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HRA ring fence: the need for scrutiny

Post author By Steve Hilditch
Post date March 8, 2011

Steve Hilditch

Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone. Steve sits on the Editorial Panel of Red Brick.

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In previous posts we welcomed the Government’s decision to implement John Healey’s proposals to reform council housing finance through ‘self-financing’. We expressed a couple of doubts about the new proposals, notably that the Government had abandoned Labour’s plan to allow councils to retain all of their capital receipts from council house sales.

One other noteworthy distinction between the two sets of plans concerns the operation of the Housing Revenue Account ‘ring fence’ – ie the rules governing transfers between the HRA, which records income and expenditure on council housing, and the General Fund, which covers the rest of council spending.

John Healey’s ‘Prospectus’ published a year ago showed the need for gradual reform of the way the ring fence operates to make the system fairer for tenants. It showed that at least 40% of general management costs are incurred on what it defined as ‘non-core’ services, services that arguably should not be met from rents but from the general income of the council. This one statistic makes a mockery of any accusation that tenants are ‘subsidised’. Therefore, over time, it was proposed that non-core services should be regarded as services provided by the landlord but funded from sources other than rent. The consultation showed virtually unanimous support for the continuation of the ring fence and the Prospectus proposed that new updated guidance should be issued.

In the Tory proposals ‘Implementing self-financing for council housing’ published in February 2011 the ring fence merits a single paragraph. On the principle it accepts that the system should ensure that ‘council taxpayers do not subsidise services specifically for the benefit of tenants and that rent is not used to subsidise functions which are for the benefit of the wider local community’ – although that statement is open to several interpretations. My concern is that it states ‘In line with our emphasis on localism we do not intend to issue new guidance on the operation of the ring-fence. We expect local authorities to take their own decisions, rooted in the principle that ‘who benefits pays’.’ The last guidance was issued in 1995 when council housing finance was very different from today.

Although the legal position will not change, the lack of guidance, the dilution of Labour’s plans for independent regulation of council housing, and the message the government is sending out that the operation of the ring fence is down to local discretion, combine to create a real danger for tenants. Council Finance Directors and local politicians of all hues will look enviously at a fairly well-funded HRA and see opportunities to shift resources to help their beleaguered General Funds.

The ring fence is easily breached and open to manipulation. In one council I worked with, there were more than 60 types of transaction between the HRA and the General Fund. These ranged from recharges for council overheads and democratic costs, to dozens of service level agreements with charges for items like central accountancy and HR, to procurement of office furniture, to rent for council premises. Then there are age-old practices where council tenants are charged twice, as rent payers and as council tax payers, for a single service – for example paying towards general street lighting but also paying extra for lighting on estate roads.

These charges have often been set historically with little challenge. One of the many benefits of ALMOs was that the process of setting up the management agreement required recharges and SLAs to be identified and renegotiated, a process sharpened by the need to obtain 2 stars in the inspection, which led to better services and significant cost reductions. My fear is that local discretion will reverse this progress and cost tenants dear over time. The temptation will be just too great – and it will undermine the move towards council housing being run as a self-financed business within the council, with services paid for out of rents in a very transparent way. The case for central guidance is strong.

Tenants have been vigilant on this in the past – witness the ‘Daylight Robbery’ campaign a few years back. In future, detailed tenant scrutiny of the local arrangements will be essential, and well-informed campaigning tenants groups could make a real difference.

Tags Council house, Housing revenue account

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Are 23,000 homes enough for London?

Post author By Tony Clements
Post date March 7, 2011

In the details of the government’s affordable housing plans there was a section on the allocation of funding to London. There was no fixed quota, but the paper suggested that it would be in line with past allocations of grant, i.e. London would get 27% of what was available.
“Under the 2008-11 Programme, London received funding estimated to deliver around 27% of national outputs. The HCA will seek to deliver a similar percentage of outputs from the new programme in London. The final figure will depend on the relative value for money of offers in London and elsewhere”
If we assume that affordable housing starts will be proportionate to the amount of funding available that means of the (up to) 85,000 new homes being built over the next 4 years, London will build 23,000.
That’s not going to redress the projected collapse of affordable housing in London that Alison Seabeck and Ken Livingstone recently warned of using the HCA’s own figures.
It may be worse than this. Affordable housing is more expensive to build in London, especially larger family homes that Boris Johnson has said will be his priority. They may need more grant per unit to make the finances of new development stack up.
Alternatively, the new affordable rent model does allow housing associations to make far more revenue by increasing rents in London, Increasing ‘affordable’ rents to 80% of market rents represents a very large increase in their income.
But there’s no guarantee that they’ll use that extra revenue to build more new homes in London – many housing associations may choose to build outside of London, where they get more bang for their buck and building is easier.
The future for affordable housing in London looks ever grimmer.

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‘Bleeding stump’ charge adds insult to injury

Post author By Steve Hilditch
Post date March 7, 2011

Steve Hilditch

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On top of the policies that have come out of Communities and Local Government department since the Election, which are bad enough, many people in the housing and local government world have been infuriated by the style of political argument adopted by Eric Pickles and Grant Shapps. It all seems so unpleasant.

Anybody with a contrary view is rubbished and serious debate about the huge and sweeping cuts to frontline services is reduced to a few soundbites about the salaries of some senior officers or a couple of funny-sounding job titles. The fact that Tory and Liberal councils are making huge cuts to frontline services is brushed aside as Labour councils are denounced for making supposedly politically-inspired cuts.

Shapps raised the political temperature by accusing Liverpool of a ‘disgraceful attack on the vulnerable’ when it made cuts to its supporting people programme. This was believed to be not entirely unconnected to the fact that the council pulled out as one of the vanguard communities for the Big Society – because of the scale of the cuts enforced by the Government. Last weekend Pickles accused Labour councils of adopting a “bleeding stump” strategy.

According to the BBC, Pickles said that Labour councils are making bigger than necessary cuts for ‘politically motivated reasons’ and that he ‘is angry about councils publicising spending cuts and blaming them on ministers.’ Even his own coalition partners have had enough: last month a large group of Lib Dems complained about his approach and said he was engaged in ‘gunboat diplomacy’ with local government.

It is therefore good to hear that the Cabinet Secretary has officially rebuked the Prime Minister over the ‘unacceptable’ behaviour of Pickles’ special advisers and the way in which they brief the media. Cameron has been told to ‘restrain his aides’. Politics is a rough old trade, as they say, but this action appears to be unprecedented. The Cabinet Secretary Gus O’Donnell’s letter, according to PR Week, read: ‘This behaviour is unacceptable. I trust you will agree with me and take necessary action to make sure that people understand this will not be tolerated.’

All over the country Labour councils have been struggling with huge front-loaded cuts to their budgets. There have been large demonstrations at many council budget-making meetings by community organisations seeking to save their services, and Labour councillors dedicated to serving their communities have faced impossible decisions. Pickles ‘bleeding stump’ comment adds insult to injury and will cause enormous resentment.

It is probably unconnected, but last week I signed up to Twitter for the first time, only to receive an email within minutes which read “you are being followed by the Conservatives”. It’s an alarming thought.

Tags Department for Communities and Local Government, Labour councils, Local government

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Localism Bill Committee debates social housing clauses

Post author By Steve Hilditch
Post date March 4, 2011

Steve Hilditch

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This week the House of Commons Committee examining the Localism Bill moved on to Part 6 of the Bill, the part dealing with social housing. Over the coming few sessions, the Committee will look at the various government proposals for homelessness and allocations, social housing tenancies, mobility, regulation, HRA reform, complaints and the Ombudsmen function. It is a huge agenda of change, much of it controversial.

In the first debate on this part, Shadow Housing Minister Alison Seabeck set out some general comments on the government’s approach and that of the Labour opposition, extracts are included below.

Readers interested in the detail of the Bill and the Parties’ stances on the issues coming up can follow the full debate clause by clause through the ‘They Work for You’ website. Start the housing section of the Localism Bill here.

The Committee has a coalition majority and its members (all parties) currently are:

Jack Dromey, David Ward, Bob Neill, Fiona Bruce, Henry Smith, Gavin Barwell, Ian Mearns, Brandon Lewis, Nick Raynsford, James Morris, Andrew Stunell, John Howell, Eric Ollerenshaw, Heidi Alexander, Iain Stewart, Siobhain McDonagh, Bill Wiggin, Alison Seabeck, Nicholas Dakin, Stephen Gilbert, Jonathan Reynolds, Julie Elliott, Greg Clark, David Simpson, Alun Cairns, Barbara Keeley

Extracts from speech of Alison Seabeck MP on 1 March 2011

“Social housing is an integral part of the housing mix in this country. It provides secure and affordable accommodation for low-income families, for pensioners and for people who are unable to work or who cannot find a job and are vulnerable. Historically, it has been a safety net ensuring that the most disadvantaged in our community, as well as those in housing need for a very broad range of reasons, retained the human right to a roof over their head. Housing is a human right that was upheld by the Supreme Court in a ruling on Manchester City Council v. Pinnock, and more recently in the case of Hounslow LBC v. Powell, in which the judges who heard the appeal talked about “respecting a person’s home”.

“Most importantly, social housing—I would prefer not to label it in that way—forms an essential part of many communities. They are homes, sometimes occupied by successive generations of the same family, which make up communities. Communities come in all shapes and sizes, but even those that may be seen by the outside world as difficult areas have a sense of strong community.

“The most recent statistics from the Department for Communities and Local Government show that 17% of households in England live in social rented housing; for pensioner households, the figure rises to more than a fifth. About a quarter of ethnic minority households live in social housing. The median household income in 2007-08 in social housing was just £10,900 a year. Those living in social housing are not in a land of milk and honey, as is sometimes suggested. Many are vulnerable, many are poor and any changes to the social housing system need to be approached carefully and with sensitivity. If only the Government had taken such an approach.

“We know that the proposals in the Bill did not feature in manifestos; they were either opposed or denied by the Conservatives and Liberal Democrats. The Miniuster (Andrew Stunell) repeatedly put his name to early-day motions in the previous Parliament on matters which now fall within his portfolio. We want to understand at which point he changed his mind on the importance of security of tenure and affordability. Was it before or after he was appointed to a position within a Government led by a Tory Prime Minister?

“We seek to amend the Government’s proposals in order to increase protections, defend the long-held rights of those in social housing and those who expect to move into social housing, and provide safeguards for homeless families within the framework of the Bill.”

Tags Alison Seabeck, Localism Bill, Social housing

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Godzilla versus King Kong: the new Affordable Rent model versus the new Housing Benefit regime

Post author By Steve Hilditch
Post date March 2, 2011

Steve Hilditch

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On 28 February, in answer to a Parliamentary Question, the Minister of State at Work and Pensions, Steve Webb, admitted that his department “has not estimated the proportion of tenants in social housing likely to claim housing benefit if rents for new tenants are let at 80% of market rates”.

This would seem a crucial piece of information and illustrates how much prejudice and how little evidence was used to determine the many changes to Housing Benefit the government is committed to introducing.

Fortunately others in the real world have been doing some background. At pretty much the same time as Mr Webb was making his admission, Family Mosaic Housing Association was publishing research based on real life calculations for a sample of their properties and tenants. This showed, in their words, that “setting rents at 80% of market rent would increase our clients’ requirement for housing benefit by 151%”.

Like a lot of housing associations, Family Mosaic does not seem to be hostile to the government’s proposals to introduce flexible tenancies or to put rents up to some extent to fund new development. It appears that quite a lot of landlords think that they should have more ‘freedoms’ and that their tenants should enjoy fewer rights (this is the long-term character flaw in my view). But at least FM deserve a little credit for digging into the issue and publishing the results.

The report states that “the impact on tenants will vary by location, with those living in inner London the hardest hit: for most of those in Essex, social rents are already at 60-80% market rates” and concludes that “for those tenants receiving benefits, the proposed new affordable housing model creates, or worsens, the poverty trap, acting as an additional disincentive to gain employment.” Rents for their properties in London would increase by over £100 per week and in some cases by over £200 per week. The worst affected people will be those on benefits facing large increases in rent but who are also likely to be caught by the overall benefits cap of £26,000, as Tony has pointed out in previous Red Brick posts.

If (when) the new rent regime comes in, income to FM to support their development programme would indeed increase, but this would be significant only in London. The cost would be shared by the new tenants paying higher rents and by Housing Benefit. If the increased cost in HB terms is anything like the figures published by FM, there will be a head-on collision between Godzilla – Eric Pickles’ policy of moving towards market rents as a way of funding development – and King Kong – Iain Duncan-Smith’s policy of cutting housing benefit to the bone.

Tags Affordable housing, Housing Benefit

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Let them drink soup

Post author By Steve Hilditch
Post date March 1, 2011

Steve Hilditch

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As I lived in Westminster for nearly forty years, readers will forgive me if I have a sharper focus on what goes on there. There is normally plenty to report. Mostly over the forty years it has been bad news. Always run by the Tories, they sank from being a paternalist council that built an astonishingly high number of council houses in the late 60s and early 70s to the depredations of Lady Porter and the post-Porter policy of shipping as many homeless people as far away from the borough as possible.

But it is their policy on street homelessness that demonstrates that they have been, and remain, fully paid-up members of the nasty party. The latest event in a long history is their plan, through a new bye-law, to ban soup runs and make sleeping on the streets illegal in a defined zone of the city, around Westminster Cathedral in Victoria. (It was in the Daily Mail, under a headline containing the word ‘callous’, so it must be true).

There is a contradiction in the stance taken by Tory Cabinet member for Housing, Angela Harvey. She complains that, of the people attending the soup kitchens, “The majority will not be rough sleepers… you see them going off with large carrier bags stuffed full of food which is for them and their house mates.” Now if that is the case, logically you might ban the soup runs. Or you might exercise your mind and wonder why it is that people need to come out on a freezing night to find free food. But why would you ban street sleeping if the people attending the soup runs are already housed?

Old Etonian and millionaire Cabinet member Sir George Young once said (or ‘quipped’ if you prefer the softer version in Wikipedia): “The homeless? Aren’t they the people you step over when you are coming out of the opera?” Quip or not, it reveals an attitude which many long-term observers of Westminster Council think also reflects the council’s real motivations: keep the place tidy and get the poor out from under our feet.

There is a genuine debate about the effect of soup runs, and whether they save lives daily or encourage people to stay out of hostels and on the streets. Westminster knows it is a balanced argument because it sponsored research from LSE which produced a sensible assessment of the pros and cons in a report less than 2 years ago. The research identified the downsides of soup runs but concluded that they “provide a safety net by making available food and social contact to those who are unable or unwilling to access other services.”

But even if you think soup runs should be banned, the first article of the Bye-law is not about that. It bans street sleeping itself. “No person shall lie down or sleep in or on any public place.” And “No person shall at any time deposit any materials used or intended to be used as bedding in or on any public place”.

As Ken Livingstone put it:

“The idea with all the other problems we’ve got, with crime, that we should have police diverted to seizing their soup is just bizarre. I think this is just another: ‘Can we move the poor on from Westminister?’”

Tags Homelessness, Soup kitchen, Westminster Council

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When two plus two makes five, and 150,000 equals 85,000

Post author By Tony Clements
Post date February 28, 2011

Steve and I have touched on this one frequently, but it’s worth a reminder for our newer Red Brick readers.
When you hear ministers saying they will build ‘up to 150,000’ new affordable homes over the next four years, they actually mean up to 85,000.
Of those 150,000 they promise around 65,000 have already been started or were in the pipeline from the previous Labour government.
Also, when they talk about £4bn being invested into affordable housing, remember that around £2bn of that is the money already committed to build out the remaining 65,000 homes from Labour’s National Affordable Housing Programme. So the real figure is about half.
The Tory government is planning to build up to 85,000 additional affordable homes in the next four years. That’s not many and that’s the key point.

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"The gloves are off"

Post author By Tony Clements
Post date February 25, 2011

On the same theme as my post yesterday, Inside Housing reports on housing professionals beginning to fight back against the government’s proposals:

“It would be wrong to call it a phoney war – tensions between housing professionals and the government have occasionally risen to the surface in the past 10 months. But this week the gloves are well and truly off.”

A useful reminder too of a few of the bodies that are speaking out against the government’s proposals: The Local Government Association, the National Housing Federation, northern RSLs, Homebuilders’ Federation. The list goes on…
Challenge to readers – can we find a respected housing body that backs the government’s reform package?

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Does anyone agree with them?

Post author By Tony Clements
Post date February 24, 2011

On Tuesday, I was chairing a mini-conference with about 40 people in the audience from London based RSLs, London boroughs and private developers. I did a similar one back in January on the theme of the new housing system, both of these under the Future of London banner.

It’s led me into greater fascination with CLG ministers’ current decision making. At none of these conferences has anyone spoken in favour of the government’s reforms.

No-one.

Admittedly, the representatives of the HCA have explained well the government’s policies and the government’s thinking behind them. But even Policy Exchange would only go as far as to say they were ‘critical friends’ of the government on housing.

Normally, making policy means alienating some people but pleasing others. Opposition is always inevitable and it’s true that normally opposition to any change outweighs the supporters. As Machiavelli says:

“… there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”

What amazes me is why ministers are not at all concerned by the fact they have no defenders at all, not even lukewarm ones. Despite the overwhelming opposition to the nature and implementation of these reforms, there is no tempering of the tone, no recognition that these are unpopular and that an entire sector thinks they probably won’t work.

Is this simply ideological zeal? The department not advising them of the reactions out there, or being too scared to do so? Is it the hope or assumption of creative destruction – if you lay waste to the old system, it’s impossible to go back and so something else better must emerge?

Or am I just niave and captured by me sector? Could this be how real political change happens and from the ground it always looks like destruction?

Alternatively, the housing minister could just believe he’ll only there for a short time and will have got away from the scene of the crime before anyone spots the bodies. While I fear for the NHS, I secretly hope the Housing Minister gets promoted to Health, to reap for himself the ‘rewards’ of another set of radical reforms.

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Releasing the grip of state control?

Post author By Steve Hilditch
Post date February 23, 2011

by Monimbo

Senior housing policy expert writing under a pseudonym.

Following my post yesterday on David Cameron’s new compulsory competitive tendering proposals, our guest blogger Monimbo, who also lived through the CCT regime of the 1980s and 1990s, penned these reflections.

Given this government’s restless urge to upend public services, arguing that the ‘grip of state control’ needs to be lessened still further was always likely to lead to more contracting out and privatisation. Of course, as David Cameron does in the Daily Telegraph of 20 February, this can always be presented as moving away from top-down targets, encouraging diversity, delivering at the lowest possible level and, once again, providing opportunities for the voluntary sector.

Yet it is pretty clear that the reality of his promised white paper on public service reform will be something remarkably similar to compulsory competitive tendering. CCT is of course the discredited policy from the 1980s, whose only enduring effect has been to privatise a large swathe of low-paid jobs, such as the very bin collection contracts which on other occasions exercise the mind of the Secretary of State for the Environment.

Cameron now claims that, by reviving CCT:

‘…power will be placed in people’s hands. Professionals will see their discretion restored. There will be more freedom, more choice and more local control.’

To which one can only ask, was he around at the time when this was done before? Does he really believe that contracting out created more diversity of providers, and more choice? As far as I recall, the outcome was either that, after an expensive and time-consuming process, the in-house teams won – or, in a few cases, that a big provider like Serco or Capita won instead. Whatever the virtues of a Serco or a Capita, do they really meet up to the starry-eyed descriptions of services brought closer to the people that Cameron enunciates in the Telegraph?

There are three fundamentals of contracting out of which he seems unaware. First, there needs to be a contract. As those involved in Housing PFI contracts know only too well, a service specified in mind-boggling detail in a contract is not a flexible service. Yet miss out the detail and what you will get is not a flexible service but a poor one. Once contracts are signed, the only flexibility they give is whatever terms can be varied that are already in the contract, at whatever price is specified. Anything beyond this is likely to be prohibitively expensive.

Second, contracts need to comply with EU procurement rules if they are above the minimum size. These rules are strict. The opportunities for including ‘social clauses’ exist, but they are carefully policed by lawyers. Does Cameron’s view of ‘diversity’ include international firms operating British public services? It may well do, but it’s probably not what his Telegraph readers have in mind.

And finally, of course, this does not reduce bureaucracy, it increases it. Cameron talks about ‘bureaucracy over-ruling common sense, targets and regulations over-ruling professional discretion.’ As CCT showed, you need more staff to run a service because to administer a complex contract you need a ‘client side’ to ensure that the contractor is doing their job. Can those on the client side dispense with bureaucracy, targets and regulations? No, they are the essence of any contract. Do they largely have to give up exercising their professional discretion? Yes, because using discretion will cost money that will no longer be available.

Cameron’s vision for public services isn’t a new one. It’s a recycled policy from the 1980s that didn’t work then and won’t work now. It may, however, succeed in what many will think is its covert aim: to get people so disenchanted with public services that they opt out, vote for tax cuts and lose all sympathy with public servants. Taken together with the effects of the spending cuts, that really does look like an objective that he might achieve.

Tags Competition, Public services