Michael Meacher

Labour Party | Oldham West and Royton

Article for The Times: COUNCIL TENANTS HAVE RIGHTS

    One aspect of the Government’s drive to ‘reform’ public services has gone little noticed.   It isn’t only in health and education that the private sector is being given a preferential role.   The same pressures are now being exerted against Council tenants to force them out of local authority housing.

     A fortnight ago the Department of Communities and Local Government announced that this was now the last time that local authorities could bid for funds to reach the decent homes target.   The Government had given a commitment, in the Labour Party 2005 manifesto, that “by 2010 we will ensure that all social tenants benefit from a decent, warm home with modern facilities”.

      But the money would only be forthcoming for this if Council tenants opt for either a stock transfer to a private landlord, or to an Arm’s Length Management Organisation (ALMO) taking over a Council’s estates, or for a Private Finance Initiative (PFI) scheme.   Moreover, the current bidding round ends on 31 July, and after that there will be no money available at all for modernisation or repairs.   This is manifestly unfair.

     The Government’s argument is that using the stock transfer and PFI route has levered in £7.4bn of private funding, and is therefore the most economic means to reach the decent homes target.   But it isn’t.   The Commons Public Account Committee found that PFI work costs on average £1,300 more per home than if the Council did the work.   Furthermore, the public loses the asset – and the continuing value from it after 30 years which is not included in the transfer price calculation.   Also, the Treasury pays more in Housing Benefit costs as tenants’ rents increase, and there are increasingly hefty early redemption charges on loans before the sell-off can take place.   Even that still leaves out the army of consultants paid out of the public purse to advise and facilitate.
The private sector route is almost certainly in the long run more expensive.

     Nor is the ALMO route obviously preferable either.   Good and excellent performing Councils, as audited by the NAO, have unnecessarily spent tenants’ money on setting up a new private company – often acquiring new posh offices, expensive re-branding and increasing senior managers’ pay – just to meet the Government’s arm’s length criteria to access the additional money on offer to ALMOs.   Forcing Councils to jump through these hoops is not value for money.

       Despite these pressures, not all Councils have gone down the Government’s chosen routes.   By this year less than half of them will have transferred their stock, while of the remainder the majority – after tenants’ ballots turned down the options – are retaining their homes, and the rest are setting up ALMOs.   The key question is now: how will repairs and improvements of Council properties be financed where tenants have voted to stay with their Councils and when the Housing Green Paper of April 2000 identified a £19bn backlog of repairs and modernisation work needed for Council homes?

     This is not a demand for a big increase in expenditure on Council housing, only that Council tenants be allowed to retain the benefit of the money they have contributed in rent and not have it siphoned off for wholly extraneous purposes.   For despite the widespread view that Council housing represents a vast repository of public subsidy funded by wealthier sections of the community, the reality is precisely the reverse.   A Parliamentary Answer of 25 May shows that Council tenants pay £1.55bn more a year in rent than they get back in Management and Maintenance and Major Repairs Allowance.   Through large sums extracted annually from local authority Housing Revenue Accounts by ODPM, Council tenants have been subsidising Government (i.e. other taxpayers) to the tune of some £800m a year, not the other way round.   In addition, Government has been taking 75% of the capital receipts from ‘right to buy’ sales, amounting to some £550m a year, rather than allowing it to be re-invested in more Council housing.

     The predictable result has been a massive under-investment in social house-building in the last 15 years leading to sharply rising homelessness. In 1990-1, 13,000 local authority homes were built; last year it was just 100.   In 1994-5, over 31,000 Housing Association homes were built; last year it was less than 17,000.   An NAO study last December found that out of a survey of 50 local authorities in areas of high housing demand, only 1 considered it would be able to meet the need for new social rented housing over the next 3 years, mainly because of insufficient funding.   The result has been a doubling of the number of homeless families in temporary accommodation, particularly in the South-East.

     It invites the question whether the enormous build-up in investment in health and education hasn’t now gone so far as to crowd out the much more modest build-up in social house-building which would alleviate far more poverty.   In particular I would question whether it is really justified for the Government to spend £5bn on building 200 Academies rather than 50,000 additional new homes in the social rented sector in areas of greatest need.

     The way out of this impasse is surely clear.   Council tenants should have the right to choice, as the Government constantly advocates, and if they reject the 3 opt-outs promoted by ODPM, they should not be penalised by losing their entitlement to repairs and improvements funding.   To deny them this if they do not vote the ‘right’ way is simply ideological blackmail.  For if Government has extra money for authorities who set up ALMOs, they could equally give the money direct to the local authority if that is what the tenants want.

     No extra money would be needed for this policy, merely a change of policy.   If the national Housing Revenue Account were ring-fenced, the huge sums annually drained off for other purposes would be retained for investment in Council housing.   Ending transfers would save Government the cost of writing off Council debts to make the sale attractive.   There would also be a saving on Housing Benefit bills since higher Housing Association rents cost the Treasury more.   Receipts from the right-to-buy sales of Council housing, which have so far yielded £45bn, would be recycled in full into more and better Council housing.   Gap funding schemes to subsidise transfers into the private sector, on which the Government is spending £180m, would be withdrawn.

     All this money would be more than enough to fund an ‘investment allowance’ for Councils to bring their properties up to modern standards and to begin to jack up the social house-building programme to meet today’s desperate shortages.   When that is what 3 million existing Council tenants demand, not to mention 1.5 million households on Council waiting lists, Government would be wise to listen.