Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witness (Questions 231-239)

MR JOHN PERRY

TUESDAY 9 JULY 2002

Chairman

  231. Can I welcome you to the Committee for our second session this afternoon. Could you introduce yourself for the record.

  (Mr Perry) I am John Perry, Policy Director of the Chartered Institute of Housing.

  232. Do you want to say anything by way of introduction or are you happy for us to go straight into questions?
  (Mr Perry) Just a sentence. It occurred to me that you are probably asking me to say whether the Local Government Bill does what it says on the tin. I think in general it does what it says on the tin; the only problem is that a lot of what is said on the tin is hidden by the label, and perhaps you would want to ask me about that later.

  Chairman: That is all you wanted to say by way of introduction? Clive Betts?

Mr Betts

  233. We had a campaign from tenants' associations around the country over what they call "Daylight Robbery" and in the legislation is a proposal to separate out the payment of housing benefit for council tenants from the Housing Revenue Account. Is that really going to cure the problem?
  (Mr Perry) The problem with the Daylight Robbery campaign was that it was difficult to see what their ultimate objective was. Certainly the Bill achieves what might be called an interim objective, the thing they were campaigning about, which is the separating out of housing benefit payments. What I think they may have wanted is that local authorities got the full benefit of the rents and the housing benefit payments and there was no redistribution mechanism. Of course, under the Bill there will still be a significant redistribution mechanism although it is perhaps not as wide-ranging as it used to be before more local authorities came into the positive subsidy net because of the introduction of the major repairs allowance a short time ago.

  234. So it does meet one of the objectives, but it still does not necessarily benefit the authority concerned because of the redistribution system?
  (Mr Perry) Exactly.

  235. Would you like to see that changed?
  (Mr Perry) There is a difficult choice to be made for housing. You can either argue for more subsidy, and with subsidy probably comes more controls, or more freedom and more autonomy, which probably means less subsidy. It is very difficult to decide at this juncture which of these routes to go down. I was in discussion with London housing directors this morning and I think they find it difficult given the particular problems of London. I think I would tend to favour measures that gave local authorities more autonomy, but whenever we look at that we need to balance that against the subsidy requirement and therefore the continued requirement to be tied to the Treasury's purse strings.

  236. Can I move to another perceived unfairness in the current arrangements—where if a local authority is proposing to transfer its stock, then the "overhanging" debt would be written off. Indeed, there is a suggestion they may go further and write off some redemption balances as well, which has been the problem stopping some transfers taking place. Is it fair that the tenants who democratically vote to stay with the local authority have the responsibility of paying off the historic debt themselves?
  (Mr Perry) Again, it is not quite as simple as that. The specific measure that they may adopt, the paying off of the breakage costs as well as the principal of the debt—means bringing England into line with Wales and Scotland where that is already happening. On the general issue it is not as simple as that because in England the subsidy system gets in the way of all rational thinking about local authority housing, including the debt issue, because debt is taken account of in the subsidy calculation. It is difficult to say within the overall subsidy calculation whether debt is fully subsidised. I would think it is not fully subsidised. There is no doubt that if debt were taken away from local authorities, there would also be a substantial loss of at least part of their subsidy. It is much easier to think about these issues if you are north of the border in Scotland. In the case of the Glasgow transfer, Glasgow tenants were specifically paying £20-odd a week towards Glasgow's debt. There was no doubt about that and it was a very clear case if they went for transfer that £20 could be used for improvement. Unfortunately, you cannot make that simple equation for Sheffield or a similar large British city.

  237. In many of the cases transfer is going ahead because of the perceived financial advantage, presumably because authorities are saying that the writing off of the debt is worth more to them than the subsidy on the debt in the current arrangements?
  (Mr Perry) I think that is true. As I tried to set out in the paper, I think that transfer is really a bid by authorities to get a range of financial freedoms but, undoubtedly, clearing the debt is one of them.

  238. You call it a "perverse incentive" for authorities who generate surplus rental income that the surplus will be transferred to other authorities which cannot generate enough. Is that not a nonsense that we ought to be trying to look at in this Bill and get rid of?
  (Mr Perry) I think that was a CIPFA's evidence, strictly speaking.

  239. Do you agree with CIPFA?
  (Mr Perry) Not entirely, I must admit. It is not something that has been introduced by the present Bill. The existing housing finance system basically shifts subsidy around according to formulae. We can rail against the formulae and certainly, for example, the basis of calculating the management and maintenance allowance is very old and very inadequate, but the shifting around is already inherent in the system and the Bill really just changes the goalposts a bit and says we are going to shift things around in a different way, but there is probably as much shifting around after the Bill as before the Bill.


 
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