Thursday, 30 March 2017

Inside edge

All posts from: September 2009

Party line

Wed, 30 Sep 2009

How the world has changed. Two years ago the Labour Party moved to stop conference delegates debating a fourth option for council housing. Last year housing minister Caroline Flint was promising that councils would take centre stage but on the defensive over her flirtation with ending security of tenure. 

This week John Healey, Flint’s successor but one as housing minister, not only announced a new wave of funding for council housebuilding but also alleged a secret Conservative plan to end security of tenure, double or even triple rents for social tenants and ”put their homes on the line with two months notice’.

In a fringe speech earlier in the week he opened up a further gap between the two parties by rejecting claims that investment in housing will plummet after the next election - unless the Tories win. 

Healey’s speech was part of a general Labour attack on the record of Tory councils like Hammersmith & Fulham, Westminster and Barnet. He did not name Hammersmith & Fulham but he was almost certainly referring to minutes of discussions about the Localis report on social housing reform that were attended by senior Tories. The report was co-authored by council leader Stephen Greenhalgh and the minutes were obtained by local Labour MP Andy Slaughter under the Freedom of Information Act. Heavily redacted copies are on his website

After several years of broad consensus between the parties on housing, politics is certainly back. Sarah Teather also made a big pitch for housing votes at the Lib Dem conference two weeks ago. 

Next week it’s the Tories’ turn. Attacks on Labour’s housing record seem and nods to the nimbies look more of a certainty than any specific commitments on the welter of ideas coming out of right-wing think tanks.

Party line

Wed, 30 Sep 2009

How the world has changed. Two years ago the Labour Party moved to stop conference delegates debating a fourth option for council housing. Last year housing minister Caroline Flint was promising that councils would take centre stage but on the defensive over her flirtation with ending security of tenure. 

This week John Healey, Flint’s successor but one as housing minister, not only announced a new wave of funding for council housebuilding but also alleged a secret Conservative plan to end security of tenure, double or even triple rents for social tenants and ”put their homes on the line with two months notice’.

In a fringe speech earlier in the week he opened up a further gap between the two parties by rejecting claims that investment in housing will plummet after the next election - unless the Tories win. 

Healey’s speech was part of a general Labour attack on the record of Tory councils like Hammersmith & Fulham, Westminster and Barnet. He did not name Hammersmith & Fulham but he was almost certainly referring to minutes of discussions about the Localis report on social housing reform that were attended by senior Tories. The report was co-authored by council leader Stephen Greenhalgh and the minutes were obtained by local Labour MP Andy Slaughter under the Freedom of Information Act. Heavily redacted copies are on his website

After several years of broad consensus between the parties on housing, politics is certainly back. Sarah Teather also made a big pitch for housing votes at the Lib Dem conference two weeks ago. 

Next week it’s the Tories’ turn. Attacks on Labour’s housing record seem and nods to the nimbies look more of a certainty than any specific commitments on the welter of ideas coming out of right-wing think tanks.

What took so long?

Tue, 29 Sep 2009

You can almost hear the stable door banging shut as the Financial Services Authority (FSA) launches its consultation on regulating sale and rent back.

The proposals include a cooling-off period, a ban on cold calling, prohibiting the use of terms like ‘mortgage rescue’ and ‘fast sale’ in adverts and making firms check that consumers can afford the deal and that it is right for them and, perhaps most significantly, more security of tenure. Anyone who sells and rents back their home would be on an assured tenancy rather than an assured shorthold.

So far, so good, but what took so long? It’s been clear for well over two years that some sale and rentback firms were exploiting vulnerable consumers by paying them less than their home was worth or denying them the security they promised. Shelter, Citizens Advice and the Council of Mortgage Lenders wrote to the Treasury in October 2007 calling for action. The Treasury asked the Office of Fair Trading to investigate in March 2008

It took until October 2008 for the OFT to conclude that, yes, there was a problem that needed regulating. It estimated that more than 50,000 families had entered into sale and rent back agreements in the previous two years. 

Four months after that, the Treasury announced that the FSA would regulate. Interim measures came into force in July but the proposals announced yesterday now go out to consultation until the end of November. Assuming everything goes to plan the new system will finally come into effect at the end of June 2010.

Welcome though the proposals are, it’s hard to escape the conclusion that they will come too late for thousands of sale and rent back victims. Or that the Treasury, OFT and FSA really ought to be having another consultation - about how to regulate the next scam that comes along in less than three years after it first appears. 

What took so long?

Tue, 29 Sep 2009

You can almost hear the stable door banging shut as the Financial Services Authority (FSA) launches its consultation on regulating sale and rent back.

The proposals include a cooling-off period, a ban on cold calling, prohibiting the use of terms like ‘mortgage rescue’ and ‘fast sale’ in adverts and making firms check that consumers can afford the deal and that it is right for them and, perhaps most significantly, more security of tenure. Anyone who sells and rents back their home would be on an assured tenancy rather than an assured shorthold.

So far, so good, but what took so long? It’s been clear for well over two years that some sale and rentback firms were exploiting vulnerable consumers by paying them less than their home was worth or denying them the security they promised. Shelter, Citizens Advice and the Council of Mortgage Lenders wrote to the Treasury in October 2007 calling for action. The Treasury asked the Office of Fair Trading to investigate in March 2008

It took until October 2008 for the OFT to conclude that, yes, there was a problem that needed regulating. It estimated that more than 50,000 families had entered into sale and rent back agreements in the previous two years. 

Four months after that, the Treasury announced that the FSA would regulate. Interim measures came into force in July but the proposals announced yesterday now go out to consultation until the end of November. Assuming everything goes to plan the new system will finally come into effect at the end of June 2010.

Welcome though the proposals are, it’s hard to escape the conclusion that they will come too late for thousands of sale and rent back victims. Or that the Treasury, OFT and FSA really ought to be having another consultation - about how to regulate the next scam that comes along in less than three years after it first appears. 

The London effect

Mon, 28 Sep 2009

How long before economic reality reasserts itself in the housing market? Perhaps not too long, according to some of the indicators in the latest survey from Hometrack.

Prices rose by 0.2% in September and the annual rate of decline fell to -5.6%, according to the market information company. The percentage of the asking price being achieved rose again to 92.4% and the percentage of postcode districts with a price increase rose again to 15.2%.

But that still leaves 85% of the country where prices are unchanged and the survey also showed a slowdown in some other lead indicators. While the number of new buyers registering with agents is still rising, the rate of increase has slowed significantly in the last two months.

Hometrack director of research Richard Donnell said the national growth was largely the result of prices in London and the South East being propped up by a shortage of quality homes for sale - a situation set to continue for the rest of the year. 

Backing for that view comes in the latest survey of prime London house prices by Knight Frank. Prices rose 1.3% in September and are up almost 9% in the last six months in areas like Kensington and Chelsea. That’s put down to strong demand from cash-rich UK and foreign buyers and a supply that is still 50% down on two years ago. 

‘Outside southern England the lack of supply is less pronounced and it is a modest pick up in sales and improved market sentiment that is supporting prices to the point where they have been tracking sideways,’ says Donnell.

He argues that a sustainable housing market recovery cannot be built on the back of price rises driven by a short term imbalance between supply and demand. ‘Question marks remain as to how long this situation can last and how resilient the market will be to changes in both levels of demand and sentiment.’

Rising unemployment and a continuing shortage of mortgages will act as a drag on demand, he says, while tax increases will reduce disposable incomes. Any increase in supply from sellers in response to the recovery so far will also put the brakes on. 

First boom, then bust, then false dawn, then stagnation?

The London effect

Mon, 28 Sep 2009

How long before economic reality reasserts itself in the housing market? Perhaps not too long, according to some of the indicators in the latest survey from Hometrack.

Prices rose by 0.2% in September and the annual rate of decline fell to -5.6%, according to the market information company. The percentage of the asking price being achieved rose again to 92.4% and the percentage of postcode districts with a price increase rose again to 15.2%.

But that still leaves 85% of the country where prices are unchanged and the survey also showed a slowdown in some other lead indicators. While the number of new buyers registering with agents is still rising, the rate of increase has slowed significantly in the last two months.

Hometrack director of research Richard Donnell said the national growth was largely the result of prices in London and the South East being propped up by a shortage of quality homes for sale - a situation set to continue for the rest of the year. 

Backing for that view comes in the latest survey of prime London house prices by Knight Frank. Prices rose 1.3% in September and are up almost 9% in the last six months in areas like Kensington and Chelsea. That’s put down to strong demand from cash-rich UK and foreign buyers and a supply that is still 50% down on two years ago. 

‘Outside southern England the lack of supply is less pronounced and it is a modest pick up in sales and improved market sentiment that is supporting prices to the point where they have been tracking sideways,’ says Donnell.

He argues that a sustainable housing market recovery cannot be built on the back of price rises driven by a short term imbalance between supply and demand. ‘Question marks remain as to how long this situation can last and how resilient the market will be to changes in both levels of demand and sentiment.’

Rising unemployment and a continuing shortage of mortgages will act as a drag on demand, he says, while tax increases will reduce disposable incomes. Any increase in supply from sellers in response to the recovery so far will also put the brakes on. 

First boom, then bust, then false dawn, then stagnation?

Public interest

Fri, 25 Sep 2009

If housing association bosses want any more reasons to step up their fight against being classified as public bodies they should find a copy of today’s Daily Mail.

The paper picks up on Inside Housing’s chief executive pay survey to feature John Belcher and the nine other ‘fat cat’ chief executives that earn more than the prime minister. The Mail styles them as ‘public sector housing bosses’ and explains: ‘Housing associations are usually registered charities and are largely funded by taxpayer money. Many like to style themselves as businesses but a High Court judgment last year ruled that they were public bodies.’

As if the implications of that judgment were not already serious enough, the pay scandal is enough to put associations in the sights of the influential right-wing tabloid alongside the rest of the public sector and its ‘gold-plated’ pensions. And the Mail reports criticism from the Tories over their pay and Labour over their record on the mortgage rescue scheme.

As things stand in the convenient grey area between public and private sector, I’m not sure what the government can do about the pay of housing association chief executives. Grant Shapps described the pay rises as ‘immoral’ but he said in his speech to the National Housing Federation Conference that the Conservatives were unlikely to legislate to stop them in future. 

Indirect or financial pressure is another option. But both the Homes and Communities Agency and Tenant Services Authority appear to be sticking to the line that pay is a matter for individual associations and in any case there seems unlikely to be much grant around to give them any leverage.

Restraint by individual associations is another. But with some very honourable exceptions, the movement as a whole seems incapable of it. 

Can chief executives hold the line that they are really independent and private sector? They had better hope so because the pressure on public sector pay is building by the day. 

Earlier this month two Tory think-tanks proposed a public sector pay freeze for one or two years plus possible 5% pay cuts for the highest-earning 10%. The Lib Dems went even further with plans for a pay freeze, the end of bonuses in the civil service and a 25% reduction in the salary bill of all public servants earning more than £100,000. And Labour has already announced a new 50% rate of tax from next April on any earnings above £150,000. 

Public interest

Fri, 25 Sep 2009

If housing association bosses want any more reasons to step up their fight against being classified as public bodies they should find a copy of today’s Daily Mail.

The paper picks up on Inside Housing’s chief executive pay survey to feature John Belcher and the nine other ‘fat cat’ chief executives that earn more than the prime minister. The Mail styles them as ‘public sector housing bosses’ and explains: ‘Housing associations are usually registered charities and are largely funded by taxpayer money. Many like to style themselves as businesses but a High Court judgment last year ruled that they were public bodies.’

As if the implications of that judgment were not already serious enough, the pay scandal is enough to put associations in the sights of the influential right-wing tabloid alongside the rest of the public sector and its ‘gold-plated’ pensions. And the Mail reports criticism from the Tories over their pay and Labour over their record on the mortgage rescue scheme.

As things stand in the convenient grey area between public and private sector, I’m not sure what the government can do about the pay of housing association chief executives. Grant Shapps described the pay rises as ‘immoral’ but he said in his speech to the National Housing Federation Conference that the Conservatives were unlikely to legislate to stop them in future. 

Indirect or financial pressure is another option. But both the Homes and Communities Agency and Tenant Services Authority appear to be sticking to the line that pay is a matter for individual associations and in any case there seems unlikely to be much grant around to give them any leverage.

Restraint by individual associations is another. But with some very honourable exceptions, the movement as a whole seems incapable of it. 

Can chief executives hold the line that they are really independent and private sector? They had better hope so because the pressure on public sector pay is building by the day. 

Earlier this month two Tory think-tanks proposed a public sector pay freeze for one or two years plus possible 5% pay cuts for the highest-earning 10%. The Lib Dems went even further with plans for a pay freeze, the end of bonuses in the civil service and a 25% reduction in the salary bill of all public servants earning more than £100,000. And Labour has already announced a new 50% rate of tax from next April on any earnings above £150,000. 

Making hay

Thu, 24 Sep 2009

The mixed signals continue for the housing market today with a huge rise in lending for house purchase and two big rights issues by housebuilders not stopping longer-term worries.

The British Bankers Association (BBA) said 38,095 mortgages were approved for house purchase in August, an increase of 81% on a year ago. Meanwhile, Barratt and Redrow revealed plans to raise a total of £870m from the stock market.

On the face of it, that indicates the market is recovering rapidly and that the two companies believe this is the right time to start buying land again. Barratt’s annual results today showed stable prices and rising reservation rates and chief executive Mark Clare said the rights issue would ‘enable the Group to develop a number of its existing sites and to take advantage of land purchasing opportunities as they arise’.

However, the BBA argued that the 81% rise was an exaggeration based on an exceptionally low number last August and that low levels of customer demand and the limited number of properties coming on to the market would constrain lending. Backing for that view seemed to come from HM Revenue and Customs yesterday with stats showing that the number of home sales fell between July and August.

It’s also worth noting that on a seasonally-adjusted basis approvals were down slightly on July and that the 38,095 total was the lowest seen since 1997 with the exception of last year.

All but one of the major housebuilders have now announced plans for rights issues, prompting suggestions of a dash for cash to exploit the recovery. However, some analysts also pointed out that housebuilders will also need cash if they are unable to rely on house price inflation.

And Barratt’s announcement suggests that it for one is hedging its bets - not surprisingly since its £720m rights issue compares with the near £680m it lost last year. 

 It notes in its announcement today: ‘The amended financing arrangements are expected to allow the Group to take advantage of opportunities that may arise in a recovering market, as well as to provide an appropriate alternative framework, should a further downturn arise.’

Making hay

Thu, 24 Sep 2009

The mixed signals continue for the housing market today with a huge rise in lending for house purchase and two big rights issues by housebuilders not stopping longer-term worries.

The British Bankers Association (BBA) said 38,095 mortgages were approved for house purchase in August, an increase of 81% on a year ago. Meanwhile, Barratt and Redrow revealed plans to raise a total of £870m from the stock market.

On the face of it, that indicates the market is recovering rapidly and that the two companies believe this is the right time to start buying land again. Barratt’s annual results today showed stable prices and rising reservation rates and chief executive Mark Clare said the rights issue would ‘enable the Group to develop a number of its existing sites and to take advantage of land purchasing opportunities as they arise’.

However, the BBA argued that the 81% rise was an exaggeration based on an exceptionally low number last August and that low levels of customer demand and the limited number of properties coming on to the market would constrain lending. Backing for that view seemed to come from HM Revenue and Customs yesterday with stats showing that the number of home sales fell between July and August.

It’s also worth noting that on a seasonally-adjusted basis approvals were down slightly on July and that the 38,095 total was the lowest seen since 1997 with the exception of last year.

All but one of the major housebuilders have now announced plans for rights issues, prompting suggestions of a dash for cash to exploit the recovery. However, some analysts also pointed out that housebuilders will also need cash if they are unable to rely on house price inflation.

And Barratt’s announcement suggests that it for one is hedging its bets - not surprisingly since its £720m rights issue compares with the near £680m it lost last year. 

 It notes in its announcement today: ‘The amended financing arrangements are expected to allow the Group to take advantage of opportunities that may arise in a recovering market, as well as to provide an appropriate alternative framework, should a further downturn arise.’

The price is wrong

Tue, 22 Sep 2009

Just how much have housing associations, local authorities and private developers overpaid contractors who rigged the tendering process? The depressing truth is that the Office of Fair Trading (OFT) investigation that ended today with 103 construction companies being fined £129.5m is only the tip of the iceberg.

The investigation reveals that a particular form of rigging known as cover pricing was rife in the industry throughout the noughties. This involved successful bidders for contracts obtaining artificially high prices from competitors. These are then submitted as genuine bids to give the client a false impression of the extent of competition for the work. In some cases there was only one genuine bid, in others the successful bidder paid the others compensation.

It’s clear from the list of 199 infringements [download here] between 2000 and 2006 published by the OFT that many of these cases involved new housing and housing refurbishment work - but they are just a sample of what went on. 

As for the rest of the iceberg, the OFT says that it ‘uncovered evidence of cover pricing in over 4,000 tenders involving over 1,000 companies but had to focus its investigation on a limited number of companies and instances where the available evidence was strongest, in order to make best use of its resources and conclude its investigation within a reasonable timeframe. The OFT could not, therefore, pursue every firm suspected of involvement in cover pricing. Moreover, the endemic nature of the practice within the industry suggests that many other companies are likely to have been involved in bid rigging, even though such activity remained undetected.’

In other words, virtually any contract let by any housing organisation in the early noughties could have been been affected.

The response from contractors is the one they always give in the wake of price rigging and blacklisting scandals: that the charges relate to historic offences that do not relate to current practices. This time though they add a cheeky plea to clients not to inflict further punishment on the firms that were fined by blocking them from bidding in future. 

According to Julia Evans, chief executive of the National Federation of Builders: ‘It is acknowledged that at one time cover pricing was a common practice in the construction industry.  It does therefore seem unfair that a small, random sample of companies has been selected by the OFT to be punished as an example to the wider industry. As the construction economy continues to deteriorate, the fines will hit the businesses involved particularly hard. They should not now face additional financial hardship by losing access to public sector work.’

That’s the advice from the OFT and Office of Government Commerce too. They point out that the guilty parties have already suffered significant financial penalties and will be particularly aware of competition rules and that it would be wrong to assume that companies that were not fined were not also involved. 

It may be true that bid rigging is just the flipside of competitive contracting and will therefore always be with us, but can you imagine that advice being given about any other group of offenders? 

 

The price is wrong

Tue, 22 Sep 2009

Just how much have housing associations, local authorities and private developers overpaid contractors who rigged the tendering process? The depressing truth is that the Office of Fair Trading (OFT) investigation that ended today with 103 construction companies being fined £129.5m is only the tip of the iceberg.

The investigation reveals that a particular form of rigging known as cover pricing was rife in the industry throughout the noughties. This involved successful bidders for contracts obtaining artificially high prices from competitors. These are then submitted as genuine bids to give the client a false impression of the extent of competition for the work. In some cases there was only one genuine bid, in others the successful bidder paid the others compensation.

It’s clear from the list of 199 infringements [download here] between 2000 and 2006 published by the OFT that many of these cases involved new housing and housing refurbishment work - but they are just a sample of what went on. 

As for the rest of the iceberg, the OFT says that it ‘uncovered evidence of cover pricing in over 4,000 tenders involving over 1,000 companies but had to focus its investigation on a limited number of companies and instances where the available evidence was strongest, in order to make best use of its resources and conclude its investigation within a reasonable timeframe. The OFT could not, therefore, pursue every firm suspected of involvement in cover pricing. Moreover, the endemic nature of the practice within the industry suggests that many other companies are likely to have been involved in bid rigging, even though such activity remained undetected.’

In other words, virtually any contract let by any housing organisation in the early noughties could have been been affected.

The response from contractors is the one they always give in the wake of price rigging and blacklisting scandals: that the charges relate to historic offences that do not relate to current practices. This time though they add a cheeky plea to clients not to inflict further punishment on the firms that were fined by blocking them from bidding in future. 

According to Julia Evans, chief executive of the National Federation of Builders: ‘It is acknowledged that at one time cover pricing was a common practice in the construction industry.  It does therefore seem unfair that a small, random sample of companies has been selected by the OFT to be punished as an example to the wider industry. As the construction economy continues to deteriorate, the fines will hit the businesses involved particularly hard. They should not now face additional financial hardship by losing access to public sector work.’

That’s the advice from the OFT and Office of Government Commerce too. They point out that the guilty parties have already suffered significant financial penalties and will be particularly aware of competition rules and that it would be wrong to assume that companies that were not fined were not also involved. 

It may be true that bid rigging is just the flipside of competitive contracting and will therefore always be with us, but can you imagine that advice being given about any other group of offenders? 

 

Twin attack

Tue, 22 Sep 2009

Housing emerged as a key Lib Dem weapon against the Conservatives and Labour at the party conference today.

First up was shadow chancellor Vince Cable’s plan for a 0.5% levy on all homes worth more than £1m - a complete contrast with the continuing Tory commitment to cut inheritance tax on all estates below £1m. ‘The Tories top priority is to cut taxes on millionaires,’ he said.  ‘Our top priority is fairer taxes for those on lower and middle incomes.’

The 0.5% levy could raise a lot of money: £1.1bn is almost half the expected take from the new 50% rate on earnings above £150,000. According to the Lib Dems, that would be enough to take 300,000 low paid workers and pensioners out of the tax system. 

Some of the details have yet to be worked out - not least how to value a £1m house - but it’s good to see at least one senior politician tackle taxation of housing.

Cable said the deficit had to be cut - not least because of the slump in the tax take from the housing and financial markets that were ‘temporary windfalls that were treated as permanent’. But he warned: ‘If public spending is cut in the usual way – slash and burn – there will be great damage to local and national services.  Good will be cut with bad. Front line services will be butchered and lower paid workers will bear the brunt of cuts. There will be particular damage to public investment in areas like social housing which we need desperately to rebuild houses to rent.’

He named alternatives including cuts in civil service bonuses, scrapping grandiose database schemes and cutting tax breaks for high earners. He said the levy would put an end to the situation where the super-rich pay the same council tax on their £30m mansions as people in Band H family homes.

Next up was shadow housing minister Sarah Teather with a speech that centred on the plight of thousands of people she said Labour had taken for granted and let down. ‘The people who live in chronic housing hell are the people who time after time, election after election, Labour take as a given. We’ve all seen the arrogance of the Labour party on election day. They go straight to the poorest areas, bang on every door and herd them out to vote. And yet they have failed the very people who elected them.’

While she had strong words for the Tories too, her main attack was on a Labour party she said had failed. ‘Building the new homes we need is not going to happen overnight,’ she said. ‘I can’t tell the people who come to my surgery that a Liberal Democrat Government will wave a magic wand and fix everything. But I can tell them, that step by step, brick by brick, we will rebuild this country’s housing stock. I can say, that if we are asked to choose between hiking up taxes on billionaires or on tenants, we will not choose tenants.’

So can the Lib Dems turn housing into an issue that can take votes from both Labour and the Tories?  Teather’s message certainly seems in tune with the way the Lib Dems have conducted grassroots campaigns to take Labour seats. It remains to be seen whether the popular Cable can make headway against George Osborne on tax. 

Twin attack

Tue, 22 Sep 2009

Housing emerged as a key Lib Dem weapon against the Conservatives and Labour at the party conference today.

First up was shadow chancellor Vince Cable’s plan for a 0.5% levy on all homes worth more than £1m - a complete contrast with the continuing Tory commitment to cut inheritance tax on all estates below £1m. ‘The Tories top priority is to cut taxes on millionaires,’ he said.  ‘Our top priority is fairer taxes for those on lower and middle incomes.’

The 0.5% levy could raise a lot of money: £1.1bn is almost half the expected take from the new 50% rate on earnings above £150,000. According to the Lib Dems, that would be enough to take 300,000 low paid workers and pensioners out of the tax system. 

Some of the details have yet to be worked out - not least how to value a £1m house - but it’s good to see at least one senior politician tackle taxation of housing.

Cable said the deficit had to be cut - not least because of the slump in the tax take from the housing and financial markets that were ‘temporary windfalls that were treated as permanent’. But he warned: ‘If public spending is cut in the usual way – slash and burn – there will be great damage to local and national services.  Good will be cut with bad. Front line services will be butchered and lower paid workers will bear the brunt of cuts. There will be particular damage to public investment in areas like social housing which we need desperately to rebuild houses to rent.’

He named alternatives including cuts in civil service bonuses, scrapping grandiose database schemes and cutting tax breaks for high earners. He said the levy would put an end to the situation where the super-rich pay the same council tax on their £30m mansions as people in Band H family homes.

Next up was shadow housing minister Sarah Teather with a speech that centred on the plight of thousands of people she said Labour had taken for granted and let down. ‘The people who live in chronic housing hell are the people who time after time, election after election, Labour take as a given. We’ve all seen the arrogance of the Labour party on election day. They go straight to the poorest areas, bang on every door and herd them out to vote. And yet they have failed the very people who elected them.’

While she had strong words for the Tories too, her main attack was on a Labour party she said had failed. ‘Building the new homes we need is not going to happen overnight,’ she said. ‘I can’t tell the people who come to my surgery that a Liberal Democrat Government will wave a magic wand and fix everything. But I can tell them, that step by step, brick by brick, we will rebuild this country’s housing stock. I can say, that if we are asked to choose between hiking up taxes on billionaires or on tenants, we will not choose tenants.’

So can the Lib Dems turn housing into an issue that can take votes from both Labour and the Tories?  Teather’s message certainly seems in tune with the way the Lib Dems have conducted grassroots campaigns to take Labour seats. It remains to be seen whether the popular Cable can make headway against George Osborne on tax. 

Anchors aweigh

Fri, 18 Sep 2009

Housing’s fattest cat is such an easy target for abuse that it’s almost tempting to give him a break.

After all, John Belcher was already paid a mind-boggling £338,000 as chief executive of the not-for-profit Anchor Trust. What’s a few grand more between friends even if his pay increase alone was four times the amount that Anchor pays its care assistants?

And it’s not as though he’s the only one with a bumper pay increase. I’ll await the details of next week’s Inside Housing salary survey with interest but an average pay increase of 7% (only just less than last year’s 7.3%) comes after a year that was probably the worst that many housing associations have ever experienced. 

As I argued last year, I think managers earn their money more in bad times than good. But the pay hikes they enjoyed while the sun was shining were justified in the name of the market. And just like for bankers and company chief executives, it seems that the market only works in one direction.

Still trying to give Mr Belcher a break, it’s also worth pointing out that he was not the only director of Anchor celebrating a bumper pay rise. According to the annual financial statement, executive directors earned total emoluments of £1.249 million in 2008/09, an increase of 19% on the previous year. The average Anchor employee saw their pay rise by just 2%

Belcher’s own £391,000 salary including bonus was up 20% on last year and Anchor paid another £35,000 into his pension plan.  

The remuneration and nomination committee justified that on the basis that it was competing with other private developers and health companies as well as housing associations and said it had used an average of date from private companies, large charities and social care companies. 

Remuneration committees everywhere say that. It’s the reason why executive pay started soaring in the private sector and the reason why the disease has spread to the public and voluntary sectors.

But how does Belcher’s salary relate to Anchor’s financial performance during the year? Turnover rose just 0.8% in 2008/09. Operating costs rose by 1.8% - in line with the pay increase for staff - and the basic operating surplus fell 31% to £5.7m.

But the accounts also include an impairment charge of £12.4m ‘to write down the carrying value of land following the cancellation and deferment of development projects due to the economic climate and the decision to close six care homes’ plus exceptional charges of £2.9m ‘arising from business reorganisation and closure costs for six care homes’.

The combined effect of that was to turn an operating surplus of £9.0m in 2007/08 into a deficit of £13.3m in 2008/09. Add in an actuarial loss on pension fund assets of £21.7m (2008: £7.2m) and the total recognised deficit for the year was £35.0m (2008: surplus of £470,000). 

That certainly seems to give a whole new meaning to performance-related pay. 

Anchors aweigh

Fri, 18 Sep 2009

Housing’s fattest cat is such an easy target for abuse that it’s almost tempting to give him a break.

After all, John Belcher was already paid a mind-boggling £338,000 as chief executive of the not-for-profit Anchor Trust. What’s a few grand more between friends even if his pay increase alone was four times the amount that Anchor pays its care assistants?

And it’s not as though he’s the only one with a bumper pay increase. I’ll await the details of next week’s Inside Housing salary survey with interest but an average pay increase of 7% (only just less than last year’s 7.3%) comes after a year that was probably the worst that many housing associations have ever experienced. 

As I argued last year, I think managers earn their money more in bad times than good. But the pay hikes they enjoyed while the sun was shining were justified in the name of the market. And just like for bankers and company chief executives, it seems that the market only works in one direction.

Still trying to give Mr Belcher a break, it’s also worth pointing out that he was not the only director of Anchor celebrating a bumper pay rise. According to the annual financial statement, executive directors earned total emoluments of £1.249 million in 2008/09, an increase of 19% on the previous year. The average Anchor employee saw their pay rise by just 2%

Belcher’s own £391,000 salary including bonus was up 20% on last year and Anchor paid another £35,000 into his pension plan.  

The remuneration and nomination committee justified that on the basis that it was competing with other private developers and health companies as well as housing associations and said it had used an average of date from private companies, large charities and social care companies. 

Remuneration committees everywhere say that. It’s the reason why executive pay started soaring in the private sector and the reason why the disease has spread to the public and voluntary sectors.

But how does Belcher’s salary relate to Anchor’s financial performance during the year? Turnover rose just 0.8% in 2008/09. Operating costs rose by 1.8% - in line with the pay increase for staff - and the basic operating surplus fell 31% to £5.7m.

But the accounts also include an impairment charge of £12.4m ‘to write down the carrying value of land following the cancellation and deferment of development projects due to the economic climate and the decision to close six care homes’ plus exceptional charges of £2.9m ‘arising from business reorganisation and closure costs for six care homes’.

The combined effect of that was to turn an operating surplus of £9.0m in 2007/08 into a deficit of £13.3m in 2008/09. Add in an actuarial loss on pension fund assets of £21.7m (2008: £7.2m) and the total recognised deficit for the year was £35.0m (2008: surplus of £470,000). 

That certainly seems to give a whole new meaning to performance-related pay. 

The first cut

Fri, 18 Sep 2009

Just when you thought it couldn’t get any worse it does. An independent analysis suggests that Communities and Local Government will be one the departments hardest hit by Labour plans to cut public spending after the next election that amount to the biggest squeeze since the 1970s.

The Institute for Fiscal Studies (IFS) says that most central government departments will see significant real cuts as overall departmental expenditure limits (DELs) ares cut by 8.6% or £32.9bn over the next spending review period between 2011-12 to 2013-14. And it says capital intensive departments are likely to be hardest hit as investment spending is cut sharply while current spending grows modestly. 

‘Capital-intensive departments such as Transport and Communities and Local Government (who are involved with local housing) are likely to be particularly concerned,’ adds the IFS. 

Transport accounted for 22% of total gross public sector investment in 2008/09 and housing for 19%. ‘With public sector net investment being cut so sharply over 2011/12 to 2013/14 these departments will almost certainly be among the hardest hit.’

The IFS says the only way to avoid the squeeze is tax increases or welfare cuts. But with the spending position even worse than it envisaged in January, when it forecast the CLG would see cuts of 4% a year in real terms in the next three years, none of the options look good. 

Two Tory think-tanks proposed even bigger cuts but with apparent protection for the new homes budget.

The first cut

Fri, 18 Sep 2009

Just when you thought it couldn’t get any worse it does. An independent analysis suggests that Communities and Local Government will be one the departments hardest hit by Labour plans to cut public spending after the next election that amount to the biggest squeeze since the 1970s.

The Institute for Fiscal Studies (IFS) says that most central government departments will see significant real cuts as overall departmental expenditure limits (DELs) ares cut by 8.6% or £32.9bn over the next spending review period between 2011-12 to 2013-14. And it says capital intensive departments are likely to be hardest hit as investment spending is cut sharply while current spending grows modestly. 

‘Capital-intensive departments such as Transport and Communities and Local Government (who are involved with local housing) are likely to be particularly concerned,’ adds the IFS. 

Transport accounted for 22% of total gross public sector investment in 2008/09 and housing for 19%. ‘With public sector net investment being cut so sharply over 2011/12 to 2013/14 these departments will almost certainly be among the hardest hit.’

The IFS says the only way to avoid the squeeze is tax increases or welfare cuts. But with the spending position even worse than it envisaged in January, when it forecast the CLG would see cuts of 4% a year in real terms in the next three years, none of the options look good. 

Two Tory think-tanks proposed even bigger cuts but with apparent protection for the new homes budget.

Cost benefit

Wed, 16 Sep 2009

Housing benefit reform may be too complex for this government but its likely Conservative successors will have no shortage of options if they take power next year.

And proposals launched today by former Tory leader Iain Duncan-Smith’s Centre for Social Justice (CSJ) are even more ambitious. Dynamic Benefits calls for the scrapping of 51 different forms of benefit and tax credit and their replacement with just two.

Universal work credit would go to people out of work or on very low wages and take in benefits like job seeker’s allowance and income support while universal life credit would cover additional living expenses for everyone on low incomes and combine things like housing benefit, council tax benefit and working tax and child tax credits.

In the process, says the CSJ, work incentives would be dramatically improved by reducing the marginal rate of benefit deductions that can be up to 85% at the moment and child poverty would be cut.

And scrapping the current system would reduce what it sees as penalties in the current system faced by people getting married, saving or moving into home ownership - an estimated 1.9m low-earning households with a mortgage would get help with their housing costs.

The report gets an enthusiastic welcome by Tory commentators like Simon Heffer, who says that David Cameron should put IDS in his first Cabinet with a brief to tackle worklessness and the undeserving poor. Housing reformers may also see it as backing for their ideas for a housing tax credit that is paid regardless of tenure. 

The big problem is the cost: £3.6bn. Even though some of that would be clawed back through increased tax and the CSJ says that in the long term the plan would save money, it’s hard to see a government intent on cutting public spending swallowing that one. The long-term problem could be that benefit reform always seems to produce more losers than its architects intend. 

And the CSJ plan is competing for attention with ones coming from other think-tanks. Localis called for a move to near-market rents for social housing with housing benefit paying up to 85% of housing costs after tax and benefits and the scrapping of capital investment subsidies to pay for it. The Progressive Conservatism project at Demos called for social tenants to be able to capitalise their housing benefit to buy a stake in their home.

The safer bet would have to be on a future Tory government finding housing benefit reform just as difficult as all its predecessors but one thing it will not be able to say is that it lacks ideas. 

Cost benefit

Wed, 16 Sep 2009

Housing benefit reform may be too complex for this government but its likely Conservative successors will have no shortage of options if they take power next year.

And proposals launched today by former Tory leader Iain Duncan-Smith’s Centre for Social Justice (CSJ) are even more ambitious. Dynamic Benefits calls for the scrapping of 51 different forms of benefit and tax credit and their replacement with just two.

Universal work credit would go to people out of work or on very low wages and take in benefits like job seeker’s allowance and income support while universal life credit would cover additional living expenses for everyone on low incomes and combine things like housing benefit, council tax benefit and working tax and child tax credits.

In the process, says the CSJ, work incentives would be dramatically improved by reducing the marginal rate of benefit deductions that can be up to 85% at the moment and child poverty would be cut.

And scrapping the current system would reduce what it sees as penalties in the current system faced by people getting married, saving or moving into home ownership - an estimated 1.9m low-earning households with a mortgage would get help with their housing costs.

The report gets an enthusiastic welcome by Tory commentators like Simon Heffer, who says that David Cameron should put IDS in his first Cabinet with a brief to tackle worklessness and the undeserving poor. Housing reformers may also see it as backing for their ideas for a housing tax credit that is paid regardless of tenure. 

The big problem is the cost: £3.6bn. Even though some of that would be clawed back through increased tax and the CSJ says that in the long term the plan would save money, it’s hard to see a government intent on cutting public spending swallowing that one. The long-term problem could be that benefit reform always seems to produce more losers than its architects intend. 

And the CSJ plan is competing for attention with ones coming from other think-tanks. Localis called for a move to near-market rents for social housing with housing benefit paying up to 85% of housing costs after tax and benefits and the scrapping of capital investment subsidies to pay for it. The Progressive Conservatism project at Demos called for social tenants to be able to capitalise their housing benefit to buy a stake in their home.

The safer bet would have to be on a future Tory government finding housing benefit reform just as difficult as all its predecessors but one thing it will not be able to say is that it lacks ideas. 

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