Glasgow City Council Housing Stock Transfer
University of Paisley
Faculty of Business
Prepared by Professor Mike Danson, Iain Fleming, Karen Gilmore,
Andy Sternberg, Geoff Whittam
21 December 1999
Commissioned by UNISON
3 Economic Issues and Housing Developments
4 Financial Aspects
5 Statutory Responsibilities
6 Democracy, Accountability, Social
7 Impact on the DLO
8 Job Security for Staff
9 TUPE and Pensions
10 Conclusions and Recommendations
Background and Remit
1. This report deals with the issues as set out in the original
invitation to tender.
2. It considers the implications of the proposals contained in
the HACAS feasibility study and associated reports.
3. Both advantages and disadvantages have been identified in the
process of stock transfer.
4. It has not been possible to address any relative inefficiencies
in the management of Glasgow City Council Housing because of lack
of time, access to information and resources. The relevance for
this report is also questionable given that HACAS do not focus on
these issues explicitly
5. The HACAS study has been overtaken by the establishment of the
Scottish Executive led Steering Group and the associated Development
6. We have analysed the HACAS report to the extent that we have
details on its assumptions, workings and findings.
7. The analysis presented in this report suggests that any alternative
model to the whole stock transfer option preferred by HACAS will
undoubtedly be more expensive, lead to greater job losses and not
demonstrate any appreciable benefits to tenants.
8. It is therefore even more vital that the details of the Ernst
Young and all other relevant reports are open to public scrutiny
and debate. If the tenants of Glasgow are to make an informed choice
on the options being presented then this is the minimum level of
9. There is a need to maintain the provision of affordable homes
for all in Glasgow.
10. The Scottish Executive is budgeting for further real cuts in
public investment in social housing.
11. Past under-investment means there is a massive repairs backlog.
12. The recommendations of the HACAS feasibility study to transfer
all Glasgow City Council's housing stock stem from financial considerations
rather than from identified management inefficiencies.
13. The proposal for a stock transfer threatens to be but the latest
in a long history of grand designs for Glasgow housing.
14. It is still unclear how the Scottish Executive intends to service
the housing debt and for how long: there are no guarantees. With
no promises to 'write-off' the debt, this uncertainty will continue.
15. A change by central government from PSBR to GGFD would benefit
the whole economy and the adoption of the GGFD would allow new opportunities
to open up to establish public housing corporations.
16. The Council is so severely burdened with debt that the status
quo does not permit the level of investment required to maintain
the existing stock in good quality or to improve the sub-standard
17. The detailed financial underpinning of the HACAS preferred
proposal has not been made available, nor has there been access
to the assumptions, workings or reports of subsequent studies. However,
we can infer the following from the HACAS report:
The core stock to be carried is at the lower end of predicted housing
The estimated management cost per unit is very low and, at best,
needs robust confirmatory evidence.
There is no evidence to justify the anticipated capital costs.
The effect of VAT is to increase total costs by more than £100m
through contracting work, with this sum lost to the Scottish economy.
Although claims are made that rent increases above RPI are unacceptable,
the proposal envisages an increase of 16% in real terms between
now and completion of phase one improvements.
Initial valuations are very sensitive to minor changes. No probabilities
No valuation model is given.
The proportion of current tenants on HousingBenefit is not addressed.
If the absolute number does not change, this implies all tenants
will be on Housing Benefit. Possible changes to Housing Benefit
would adversely affect the income flows to the tenants, the housing
trust/associations and so raise questions over the costs of financing
The number of uncertainties surrounding funding is very large.
The political nature of this proposal is briefly recognised in
S.2.3 of the HACAS report. If the Government took over the current
debt then existing finance charges debited to the HRA would be
sufficient to fund the whole proposal over virtually the same
timescale without the need for large rent rises.
18. The record numbers of homeless people will not be helped by
the wholesale transfer of the City's housing stock.
19. Changes to the ownership of stock will increase the costs of
supporting the homeless and make the management of their rights
more complex and difficult to achieve.
20. Housing benefit has become the active source of much housing
subsidy and investment.
21. Any changes or threats of changes to this benefit will increase
the effective interest rates faced by a transferred housing stock.
22. It will also deepen the poverty trap created by this benefit
which tries and fails to meet two conflicting objectives simultaneously.
Democracy, Accountability, Social Inclusion
23. Tenants and trades unions have been excluded from all discussions
on the development of proposals to transfer the housing stock in
Glasgow. This conflicts with the social inclusion agenda and does
not augur well for the future
24. The creation of yet more QUANGOs would not improve democratic
25. There will be negative effects on jobs, incomes and training
for many in the most disadvantaged areas of the city through redundancies,
higher rents, and dislocations to labour, capital and property markets.
26. There will be wider unfavourable impacts on the rest of the
construction industry, housing associations and economic development.
27. Partnerships, networks and 'joined-up' government will be undermined
by further disruption of key players in housing, education, health
and economic regeneration.
28. The proposed stock transfer will exacerbate and repeat the
cycles of exaggerated expectations and unfulfilled promises of the
Effects on the Workforce
29. The DLO is already recognised as an exemplary employer, complementing
social inclusion, training and quality delivery agendas.
30. The DLO must be retained within the same overall organisation
if these advantages are to be maintained, and higher costs and VAT
losses to the city and Scotland avoided.
31. A failure to protect the legal cohesion between the housing
and DLO functions of the Council will increase operating costs for
the new organisations, adversely effect job security, endanger health
and safety, undermine training regimes, and lead to a deterioration
in the quality of services.
32. Despite these points, the feasibility study proposes splitting
the DLO from the housing trust/CBOs to benefit funders
33. There have be no attempts in the feasibility study to capture
the full costs and benefits of the proposed transfer.
34. Any other study, with less favourable and more realistic assumptions,
would demonstrate higher costs and lower benefits of stock transfer.
35. Unit costs for remaining departments in the council would increase,
with associated redundancies.
36. There would be poorer quality of housing services with a loss
of economies of scale.
37. Staff satisfaction would be poorer with the separation of administrative
responsibilities for the homeless and housing benefit from implementation
38. There would be a deterioration in the terms and conditions
of staff in the DLO, building services and other departments, with
redundancies and loss of training opportunities. These would have
wider and unfavourable impacts.
39. It is probable that different staff would be treated differently
40. Experience suggests that there would be further changes in
the terms and conditions of staff after transfer, especially for
41. There is some potential to improve the position for staff,
but there would be no guarantees. Differen tials between grades
and between new recruits and staff transferring and new recruits
would be likely to be introduced.
42. Despite the legislation, there are clear problems with TUPE
The option we recommend you explore further is a Local Housing Quasi-Corporation.
This would ring-fence the housing account within the local authority.
It could borrow money based on an effective business plan and on
the regular income and asset base of the housing stock, but with
no recourse to the general assets of the authority
This is the cheapest alternative funding solution for investment.
Residents would benefit from capital investment without the uncertainties
of a new landlord.
The local authority would retain ownership, control, and retain
its own nomination/allocation policies
This is the only option which guarantees the retention of jobs,
incomes and training opportunities for the existing workforce.
The existing debt should be written-off by theScottish Executive,
or central government, effectively taking it over.
It is in line with best value practice, and would allow improvements
in management and closer tenant involvement in an environment of
co-operation, trust & security.
Tenants should retain their secure tenancies and other rights.
Although the borrowing would be included in the PSBR measure of
public indebtedness it would be excluded from the GGFD definition.
Campaigning for a change in definition from PSBR to GGFD would favour
this scheme and bring Britain into line with the rest of Europe.
There would be guaranteed benefits for tenants, Glasgow council
taxpayers and Scottish taxpayers.
The promotion of integrated, community based regeneration policies
would be enhanced.
Glasgow City Council has proposed a transfer of its Housing Stock
to overcome certain perceived management and financial difficulties
and to open the opportunities to raise funds for significant investment
in the city's social housing.
This proposal is opposed by the STUC and Glasgow Joint Trade Union
Committee, including the City Council Branch of UNISON.
As part of its campaign, UNISON commissioned research from the
University of Paisley to provide a counter-assessment of the City
Council's proposals. This study reports on the implications for
tenants and workers of the stock transfer
The research includes assessment of
Analysis of Financial Plan
Analysis of Capital Plan
Effect on Housing Revenue Account
Local Democracy and Accountability
Impact on Social Inclusion
Impact on Jobs in DLO
Job Security for Staff
It has been clear since the outset that, whilst we recognise that
UNISON is opposed to the transfer of the housing stock in principal,
unless tenants are better informed about the implications of the
stock transfer, then the ballots amongst the tenants would be likely
to favour transfer and the sale/transfer will go ahead. As well
as addressing the above issues, our original objectives included
looking at alternative models and attempting to determine which
could provide the best delivery for tenants and workers. We also
intended to determine whether the crisis which has developed in
council housing within Glasgow is a result of ownership or management
failure, thereby establishing whether in fact ownership is the key
issue for service delivery. In the event there has been a limited
opportunity to address these issues, although there is some discussion
of them below.
The failure of Glasgow City Council and the Scottish Executive to
release reports, information and the detailed assumptions on the
management and operations of the housing department and DLO have
curtailed our ability to explore these issues in sufficient depth
to be able to give definitive answers. However, we believe we have
identified enough concerns to raise doubts over the stock transfer
proposal as envisaged in the HACAS and related reports, and in any
other commissioned but unavailable studies (particularly that by
Ernst & Young).
In recent times, many authorities have pursued stock transfer policies
(Urban Land and Planning Act). In larger authorities they relate
only to specific districts/estates, while some medium sized Councils
have undertaken whole stock transfers. Critically the stock in these
cases was valued in excess of debt on the stock
Transfers were undertaken to existing or specially created Housing
Associations (e.g. Broomleigh). It is notable that a number of areas,
e.g. two district ballots in Lewisham and Tower Hamlets in London,
have recently voted against transfer.
Advantages of Stock transfer
Removes responsibility from 'political' authority to focused management
creating enabler/provider split. Management agent able to get on
with the job free of 'political' interferenc
No Client/Contractor split. Management agent owns stock
Council retains right to re-lets
Tenants retain right to buy and can negotiate rent and improvement
The move to alternative management is often linked to other sources
of funding, such as single regeneration budget (SRB) money in England
for instance. These initiatives, begun under the Tories and continued
under Labour, are a form of 'top slicing'. Money is targeted on
prime sites where it can attract the most political capital, rather
than being evenly distributed in local authorities' capital allocations.
The proposals for Glasgow can be seen therefore as a flagship for
the 'Third Way'. They allow the new Scottish Executive to show,
both to the electorate here and to New Labour in London, that it
can achieve modernisation of the social institutions in Scotland.
Bids for such financial support have a wide ranging breadth (energy
saving, estate security, crime prevention, employment, social inclusion)
to tie in with the local and especially central state's social agenda.
Without a funding target there is no motive for transfer.
To legitimise the transfer, ballots must be held of affected tenants.
It can be argued that this need for a ballot creates a high element
of risk. Tenants, political groups, and trades unions may be opposed
Because they substitute 'assured' for 'secure' tenancies.
Increased investment may be linked to future rent rises, which are
outside the conventional control mechanisms of local authority rents.
Many transferred estates experience very high rent levels.
While initiatives may tackle 'residualisation' by the sale of
blocks to private developers to finance improvements on the remainder
of 'social' housing; high rent levels for remaining social tenants
may create a poverty trap.
Because of a familiarity with the existing democratic culture
of tenants' participation. Local authorities with directly elected
representatives appear more accountable than Housing Associations
with Management Committees outside an elective process.
Housing Associations have become more commercially motivated and
tenants may feel they are pursuing a wide-ranging agenda of their
As a result of the above, Councils now often employ market researchers
to assess the prospects of tenants agreeing to transfer (e.g. Sunderland).
Transfers are more likely to be successful where additional state
funding is offered as a 'carrot', as in the Priority estates or
SRB type examples in England, or the SIPs (Social Inclusion Partnership
areas) in Scotland. An element of local authority grant allocation
is 'discretionary'. Transferring management as part of a Housing
Strategy would find favour under such regimes.
The efficiency of the council landlord
The perceived inefficiency of the typical local authority manager
has been publicly recognised since the mid 80s (Audit Commission
The Crisis in Council Housing). There is a belief that council landlords
represent large scale, ineffective, inefficient, and politically
motivated bureaucracies dominated by interests groups (management,
unions, politicians, and professional tenants) whose interests usually
come before those of the service user. They are understood to be
unable to assess or control costs, they are ridden by reactive crisis
management. Councils are unable to plan strategically and prevent
problems before they occur. To the extent that Glasgow is perceived
as characterised in this way may well determine the grounds on which
the debate will be conducted over the proposed stock transfer.
Increasingly local authorities are being judged on their performance.
Performance indicators vary but include some or all of the following:
re-letting empty properties quickly, obtaining value for public
money spent on capital programmes and responsive repairs, providing
an effective repair service to tenants, completing repairs within
agreed timescales to agreed standards, low levels of litigation,
low levels of Ombudsman complaints of maladministration, low levels
of customer complaints, collecting rent, enforcing tenancy conditions,
having an effective and deliverable housing strategy that addresses
a wide range of needs in the community.
Creating a framework whereby a landlord's performance can be objectively
assessed has been an integral part of all efforts to improve standards
of management in the last ten years. 'Best Value' has taken over
where Housing Management Compulsory Competitive Tendering(HMCCT)
left off within the context of Labour (state-power) dominated urban
government. Hostility to the private sector has been replaced by
a desire to locate private sector partners. There is a new culture
Private/Public partnership is central to the Government's strategy
of reducing the cost of the perceived inefficient public sector
management. The duty to obtain Best Value will mean the authority
has to prove it is the most cost-effective service deliverer. Audits
and the Housing Inspectorate will be used as sticks to force through
wide ranging re-structuring of services which could possibly entail
the forcible disbandment of local bureaucracies. Authorities will
have to demonstrate 'continuous improvement'.
Alternative management models
Kensington and Chelsea transferred all their stock to Tenant Managed
Ownership to evade HMCCT. Greater tenant involvement and control
are clearly high on this Government's Agenda. In England, DETR scores
the performance of local authorities. Unfortunately authorities
who score highly on tenant involvement are not always high scorers
as efficient landlords.
As HMCCT was abolished, so EC procurement law has been used to let
in private sector partners to manage stock. Several authorities
(Islington, Lewisham) are doing this in a Best Value context as
part of a range of initiatives (including stock transfer). The DSO
does not bid, but the new provider is used as a bench mark for the
public provider to match its performance to. This is like HMCCT.
This course of action evades the need to ballot as there is no transfer
Sell-off the service or form a joint venture to create a service
team. This approach is common in cleansing. It enables new capital
investment from the private sector model to be realised but the
authority retains some control through the management board.
Types of property (Victorian Street property with high levels of
disrepair) may be parcelled and a management agreement sought with
a social landlord with City backing to claw in private finance.
The City places rigid controls on the management agent. The authority
effectively leases properties for 30 years and retains ownership.
This also evades a ballot as there is no transfer of ownership.
This Local Government Association option involves the re-organisation
of Council housing services so that there is managerial autonomy
and separate ring-fenced accounts within the local authority. It
has been suggested (UCATT) that this model means borrowing need
not affect government spending plans nor borrowing limits (though
this may depend on changes to the definition of borrowing used by
the government from PSBR to GGFD, see below). The local authorities
retain ownership and control of their housing stock, with secured
tenancies retained and not replaced with assured tenancies. The
Corporation could borrow based on an effective business plan, backed
with the regular income and asset base of the housing stock. This
is the cheapest alternative funding source for new investment (Joseph
Rowntree Foundation report 'Models for housing investment', HACAS),
and tenants would 'benefit from capital investment without the uncertainties
of a new landlord'. DLO workers remain with their current employers.
Local Housing Companies/Corporations
This is an Institute of Housing sponsored model. Effectively, it
establishes a devolved, arms-length trading body. Although the Council
would wholly own the local housing company, the housing stock would
be transferred with tenants' consent. Borrowing would be secured
on the asset stock and on the regular rental income. Existing loan
debt would have to be repaid. Tenants would not automatically retain
their secured tenancies. The board would be made up of representatives
of Council representatives, tenant representatives and independent
people. It is considered that the business plan would encourage
cost-effectiveness (Joseph Rowntree Foundation report 'Models for
housing investment', HACAS). The advantages of this model, as with
the quasi-corporation, require the government to change its measure
of public indebtedness from the PSBR to GGFD (see below), secure
tenancies to be retained and the debt to be written off. Under this
model it is much easier for the stock subsequently to be sold on
to another company or entity, potentially weakening tenant rights
further. TUPE rules, discussed in detail in Section 9 below, are
a weak instrument to protect the position of workers in the housing
and other DLOs, this model would do little to retain their current
council employment rights.
According to general academic thought (especially D Maclennan, Glasgow
University), there is a view that sees a 3-5,000 stock size as being
an effective scale for a housing provider. Many Labour authorities
with a long history of decentralised, estate-based offices are moving
back to a district system with larger offices in a parallel of this.
This could be the basis of an effective public sector management
Transfer of stock by type-Sheltered, Special needs, Hostels. In
these models, the management focus more likely would be service-user
The general background for Glasgow
Whilst the above provides the general framework as to what has been
occurring throughout the UK, there are specific aspects to Scotland
and Glasgow. In particular, Scotland and Glasgow have a higher incidence
of council housing because Scots, in line with the rest of Europe,
have never put home ownership at the top of their personal agenda.
At around forty per cent in Glasgow, council tenancy is particularly
high. Over the last two decades the population of the city has been
falling, and this trend is expected to continue with the city population
falling by another ten per cent by the year 2013. This has squeezed
the need for council housing. Some 11,500 dwellings have already
been demolished with a further 16,000 to go by 2003. Of the remainder,
nearly fifty per cent suffer from condensation or dampness and less
than forty per cent have central heating or double-glazing. Rents
are the second highest in Scotland and appear to be out of kilter
with local earnings and property valuations. The current repair
and improvement programme is estimated to be £1.5 billion
hence the option of privatisation in line with current thinking
from Westminster appears to be attractive to the City Council.
1. Study has considered the implications of the proposals contained
in the feasibility study and associated reports
2. A number of advantages and disadvantages have been identified
in the process of stock transfer
3. It has not been possible to address any relative inefficiencies
in the management of Glasgow City Council Housing because of lack
of time, access to information and resources.
4. The remainder of the report deals with the issues as set out
in the original invitation to tender.
Economic Issues and Housing Developments
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