08 November 2002
The visibly deteriorating state of council housing is a political predicament that has haunted successive governments.
In Scotland, the issue of how to tackle an outstanding repair and investment bill that runs into billions of pounds has moved up the political agenda, with the Executive turning to stock transfers as the cure for its housing malaise.
Ministers have set the ambitious target of transferring 170,000 of Scotland's 500,000 council housing stock to registered social landlords by 2006. And, having gone one step further than English ministers by offering to write off both the outstanding housing debt and the premiums for early debt transfer, the writing is apparently on the wall for Scottish council housing.
But if a debate among Scottish local authority finance directors, sponsored by Public Finance and Consilium Technologies, is any indicator, councils are less than convinced by the arguments for stock transfer. In fact, 65% of finance directors said that transfers did not offer the best prospects for the future of social housing in Scotland. Thirty-five per cent felt they did.
Charles Armstrong, finance director at Aberdeenshire Council, argued that authorities were still able to provide good-quality housing through traditional capital investment and pre-agreed rent increases. He said tenants in Aberdeenshire had agreed to a long-term pattern of rent increases linked to the retail price index plus 3% for five years then RPI plus 2% for the next 25. `This will allow us to maintain our stock in good condition as well as embarking on a programme of modernisation totalling £60m over the next 30 years,' he told the debate in Aberdeen on October 31.
He dubbed the Executive's policy of writing off debt as a `one-off bribe' that distorted free market controls. It cost the public purse, and was inevitably at the expense of something else. `What matters is the tenant, not political dogma or even short-term financial benefits and not what the government, the academics, the housing professionals or even accountants think best for them.'
For Bruce West, head of accounting at Argyll and Bute Council, transfers offer too many financial and social benefits for authorities to resist. His council is conducting a feasibility study into transferring its stock.
West pointed out that in 1999/2000, housing revenue account loan charges exceeded capital investment by £100m. `This circle needs to be broken. Stock transfer is the only option.'
He told the debate, chaired by David Sawers, director of finance and depute chief executive at Angus Council, that transfers also provide authorities with a more strategic focus while empowering tenants. `For tenants, it's improved housing at affordable rents with increased involvement. For councils, it's improved stock, enhanced local environment and a more focused strategy to meet local need. For the public, a robust process to determine value for money.'
So far three Scottish authorities have opted to transfer their housing stock: Glasgow, Dumfries & Galloway and the Scottish Borders. George Black, director of finance at Glasgow which is in the throes of transferring around 80,000 homes is, like West, pragmatic. `Some authorities are using up to 50% of rental income to service debt, so releasing that money over 30 years for investment is vital. For authorities with high investment needs, high rents and high debts it is likely to be the only way to go.'
But for the majority of finance directors the debate is not just whether to transfer or not. The Executive's `one size fits all approach' gives those with low debt an effective fait accompli. But there may well be an alternative on the horizon.
`The average debt per house is £6,000 and, under the current rules, some authorities will be debt-free within a few years,' said Ian Jackson, director of corporate services at Midlothian Council. `The question is, assuming the prudential code is to replace Section 94 borrowing consent for the housing revenue account in Scotland, will a local authority with low debt levels and the ability to determine its own investment level use the prudential code as a viable alternative to stock transfer?'
The Executive has yet to announce whether this will be the case, but 65% of Scottish finance directors are clearly waiting anxiously to know.
PFnov2002
