05 November 2004
Local authorities and registered social landlords must find housing efficiency savings of £835m per year by 2008 under the government's strict Gershon targets.
The figure is included in the Office of the Deputy Prime Minister's technical note outlining how it will meet its share of the £21.5bn annual savings identified by Sir Peter Gershon's all-encompassing review of Whitehall spending.
The ODPM, Department for Education and Skills, Department of Health and Ministry of Defence were among the departments that finally submitted detailed plans for meeting their efficiency commitments this week.
Under the ODPM's proposals, the department is committed to total efficiency gains of £620m by 2008. This includes efficiencies in social housing procurement by RSLs, but not by local authorities.
When Gershon published his July report, Releasing resources to the front line, councils' social housing targets were included in local government's total £6.45bn annual savings figure, but it was not made clear what the exact commitments would be.
The ODPM technical note outlines for the first time all social housing efficiency expectations.
But doubts over the figures have already surfaced. RSLs must find £355m per year in savings by 2008 as part of the ODPM's £620m target, Councils must find £480m from the sector annually, which could be freed for investment in frontline housing services.
According to the note, all social housing savings will be made through improved procurement. The ODPM this week announced it would set up two pilot schemes to trial efficiency projects in housing management and maintenance, including 'exploring the potential for procuring maintenance materials through capital works consortia.'
Alongside the pilots, RSLs will be expected to improve the procurement of 'new supply' housing by 'developing the Housing Corporation's partnering approach to investment' and exploring payment of grant direct to developers.
Other improvements must be made on capital works, through aggregated supply consortiums and the collective purchase of 'commodity goods', such as phone lines for housing.
The ODPM admits the targets are tough. It said: 'The scale of the challenge is high… [housing] costs are increasing well above inflation, with land prices rising at a rate of more than 15% a year, and increasing construction costs.'
One senior social housing official told Public Finance that the escalating costs are often so prohibitive that it would be 'nigh on impossible' to meet all efficiency targets unless 'the ODPM uses a very generous definition of what constitutes improved quality of services under Gershon's review.'
That is a reference to the 'non-cashable' savings, controversial measurements of improved service quality, within Whitehall's efficiency programme. Neither the Treasury nor individual departments have outlined how these will be measured.
A spokesman for the Housing Corporation said: 'The Housing Corporation and the National Housing Federation are talking to the ODPM about the calculus involved, including those for non-cashable savings, because they will determine future activity in the sector.'
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