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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


Executive Summary
1 Introduction
2 Background
3 Economic Issues and Housing Developments
4 Financial Aspects

5 Statutory Responsibilities
6 Democracy, Accountability, Social Inclusion

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 Team.

6. We have analysed the HACAS report to the extent that we have details on its assumptions, workings and findings.

Economic Issues
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 information required.

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.

Financial Issues
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 stock.

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 demand.

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 are considered.

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 transfer.

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 accountability.

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 past century.

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 after transfer

40. Experience suggests that there would be further changes in the terms and conditions of staff after transfer, especially for construction trades.

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 in practice.

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

Economic Issues
Analysis of Financial Plan
Analysis of Capital Plan
Effect on Housing Revenue Account
Statutory Responsibilities
Local Democracy and Accountability
Impact on Social Inclusion
Impact on Jobs in DLO
Job Security for Staff
Pensions Issues

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).

Stock transfers
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
Devolved management

Removes responsibility from 'political' authority to focused management agent,
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 packages

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 to transfer:
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 own.

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.

Performance framework
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 of co-operation.

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
Tenant Management

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.

Externalising Management
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 of ownership.

Externalised Partnership
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.

Quasi-housing Corporations
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.

Organisational re-structuring
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 model.

Co-operative management.
Type transfer.

Transfer of stock by type-Sheltered, Special needs, Hostels. In these models, the management focus more likely would be service-user oriented

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.


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