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


Examination of Witnesses (Questions 680- 699)

THURSDAY 11 JULY 2002

RT HON NICK RAYNSFORD MP, MS PAM WILLIAMS, AND MR STEPHEN BRIODY

Mr O'Brien

  680. If the financial officer does advise on the level of council tax that should be set or rent but still the authority takes the decision that their earlier consideration should apply, how will clause 26 stop that?
  (Mr Raynsford) It will not stop that but what it will do is demonstrate that the councillors have acted in a way that disregarded the professional advice of their chief financial officer and that of course would be a very, very serious matter that the Audit Commission will be looking at in the course of the comprehensive performance assessment of that authority.

  681. There is this question of how much statutory responsibility you can put on local government officers because they are weighted down now with statutory responsibilities. How far are we going to go on that issue, because, if the people making the decisions wanted to stick to their earlier decision, the chief financial officer cannot prevent it.
  (Mr Raynsford) You are quite right. It is a members' decision but we think it is absolutely right that the chief financial officer should be clear that he or she has an absolute obligation to raise this matter and this removes any ambiguity about that.

Chairman

  682. There is no ambiguity, is there? They have a professional duty. They are in breach of their own professional rules if they do not do it.
  (Mr Raynsford) I accept that entirely, but I do not want to repeat ad nauseam the same names. I have to say that in certain authorities we have seen procedures failing to achieve the results that those professional rules should achieve in ensuring that senior officers are able to speak freely and fearlessly about the financial risks the authority is taking before the authority reaches a decision.

Mr O'Brien

  683. Out of the number of local authorities that we have operating, do you know how many local authorities fail to monitor their budget?
  (Mr Raynsford) It would be a tiny number. I am sure the vast majority of authorities have more than adequate arrangements in place, but all of these provisions are to ensure that rigorous standards apply everywhere, because we know from bitter experience the consequence of a failure in a very small number of authorities to behave in the way that all the rest do.

  684. You say a significant minority of authorities are involved. Why should this apply to all the authorities?
  (Mr Raynsford) It is not a new burden that will be burdensome to any well run authority because this will already happen but this will ensure that every authority, including some that have not been well run, maintains the standards of the best.

  685. I come back to the question of people spending hours monitoring to fulfil this regulation when only a handful need to be involved.
  (Mr Raynsford) The monitoring is something that is going on already. Most authorities already have in place rigorous procedures for monitoring their budget. That is no extra burden at all.

  686. Finance officers have that responsibility now and they do it but, putting it on the basis of the Bill, we are saying that this applies to all the authorities when you have said yourself that only a handful are responsible.
  (Mr Raynsford) Unfortunately, that small handful have had a disproportionate amount of attention, not just in this Committee but—

  687. Should we not target those people in the first instance?
  (Mr Raynsford) We are. Our whole philosophy is that prevention is better than intervention after a problem has arisen and this is all about prevention.

Mr Betts

  688. Many of us have been very supportive of the government's commitment to bring all social housing up to a decent standard by 2010. When Stephen Byers, the then Secretary of State, came to the Committee in January of this year, he said very clearly that that commitment to get all houses nationally up to that decent threshold standard by 2010 would apply irrespective of whether tenants in any individual authority voted to have their stock transferred or agreed to go to a wholly owned, arm's length company or decided to stay with the local authorities under the current arrangements. Does that government commitment and policy still apply?
  (Mr Raynsford) Our whole approach has been to ensure that the commitment to bring all social housing up to a decent standard by 2010 should be achieved through a range of different approaches. In many cases, this will be done by the authority itself, using its major repairs allowance and its capital resources to improve the condition of its stock. In some cases, there will be a decision to transfer the stock to a registered social landlord. In some cases, authorities will establish arm's length management organisations. That framework is a framework where we have confidence that the target can be delivered. If any of those elements were to be dropped out of the equation, that would certainly raise questions about the deliverability of the objective, but in the case of individual tenants in individual areas they remain free to reach a decision as to what is the right way forward. What we have seen is there have been different decisions in different areas. Some have voted in favour of stock transfer; some have bitterly opposed it. That has been the case but it has been compatible with the programme that I have described involving all three elements being taken forward. Provided that remains the case, there should be no problem.

  689. That is a slightly different answer to the one Stephen Byers gave because what you seem to be saying is that you are relying on different ballots in different areas giving collectively the right number of tenants who agree to go to transfer so that that stream of money from the private sector can be brought on; the right number of tenants voting to go to wholly owned companies so that stream of money and the right members elect for local authorities so the tenants collectively, through their individual ballots, do not come to the view that the government has just set out in terms of the funding streams. The government is going to have a problem meeting its target by 2010, is it not?
  (Mr Raynsford) That would be the consequence, but we have formed our judgment looking at the patterns of tenant ballots over the last few years, and we are quite confident that a substantial number of tenants do see advantages in stock transfer and will therefore continue to vote for it.

  690. If tenants change their pattern of voting, which is quite possible because it is free; there is no pressure for them to go in any way; it is a genuinely free ballot, so if they change their pattern of voting, the government will then have to change their pattern of funding or their recognition that the funding pattern would have to change in order to deliver that target because surely the 2010 target is a manifesto commitment.
  (Mr Raynsford) It is and we intend to deliver it. It depends on a combination of factors like many other policies. We will continue to monitor closely how trends develop. I can say at the moment that the current level of stock transfers remains on course so that we should not have difficulty in achieving that target.

  691. If the pattern of voting changed, the government would look at how that would affect the need for funding to change. It would not drop the 2010 target?
  (Mr Raynsford) Clearly, were there to be a change, we would need to take that into account but I am not the Housing Minister and I cannot possibly commit Lord Rooker on this.

  692. There is no intention to drop the 2010 target?
  (Mr Raynsford) No.

  693. Can I look at this issue of the ballots that take place because certainly the choice is free. There is no pressure from the government on any individual tenants to move stock transfer or any other arrangements than the current ones; yet if we look at the prudential guidelines, which I personally welcome in principle, the amount of freedom, even though they are a wholly owned, local authority company, for that company to operate, to borrow from different sources is very different to that which would exist if tenants voted for their stock to be transferred to a housing association, is it not?
  (Mr Raynsford) It is different because it remains still wholly owned by the local authority and therefore comes within the ambit of public expenditure. We cannot simply rewrite the rules because this happens to be owned by the local authority.

  694. Also there is the big difference that when stock transfers out of the local authority the overhanging debt is written off and we understand there is now consideration being given by the government to writing the breakage costs off as well. Does that not really unbalance the whole playing field? Are not tenants who want to remain with the local authority being disadvantages? Effectively, the general tax payer is being asked to support and subsidise tenants who vote for a stock transfer.
  (Mr Raynsford) No, because in reality, if the stock remains with the local authority, the local authority continues to receive the housing revenue account subsidy for that property. All that is happening in the case of writing off overhanging debt is that a single payment is made in computation of what otherwise would be a continuing subsidy stream in the years ahead. It would seem rather odd for the subsidy to be paid when the authority does not have the stock.

  695. I can see that but the advantage in financial terms of a transfer—it is put this way to tenants—and the amount of subsidy that will be lost that would otherwise be paid if they remain with the local authority is significantly less in most of the cases than the amount of debt that is written off as overhanging debt, particularly if you then write breakage costs off as well. That total write-off in benefit per property would be far greater than any subsidy that is lost, so there is a government financial incentive to transfer.
  (Mr Raynsford) As you know, I have not been Housing Minister for the last 12 months, so I cannot give you a detailed response but the principle must be right that if a local authority ceases to own property it should not be receiving subsidy in respect of—

  696. Could we have a note on that issue of the balance of benefit from overhanging debt write-off and breakage costs as against subsidy?
  (Mr Raynsford) I am very happy to ask Lord Rooker to send you a note on that.

  697. I know you are not the Housing Minister but I have heard your views on this in the past. You clearly committed the government to do something about the tenants' campaign daylight robbery and the nearly poor subsidising the very poor through the benefits system. Some people argue now that what we had as daylight robbery has now been replaced by the government sneaking up in the middle of the night and doing something behind the scenes, in that there is now a possibility of authorities where there is a net subsidy. How would that net subsidy transfer effectively to other housing authorities so the nearly poor in one authority will in future subsidise the nearly poor in another authority? Is that a fair assessment of clause 97 and related matters?
  (Mr Raynsford) No, it is not. Very obviously, one cannot simply change a framework under which housing revenue account subsidy did include housing benefit subsidy to the different framework that we are setting in place without making sure that the overall financial consequences do not disadvantage many authorities that have benefited from the previous arrangements. Those authorities that were in subsidy would lose out substantially were the new rules to apply—

  698. Is that not for central government to sort out?
  (Mr Raynsford) This is the responsibility of Lord Rooker rather than mine but I am happy to respond because of my previous association with this policy area. The approach is to take out the housing benefit subsidy element from the housing revenue account for good reasons, because of the complaints that have been made about it and we welcome that; while at the same time not in consequence resulting in a significant redistribution of subsidy in favour of better off authorities at the expense of those who have been in receipt of subsidy under the previous arrangements. That would be the consequence if we did not take the steps that we are proposing.

  699. Has any work been done on that?
  (Mr Raynsford) Yes.


 
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