IN THE AFTERMATH of years of neoliberalism, a Corbyn government, when elected, will face a raft of fiendishly complex crises. An immediate test will be which of the manifold Tory disasters to prioritise for treatment. The scale of the assault on the public sphere through privatisations, cuts and neglect has been too great to expect that everything could be put right at the drop of a hat. I want to make the case here why education is crucial for the much needed recovery. The cutting edge of the Tory Party has always understood the rôle that education plays in shaping lives and the future of the country. Consciously or otherwise, they have always seen it as creating winners and losers and their management of the education system, at least since the 1980s, has focused on giving reality to that win-lose structure. It reflects the way they think about the world and it confirms them in their self-belief as the only party entitled to govern. Labour’s 2017 Manifesto promised “a National Education Service” which would aim to “give people confidence and hope by making education a right, not a privilege”. This view of education as a universal entitlement is diametrically opposed to the dominant Tory philosophy but it will need careful planning and patience to move the country anywhere near that goal.
The fragmented system Labour will inherit will be what the Tories have deliberately designed. A system severely under-resourced that forces people to compete for a privilege which ought to have been an entitlement. Better still from the Tory point of view, a system that parents are prepared to pay to get out of (using public schools) or pay to negotiate (by moving house) if they can. Up to a point, it works for the few but it leaves most children and parents and the wider community, who would all benefit from being part of an educated populace, short-changed. The crude use of league tables and a punitive monitoring/accountability system (Ofsted) compel schools to compete for easier-to-educate students so that many schools overtly or covertly select their intake.
In its very nature, the act of selecting the few is also the act of rejecting the many. From a Tory point of view, this is integral to cultivating the life-changing self-images of failure and lack of worth that has been so essential for maintaining the English way of life. Failure is not seen as something to remedy through constructive help but rather to be demonised and punished. Local authority schools deemed to be “failing” are not helped with advice and support. They are privatised to become an academy or part of a multi-academy trust (MAT). This is a one-way ticket. Failing academies and MATs are just passed on to other MATs. Returning schools to an elected local authority is expressly proscribed by the DfE. With selection, it is not just the 164 grammar schools and their concomitant under-resourced secondary moderns that are the problem. Faith schools and some schools with “good reputations” also select by massaging the School Admissions Code that is supposed to prevent this happening. The reality in this pseudo-market is that schools choose students and parents – not the other way round.
Local Authorities have been in the firing line since 1988. In terms of educational performance, they are a mixed bag. Of the 152 local authorities, some (e.g. Hackney and Hampshire) have good reputations. Others like Barnet and Westminster have outsourced their educational obligations. Others like Kent, Buckingham and Lincoln have maintained a highly selective grammar school system. What they have in common is that they all have statutory educational responsibilities and they have all been elected. They will all have methods by which parents and other residents in the area can raise issues or make complaints regarding education. Unsatisfactory local authorities can, in principle, be replaced at the next election. Contrast that with the 1300 or so multi-academy trusts into which it is Tory policy to drive the remaining local authority schools. Although they are designated as non-profit making, they are in reality private companies under no legal obligation to respond to parental or community complaints. An unhappy parent only has recourse to the secretary of state or, if the parent is rich enough, to the law courts.
Inclusion and equal opportunities need to be at the heart of education provision. That should mean that an ideal national education service would base itself on what should be every child’s educational entitlement and ensure that every individual child gets that entitlement. Defining that entitlement, however, clearly requires a national discussion independent of political manoeuvring. It should not be dependent on the whim of individual prime ministers or secretaries of state. The curriculum – what children are taught - would obviously be part of that discussion. Even for the most basic levels of literacy and numeracy, there have been idiosyncratic ministerial interventions, sometimes to promote commercial packages while ignoring the depth of experience of the practitioners who actually have to teach.
The National Curriculum, introduced in 1988, has become more and more of an oxymoron as more and more institutions are exempted from teaching it. The curriculum should be a balance of knowledge and understanding, the former implying content and the latter implying ability to make use of and apply what has been learnt. It is, however, much easier and cheaper to test retention of content (think pub quiz) than it is to test the ability to apply understanding in new situations i.e. problem solve. The tendency towards snapshot inspections by Ofsted and commercialised testing has helped the curriculum into becoming more content based and less concerned with developing innovative thinking.
With or without a consensual definition of entitlement, there is a growing crisis for children with special educational needs or disabilities (SEND). These children require more resources allocated to them if they are to achieve the same entitlement as other children. Funding for additional support for SEND children used to be paid directly to the local authorities, who would be able to establish support services for all the schools in their area. Now that the funding has been taken away from the LAs and passed directly to the schools in the LA area (including the academies and free schools) the loss of the economy of scale provided by the centralised fund has placed more funding pressure on individual schools so that the ability to support SEND children has been seriously weakened. The changes to the National Funding Formula have slightly improved the balance of funding for SEND compared with the basic pupil allocation but the improvement is completely overwhelmed by the government’s inclusion of “just managing” families in the pupils considered to be deprived (so the money is to be divided among more pupils) and by the sixth year of real terms cuts to per pupil funding. Those cuts are planned to continue until 2020. The www.schoolcuts.org.uk site has already flagged up the thousands of teaching posts to be lost this autumn because of the government’s underfunding (about £3 billion this year). Continuing austerity to 2020 can only accelerate the school system’s collapse into the privatised asset stripping that calls itself the academies and free schools movement.
Cooperation between schools has rightly been identified as a means of improving education in an area as schools share their experience and solutions found for local problems and for teaching issues in general. When funding is scarce, pooling resources can also help to ameliorate difficult situations. That of course was always one of the overriding arguments in favour of local authorities. Replacing LAs with MATs has made meaningful cooperation unlikely since these businesses are in direct competition with each other. An incoming government should be prepared to stop any further privatisations on its first day in office but should also have worked out how to facilitate meaningful cooperation between all the state-funded schools in a local authority area. It should not be forgotten that academies and MATs are state-funded. A competition system must produce losers. A National Education Service worth its name should stress that cooperation optimises the use of resources and that as more children achieve their entitlement, the whole country benefits.
An education service needs teachers. One of the many acts of vandalism committed in the interests of privatisation has been the pressure to move teacher education out of universities and into on-the-job training in schools. It reveals narrow-minded thinking that sees teaching as little more than learning to drive a car. University education departments have been forced to close and members of experienced university teaching departments have become scattered. The problem of maintaining high standards in teaching has been further compounded by allowing people without qualified teacher status to teach in academies. Rebuilding the supply of properly qualified teachers and remunerating them at a level that enables them to live and work in any part of the country will be an urgent priority from day one but it will take years to put right. There will also need to be appropriate professional development for those who have shown an interest in teaching and have taught before becoming qualified.
Changing education for the better will be a slow expensive business. The current situation has taken nearly thirty years to develop and cannot be put right in days or weeks. It will be easy for an incoming government to downplay education when there will be so much fire-fighting to be done but if there is to be a better world created than the one we live in, it will be the children in our schools now who have to be ready for it. They should not be forgotten. On day one a Corbyn government should issue a statement of intent to develop a fully inclusive education system. That will mean phasing out selection in all its forms, restoring locally elected accountability for the school system which necessarily means halting further academisation but also means bringing all the schools in a geographical area under the same administrative monitoring and guidance. We used to call such organisations local authorities. It should also have given thought to structuring a national discussion about what educational entitlement should mean and how it should be monitored. In the interim, the curriculum should not be changed again and teachers should be allowed to let it settle in and find ways to cope with its anomalies. There is an urgent need to establish a fair funding system that supports every child but that recognises that different children with different needs in different parts of the country cannot be supported in a simplistic formulaic way that ignores local input. Whatever the changes, children in existing schools should not have their educational lives disrupted – Peter should not be robbed to pay Paul.
Keith Lichman, Secretary, Campaign For State Education
A RIGHT TO INDEPENDENT LIVING and a universal national independent living service paid for from direct taxation and free at the point of delivery, alongside the NHS, is the only way to solve the social care catastrophe that faces people of all ages in England and Wales.
The government has no credible proposals to offer following the dementia tax debacle during the election campaign. The long awaited Green Paper on social care has been delayed again until next May.
The panel of expert advisers appointed by government includes no disabled people or disabled people’s user-led organisations in open defiance of the UN disability committee and the Convention on the Rights of Persons with Disabilities.
Meanwhile local authorities (LAs) who are responsible for delivering social care face hundreds of millions of pounds in extra cuts to their budgets over the next four years. This is on top of the near 50% cut already made since 2010. New research from the University of Oxford has linked government cuts in adult social care and health spending to nearly 120,000 'excess' deaths in England since 2010. Most of the deaths were among the over-60s and care home residents.
The situation is so bad LAs are now putting poor people’s personal contributions up so high that they are giving up their social care because they can’t afford it. So we have the dangerous situation where people who have been assessed as needing care under the mis-named Care Act are losing it because it is too expensive. They are having to make appalling choices like: do I eat and pay my rent, or do I give up my care and independence? How can this be justified in a 21st century advanced western society with any claim to being civilised?
This is happening in Labour-controlled authorities as well as Tory ones. They are choosing to obey Tory austerity policy and financial legislation over their legal duties to disabled and older people under the Care Act. The political choice for elected councillors in austerity Britain in 2017 is whether to break the law. At present the penalties for not meeting legal duties under social care legislation are non-existent while for passing ‘illegal budgets’ they are high. So LAs pass balanced budgets which result in disabled people becoming prisoners in their own homes, being told to wear nappies overnight because night care is too expensive, or going for days without human contact and ending up in hospital or dying.
We currently have a social care system based on the Poor Law principles of means and needs testing. The bottom line trumps everything. As council budgets are cut, so needs are no longer recognised or met. It is currently estimated that about one million people with social care needs don’t get any support.
Disabled people of all ages are in the process of designing a new vision based on rights and the UN Convention on the Rights of Persons with Disabilities (CRPD). We, the users of social care, are planning a service that will be led by us, not service providers whose main focus has become to meet budget targets (cuts) and ration the care based on neo-liberal ideology - not rights or need. Personalisation policy is dead. The Care Act is as useful as a wet paper bag.
So what will address the requirements of an ageing and increasingly disabled population, with a complex mix of health, social care and poverty issues?
We start with the notion that we are disabled not by our impairments or long term health conditions, but by the barriers created in society that prevent us leading full and equal independent lives. This is called the social model of disability. We are committed to an inclusive definition of disabled people that includes people experiencing distress, with learning difficulties, long term and life-limiting conditions as well as physical and sensory impairments.
It also recognises the rights and interests of disabled children and disabled parents. From this follows the philosophy of independent living, based not on compensating for people’s ‘dependence’ but instead on making it possible for disabled people to live lives as equal as possible to non-disabled people.
Increasingly the biggest barrier is the rationed, privatised and failing social care system which is being starved of funds. We start from our lived experience - we know what works best for us.
So we are proposing to co-create a new universal right to independent living, enshrined in law and delivered through a new national independent living service managed by central government, led by disabled people, but delivered locally.
This local service will be shaped and delivered by user-led disabled people’s organisations, co-operatives and social enterprises. It will be for need not profit and will not be means tested. It will be independent of, but sit alongside, the NHS and will be funded from direct taxation. There is a much bigger job to do in helping the NHS move to adopting a social model of disability, distress and ageing. It will also demand an end to current discriminatory and cruel approaches to ‘welfare reform’ and instead advocate a new independent living based approach.
It will be about independent living in the broadest sense, not just social care and health. It will therefore need to be located in a cross-government body which can oversee implementation plans, whether it be in transport, education, housing, or social security.
This will ensure that independent living is mainstreamed in every area of activity, not just ghettoised in the DWP as the Office for Disability Issues is at the moment.
The social care element will need to have its own identity in a national independent living service. This will build on and learn the lessons from the Independent Living Fund, closed by the Coalition government in 2015. It will also learn from the experiences of user-led disabled people’s organisations (DPOs), user-led social enterprises and co-ops which have innovated and developed exciting models of self-organised and self-directed care through personal budgets and peer support. It will work with non-disabled allies who share the critique of the existing system and who work to the social models of disability and distress.
It’s also time we stopped thinking of supporting people to live independent lives as a ‘burden’ and instead as a wealth creator. This was the basis on which the NHS was created and it has been shown to work, improving the nation’s health, well-being and productivity. We know that a pennypinching approach to social care funding has disastrously perverse results: it undermines policies for prevention, leaving people’s health and wellbeing to deteriorate at even greater cost to the exchequer (even if we discount the costs to human happiness). We are also seeing its wasteful effects on the NHS, on accident and emergency departments and in so-called bed blocking.
Instead we can see social care as a social and economic generator. Rather than treat its 1.5 million workforce as a marginal pool of low grade, low skilled and low paid workers, we can begin to grow it as jewel in the service industry crown. Such support work could take its place as a source of valued jobs, skills and opportunities. Such employment would create wealth directly as well as indirectly, by providing support to enable people to maximise the quality of their lives and contribution to their communities.
Reconceiving social care in this way - with the primary concern being people’s wellbeing and independent living - also offers the prospect of an economy that is no longer reliant on jobs which robots will be able to do in the future or based on consumerist growth, with all the environmental and social problems these bring in its wake. It would take account of changing demographics and our increasing requirements for support during life’s course. Supporting, maintaining and improving people’s wellbeing would become a central aim of economic activity. Such a needs-based and person-centred approach would value us equally and be concerned with our needs whatever our role - worker, service user or citizen. It would offer the prospect of a truly sustainable and rightsbased economy and society.
These early ideas are being developed in conversations initiated by Disabled People Against Cuts (DPAC) and the DPOs in the Reclaiming Our Futures Alliance (ROFA), including Shaping Our Lives. Our demand is that going forward, the dual principles of the disability movement are applied - Nothing About Us, Without Us and Professionals On Tap, Not On Top!
Labour’s Housing Green Paper – Part 1
We need 100,000 council homes a year, not “affordable homes”
“We have a housing crisis in this country that can only be solved by local government building more. Labour’s 2017 manifesto promised to build 100,000 council homes to ‘rent or buy’. It called for a ‘pause’ to the right to buy (RTB), and to lift the borrowing cap so councils could borrow to build more. We need to be bolder. Don’t suspend the right to buy, end it. Don’t promise to lift the borrowing cap, cancel the debt.”
Doina Cornell , Leader Stroud Council
The Labour Party has published a Green Paper, Housing for the Many. This is part one of an analysis of the proposals. The document marks some progress from the Party’s general election Manifesto. Labour’s “first housing priority” of helping young people onto the proverbial housing ladder – young people it should be said, earning up to £100,000 a year – has disappeared. Yet there is still a big gap between this document and Jeremy Corbyn’s original aspiration of Labour building 100,000 council homes a year. The policy in the ‘mini-housing manifesto’ (Labour’s New Deal for Housing) was more candid than the housing section in the general election Manifesto. It was firmly rooted in New Labour’s housing philosophy with its worship of home ownership. For that reason it was subject to much sharp criticism.
It’s quite clear that Shadow Housing Minister John Healey has been under pressure both from tenants and some MPs. The announcement by Corbyn of a social housing review was a clear indication that he recognised the weakness of the policy, whilst John McDonnell has spoken about the need to radicalise Labour’s policies contained in the Manifesto.
In the Green Paper there is a significant shift in the language. There are some welcome policies such as the commitment to end “affordable rent” and the conversion of ‘social rent’ homes to “affordable rent”. Yet still we find that there is no commitment to building a specific number of council homes.
The Green paper, instead of abandoning the risible “affordable housing” formula, seeks to redefine it. It identifies three types of “affordable home”. “We propose a new affordability standard with three elements.” These are:
In a speech announcing the Green Paper Jeremy Corbyn said the majority of the 100,000 will be ‘social rent’ homes. Yet there is nothing in the document to confirm this. Neither is it clear who will build ‘living rent homes’. Will they be built outside of the Housing Revenue Account, or inside, in which case they would be council homes charging rents higher than ‘social rent’? As devised by the London Mayor ‘living rent’ is for “middle-income households” who want to save up to buy a property. According to the Mayor’s website a “living rent” tenant would pay (depending on where they live) around £1,000 a month for a two bedroom property. This compares to the average two bedroom council rent in the London boroughs of £107 a week, and the highest, in Westminster, of £136 a week. Wouldn’t it make more sense to devote resources to building council housing with ‘social rent’?
The grant from Homes England for “affordable housing” will be for these three types. We are told that £4 billion a year will be available though there is no indication of how this grant will be divided between the three types. Councils, for instance, will have to compete with housing associations (HAs) for grant. The latter are in a stronger financial position to carry out annual building programmes because of higher rents and because they have built many more homes than councils have. Hence they have the personnel and infrastructure in place to do so annually. We don’t know whether there will be any guidance from a Labour government to tell Homes England how it should hand out the grant, in what proportions. If there is no grant specifically for council homes then the danger is that the money will be doled out, as under New Labour’s NAHP, largely to housing associations.
£4 billion is the amount that was available 10 years ago. This is completely inadequate when you factor in a decade’s inflation. Prior to the housing crash New Labour banned councils from even applying for social housing grant. When it finally did allow them to apply the results were puny. Under NAHP the highest number of council homes built in any year was a paltry 3,080.
Although we are told that Labour will build the largest council homes programme for 30 years, when you check how many were built then it was only 16,000 in England. Beating this would not be a very large ambition. In any case the Green Paper has no target for council homes.
Council or housing associations – does it matter?
New Labour’s bias towards housing associations was based on the fact that council housing debt was on the public books whereas housing association debt was not. New Labour set out to eradicate council housing by pressuring tenants to vote for transfer of their homes to housing associations. It set the target of transferring 200,000 council homes a year. It was prepared to write off housing debt just as long as tenants voted the ‘right way’. A Parliamentary committee described this as blackmail. There was no debt write off for council tenants. If tenants had not resisted transfer then there would be hardly any homes left today.
The term ‘social housing’ implies that council housing and HA homes are the same. Does it matter whether it is councils or HAs that build new homes? It does. Despite all the talk of their ‘social purpose’ HAs are private businesses. Whereas council tenants have the chance to vote their landlord out of office they cannot do that with a HA board. Even when there are tenants on the Board they have a legal responsibility to the business. They are accountable to the Board, not to the tenants who may elect them.
Despite New Labour’s efforts to drive council rents up to HA levels, council rents are lower than HA rents, meaning the HB bill is lower for council homes.
The Green Paper completely ignores the fact that HAs, led by the National Housing Federation, their industry body, capitulated to the government over the ‘voluntary’ extension of RTB. They were perfectly happy to accept councils being robbed of receipts for enforced sale of ‘higher value’ council homes, and to take the money to cover the difference between RTB sales and the market value of their homes (something denied to councils). The Paper also ignores the process of commercialisation taking place. At a recent meeting with Housing Minister Dominic Raab, three groups of housing tenants told him that their HAs had abandoned their social purpose and were turning into businesses. They were all facing huge rent increases and/or their homes been sold off without them being given a say.
For these reasons Labour should concentrate grant for ‘social rent’ homes on councils rather than HAs.
HRA funding crisis
One major issue which is not addressed by the document is the funding crisis faced by Housing Revenue Accounts (HRAs). The system of self-financing was actually drawn up by New Labour when John Healey was housing minister. Since Labour lost the 2010 election self-financing was implemented by the Tories. The only difference was that the Tories increased the bogus debt that was imposed on councils (an extra £13 billion of ‘debt’ was handed out to 136 councils). In the consultation on New Labour’s proposals they refused to cancel the debt, an eminently sensible demand given the fact that it was fictitious, the result of creative accountancy by the Treasury. As the House of Commons Parliamentary Council Housing group had shown in its 2009 report, over 25 years council tenants had paid £91 billion in rent but councils had only received £60 billion in ‘allowances’. They had paid more in rent than the actual historic debt for building their homes. Yet New Labour proposed to carry on fleecing tenants by imposing fictitious debt on them. Council tenants’ rent pays for the servicing of this ‘debt’.
Since the ‘debt settlement’ of 2012 when each council was given a certain amount of debt, the Tories have starved council HRAs of funding by changes in the national rent policy (e.g. a 4 year rent cut) and increases in the discounts for RTB sales. As a result of the latter policy sales increased nearly five fold. This has meant that the rent lost from sales is much higher than was estimated in the settlement. Each home sold is rental loss over the course of the 30 year business plan. Individual councils are taking in hundreds of millions of pounds less in rent than was planned for in 2012. The debt they were given was based on income projections which bear no comparison to what councils are actually taking in today.
It is simply extraordinary that Labour’s Shadow Housing Minister, despite being appraised of this situation, has abstained from denouncing the Tories for under-funding existing council housing. We only speculate as to why this silence has been maintained. I suspect that this refusal to demand that the Tories cut the debt in line with the rent income lost is because Labour could not make that demand without making its own commitment to cut the debt. This the Shadow Housing Minister appears not to be prepared to do. Whether or not this has been discussed with the Shadow Chancellor we don’t know.
However, as Doina Cornell says, and Swindon Tenants Campaign Group has long argued, we need a commitment from Labour to cancel the debt.
Borrowing to build?
Labour’s proposal to raise the borrowing cap for local HRAs is made in the expectation that councils can take on more debt in order to fund new building. This is unrealistic given the level of debt with which they are saddled. Stock owning authorities, at the end of the 2016/17 financial year still had £26 billion of this bogus debt to service. Given the under-funding of HRAs the cost of servicing any additional debt will eat into their resources for maintaining and renewing existing stock. The Green Paper suggests that councils have the resources to build between 60,000 and 80,000 new homes. Yet this takes no account of the financial crisis they face as a result of the debt settlement and government policies since then. These authorities are losing billions of pounds in income compared to projections in 2012. As a result they are cutting back on the scale of necessary work renewing key components. We have shown the connection between the funding crisis and the disaster at Grenfell Tower. More generally, the starvation of HRAs will result in a deterioration of the standard of tenants’ homes. Expenditure by all HRAs on debt and service charges is around 25% of their income. Hence debt cancellation would increase their income by £2 billion a year; significant extra resources for maintaining and renewing their existing housing stock.
RTB – end it “full stop”
When interviewed in the first leadership election Jeremy Corbyn said he wanted to end RTB “full stop”. But even his campaign organisers were too nervous to break with New Labour’s RTB shibboleth. We know that there was a debate in his campaign team, but they ended up talking only of ‘mitigating the impact’ of RTB.
Labour adopted the policy of suspension of RTB when John Healey had resigned from his Shadow Housing post as part of the organised attempt to force Corbyn to resign. The policy has remained a dead letter. Even when Housing Minister Gavin Barwell announced that RTB was only “politically justified” if homes sold were replaced, Labour failed to demand that the Tories suspend given that they were not being replaced.
The Green paper says that RTB will be suspended immediately and councils will have the right reinstated “only if they have a proven plan to replace homes sold one-for-one and like-for-like”. It would seem unlikely that any council would be in a position to prove that, so why not simply end RTB sales? In fact there are plenty of indications of majority support amongst Party members and supporters for ending RTB. At a recent Labour housing conference in Leicester, (Sir) Peter Soulsby, City Mayor said that suspension wasn’t sufficient, it should be stopped. In a recent article by the Labour Leader of Stroud Council, Doina Cornell, she called for ending RTB as well as debt cancellation.
If Labour wants to significantly increase the numbers of council homes available (there are only 1.6 million left in England) then it should end RTB and not leave open room for manoeuvre by any councils who would want to reintroduce it.
Finally, the question of the level of ‘social rent’ is not dealt with in the Paper. It simply says that a Labour government will consult on setting a new and longer 10 year rent settlement “to support sustained investment in a new generation of genuinely affordable homes”. This issue cannot wait for the election of a Labour government it needs to determine a policy before then. Currently we have heard no Labour response to this government’s proposal to introduce 5 years of above inflation rent increases, CPI+1%. I wrote to John Healey on this asking what Labour’s policy was yet, as yet have received no response.
Labour needs to oppose this government’s above inflation rent increases and make a commitment that they will not introducing such increases. It should be remembered that one of the drivers of the increased HB bill was New Labour’s policy of ‘rent equalisation’. This was designed to push up council rents to the higher level of HA rents. It was partly motivated by the hope that if council and HA rents were at the same level then tenants would not bother voting against transfer of housing stock to HAs.
As a result of these above inflation increases council rents are too high for some tenants and people on the waiting lists. This is not just in London where rents are highest. In Swindon the Tory council, by way of a new allocations policy, is turning down people who have come top in bidding for a tenancy, because they(i.e. council officers) believe the applicant earns too little to afford to pay the rent. This is the “Greenlight for Housing” process which has been borrowed from HAs where it is widespread.
There are other issues in the Green Paper which I will look at in Part Two. Suffice it to say here that the document does not constitute the “radical action programme” which Jeremy Corbyn said was needed in housing. Although we don’t know the time-scale yet there will be consultation on the Green Paper. It’s important that the pressure which has seen some improvements in Labour’s proposed housing policy is stepped up to radicalise it further. We need a commitment to build 100,000 council homes a year not 100,000 “affordable homes”. Councils will be unable to build on any scale unless they have the prospect of grant, without having to compete for it. The same level of grant as 10 years ago is insufficient. We believe that £80,000 a property is required. Without grant specifically directed at building council homes then councils will not have the resources to put in place the teams and resources necessary to begin sustained annual building programmes beginning from a very low base.
Martin Wicks April 23rd 2018
Labour’s Housing Green paper – Part 2
Labour should introduce a duty on councils to build council housing in the framework of the housing revenue account
Labour’s Housing Green Paper has a fundamental flaw at its heart. It says that a Labour government “will introduce a duty (on councils) to deliver affordable homes”. As we explained in Part 1 the Green Paper is proposing three types of “affordable home”:
· ‘social rent’ (which applies to council and housing association homes);
· ‘living rent’ – a third of “average local household incomes”, and
· low cost ownership homes.
The grant to support building these “three elements” will be available from Homes England. Councils and housing associations will have to bid, and compete, for grant. At a recent meeting Shadow Housing Minister John Healey was asked how the £4 billion annual grant said to be available under a Labour government would be divided up between the “three elements”. John’s reply was that it is up to local councils.
The implication of this is that councils will be able to carry out their duty even if they build not a single council home. They can apply for grant for low cost ownership homes alone and that qualifies as “affordable homes”. This would seem to give councils the freedom to abstain from building any council homes. Talk of the “largest council housing programme for 30 years” is meaningless if councils have no duty to build council housing and Labour has no commitment to fund a specific number of council homes.
Fears on this score are reinforced by the fact that the Green Paper supports Local Housing Companies (LHCs). Readers will probably have heard of one such company proposed in Haringey; the Haringey Development Vehicle which proposed to knock down much council housing in a “regeneration” scheme involving the private company Lendlease. The furore over this saw members of the local Labour Parties, MPs, and tenants demanding that this proposal was abandoned. An outcome of this struggle is Labour’s commitment that any regeneration scheme will be subject to a ballot of the people affected. Corbyn made reference to this type of scheme when he talked of “social cleansing” at the last Labour conference.
Whilst they may vary in the form that they take, there is a proliferation of LHCs across the country; private companies owned wholly or in part by councils. Why are they being set up? The reasons are twofold: the absence of central government grant for building council housing and the rapidly disappearing grant for council General Funds.
In the first round of the government’s Affordable Homes Programme the grant available for ‘social housing’ could not be used by councils or housing associations for ‘social rent’ homes. They had to agree to charge “affordable rent” and also convert ‘social rent’ homes to “affordable rent” as a precondition of receiving grant from the Homes & Communities Agency. In the second round the only grant for ‘social housing’ was for a mere 8,000 supported housing units. This had led some councils which want to build council housing to set up LHCs to circumvent the restrictions on Housing Revenue Accounts. For others they are a means of providing revenue for their depleted General Funds.
The type of building they are carrying out or intending to, is
· Councils homes charging ‘social rent’ (i.e. a council rent);
· Charging “affordable rent”;
· Building homes for sale on the open market and/or
· Building homes for the private rental sector (PRS).
The financial benefits of building new homes, regardless of their tenure are:
· The income they can raise from market sales, the extra council tax that new homes bring and New Homes Bonus they produce;
· The revenue stream from private rented properties.
The rise of local housing companies
The Smith Institute produced a report on LHCs in October 2017. It examines the concept, what companies have set up and what their various motivations are. Here are some examples.
In a survey of councils the Smith Institute found that 60% of them said they were motivated to establish a joint venture “because it offered a financial return”. The scale of building that these companies have managed is minuscule. Inside Housing reported that they had managed to build 528 properties of which only 35% were “affordable”. It was a survey which may have underestimated the actual numbers but the scale of what will be built is reflected by an estimated average of 50 units a year. In many towns this level of building, even if they are built as council homes, is insufficient to replace the number of homes lost under RTB.
Labour supports LHCs
Labour’s Housing Green Paper refers to LHCs. It says that
“By building on council land and offering a mix of housing for private rent and sale they’re able to cross-subsidise affordable homes in a similar way to housing associations.”
It says that research suggests the number of local housing companies could reach 200 by 2020, collectively providing an estimated 10,000 homes a year, with around 30-40% going to “low income households”.
It appears that Labour is proposing to allow these companies to continue and is committing to “remove the threat of right to buy from local housing companies”. It adds
“Our plans for a sustained increase in affordable homes will create new opportunities for alternative affordable housing providers, including community-led housing, co-op housing, local housing companies and and tenant and employee co-owned mutual housing societies.”
There is a certain sleight of hand here, because the key vehicle, in terms of scale, is LHCs. The others are liable to be marginal.
The crucial question in relation to LHCs is this. If Labour is offering grant for councils to once again build council housing with ‘social rent’ then why would they need to set up (or continue with) private companies to build homes outside of the Housing Revenue Account?
If Labour was serious about large scale council house building then it should make it obligatory for councils to build council homes within the framework of housing revenue accounts. Councils should be barred from becoming developers/builders in the private market (see later section The property game). Adequate funding of local services cannot be secured by risky speculation rooted in the volatile private housing market.
It is one thing for Labour councils to manoeuvre in circumstances where they have little or no finance to build council housing but the move to build PRS homes is seen as a replacement for central government funding to the General Fund. Yet setting up LHCs cannot resolve the funding crisis. Its scale is such that a higher and higher proportion of council funds is going to social care, for adults and children. It’s beyond the scope of this article. I raise it here insofar as it impinges on housing.
Labour has said that it would provide more funding for local authorities though with no numbers. However, Labour authorities are unlikely to move away from LHCs unless they are shown that
What is clear is that the funding crisis cannot be resolved by councils taking the risky step of become builders/developers. Labour councils are taking the wrong road when they set up these LHCs. They should be demanding of the Labour leadership that it commit to providing the necessary funding for them to begin again large scale, and annual, building programmes. Building PRS homes or homes for sale on council land means that it can’t be used to build council housing.
The property game
As well as building housing councils are becoming property developers/speculators through these vehicles. In an editorial entitled “Local councils are set to lose the property game” (April 2017) the Financial Times (FT) reported that local authorities had invested £1.2 billion borrowed from the PWLB in real estate projects, in just one year. The PWLB is an agency of the Treasury “designed to fund local capital projects”.
Warning of the dangers of this development the FT said
“The return from this manoeuvre is very welcome at the councils. Government spending cuts have made it very difficult to fund local services, from social care to libraries to child care. Yes, the loans are long term, but the yields on the investments – offices, parks, residential developments, and so on – are not guaranteed. Prices fall. Rents go unpaid or are negotiated downward. Accentuating the risk, council finances are already leveraged, through tax receipts, to the local economy. When the loan to value ratios of the loans are 100%, as some are, the leverage is amplified further. It would not, require a big correction in the real estate market to turn these investments from a source of funding into an absorber of it.”
At the extreme end of these developments is Spelthorne which borrowed £380 million to fund the purchase of the BT campus in Sunbury on Thames. This is four times the size of all its other assets combined.
The FT said that the PWLB should simply refrain from lending for anything other than local capital projects.
“Equally the government itself needs to have a hard look at the local council credit expansion and recognise that it is a symptom of budgets being driven to breaking point. Speculation cannot solve the crisis in social care. But if the government ties its own hands on revenue increases, local councils, left with few other options, will give speculation a try…. The Treasury should put a stop to the local council credit bubble before it grows even larger.”
Labour should commit to stop this dangerous rush of councils to become developers/builders. Conceived as a means of funding the General Fund, if an LHC fails, finding itself in financial problems then this will have knock-on consequences for other council spending. As the Financial Times said, these investments can readily become “absorbers of funding” rather than a source of it.
The housing crisis cannot be resolved by councils entering the housing market. The only way to begin to resolve it is to return to large scale council house building. That should be Labour’s “first housing priority”.
April 29th 2018