The Role and Effectiveness of the Housing Corporation (HC 401-iv) ODPM Committee 17 May 2004

Evidence given by Rt. Hon Keith Hill MP, Minister of State for Housing and Planning, Office of the Deputy Prime Minister Neil McDonald, Director of Housing, Office of the Deputy Prime Minister Peter Ruback, Head of Affordable Housing, Office of the Deputy Prime Minister.

Q391 Mr. David Clelland: We mentioned Kate Barker's report, as we are bound to do, of course. One of the suggestions she made in order to meet demands and bring prices down was to increase significantly the number of private sector homes built each year. Is the Government revising its house-building targets in the light of the report?

Keith Hill: We welcome Kate Barker's report. We welcome the contribution it has made towards securing greater stability in the housing market, and also the ways in which it has identified the way in which we can secure greater provision of affordable housing. Kate Barker herself set out a range of housing outcomes. Her base-line was actually the target that the Government of course set out in the communities plan of last year, which for London and the wider South-East is the 930,000 set out in RPG-9, plus the 200,000 that we expect to deliver through the growth areas. So we were pleased to see that we were within the kind of parameters identified by Kate Barker. She, of course, is in favour of larger figures in order to achieve those wider econometric goals. But of course her figures are national figures, and one of the key things that we will have to look at is how these higher targets are to be achieved at the regional level. So I think all partners accept that a good deal of analysis and a good deal of work need to go on in order to respond to the agenda that she has set.

Q392 Mr. David Clelland: But in terms of private homes, which of the targets that Kate Barker has put forward is the Government likely to be adopting?

Keith Hill: We cannot say at this stage. That is exactly why we want to reflect and consult on these proposals and their achievability. We welcome the commitment that she sets out to increased numbers; it is a matter of implementation. One thing that we totally concur with Kate Barker on, of course, is our belief that the private sector needs to up its gain. The truth is that the private sector has been operating at steady state really for about 15 years, 160,000. The truth is that it has not been responsive to changes in the housing market, and we are engaging at a number of levels with both the house builders and developers, but also, critically, with the local authorities and with the planning structures, to create a situation in which higher housing growth can be achieved.

Q393 Mr. David Clelland: But we cannot quantify it yet? Kate Barker suggested, for instance, anything between 70,000 and 120,000 additional private houses each year.

Keith Hill: We are certainly not in a position to commit to any of those numbers at this stage. It is a challenging agenda, and I am sure you would agree with me that it would be almost facile for the Government to accept a number without really thinking very hard about the resource implications of delivering higher numbers.

Q394 Mr. David Clelland: OK, can I turn to social housing. You mentioned earlier there is a major investment that the Government is putting in in this area. What increase are you hoping for in this July's comprehensive spending review?

Keith Hill: That absolutely is a matter for the Treasury, and I think you know, Mr Clelland, that it would be worth more than my humble job is worth for me to attempt any precision on that particular subject.

Q395 Andrew Bennett: At least you could tell us what you are asking for.

Keith Hill: These are matters for negotiation within Government, Mr Bennett. I am all for transparency, but there are limits.

Q396 Chairman: Some other things have come out of the inquiry. I feel a slight unease that the Government is indicating that there is going to be a step change in investment in housing; indeed there has been, there is going to continue to be, and the organisation which served us well when we were ticking along or even slightly backwards, as happened to some extent in the eighties and nineties, do we need a bit of a shot in the arm? There needs to be a reform so that the organisation or framework generally can deliver this greater amount of investment? I am not quite sure, in a sense, that is going to happen, somehow.

Keith Hill: We think we are doing that with the major agency we use to deliver our investment in social housing, and that is the subject of your inquiry. I hope I have already begun to explain some of the ways in which we see the Housing Corporation and the RSLs stepping up their performance. When we speak to developers, of course, their main complaint lies in the planning system, and you will know - and I am sure rejoice with me - that last week we finally saw the enactment of the Planning Bill first introduced into this House in December 2002. I am told that it has had the longest parliamentary journey of any piece of legislation ever, but it was the first major(?) subject to carry over, of course. We do believe that the new planning mechanisms that we set out in the Planning Compulsory Purchase Act will go a long way to creating a planning system at the local level which is fairer, more flexible, more participatory, but also faster as well. We think that is important. You will be aware, of course, that through our growth areas programme we are injecting huge investments into the infrastructure in the growth areas - I have particular responsibility for the Thames Gateway - but that total programme from ODPM amounts to something in the order of £660 million, which is about new transport, new education, new health, land remediation, new housing investments in those areas. The Department for Transport of course again in the broader growth areas terrain made announcements as a result of the completion of multi-modal studies of something like £2.1 billion worth of investment in new transport infrastructure. That is very helpful. We have a new and dynamic English Partnerships, which is very actively engaged in land assembly, and as an aspect of that I am sure that you were very pleased to see the announcement we made about a month ago on the deal that we have arrived at with the Department of Health in terms of the 101 NHS sites which we think can also contribute to significant new housing growth; and we are engaging constantly with developers and the private sector to encourage them to improve their own performance across a range of issues. We are certainly, we believe, creating a broad framework in which there are much bigger opportunities for investment and development by house builders than heretofore.

Q397 Mr. David Clelland: The key point that came out of the end-to-end review of course - and this is the one emphasised by the Treasury - is the need to improve the efficiency of housing associations. Can housing associations become more efficient without driving down quality?

Keith Hill: I am not entirely sure what you are getting at there. I would be grateful if you could perhaps just explain a little more what you think the choice is.

Q398 Mr. David Clelland: You remember what happened to local authorities, for instance. Local authorities were a big driving force for providing new housing after the war, and a terrific job they did - I am not sure why they are not allowed to do it any more, but however - housing associations now are seen to be getting into the same position, where Government at the centre is trying to drive down costs and what they call 'improve efficiency', which led to a lot of the sixties' development, for instance, that local authorities got into so much trouble over. Is there not a danger of this happening again? If efficiency is going to be the aim of the Treasury, they have got to be looking at efficiency all the time, are they going to be compromising on quality, particularly when it comes to new developments?

Keith Hill: The answer is no, they are not. Thank you very much indeed for that explanation. The answer is no, they are not going to be compromising on quality. I have it in mind that there is something called the quality design implementation scheme, whereby we expect the Housing Corporation to monitor very carefully the quality of the products of the housing associations. But I think rather more to the point, as you will be very well aware, we have worked with the Housing Corporation to identify a fairly small group of partners for the implementation of the greater part of housing investment coming forward from the Housing Corporation - about 70 of them in total. These are housing associations with proven records of efficient and high quality production of new housing. We are confident that they will be producing not only bigger numbers, more cost-effectively, but also it is absolutely fundamental that the quality of the product should be high. The truth is, of course, that we recognise that absolutely central to our commitment to housing growth, but also of course to primary investment on brown-field rather than green-field, that we need to drive up the densities; and absolutely critical to denser housing is higher quality of design, so there is a virtual circle here.

Q399 Mr. David Clelland: Is that not exactly what was said in the sixties - higher densities, more adventurous designs?

Keith Hill: But it was not cheap, was it?

Q400 Mr. David Clelland: No, exactly.

Keith Hill: And I think we all learned the lessons of that failure in that period, which is why really we use absolutely now the language of sustainable developments. We are not in the business of encouraging the development of soulless estates in which nobody wants to live, and which are actually counter-productive to quality of life of residents on those estates. The whole centre of the project now - which is why we have acquired in my department the new strapline 'Creating sustainable communities' is that commitment to creating places where people want to live, want to have families and want their children to be able to live in as well. So design is absolutely at the centre of this particular project.

Q401 Mr. David Clelland: It is coming back to efficiency. It is obviously incumbent on central Government to be efficient as well. Is it very efficient to be building more houses in the growth areas of the South-East, and concentrating development there, when we could have development in other parts of the country which is not so expensive?

Keith Hill: I think we need to do both. I think one of the clear lessons that I have learned - if I might share this with you, Mr Clelland - is that the north is all about demolition and the south is all about growth. The truth is, of course, that growth is intrinsic to regeneration. I have to say that there is not one of the housing market renewal Pathfinder projects which does not itself include significant elements of house building, and to that extent new housing growth. That is fundamental; you cannot hope to regenerate and rebuild economies unless you have decent places for people to live in. We also, I think, recognise that there are other areas of the north Midlands and the north of England where there are quite genuine housing hotspots with high levels of demand. I think these need to be responded to as well. But, having said that, I think we have to recognise that the greatest pressures in terms of household formation are in London and the wider South-East. I find it, as I am sure you will, a staggering statistic to discover that in the period up to 2030 something like 70 per cent of all natural population growth in this country - that is to say England, Scotland, Wales and Northern Ireland - and natural growth means the excess of births over deaths - will occur in the city of London alone. That is a reflection of the sort of pressures that we have down here. The truth is - if I might just strain your patience for a second - that London and the wider South-East do remain the most dynamic aspect of the UK economy, and that the success of other parts of the UK are dependent on the success of London and the wider South-East. 60 per cent of London's exports and imports go to other areas in England alone, and there is a similar relationship in terms of economic growth between your city and the cities of the north and London. There is a symbiosis there; each depends on the other; and we have to allow that growth to continue in London and the South-East, while at the same time creating a framework for growth in other parts of the UK.

Q402 Mr. David Clelland: You say we have to allow that, but surely that is not very intelligent planning? You have identified the problem - overheating in the South-East, and tremendous growth in housing and everything else - and at the same time identified the problem of the areas where there is potential for growth. Surely the Government ought to be looking at relieving the temperature in the South-East, and spreading the burden out of it, or spreading the advantages out of it?

Keith Hill: We are investing --

Q403 Mr. David Clelland: Have you, for instance, weighed the cost of improving the transport infrastructure and economic development in the regions as opposed to continuing to feed the heat in the South-East?

Keith Hill: We all know what the effect of that weighing is, that the largest single civil engineering investment by far in this country is the modernisation of the west-coast main line, at £9 billion. I put it to you that the benefits of that particular huge amount of investment are certainly as even shared between London and the South-East as they are between the west Midlands, the north-west and the west of Scotland, for that matter. In other words, I think that kind of investment is already going into the north of England.

Q404 Mr. David Clelland: Have you any idea what the impact of that is going to be in terms of relieving the pressure on the South-East, because it seems to me from what you have said that that is not going to relieve the pressure on the South-East, because you have just admitted that is going to continue to grow. It does not go anywhere near it.

Keith Hill: It will contribute to spreading economic prosperity; and while I am not an expert on these matters, I cannot but feel that where you have economic uplift - as is unquestionably occurring in many parts of the north and the north Midlands - that that itself creates a momentum, a critical mass, which will encourage more investment and more growth, and presumably will seek to even out economic development in the country.

Mr. David Clelland: You are a main of great faith.

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Q431 Mr. David Clelland: Minister, I think earlier you referred to the timetable for the merging of the Regional Housing Boards and Regional Planning Boards, I think you said, in the back end, the second part of 2005.

Keith Hill: Yes, that sort of thing.

Q432 Mr. David Clelland: Can you tell us - and I know this is one of Kate Barker's recommendations - why you think that this is a good idea, given the fact that the two boards seem to be working perfectly well together at the moment. It does not appear to be broke, so why do you think it needs to be fixed?

Keith Hill: I think on the face of matters there is obviously a strong case for closer working of the planning and housing functions. We certainly see a major part of the new regional spatial strategies being in the area of identifying opportunities for housing growth. That is the planning function, and it seems sensible to more closely align the housing delivery aspect of that with the planning function.

Q433 Mr. David Clelland: So you believe the housing boards are working fine and the planning boards are working fine. Is one working better than the other?

Keith Hill: I would not want to make that kind of invidious comparison. We certainly think that both have worked well, within the different framework of their powers. Quite clearly the housing boards, which we think have done very well in the short time that they had to work, we very much hope that as they deal with the next round of proposals, that they will be widening and deepening their consultation. We think that they have done pretty well, and we think that the Regional Planning Boards will now have the opportunity through the new legislative framework and the regional spatial strategies to deepen their performance with regard to planning. As I say, we accept in principle the case which says that these functions should be more closely aligned, and we are going out to consultation precisely on those proposals which appear in Kate Barker's final report, from the summer of this year.

Q434 Mr. David Clelland: What about the constitution of whatever new merged body comes about? The housing boards are mainly constituted of officers, and the planning boards mainly of elected members.

Keith Hill: Yes.

Q435 Mr. David Clelland: How would you see the merged boards being constituted?

Keith Hill: That is exactly the conclusion that we would expect to emerge from our consultation. I am sure you would agree, absolutely no point in Government making its mind up before it goes out to consultation on the matter.

Q436 Andrew Bennett: It might help if you had a preferred view, though.

Keith Hill: I dare say that we shall be setting out the parameters of that consultation in due course.

Q437 Mr. David Clelland: In November the three northern regions will be having referenda on regional government, and I am certainly hoping that at least one of those will win, if not all three. What difference will that make? Should not regional government when it comes in have some say about these functions and how they operate?

Keith Hill: Of course they will have specific responsibilities under the terms of the elected regional assemblies' legislation; they will have the planning responsibility and they will have the housing responsibility. But again we are not laying the law down, and it will be up to them to decide what the structure of the future arrangements should be.

Q438 Mr. David Clelland: So whatever new structure you come up with at the latter end of 2005, which will be before any regional government would actually be set up, I would imagine, can be unpicked again by the regional government when it comes in, can it?

Keith Hill: I think that is the nature of a devolved democracy, is it not?

Mr. David Clelland: Thank you very much.

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Q456 Mr. David Clelland: Still on this question of relationships, can I turn to the relationship between the Housing Corporation and the Audit Commission? Are you satisfied that the current protocol between the Corporation and the Audit Commission is robust enough to avoid "turf wars" breaking out? Could it be clearer and less ambiguous than it is at the moment?

Keith Hill: I do not know about that, since as I understand it the suggestion that the role of the Audit Commission might be expanded to take on regulation emanates from the Audit Commission itself. That sounds to me like a bit of a turf war in the making. Let me say that I would strongly resist such a proposal. It seems to me that what the Audit Commission does, which is as I understand it essentially to assess the quality of management in housing services, is quite different from the specialisms which the Housing Corporation brings to the party, which on the one hand is experiencing the regulation of what are essentially private sector concerns and secondly the issue of procurement and delivery of new housing.

Q457 Mr. David Clelland: When this responsibility for inspection was passed to the Audit Commission, the objective I believe was to have broadly the same inspection regime for whoever was providing social housing, but of course housing associations and local authorities work in different ways. Is it practical to have a standard inspection regime for the two bodies?

Keith Hill: If we remain focused on what the Audit Commission does, which is to assess the quality of management of housing services, then it does seem to me there are benefits to be derived from like with like comparisons - you are comparing the quality of management in council housing and the quality of management in the RSOs. That seems to me the basis for reasonable comparisons between the two, but I think it is a very different proposition from moving into the regulatory and procurement areas.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.