Examination of Witnesses (Questions 680-
THURSDAY 11 JULY 2002
MP, MS PAM
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.
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.
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
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
687. Should we not target those people in the
(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.
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
(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
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
(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 transferit is put this way to tenantsand
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
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
(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.