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Item 1 on the agenda is a piece of subordinate legislation, which is subject to negative procedure. The committee will consider the Housing Revenue Account General Fund Contribution Limits (Scotland) Order 2000. The committee has before it a copy of the order, including an explanatory note and a committee paper prepared by the clerk, which includes a note on procedure. I thank Martin Verity for that note, which was extremely helpful.
Thank you, convener. The Housing Revenue Account General Fund Contribution Limits (Scotland) Order 2000 is, as you said, a negative instrument. It restricts the amount that local authorities may budget to transfer from their general funds to their housing revenue accounts. General fund contributions are effectively a subsidy from the council tax payer to the rent payer. There is no evidence to suggest that housing revenue accounts are under particular pressure compared with general services accounts. The order, therefore, confirms that no authority will be permitted to budget for a contribution from the general fund in 2000-01.
Thank you. Do members have any questions for the minister or his officials?
East Ayrshire Council has just announced whopping rent increases of just under £5 a week to balance their housing revenue account. Why should the council not be allowed to take money from other parts of the budget to keep rent increases down?
East Ayrshire Council has some of the lowest rents in Scotland, irrespective of the recent announcement. The local authority felt that it was important to maintain its programme of capital development and investment in existing stock. A judgment was therefore made at local level about what would be a reasonable sum to develop the programme.
In the spirit of subsidiarity, is not it a decision for the local authority if it wants to reduce expenditure elsewhere and put more money into housing? Why does a decision have to be imposed by central Government?
In strict terms, the decision is not being imposed by central Government. Local authorities have responsibility for addressing how best to meet from within their housing revenue account the aspirations of tenants. In East Ayrshire, the council felt it appropriate to consider a rent increase to improve the capacity of the stock. The measure of that decision will be the investment that is generated there over time.
Yes, but in principle, why should central Government restrict local authorities? In the spirit of subsidiarity, we should surely allow local authorities to decide their spending priorities, as we do with other programmes. Why should local authorities not be allowed to decide that housing is a higher priority and fund that from other budgets?
We have made it clear through our expenditure commitments where the priorities in public spend are. That is appropriate. To take your argument to its conclusion, would you be willing to go to other committees and say that we should take money out of their accounts to pay for housing? We must examine in the round where the money comes from. In East Ayrshire, it is for the local authority to determine how it wants to address the aspirations of tenants. The council has chosen to meet them through a rent increase, which will go towards investment.
What about the general principle? The Scottish Executive allows local authorities to spend, for example, more on education and less on leisure, or more on social work and less on transport. That is a decision for the local authority. Why should housing be in a special category?
Even in the statistical analysis from last year, there is a £60 million carry-over from local authority housing revenue accounts, so some local authorities still have the flexibility to address the issue, rather than expect the general council tax payer to cross-subsidise housing further.
This question may apply both to the general fund contribution and to the housing support grant. A number of people have pointed out the cost—in this context I mean the revenue implications—of demolition of houses, regeneration and so on. Is there any reason why the council tax payer should bear that cost, rather than its being seen as a failure of general policies in a broader context?
Douglas Hamilton, who is in the housing division, will touch on some of the detail.
The first question was about who supports demolition. It has been possible for councils to transfer the debt on demolished stock out of the housing revenue account into the general fund, so that it is supported by the council tax payer more generally. Does that answer the question?
Does that apply to the whole of the result of the demolition?
You mean the debt?
Yes.
It applies to the debt on the demolished houses and to the costs of the demolition.
The question was on the implications of the right to buy. The rent payer effectively pays for the cost of the housing. The housing account is losing, by virtue of the discount, the possible input of capital and the reduction of the loan charges, which are very high in some councils. Is it reasonable that those costs should in effect be borne by the rent payer?
Under the rules on the use of receipts from the right to buy, 75 per cent of receipts must go towards redeeming debt, so the residual debt burden on the rent payers is reduced.
Yes, except that that takes no account of the discount, which in effect is money lost to the housing revenue account. The debt on the housing revenue account could be reduced by substantially more, were it not for the discount under the right-to-buy arrangements. Is that a reasonable result of general Government policy?
Our commitment is that we still want tenants to have the opportunity to use the right to buy, which contains the discount figure. In the past year or so there has been a substantial change in cost floor rules to take account of the effectiveness of public expenditure. We are trying to balance two things: the aspiration for home ownership, which for many people is achieved by exercising the right to buy their council house—many people stay in their communities and stabilise them as a result; and the need for investment. The cost of that is reflected in the discount price. I am happy to take more detailed views on that. I cannot give you a detailed answer today, but I am happy to take a submission from you, Robert, if you feel that that would be useful.
I want to follow up Alex Neil's point. Given the desire of the Executive to move towards a position where local authorities move out of the landlord role and have more of a housing strategy role, will the situation regarding councils' right to move money—they will still have to run hostels and so on—change?
At the moment, we are considering a number of options to be included in the housing bill. We are also waiting for the outcome of the homelessness review, which may consider how hostels are funded and whether the current route is appropriate. Many people have argued that it is and that is part of the contribution to the debate. It would be premature to make any major judgments about that. There is everything to play for in the debate.
Minister, would you agree that for historical reasons—which are everything to do with flaws in the structure of local government, socio-economic deprivation and the way in which inequalities impact across Scotland—there are many councils, such as Glasgow and Dundee, that have not only high rent levels, but high council tax levels, on which it would be no use whatever to apply the principle of subsidiarity, because they could not raise the council tax to subsidise the housing revenue account?
I agree with all three of those points.
Has the Scottish Executive got anything to say about rents?
The affordability of rents is bound up with the debate on the impact of housing benefit, which will need to take place given that 60 per cent of rent payers in Scotland—80 per cent in some parts of Scotland—are dependent on housing benefit. The subsidy comes from there.
I want to be clear about that. The general fund contribution is not the way in which to ensure affordability of rents for public sector tenants, but neither is housing benefit. The level of housing benefit that is paid to tenants in Scotland to allow them to pay their rent is unsustainable. Is the Scottish Executive aware of the problem and is it intending to do something about affordability of rents, so that tenants are no longer reliant on housing benefit as the only way in which they can afford to pay for their housing?
We are aware of those issues, which were raised in the submissions that many organisations, councils and associations have made in response to the housing green paper. There are no simple answers to the questions that you have asked, although they are worth asking. I am not convinced that we can get answers that will satisfy everyone in this room, but the issues are finally being debated after being ignored for a considerable period.
Who is subsidising whom and who is paying for what? Why do you think that it is important to restrict the cross-subsidy from the general account to housing revenue? In many cases, because tenants' rents are being paid for through housing benefit, rents are subsidising general accounts—open space maintenance, common repairs for owner-occupiers, homeless services, central services and direct labour organisations. It is not obvious that tenants are getting the benefit of those services, but they are paying for them through rents. Why are you prepared to limit cross-subsidising one way when tenants throughout Scotland are subsidising the general council tax account across a range of services?
I do not think that there are many examples of transfers from the housing revenue account to the general fund.
People may not be prepared to say on the record that that is happening, but it is. I hope that the minister will take that into account when examining housing finances. Cross-subsidy via housing benefit is being used to keep council tax down across Scotland. We all know that that is happening, and we need to be more up front about it. We expect leadership in addressing the issue.
If it is happening, people should submit that to the Executive for consideration.
You have a responsibility to consider it.
I will deal with things that people say are happening, although it is not enough just to speculate that something is happening—if evidence is provided, we will examine it.
Cross-subsidy may become more apparent if there are major moves towards community ownership. There will then need to be much clearer definitions of who is paying for what.
I want to follow up on the point that Fiona Hyslop made. I believe that the housing revenue account is subsidising the general account. Robert Brown made a point about the right to buy and who pays for the discount. That could be seen as the housing account subsidising the general good of an area. However, I do not agree that subsidy of the maintenance of open spaces and homelessness services is as widespread as Fiona Hyslop suggested. In the majority of local authorities, the administration of homelessness is paid for through the general account. I would appreciate it if the minister would ask local authorities for their views on this matter.
We did not speak to COSLA. COSLA was told that no general fund contributions would be permitted for next year, and had no comment to make on that. The information was given to local authorities, but none of them requested that provision be made for a general fund contribution next year.
The funding of homelessness services will be part of the review that Jackie Baillie is undertaking, which will report in due course.
I believe that now housing revenue accounts fund themselves and authorities do not have the right to transfer resources, local tenants have much more power to make decisions on their level of rents and so on. That is a step in the right direction for housing. Has local government suggested to you in the past that the housing revenue account should be subsidised from the general account?
Not to my knowledge.
I must now formally ask the committee whether it is content with SSI 2000/33. I confirm that the instrument is not subject to amendment. If the committee is content, we must conclude that, in its report to the Parliament, the committee does not wish to make any formal recommendation. Because no motion to annul has been lodged, if any member is not content they will have to lodge a motion with the chamber office. Are we agreed that we do not want to make any recommendation to Parliament?
Members indicated agreement.