immediately the thing becomes available, so they bear the maintenance charges and they bear the capital charge on their budget under resource accounting. That speeds up the incentive on Defence Estates to market the property quickly. Defence Estates only come in when we are dealing with selling. When we are dealing with reducing properties under the six-month notice to Anningtons, we use the Valuations Agency Office which is nationally recognised and good at that valuation process, and that also helps to speed it up[6].

  51. Can I move on to comment on something that appears in our last Report, although it is not the direct issue that we were addressing. Some of the management practices carried out in your Department must reflect in some way the attitude expressed by it. I was shocked in the last Report, I am again shocked to discover, that someone has to have a marriage certificate to qualify them; they may well have been living together and indeed have had a family for some considerable period of time, but they do not hold that certificate. Is that still the common practice? I suspect the person I should address this to is Air Marshal Pledger. Can you explain why it is the common practice?
  (Mr Tebbit) Ministers are still responsible for the policy of the Department, and the policy is that family quarters or married quarters are only available to people who are married and not to people who happen to be living together and not married. We have no plans to change that at present.

  52. This has been brought before Ministers who sanctioned that no-change policy. Can I move on to Figure 2 on page 13? There has been some comment in the Report about the complex entitlement criterion which is laid out in Figure 2 and the fact that that complicates very considerably the management. Indeed, it is reflected in Appendix 3 of the Report. Has there been any discussion of simplifying the criterion and making it a little easier to be able to manage the property portfolio?
  (Mr Tebbit) Firstly, this does look a little out of perspective. 80 per cent of the housing is for other ranks rather than officers, therefore 80 per cent of the houses are based on family size, allocated according to family size, rather than rank. This is only dealing with the 20 per cent of officers. That said, I take your point, we have looked at injecting some more flexibility into the system. There is at least one other factor, other than rank, which affects officers, whether it is command appointment, or size of family, that is also taken into account, or whether there was an entertainment obligation with the job. There is also now something called a "one down mechanism", which is if there are no quarters to meet one's entitlement, one is obliged to take a rank down. This used to apply only to the Army and the Navy, but I am sure Air Marshal Pledger will explain it is now being extended to the RAF as well, who were previously exempt from the "one down" rule. That makes it easier to get more flexibility in. There is some ability to change the margin between senior officer quarters and junior officer quarters, where we can move people between properties, to some extent. In our new builds there will be houses to make that more possible. People can also pay extra to be over-housed, as it were, in relation to their entitlement, if those houses happen to be available, again to reduce the vacancies. There is a lot of flexibility in the system. Some single and married, unaccompanied people, married people without children, can also occupy houses under the eligibility rules rather than the entitlement rules, which helps ensure that we reduce empty properties to a minimum.

  53. Thank you for that full explanation. Can I ask Mr Wilson whether he has ever recommended to the Accounting Officer that there be a change in those criteria?
  (Mr Wilson) I do not set the policy in my seat.

  54. I never asked you to set the policy. I asked whether you ever issued a report that recommended that there may be a change to the entitlement rules under the service?
  (Mr Wilson) I have not made that recommendation. If one looks at the other side of the coin, the SSFA, the substitute accommodation, there is very little of this. It is mainly provided because there is no accommodation at all available in that location, rather than because an officer is not entitled to a particular type of property as opposed to another type of property.

  55. Can I move on to mixed estates, another issue that seems to be very central to the Department? This seems to be frowned on entirely. Both previous questions mentioned pepper-potting and the difficulties you face. Would it not make a significant improvement in efficiency if you allowed mixed estates? Why do you continue not to allow them?
  (Mr Tebbit) It is not that we do not allow them, it is they can be quite tricky to manage. A year ago we did create a post of a Mixed Estates Strategy Co-ordinator, who we now have in the Ministry of Defence. That has been going since August 1999 specifically to overcome difficulties that can arise in mixed estates, perceptions of families who are concerned—particularly if their spouses are off on deployment, as they were, for example, in Kosovo—about who might move in next door. Human consideration is a real point. We are seeking to manage it and to reassure people. We do have efforts in place to improve that. Mixed estates are there. We do have quite a number of houses which are taken up under that arrangement, so we do have this happening, not so much with housing associations where they are looking for blocks but we have mixed estates and they are not, as it were, a problem in principle but in practice we have to make sure we can run them.
  (Air Marshal Pledger) Could I add a perspective of practicality here for both your last question and this one? We are dealing with an inheritance of a certain number and type of houses and what we are trying to do is make best use of them. If we had a complete free rein to go and pick and choose in the future, some of your previous questions would be much easier to answer, but there are a certain number of these and, like it or not, when you are living in a two bed-roomed house and you have another child you are entitled to move, and that makes good sense. If in future we were to completely re-provide the estate, we might do so differently to give the kind of flexibility you are arguing for. The second point is on the mixed estates, yes, they happen, we can take you to quite a few of them, but again the practicalities are that some of these are behind the wire and I have to say not too many people would enjoy the process of getting into those estates which the military family actually goes through because they recognise the need. So there are huge practicalities which have to be borne in mind in responding to your question.

  56. I take your point and I do not want to continue on this particular line, but I did note that in terms of other Services in other countries where they use almost entirely the private sector, none of these mixing problems seem to occur, but I shall move on. I want to speak to Mr Wilson in relation to the management margin that was hinted at in this report. As I understand it, local authorities get berated for having a vacancy factor of 2 to 3 per cent, housing associations similarly. You are talking about reaching 13 per cent and you are nowhere near it. Tell me what figure you should be reaching for if you were an efficient housing organisation?
  (Mr Wilson) We have 22,000 moves a year, our long-term target is a margin of around 10 per cent.
  (Mr Tebbit) If I may say so, we are not in the same position as housing associations or local authorities.

  57. I do accept that, I was just using it as an illustrative figure.
  (Mr Tebbit) We queue houses for people, rather than people for houses, so it is a different role. Therefore, the view the Services have come to with the Executive is that about 10 per cent on top of core requirements, once they are clearly defined, would be about right. I have accepted that as a reasonable figure. It is a different function from a housing association or a local authority.

  58. Was that done as a result of the report we are looking at? If you have done that work, can you give us some idea of the variation there is between each of the different regions? What tolerances are you talking about? From which per cent to which per cent makes up the overall 10 per cent figure?
  (Mr Wilson) It could vary between, at the bottom end, some 3½ per cent up to around 20 per cent at the top end of the range. For example, we would need to allow an additional margin for where we have properties awaiting modernisation, because our consultation with the Service families has shown that on balance where there is a major modernisation they would prefer to be moved rather than to have the modernisation conducted around them. So we have a margin of 1,700 or 1,800 properties awaiting modernisation. At the upper end of the spectrum, where we are talking of the 20 per cent figure, in most cases this is where we are also expecting incoming unit moves over the next two or three years ahead; places like Aldershot for example.

  59. I am up against the time constraint we have here but my final question follows on two previous inquiries and it is really about the risk that is borne between the Department and Annington Homes, and it relates to the combination of the constraints you are working under, under pepper-potting, as you have already mentioned, and indeed the dilapidations charges and the very onerous manpower requirements of looking through and evaluating whatever repairs need to be carried out. On balance, looking back on that agreement, do you think there has been a fair balance of risk taken by both parties?
  (Mr Tebbit) Clearly I cannot look back with that luxury. We have to move on and manage what we have most effectively. Remember, the rent charges we pay to Annington are very low, they are 58 per cent discounted on what would otherwise be a commercial valuation. We simply have to make the most cost-effective use of the agreement which we have reached and it is not for us to judge whether it was a good or bad one.

6   Note by Witness: Defence Estates undertake a range of technical and contractual functions for DHE relating to properties to be returned to Annington Homes, including dilapidation valuations, work they have largely contracted to the Valuations Agency. Back

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