By Craig Binns

People with acute political instincts will already have clocked the Executive’s present council housing stock transfer policy as a potential disaster – another poll tax. Incoherent justifications of the proposal by Ministers; central government interference in the day to day operation of the process; gross and unexplained delays in implementation; changes of direction; failure to keep interested parties informed; absence of local democratic control; exorbitant and spiralling Dome-like costs: many danger signs are on display. The responsible Minister, Wendy Alexander, has now decided to abandon this “poisoned chalice” in favour of another portfolio, and her Deputy, Frank McAveety, has been unceremoniously sacked by a wise and vengeful Henry McLeish. It’s a mess. Why? Because, like the Poll Tax and the Millennium Dome, housing stock transfer is driven not by need, popular demand, or any other rational consideration, but by a flawed ideology inherited from the pre-1997 Tory administration. It is part of the same process that has given us PFI, PPP, Air Traffic Control privatisation plans and the current chaos on the railways.

Contrary to the claims of its supporters, stock transfer will create no new resources, but will in fact suck potential investment funding away from social rented housing. The transfer landlords will have to borrow money from commercial lenders at higher rates than the government charges to local authorities. VAT will be charged on improvement works, which will entail extra costs of £200m in Glasgow, according to the Council’s own consultants, Ernst & Young. The transaction itself will cost tens of millions; if ownership of the stock is subsequently fragmented among a number of agencies, as proposed, the additional management costs will amount to hundreds of millions of pounds over the next thirty years. All of this will be paid for by rent payers, council taxpayers and income tax payers.

There are other problems too. For example, to create a single social tenancy, the Executive intends to extend Right to Buy to assured housing association tenants. As in the case of council house sales, this will place heavy financial burdens on the remaining association tenants. But the problems and extra costs arising from stock transfer are so numerous that only a tiny sample of them can be considered here, and every week more and more are revealed. In the few days before writing this, we have had disputes over the effect of stock transfer on the Executive’s proposal to fund central heating installation in council housing, and controversy over its possible impact on Housing Benefit payments to certain tenants. More amusingly, the Executive’s contention that transfer is not privatisation appears to have been exploded in Berwickshire, the first Scottish local authority to transfer all its stock to a housing association. According to the Metro of 6th November, Berwickshire Housing Association is attempting to evict a tenant for arrears. This is being challenged under the Human Rights Act, but the association’s lawyer has come up with an interesting defence: he claims the association is a private landlord, so the eviction is a private matter and the Human Rights Act doesn’t apply. So much for Wendy Alexander’s “social landlords” and “community ownership”.

Opposition to stock transfer is growing. The STUC, all the council workers’ unions, the Scottish Tenants Organisation and many local tenants groups have joined in demanding that council housing be improved without transfer. But drive towards council stock transfer is stronger in Scotland than in England. A Labour Party Policy Forum held in England in July produced a document containing the following words, as reported to UNISON’s National Affiliated Political Committee:

“It must be recognised … that a free choice between alternative forms of management can only be exercised where there is a genuine level playing field, and local authority housing is seen as a viable and attractive option. This requires encouraging all authorities to take a strategic view of needs across all housing and supporting the creation of new arms length companies to manage local authority owned housing, with such companies given extra scope to borrow where there is a proven record of efficient management and a sound business plan. Labour will ensure that local authorities which have established arms length management companies which have greater financial freedom, can borrow to improve their stock.”

Council workers’ unions would be happy to discuss proposals based on such a policy. If this can be contemplated in England, why is the Scottish Executive so insistent on its single-option transfer proposal?

One reason may be the contempt which some of our politicians have for local authorities and all their works. Councils are supposed to be incapable of managing housing, or indeed education and other services. But why is this? It is simply because the resources available to councils have been so severely cut over the last twenty years. Housing associations can improve their stock, while charging rents lower in Glasgow than the council average by around 20%. But there is no magic about this; associations get lavish grant funding from the government, while the council has to depend on borrowing.

If changes are needed in council practices – for example, in the direction of greater tenant involvement – the Executive already has power to direct councils to adopt these practices without going to the trouble and expense of stock transfer.

There is an obvious alternative to stock transfer. If the present outstanding council housing debt was taken over by central government, servicing costs amounting to £100m per year would be saved. In ten years (the period of the proposed post-transfer improvement programme) this would amount to about £1bn, not much less than the projected cost of the improvements, without any above-inflation increase in rents. And, as noted, hundreds of millions in VAT, and management and transaction costs, would be saved.

So why the insistence on removing housing from council ownership? As far as we can see, like other forms of privatisation, stock transfer is driven by a desire to minimise public borrowing, as defined by the Public Sector Borrowing Requirement. But it would be possible for Gordon Brown simply to remove council housing from the PSBR, which he could do by adopting the measure of public debt used in all other European Union states. It is called General Government Financial Deficit, and it doesn’t include investment in self-financing municipally owned enterprises. Why doesn’t the Chancellor make this simple and overdue change in Treasury practice? Is he really content to squander billions of pounds of public money merely to sustain his reputation for fiscal “prudence” in the pages of the Daily Mail? If there is some other motive, we would like to know what it is, but nothing we have been told makes any sense.

The changes in the Scottish Executive may give us a last chance to secure a change of policy. Stock transfer is not popular; tenants are at best suspicious of it, and council workers are opposed to it. As stated recently by Charlie Gordon, Leader of the Glasgow City Administration, if there was a tenants’ ballot now, the vote would go against it. He’s probably right, and the gross delays in holding this ballot (originally scheduled for November 2000, then postponed to May 2001, now most probably November 2001, but who knows?) can do nothing to endear tenants to the transfer. Their homes will decay further as pre transfer spending on improvements winds down. If tenants nevertheless vote yes, it will be because they are being blackmailed: vote yes and get your house done up; vote no and it will be left to rot. They may vote yes, but they will punish the administration that does this to them the next time they are within reach of a ballot box at a Council or Scottish Parliamentary election.

We ask the Executive to be mindful of this, and to reconsider the whole policy, which it can now do without losing face. As we have seen, there are other ways of doing all the things required to improve public sector housing at a fraction of the cost of stock transfer. The new administration on the Mound has already shown a readiness to consider change. If Henry McLeish’s promised “bonfire of the quangos” indicates a view that public services should be provided by the appropriate democratically-elected authorities, it is very welcome. Housing stock transfer, with its “steering groups” and other unelected cabals, is irredeemably quangoid, and the First Minister should consign it to his bonfire at the earliest opportunity.