We move to agenda item 4, which is on the financial memorandum to the Homelessness etc (Scotland) Bill. We have an array of witnesses. I welcome Mark Turley, the head of housing at the City of Edinburgh Council; Alan McKeown, the housing development officer for the Convention of Scottish Local Authorities; Ian Williamson, the head of investment and performance at Communities Scotland; Pat Bagot, the policy and practice manager for Communities Scotland; David Orr, the chief executive of the Scottish Federation of Housing Associations; and David Bookbinder, the policy officer for the Scottish Federation of Housing Associations. We have received written submissions from each organisation represented here. I hope that we will not require opening statements from them. If anybody is desperate to say something, they can do so. If not, we will move straight to questions.
I shall ask a simple question to start with. I have read as much as I could of the written information that we have received. Do any of you think that the financial implications of the bill are stated clearly in the financial memorandum?
There is scope for clarification throughout the financial memorandum. I hope that we can get in and about that today.
Does anybody see a weakness in the memorandum? The bill will impinge differently on different organisations. Is there any particular aspect that causes concern for any organisation?
The biggest uncertainty is around the possible implications and how they will vary from authority to authority. We are not talking just about the housing budget for homelessness, but about the knock-on effects that the bill will have on other budgets. Resourcing the bill adequately requires not just adequate resourcing of the cost of the direct responsibilities for homelessness, but consideration of the development fund budget for housing and the supporting people budget. We must also address the implications that the bill will have, not just on the revenue accounts, but on general funds. I am sure that David Orr, from the SFHA, will have some good points to make on that subject.
As it is written, the financial memorandum overstates the potential for making savings in the longer term. If it is implemented, the bill will deliver improved services; however, to anticipate significant savings—as the financial memorandum does—is perhaps to be unreasonably optimistic. There will be a continuing cost requirement to fund the services that will be required over the long term to ensure that if we manage to deal with homelessness in its present form, it will not reappear in the future. Although we will want to discuss capital and the supply of good-quality, affordable rented housing, the potential revenue cost of providing the support services is understated in the memorandum.
Can you quantify that? Do you have any notion of the extent to which that revenue cost is understated?
Housing associations will be required to increase the number of previously homeless people whom they accommodate and, for many people, the provisions of the bill will require a support package to be put in place. The revenue support funding for those support packages is being brought together through the supporting people proposals, which will be implemented early next year. The present rate of funding will deal with the projects that already exist in Scotland; however, the bill contains a clear requirement to increase the level of support for those projects. There is no clear evidence that the supporting people budget in future years will be able to grow to meet the increasing demand. I cannot put a figure on that yet, as it is difficult to identify what the support packages will look like.
I have a question for Mr McKeown. You talked about the uncertainty over costs. Are such uncertainties unreasonable?
The short answer is no. However, we must try to bottom out those uncertainties. There are routes for us to do that between local authorities, housing associations and the Scottish Executive. We need to get behind what the bill is saying and try to bottom that out. Is that possible? We can probably get some more solid ground, but I do not think that we can get the figures exact.
If the Executive had tried harder, could it have come up with a better financial memorandum?
That is a difficult question to answer directly. Given the time available and the fact that the relationship is there, we can develop the memorandum further. We are beginning discussions and I hope that we can further them and come to a better understanding before the bill goes much further through Parliament.
Did the Scottish Executive consult some or all of your organisations when it was drawing up the financial memorandum?
I know that COSLA has been involved in in-depth discussions. Mark Turley from the City of Edinburgh Council has been the principal officer involved, through the homelessness task force and the homelessness monitoring group. COSLA's views have therefore been reflected from beginning to end in the process—if we can say that this is the end now. However, I am not sure that we were involved directly in the drafting of the financial memorandum or the explanatory notes to the bill.
Are you saying that the consultation focused largely on the policy issues and did not concentrate heavily on the financial aspects of the bill?
Yes, that is a fair assessment.
Did anyone come forward with views on the financial aspects of the bill or their implications?
I would like to answer that, given my background in and involvement with the homelessness task force and the homelessness monitoring group. There are three distinct types of financial implication and the answer to your question is slightly different for each of them.
Are you saying that on the basis of the information that is available to everyone at the moment, it is not possible to be more precise about estimating costs?
I believe that we can say that the issues around priority need will involve significantly more—many millions of pounds more—annual investment to generate additional supply in the order of many thousands of houses per year. Existing budgets will not address supply issues. There might be scope to look within the budget at the new resources that have been announced for the support of stock transfer. Stock transfer might address quality issues, but it will not address supply issues. There might be scope to re-examine that, but we are talking in the order of many tens or hundreds of millions of pounds for priority need. That is the huge part. As we said earlier, the intentionality issue is about revenue support rather than capital investment.
From your side of the fence, how long would it take to work out a reasonable range of costs that would be required to attach to the delivery of the bill?
We could probably do that before the end of the year. However, I would be cautious about what we would use the figures for. They would be indicative and would be used simply as guidelines. As ever, this is moveable, but we should be able to have discussions and work through that before the end of the year. There is good statistical evidence on the level of homelessness and how that is broken down into various categories.
We must be concerned not so much about the statistics that exist on how much homelessness there is and whether a change in categorisation—which has been described already—will increase or reduce that, but about coming up with the actual cost of implementation and delivery, otherwise the Parliament cannot agree to any bill, no matter which one it is. The difficulty that we have with a number of financial memoranda is that the figures are not fully quantified. We listen to the evidence of people such as you. For example, your colleague Mark Turley just talked about hundreds of millions of pounds possibly being required to deal with priority need. How specific is "hundreds of millions", which is not listed in the memorandum? Our angle of approach is that we must be as robust as possible. On your side, we are looking to you to supply us with evidence if you can.
We have tried hard to do that. We will try to elicit some more responses from member councils and submit them to the committee as soon as we can.
I stress that on priority need, which is the biggie, the task force recommendations and the bill propose a phased relaxation of the priority need provisions. The only immediate relaxation is in bringing under the scope of statute those categories that are already defined in the code of guidance. We have consulted our members and they are all confident that, to a large extent, most of the people in those categories are already treated as being in priority need.
That is fine, but is the local authority sector capable of furnishing the requirements of the bill without additional support or resource from the Executive?
There are resource requirements under all three headings. Priority need and intentionality clearly have resource implications, and local connection may well require some redistribution of existing resources.
I wish to be clear. It seems that you are suggesting that you want further research on the circumstances of what is available within the housing sector before you move forward and trigger further additions to the priority list. In other words, the supply has to be taken account of before you move to the principle. Is that what the bill proposes as you understand it, or is the bill essentially moving towards the principle and leaving the funding to be sorted out subsequently? What is your view of the mechanism that will follow the introduction of the bill?
The task force recommendations and, as I understand it the bill, propose that there will be staged reviews. The task force envisaged that the first of those would be around 2005 or 2006, but the key is that councils are already under a statutory duty as a result of the Housing (Scotland) Act 2001 to produce homelessness strategies. Within that, they have to identify what measures would be necessary to allow a relaxation and eventual abolition of the proposed priority needs requirements of the bill.
May I add to that? Over the past 20 years, one of the effects of the statutory provisions to deal with homelessness—even if it was not intended—has been to ration the supply of housing to people who are homeless. The impact of the Homelessness etc (Scotland) Bill, if it becomes law, will be to change those rationing mechanisms, and effectively to reduce them substantially over time, so that the number of people who will be statutorily able to access housing will increase.
Demand will not be even throughout the country.
No, it will not.
Are you able to predict where bottlenecks are likely to develop, even if you are not able to predict their scale?
In the first instance, the bottlenecks will occur almost anywhere in rural Scotland and in the housing bottleneck areas of urban Scotland, such as the whole of Edinburgh, most of Aberdeen and Perth. The bottlenecks will occur in places in which the local economy has created housing hotspots. If we do not invest in the delivery of good-quality, affordable, rented housing in such places, people will be driven out of those housing markets. Evidence that that is happening already exists.
Would it be sensible for the Executive at least to have an interim solution to that problem? Should there be a formula for identifying those areas, which would enable resources to be allocated through Communities Scotland or the development funds that at least some local authorities will receive?
In theory, that suggestion is sensible. The difficulty is that most of the programmes that are funded by Communities Scotland funding will have a continuing financial requirement. In some parts of Scotland, there will be a genuine improvement as a result of the stock transfer programme, which will improve the quality of some existing housing stock that people do not want to live in. The programme will have a significant benefit in those areas.
It would be interesting to hear whether Communities Scotland shares that view.
Members will have seen from the budget bill that housing investment will increase over the budget period. Through the stock transfer programme and our development programme, there is an average investment of £350 million. Our target of providing 18,000 new and improved houses is challenging in an environment in which costs are rising. In the past four years, the unit cost of a social rented house has gone up from £59,000 to £71,000. Grant rates have not come down commensurately and they will not come down. Achieving that stretching target will be problematic.
South Lanarkshire Council's written evidence suggests that about 70 per cent of the houses available for re-let there will in future have to go to the homeless if the bill is passed. The council believes that that would be grossly unfair on others who require housing. Would you share that view?
I should perhaps point out that Communities Scotland is of course part of the Executive. However, resources for our development programme are currently allocated on the basis of measures of social exclusion. We take six indicators relating to place and individuals, one of which is the level of homelessness. We take a measure across Scotland and then allocate the resources accordingly. Interestingly, according to the formula, Highland should get allocated about 4.2 per cent of our total budget, whereas it is in fact getting 6.2 per cent of it.
So it might get 12 houses instead of eight.
It has had significant increments to its programmes, particularly in recent years, because of the rural partnership for change pilot. For the future, we are moving into a scenario involving local housing strategies, which will identify the problems and the proposed solutions in each local authority area. Implicit in the local housing strategies will be the housing aspects of the homelessness strategies. We are looking to a resource allocation system that will rely heavily on evidence in the local housing strategy to determine the appropriate level of resources in the future.
Is what Highland Council is telling us correct? Will the extra money allow eight extra units to be developed? The council estimates that it needs to provide an additional 285 units. Eight seems to be a considerable undershot.
I am not in a position to judge Highland Council's figures. If it is talking about an increase of £400,000 in its programme, it is probably right about the figure of eight houses. There is an issue around the size and shape of the problem in the Highlands. A number of authorities could have commented similarly that they need additional resources to tackle the problem. We are, however, working within a finite level of resources within the programmes that we are managing.
Is there a danger that, if you are driven by legislative requirements, you will have to reorientate the balance of budgets both within and between local authorities in order to put the provisions of the Homelessness etc (Scotland) Bill into effect? The effect of that on other policies, such as refurbishment and social inclusion strategies in areas where the houses are in a poor state or the people are poor, would be difficult to quantify. Do you have a quantification of that?
It is difficult to give a specific quantification. Household formation is changing in Scotland and there are different requirements on the housing stock. If one ignores the bill entirely, the way in which people want to live means that, even without a growth in population, we will need to increase the number of homes by 10 per cent in the next 10 years. The present levels of investment will not allow us to keep pace with the additional demand from people who require affordable rented housing. If we add additional statutory requirements to provide housing for homeless people, the Government and its agencies will be required to deliver funding that meets those statutory requirements first. That will mean that other people will end up in a different queue and living in poor-quality housing or the wrong kind of housing for their needs.
So given current investment projections, the bill might lead to a crowding-out of other investment priorities and might have an impact on your allocation policy, which could have other social consequences.
Absolutely. That is our contention. This is a guideline rather than a scientific figure, but SFHA's view is that, given the overall increase in available funding in the past few years, we want the Parliament and the Executive to set a target of providing sufficient public investment to deliver 10,000 new or improved houses a year. At that level, we might meet both the new demand from different kinds of household formation and the requirements of the bill.
Will local authority or housing association tenants feel the impact of the bill through increased charges or perhaps because you will have to adapt your policies to meet the bill's requirements rather than taking other measures that might benefit tenants?
I will highlight two categories of people who will feel an impact. The first is existing tenants, particularly those who are legitimately seeking a transfer and who have lived in a house for 15 or 20 years, which might be the length of time since the most recent modernisation programme was carried out. The other obvious category is people on waiting lists or housing lists. Statutory responsibilities must come first. When households that live in poor-quality housing fall on hard times, if they cannot meet the rent payments, they will lose their tenancy and be housed through the homelessness route. That is right, because the bill's aim is to help people who have fallen on hard times. However, other households on the waiting list that are living in poor housing but are just managing to keep up the rent payments will be less likely to get a look in because the statutory responsibilities will have to come first.
From COSLA's perspective, there can be nothing wrong with a policy aspiration that says that people who are homeless will, in broad terms, have a right to housing. There would be something wrong if, in the long term, we were not trying to rectify the current situation whereby fit and healthy single people are excluded from housing even if they are homeless.
Perhaps this is not entirely an issue for today, but if I follow you correctly, the bill's extension of the entitlements associated with homelessness could be effected only by extending the waiting period or reducing the expectations of those who currently use rented property. Will the bill solve one problem simply by potentially disadvantaging another group of people who are users or potential users of rented housing?
No, that is not the case. That would be the case if what was being asked for was a blind commitment to expansion of the priority need groups, but that is not what is being recommended. The recommendation is that the priority need groups be extended only when it can be demonstrated that there is housing available to meet those needs.
Is that the same as saying that implementation of the bill will not exacerbate the housing needs situation?
That is true in respect of priority need. COSLA has concerns about the impact of the intentionality provisions, which we have discussed less this morning. Intentionality relates to much smaller numbers, although those numbers often represent very acute cases.
I want to move on to a slightly different subject. The bill would encourage the offering of support to people who are having problems with their tenancy. Those problems might arise from anti-social behaviour, from the fact that they cannot cope with finances or for other reasons. The bill's supporting literature suggests that fewer people will present as homeless under the homelessness legislation.
Everyone supports the principles behind the bill. We hope that we will be able to reduce the churn rate. Clearly, the continuing need for support for the repeat homeless not only has serious impacts on the ability to sustain tenancies but has long-term resource implications.
The bill covers a handful of the recommendations of the homelessness task force. There are 59 recommendations in total. The majority of those are designed to prevent homelessness, through a range of measures—not least making better arrangements for people when they leave institutions. If we improve the management of people during transitional periods in their lives, that will have as great an impact on the churn as the provisions of the bill will. Those provisions are only part of the full picture. There should be a reduction in churn, but it will not be the result solely of these legislative proposals.
My experience of churn was that it related largely to the anti-social behaviour of neighbours, poor-quality housing and an inability to manage finance. It did not relate a great deal to people leaving institutions or care. How can you address the issues that I have raised, which are responsible for a significant proportion of the re-lets in the city in which I served as a councillor? The same people moved round the same houses, which everyone thought were inadequate. Will the bill help us to tackle that problem, or will the problem be exacerbated as we give higher priority to those who are regarded as homeless, rather than to people who are moving because they do not get on with their neighbours?
In COSLA's view, it is good that the Executive has committed itself to implementing the task force's recommendations. It is good that it appears to aspire to do away with priority need. It is good that the Executive has recognised that, to do so, it must improve the supply and quality of Scotland's affordable housing stock. COSLA agrees that, unless that happens, it would be irresponsible to expand the priority need groups. Such a step would thwart the Executive's aspirations.
Why do you believe that the financial memorandum does not make provision for the level of support that is required in more difficult cases? Do you think that that cost should fall on housing budgets or on other budgets? Housing revenue accounts are ring fenced.
The support to which we refer is far more intensive than the sort of support that one would expect to fund from within the housing revenue account. Some households' needs could be met through the supporting people initiative. However, because the pot for the supporting people initiative has now been sized—with the exception of pipeline projects—it will be difficult to use the initiative to meet new statutory requirements. The bill may become statute after the door has closed on supporting people initiative funding.
I want to give Pat Bagot an opportunity to come in on that.
There are a number of issues that make it essential for revenue support to come with the capital development. The supporting people programme offers the opportunity for that and provision has been made for additional furniture grants to enable people to sustain tenancies. Local authorities are currently developing supporting people programme strategies, which will be assessed by Communities Scotland as part of the local housing strategies. Local authorities will have to prioritise the groups of people whom they can help through the supporting people programme, which is a ring-fenced budget, to enable them to sustain tenancies. The size of the budget is under discussion with the Treasury, and we do not know the answers on pipeline or growth as yet, but we are expecting to hear about that imminently. When the pool of money is known, local authorities will be required to prioritise the types of people whom they want to support through it.
Some concerns were raised about the fact that you have ring fenced money for furniture, which could be about £3,000 per unit of accommodation. As someone who has experience as a councillor, I am well aware that you will get complaints from existing tenants, particularly of council housing, saying, "Those folk are using the system, but when I tried to get a loan, I was turned down." I believe that you will be exposing yourself to some difficulty. The other figures that were available to us through Shelter indicated that it could cost £5,000 per family to support people in difficult tenancies. Have we got the appropriate levels of budgeting to meet those concerns and needs?
That is correct. The scheme is currently being developed, but the furniture grants that will be available from Communities Scotland are operating alongside other grants, including the community care grants for furnishing and crisis grants under social security legislation.
Those moneys are often loans, though, are they not?
The community care money is a grant and the crisis money is a loan. Some homeless people are not eligible for a loan because they had received loans several years ago and did not repay them. However, they are still homeless and unable to have a second chance to get into secure housing.
I think that we are straying into policy rather than finance areas.
Those were concerns of councils.
I understand that, but we are straying.
I have thought about how to explain how the bill will work in practice. I will give an example—perhaps the matter can be incorporated into the financial memorandum. If a household is evicted for serious anti-social behaviour, the requirement continues that housing be provided for that household. The SFHA agrees with and supports that principle. If that household were referred to a housing association, the association would provide accommodation on a probationary basis, using a short Scottish secure tenancy. According to the bill, the landlord is required to support that household to enable it to sustain that tenancy—we support the principle behind that.
I ask COSLA the same questions. David Orr said that it was dangerous to overstate savings. Does COSLA share that view? Do other financial issues cause it concern?
Yes. We have made that point in our written submission. Savings might be possible on paper, but those savings might be something completely different. Other costs fall under three broad headings—the physical provision of housing and its quality; support issues, which David Orr covered; and management. Can we bottom them out to reach a more accurate figure? We can have a good try at that. That returns to the point that the process for that would be discussion with the Executive.
We must rely on our Executive colleagues to answer the convener's question directly. However, I hear what people say about the supply issue, which involves enormous pressures to produce better-quality housing that is easier and less costly to occupy. That costs money. The harder we press the quality button, the fewer units we will get for our money.
I thank the witnesses for giving us their evidence today.
One of the benefits of developing this policy with the homelessness task force over two years and involving many partners is that many of our good lines have been taken by the partners who have been involved in the process.
My colleagues are reminding me, rightly, that our focus is the financial memorandum. What steps have you taken to ensure that you can quantify the total costs of the bill to the public purse? Can you be confident that the costs that are contained in your estimates are accurate?
It is clear from the responses that you have received to those questions that there is a limit to the quantification that we can do at present. However, we have put in place the actions that we need to take to produce the evidence on which we can base our estimates of quantifiable costs. We estimate that the immediate impact of the bill—particularly in terms of priority need—will be at roughly nil increased cost, as we are moving the categories of people who are regarded as having priority need from the guidance into the body of legislation. Responses to our consultation from most local authorities suggested that they followed the guidance anyway.
We have heard from the key agencies that are involved—from COSLA in particular and from the SFHA—that they estimate that extending the priority need category will have a considerable impact on required additional housing. We have also heard that implementation might involve increased rationing of the existing housing stock, which is not really quantified in any shape or form in the financial memorandum. Is the policy being quantified adequately in financial terms in the information that we are being given? I do not deny its desirability; I am just asking whether we are taking account adequately of what is needed to deliver and of what the impact of delivery will be on the amenity that housing tenants enjoy.
We have assessed adequately the impact in so far as we are able to, but we have not put into the bill anything that will be brought into effect without our first knowing what the impact will be. We have staged the process in recognition of the fact that more information will come, and so that we will not take too big a step in the first instance or a step beyond what local authorities will be able to cope with. On the basis of the assessments that we have made, the first step is copable with. The next step will not be taken until we are satisfied that it, too, is copable with, on the basis of the assessments that are made with the further information that is available to us.
Is there not a danger, based on the past experience of local authorities and others, that once you have introduced the principle that a certain route can be taken, the funding will not necessarily follow in the way that you are perhaps suggesting?
Section 3 specifically requires the minister to make a statement that takes account of the availability of resources and local authorities' ability to respond to the expansion. I do not think that the principle will creep in by stealth. There is an absolute requirement to stop and make the assessment before the next stage can be taken forward within the context of the legislation.
In that context, is it possible for you to come up with some quantification of potential loss of amenity to other tenants that would allow you to say precisely what the impact would be of extending an aspect of priority need?
Not at this stage, because to do that we need the information that will be made available to us through local housing and local homelessness strategies. It is important that we understand the size of the problem and what the individual elements of it are before we quantify the impact of the expansion.
South Lanarkshire Council has submitted evidence that suggests that, in East Kilbride, extending priority need will have a major impact on re-lets. Have you had any evidence from the task force or anybody else on the kind of impact that it is likely to have in general, or do you dispute the figures from South Lanarkshire Council? Are such figures to do only with areas that are under high pressure?
I will make two points. First, in the consultation document, which was issued prior to the drafting of the bill, we asked specifically for comments on the resource implications of the bill. In general terms, the answers that we received were that it is difficult to assess the resource implications at the moment and that a number of elements need to be brought together before that assessment can be made. We got no strong feeling from our consultees that anybody was in a position to quantify what the bill would cost after its delivery over the 10-year period.
Our problem is that the financial memorandum is meant to tell us how much the bill costs and who picks up the costs, but there are hardly any figures in the financial memorandum. The only figures in it are budgets that have already been allocated. It does not really tell us anything about the costs. The issue is not whether the bill is "copable with"—I think that those were your words—but who will pay and how much they will pay. The minister does not even have to say anything about the costs in the statement that he makes. I see nothing in the bill about the minister having to talk about the costs.
The financial memorandum talks about the local authority's ability to respond.
That is the ability to cope with the bill, I presume. We should have some figures in the financial memorandum. Otherwise, what on earth is the point of having it?
The bill implements the task force's recommendations, which looked forward for a period of 10 years. It is difficult to make an assessment of a 10-year programme at the beginning of the bill. However, it tries to build in the checks and balances that ensure that the different stages of the programme are not implemented until we have a clear indication of how they will be delivered.
The bill is an Executive bill. The Executive therefore has a responsibility to supply a robust financial memorandum. Given the apparent inability to cost anything in the bill accurately, will you tell us what directions the Executive gave you to help to produce the memorandum?
The memorandum was based on an instruction to deliver the homelessness task force's recommendations.
However, as far as the Parliament is concerned, the committee, on the Parliament's behalf, is obliged to gain a clear view of the costs. That is why we are taking evidence. Will the Executive come back with a new memorandum to go with the bill and republish the bill if no figures that anybody can quantify are available? The committee's responsibility is to quantify the figures.
The Executive has put in place in the spending review a set line of funding for homelessness. In addition, it has increased the available funding for housing supply through the Communities Scotland development programme and through the community ownership programme. The Executive's view is that that is sufficient to deliver the bill as it comes into force. The Executive is of the view that the next stages in the expansion of priority need—this was taken from the task force's recommendations—should not be implemented until the Executive is next able to take an opinion on whether it can meet the costs. Those elements will not be implemented until the costs are assured.
That is the kind of clear statement that should have been part of the financial memorandum. Such a health warning should be at the opening of the memorandum.
I am sorry. I thought that we had made that point in the financial memorandum. If we have not, I apologise.
It has not been made specifically.
I will ask about the projected savings. We have heard the concerns of the delivery organisations—if I can call them that—that there are no real identifiable savings. We have heard their queries about the projected savings. Do you have a different view?
I have a different view if we consider the task force's recommendations as a whole. We expect some possibly minor administrative savings under the change from a duty to investigate intentionality to the power to do so, although those savings will be offset by increased responsibilities when a person has been identified as being intentionally homeless.
We have a number of other detailed questions on the financial memorandum. However, bearing in mind the time, would it be appropriate to submit those questions in writing, if members agree to that? You would obviously be under a tight time constraint to respond.
We will respond quickly.
I thank you for your evidence.
Meeting continued in private until 13:02.
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