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

Examination of Witnesses (Questions 360-379)



Mr Betts

  360. Some of the proposals in the Bill will require primary legislation, but for other measures we will have to wait for regulation and probably guidance, which may not come through until after the Bill has gone through Parliament. Are you concerned in any way about the balance between primary and secondary legislation, in terms of the proposals?
  (Mr Rogers) Yes. It is always much better to get things in primary legislation first. We have a history of lobbying for changes, particularly on powers to trade and charge, and have been doing so for more than ten years. We now appear to be seeing a glimmer through the White Paper of that opportunity, admittedly with restrictions through CPA—and my views are clear on that. It would be much better if those freedoms were defined and available now so that they could be implemented quickly, rather than waiting for further consultation downstream on regulations and orders.
  (Mr Nolan) If I could just put a word in for politicians, in Coventry, particularly because the city was bombed and re-built in the fifties it was aging and falling apart and we needed something to revitalise it. It was the politicians who did that. If there is something I would look for in the Bill, it would be an entrenched form of bill of rights of politicians to do what they believe is best for their city and their constituency—and that will be tested in the most severe inspection of all, in the ballot box.
  (Mr Williams) If I could draw attention to three aspects where regulations will be made that are of concern to Wolverhampton, they relate to financial issues. The first is on capital finance, where there are reserve powers for the Secretary of State to set limits for individual authorities, which seems to be taking us back to the old credit regime limits. The second is in respect of financial administration. There are powers for the Secretary of State to determine minimum reserve levels for individual authorities. This is viewed with great concern in Wolverhampton. We believe that we are a well-run financial authority; we have no record of overspending against budgets; and we regularly take monitoring reports to members. If the Secretary of State were to use this power in a fairly casual way, without a full assessment of local circumstances, I could envisage a situation where Wolverhampton's minimum reserve level would have to be increased. At the moment, we are quite confident that we can maintain a contingency reserve of £2 million. If that had to be increased, the council would be faced with the difficult choice of either cutting services or increasing the council tax. The third issue relates to housing finance.


  361. How do your reserves compare to other authorities around Wolverhampton? Are you more reserve conscious, or less?
  (Mr Williams) I think we are a well-run, prudent authority; but if you were to look simply at balance sheets or budgets, you may well conclude that the level of our contingency reserve compared to some other authorities seems low. In fact, the Audit Commission statistics would show that. I repeat that we have no record of overspending against budgets; we have had no adverse comments from our external auditors, and we believe that £2 million for Wolverhampton is a prudent level.

  362. Presumably, it would be fairly difficult for the councillors to convince the electorate that they should have cuts in the library service in order that you should have higher reserves?
  (Mr Williams) That would be an impossible task for the electorate. In such a situation, clearly, there would be a mechanism for the authority to appeal, should any authority ever get to that position, but if the Secretary of State's will prevailed, it would be a difficult decision between reducing expenditure or increasing council tax.

Sir Paul Beresford

  363. You are satisfied in Westminster that the finance officer and the auditor annually look at your balances, and that if they felt it was out of line, you would be told.
  (Mr Rogers) Yes.
  (Mr Williams) The next one is housing finance, which is the most important from Wolverhampton's perspective. There are two issues. Part 7 of the draft Bill would allow the Secretary of State to adopt a highly subjective regime to determine each local authority's annual subsidy for council housing. It mixes the present formula approach with subjective assessments of HRA business plans and authorities' performances, and "assumptions as to any other matter". Clearly, this would give extremely wide powers to the Secretary of State with which to determine subsidy, and the Government has determined the general fund services that plan-based grant decisions are not appropriate, but for housing finance apparently a different approach is being taken. The other issue on housing finance is the requirement that housing revenue account surpluses can be paid to the Government for re-distribution to other services. This has been an issue in an exchange of letters between Wolverhampton and government ministers for many years.


  364. Do you anticipate Wolverhampton being a winner or a loser on this?
  (Mr Williams) The Government's view is that Wolverhampton's housing revenue account makes a £10 million surplus this year. Clearly, we do not believe that that is a reasonable assumption to make. When rebates are transferred from the housing revenue account to the general fund, that will not improve the finances of the housing revenue account. We believe that it will be financially neutral.

Chris Grayling

  365. This begs the interesting point that an easy perception to draw from the proposals is that this is an excuse to relocate finance from rich areas to poor areas, and the natural instinct is that effectively the Home Counties will be losing and places like Wolverhampton will gain. Therefore, your comment that Wolverhampton might not necessarily be a gainer suggests a much muddier picture than one might otherwise have thought.
  (Mr Williams) In respect of housing finance, I believe there are far more housing authorities that have got surpluses in the Government's view and are required to pay sums of money over to the Government, so I want to ask the Committee to recommend that if this approach has to continue, that the Secretary of State should quite clearly show for each housing authority the surplus that is being paid to the Government as well as any subsidy that is received by other housing authorities, and then go on to show if there is an overall net surplus nationally, and to further indicate to what purposes and to which services those surpluses are being applied. Are they being used to repay overhanging debt of authorities that transferred to other social landlords, or are they being used to help finance other government priorities?


  366. How would it go down in Wolverhampton if money was being paid over to help them out in Birmingham or in Sandwell?
  (Mr Nolan) Or West Bromwich?
  (Mr Williams) If we could see that there were clearly other authorities that were in a worse position than Wolverhampton, there could be a case which the Government and officers could try to address, but given that Wolverhampton is the 29th most deprived area out of the 355 metropolitan districts, and 63 per cent of tenants in Wolverhampton are in receipt of rent rebate, it is very difficult for local tenants to understand why £10 million worth of subsidy is being foregone and paid back to the Government. It is equivalent to £1 per tenant per day.

Mr Betts

  367. On the issue of accountability of officers and politicians to their electorate and to the tenants and council tax payers, is there any chance that you could explain to a council tenant or a council tax payer in your borough exactly how the housing finance system is going to operate?
  (Mr Williams) I think it is possible to explain. It is not a particularly difficult calculation. If you take Wolverhampton as an example, on the face of it this year, we are going to receive £39.8 million of subsidy. £35 million of that is to reimburse us for the cost of rent rebates, so that leaves £4.8 million once the rebates are removed. But out of that £4.8 million, £15.5 million is the major repairs allowance. This is a capital grant and can only be spent for capital purposes on HRA property. It cannot be used on HRA revenue expenditure. If you take the £15.5 million away from £4.8 million, you are left with a deficit.

Sir Paul Beresford

  368. You are effectively saying that you have a stealth tax through the rents and through subsidies, where Government is setting the rents, and in addition to that, if you have capital receipts you are likely to lose those as well, including retrospective capital receipts. You are doing really well.
  (Mr Williams) This has been a matter of contention between Wolverhampton and the Government for some time now because this subsidy first arose in 1993 at £1million, and it has been rising steadily ever since. Under the new arrangements, when it becomes more transparent that there is this surplus being paid to the Government, at that stage it would be far more difficult for the Government and local councils generally because it would be far more obvious to tenants as to the extent of the position.

Mrs Dunwoody

  369. If you sent out a little note to everybody, saying, "£1 from every one of you is going to somebody else" do you think you would be terribly popular?
  (Mr Williams) No.

Chris Grayling

  370. You are exactly the profile of council that I was expecting to be the beneficiary. Maybe the three councils could give a sense of this. If you are not winners, who is?
  (Mr Williams) When it comes to housing finance, there are many, many councils that are winning. In terms of general funds and the replacement of standard spending assessments, we are all waiting to see what the system is going to be. The Government issued the consultation paper a few days ago. On the face of it, the proposals seem very similar to the new arrangements. There are potential winners and gainers, but until firm decisions are made, no-one really knows.

Mr O'Brien

  371. How does the index of multiple deprivation apply in your area?
  (Mr Williams) That would be reflected in terms of the Government's standard spending assessment approach.

  372. Does it impact upon your tenants?
  (Mr Williams) In terms of the housing revenue account, it is more likely to have an impact on the Government's calculation of what it considers to be the average rent.

  373. How do you think we should present a report on how the index of multiple deprivation should apply in your particular case?
  (Mr Williams) Far greater attention should be given to stock condition surveys and the repairs backlog, and trying to make additional resources available to target and address those issues.

  374. A general environment situation on your housing estates.
  (Mr Williams) It should more accurately reflect the stock condition and surveys and a need for investment.

  Chairman: I get the impression that as far as the regulations are concerned, Wolverhampton is voting them down.

Chris Grayling

  375. Sir Paul was joking about you subsidising Sandwell and so forth, but in conversations you have had with your neighbours, how do you think they have been affected by the arrangement?
  (Mr Williams) Obviously, the Government can provide figures if you need to see them, but my recollection is that there are very few housing authorities in England that are net receivers of subsidies; there are more in the Wolverhampton position.

Christine Russell

  376. Mr Rogers, you indicated dissatisfaction on the part of Westminster that there is nothing in the draft Bill to streamline Best Value. Can you spell out what you would have liked to have seen in the Bill?
  (Mr Rogers) We would certainly have liked to have seen specific proposals where there has been good performance to define what "light touch" means. It is a very precise term, but it is very difficult to pin anybody down on what it means to the authority. Where we have good performance our experience is that the light touch is not very light, and actually it demands the same sort of rigour that the old system does. I would welcome inspectors getting together to simplify the entire inspection process, rather than have multiple interviews with multiple inspectors talking about corporate priorities and corporate resource allocation, and essentially how we ration resources to meet the needs in our communities. A simple streamlining of the existing inspection regime would give us everything we want, without resorting to CPA. I think that Best Value has had its role. The important point is that process has taken over—

  377. Do you have anything to add on Coventry?
  (Mr Nolan) Westminster might differ from us. We are glad to see the back of CCT and the introduction of Best Value, which was a welcome innovation. We are working at it, but there is always the difficulty about who inspects the inspectors. In the main, it has worked well for us.
  (Mr Williams) We have similar comments to Coventry. Clearly, compulsive competitive tendering was not very popular. As regards best value, there are concerns about whether authorities are all working to the same standards and the same performance levels. In Wolverhampton we have carried out a number of Best Value reviews, which the inspectors have said they are not going to inspect because there are not enough inspectors available across the country to keep on top of all the Best Value reviews that authorities have been required to do. In Wolverhampton they are targeting the Best Value reviews that relate to front-line services, as opposed to other services.

  378. Back to Westminster: in your introduction you mentioned that you would have liked to have seen the Bill going further in regard to discretionary fees and charges. Would you like to amplify that point?
  (Mr Rogers) If local authorities have no obligation to provide services, it is totally illogical that if they do provide those services they should not be allowed to charge for them, and that they should not be allowed to charge the cost that could be borne for those services. At the present that is not the case, and despite repeated requests and lobbying to try and achieve amendments through regulation, we appear to be making very little progress. That is a major issue for us. Similarly, on the question of scale charges, the costs of some of our services are vastly over the level of fees that we can charge, and that is particularly so in planning. If you take an areas such as Westminster, where a significant part of the city is a conservation area or contains listed buildings, where fees are not payable, or Paddington Special Area Development, where again £1 million costs have gone in, we are constrained by the maximum fee scale. Those are the sorts of illogicalities that we see in the current charges.

  379. Are there any big omissions that you believe should have been included by the Government in the Bill?
  (Mr Rogers) There is one concern and I am afraid that it comes back to housing finance. The effect of the subsidy regime if rent rebates come out, will be perhaps to move with it the element of costs that is currently constrained within the HRA for the residual subsidy element. We would like to see an assurance that there will be no impact on the general fund from that switch from the housing revenue account.
  (Mr Nolan) I keep reading about freedoms and flexibilities, and I just hope I am going to live long enough to see them—and the power of well-being. All local authorities are different. We think that Coventry is unique rather than distinctive. I am really scared that whether deliberately or otherwise party politics will be squeezed out of local government, and that would be an enormous mistake for the constitution of this country because if you are not getting people active in politics at a local level, making a real contribution to their local community, that would be really dangerous for politics nationally. You need to trust and respect the integrity and goodwill of local politicians right across the board.
  (Mr Williams) I would not suggest additions to the Bill particularly but there are two items that will be included in the Bill that we would like more information on. One is that the Bill gives the Secretary of State powers to make revenue or capital grants, with a very wide power; and we would like to know more about the detail of it. The second issue is also important, and that is the one about staff transferring to other employers and protecting their employment terms and conditions, particularly pensions. We have all noticed over recent months the difficulties that are arising in a number of pension funds, and from the local authority perspective we would wish to ensure that local authority employees, if they transfer, will receive comparable pensions with the high-quality schemes that local government operates.

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