Khan we fix it everywhere?

Yesterday was a busy day for housing all round, but the happiest news was in the capital; where Mayor Sadiq Khan has announced a huge investment in new council housing. This can only be a good thing, but it is worth looking through what is actually being proposed and, perhaps crucially for anyone interested in housing outside of London, see if this can be replicated elsewhere.

The document, Building Council Homes for Londoners is actually quite readable, for a technical briefing, so if you are interested it is worth having a look through. I will do my best to summarise, but it is rare I can suggest a general reader looking at a document like that, so feel free to.

There are two main legs to the funding side, a not-insignificant block of money (£1.67 billion) given to the capital from the Chancellor in the Spring Statement and an interesting wheeze about right to buy receipts.

Coming to the £1.67 billion first- I know I have mentioned seemingly big bits of money before and pleaded for people to understand them in context. But we can do that a little bit with this- compare this amount to the £2 billion added for all of England earlier this year. I was critical of the size of latter because per area because it didn’t actually amount to all that much. Spread thinly across the country (or even in centered on particular areas) it wasn’t going to amount to a huge amount of extra housebuilding. Plus as it was for both Council and Housing Association house building and it is the government at the end of the day who will be deciding who gets funds and who does not.

The Mayor has been given much more freedom with his (per head) much larger allocation of cash and the announcement yesterday shows how he is going to use it. He is choosing to spend this money unequivocally on Council housing. This isn’t just traditional social rent, but could also be London affordable rent, London living rent or shared ownership. What it clearly isn’t is affordable rent. Housing Associations aren’t completely out of the picture as there is another funding mechanism similar to the affordable housing programme for them to bid for.

In terms of what the Mayor will consider funding with this cash, for rents below the London affordable rent levels he will pay £100k per property. This looks positive compared to the “average” £80k paid under the affordable housing programme (although you’d expect London properties to be above average in that programme). For the other rental or shared ownership schemes he will pay £38k per unit for quick wins (started before April 2020) or £28k per unit for later starts. There is an emphasis on a programme approach, so we are talking about each borough putting in a sizable application and, if the worked example is anything to go by, a mixture of rent types.

So this looks like a more generous scheme than central government’s direct scheme focused on delivering only Council homes. It exists because:

  1. the government has decided to give a large block of capital funding to London
  2. the Mayor has the power to decide what to do with the money
  3. being directly elected he has a strong personal mandate and
  4. he has decided to do something linked wholly to council homes with it.

Without any of these rungs the scheme would not look like this. Other authorities, for example the metro mayor areas, may have the personal mandate but usually any funds they get from government are limited and very prescriptive. Just look at the housing deals announced for the West Midlands and Greater Manchester. They are both having to up their overall housing supply numbers just to get significantly smaller agreements from government and would be unlikely to be allowed to do anything like spend all of the extra cash on council housing.

Non metro-mayor areas (which we do have to remember is the vast majority of the country) will just have to take their share of the affordable housing programme, use up any housing revenue account headroom they have (and any extra they can grub from the government) and try to use up right to buy receipts as best they can.

Which brings me on to the second part of the Mayor’s announcement- the use of right to buy returns. This is a very clever little bit of circulating cash -I won’t go so far as to say laundering it- but certainly relies heavily on London having a different arrangement to the rest of the country.

You’ll probably know the issues relating to right to buy receipts- homes are sold at a discount, the Treasury takes some costs back straight away and, after all this, the money can only be used to fund 30% of a new housing association home. All this and councils have to use the money within 3 years or it disappears off to the Treasury.

But what happens then? For everywhere except London the money goes to the Homes and Communities Agency, who plough it back somewhere across the country- who knows where? In London the money goes to the GLA, who until now have been giving it out as part of their affordable housing programme.

What the Mayor is now proposing is London councils that wish to opt-in can give right to buy money back to the Treasury, who pass it on the GLA. So far, so the same. But then, the GLA will ring-fence the money to be spent in the council’s area and will allow the council to make the funding decisions. There will still be rules with this- the 30% rule and the housing association rules look like they will be the same. But it looks like the Mayor’s office will be much more flexible and open-minded about how this money can be shared out, particularly with regard to mixed sites (ie. where one house is funded through right to buy and another through a grant). It will also give councils more freedom to (within limits) move money about whilst construction is ongoing in order to deliver more homes.

The total amount of funding for this is much smaller than the £1.67 billion- London councils have so far given back to the Treasury £50 million. But the key issue is that instead of losing money because of a strict set of rules, councils in London will be able to in effect keep money to replace (to an extent) right to buy homes. With the government-enforced rules still in place it remains to be seen if 1:1 replacements can be achieved (I suspect not quite) but this is still much likely to be a better, friendlier scheme than the one overseen by the Treasury.

Again, this clever little circulation of cash can only works because of the powers held by the London Mayor and GLA. Nowhere else in the country has this arrangement and I doubt the HCA are going to suggest something similar for every other council.

So what the Mayor is doing is using his significant and unique powers (and personal mandate) to mitigate against what he (and I) see as central government’s failures. But it isn’t replicable elsewhere without those powers being devolved, something that was unlikely the day before yesterday and is perhaps incredibly unlikely now. I’m sure central government are smarting slightly at his actions, but the point is he alone is able to do this.

One of the challenges of devolution, particularly the uneven and deal-led devolution preferred by the government since 2010, is that different areas will have different agreements. London is always likely to do well out of this, especially if they have an activist Mayor who is unconcerned about his popularity with the Westminster government of the day. London has a huge number of challenges, especially in the provision of affordable housing, but it is also in a position of power. It is doing far better that other areas on insisting on affordable housing proportions through section 106 (again, due to the powers of the Mayor) and has the ability to gain investment from around the world.

So this is great news for London, but without rule changes it doesn’t mean much for anywhere else. That isn’t a criticism, it’s just a point to be made when celebrating the scheme. As discussed enough times here already, what would make the difference everywhere is a lifting of the HRA borrowing cap and further investment in council housing as a genuine alternative to the other tenure types available in the country. Labour’s green paper goes some way to moving ahead with that- if they were in power. We continue to wait for the government’s social housing green paper.

Delving into devolution

Never plan ahead unless you are prepared to throw away. That’s a lesson I have had to learn over and over again.

As I’ve said elsewhere, I had a plan to talk about the trend of government “doing deals” instead of offering the same policy options to everywhere, both through devolution and for new council housing.

Never mind that the letters were falling off from behind Theresa May, her housing policy proposals didn’t once mention the deals government have been working on with some councils for many months now.

I don’t think that means that the deals are not going to happen, just that government thinking has bypassed them for now. Rather than hark on about something that is on the back burner, I will try and talk about devolution more widely, in particular a wide view of what it could mean for the country (and by that I mean England) as a whole.

Now that the dust is settling on the first tranche of devolution deals, with elected metro mayors in a number of larger city regions, I think we need to calmly and reasonably look at where devolution could be leading us as a country and comprehend what this new multi-speed system is going to look like.

We should first take a couple of steps back. Right back to 1974 in fact and forward through many acts to the creation of many of the local government systems we see today. What we need to understand is that England is already a diverse system, with London having its own rules and the rest of the country being split into unitary systems, two tier systems, metropolitan boroughs, non-metropolitan boroughs. Some authorities have a committee system, some a cabinet system and some elected mayors.

The impact of these different systems and the negotiations that brought them about means that councils can be big or small, self contained or not. In just one example, Leeds City Council covers a huge, diverse area. You can walk around the edges of the Leeds district, only very occasionally interacting with something that isn’t countryside or a village. Even the urban join with Bradford isn’t that wide, when you look at it or walk it. Manchester City Council covers a much smaller area, is bordered by Salford and Trafford, both themselves large urban areas part of what the layman would call “Manchester”, although be careful doing that in some parts of Salford!

The reasons behind this are tied up with history and practically ancient politics. Yes, it happened that Manchester and Salford centres grew up next to each other, and Newcastle and Gateshead for that matter. There are historical and political reasons Herefordshire is a unitary authority and Worcestershire isn’t and why it is Herefordshire and Worcestershire, not “Hereford and Worcester”.

The point is, the structure of local government has evolved to both reflect and create very different areas and has done so because government has usually been remarkably pragmatic and open to what they perceive to be the requirements of the local area. But most powers given to councils have been across the board, with only tinkering or one off payments between them. Authorities have often been able to come to their own conclusion on how they wish to run services, but not which services they choose to run.

This was even the case in local authorities that opted to have elected mayors; it was simply another way of administering the same services. In the early 2010s two things changed. One is very techie but could be important in all number of ways- in 2011 councils became able to do anything an individual could do. So they could set up companies more freely, take on other non-statutory responsibilities and were generally more free to act. It is worth pointing this out because really there is nothing apart from finances stopping many authorities from doing what they want- as long as it isn’t creating taxes or go to war. But finance is the key one and we will come back to it!

The other was wider devolution- multiple authorities working together to create a combined authority. This is especially true as this often meant taking responsibility for central government functions and delivering them locally. The list of potential responsibilities is long, but let’s for the sake of brevity state that anything apart from taxing and warring was on the table. Everything was up for grabs, but that’s where the deal comes in. Each different set of authorities taking part had to come to an agreement first with each other and then secondly with central government about what they would like to control and how they were going to be measured on whether they have succeeded.

This means, especially as more areas catch up with the outriders on devolution, that different places have different deals. One place may have a deal to look after health and social care funding, whilst another may not. One may put the oversight of Police into the metro mayor’s hands, another may stick with a police and crime commissioner (for as long as they last). One may have an intricate deal on new housing delivery, another may have just received a cash amount to unlock housing sites. A third may not have considered housing at all in their deal. Many may soon try to franchise bus services, but others may choose to leave that alone.

All this means policy making at the national level will have to become a lot more cautious about what and where central government can make changes- law and guidance will have to be clear about where it applies- which probably means exemptions coming out of your ears. It also means people moving from one devolved area to another will not necessarily have the same entitlements, support or interactions with their local representatives.

Areas that do not have a deal will still be covered by policy decisions made at Westminster, but with fewer and fewer areas covered (particularly populated areas) this is going to mean a very different type of policy making. It could, over time, mean that some Westminster policies and debates become quite tailored to the needs of some of those areas. Assuming it will mostly be rural and semi-rural areas left un-devolved it may mean that some debates in Westminster become focused on those areas.

Indeed, this could even mean that smaller urban areas not in devolution deals will be ignored because the “non devolved areas” are seemingly represented by the views of rural and semi-rural areas. It may also lead to some strange variant of the West Lothian Question- why should Greater Manchester MPs vote on a topic that doesn’t affect their area?

Those on the outside of devolved areas may well look at the extra funding being received with envious eyes. Indeed, this is arguably one of the reasons the Leeds City Region has ended up in the quagmire it has. Those who want to say “me too!” or “me as well!” need to have their cases looked at, but there needs to be some clear and consistent direction from government about who can be involved in devolution and who cannot.

In whatever scheme there will be places outside of devolution. Jonn Elledge’s piece on Herefordshire neatly illustrates that they can and probably will feel left out and something may need to be created for them- I’m suggesting calling it devo-min.

To put that another way, if devolution isn’t for everybody (and that is the mood music out of the government) then the government does have to be clear how the world will work for those left outside the devolved areas as well as accept that their decision making power has been reduced for large parts of the country. Politically, it would be better if this looked like an offer rather than telling them “things will stay the same”, but that’s for the politicians to decide.

I want to come back to finances, because it is clear that the next step for devolution is going to be fiscal. Metro mayors are not going to be happy with a begging bowl approach for long- they are going to want to set taxes. Given the rather terrible state of council tax this isn’t exactly unreasonable; practically anything save a poll tax would be better than further tinkering with council tax.

So we may see different tax rates and indeed different tax styles in different areas. Maybe a land value tax somewhere and an additional income tax somewhere else. This doesn’t necessarily mean the overall tax burden will increase, but there will be pressure to allow metro mayors to levy their own funds to pay for the services they feel people want.

I can imagine the Treasury in particular will try hard not to accept this, but past a certain point it is going to be hard to resist. It will be fiscally hard to control (isn’t that the point?) but could lead to significant buy-in if people recognise the links between their payments and the services they receive. I suspect as a final statement, the Treasury will argue that any authority with fiscal powers should be allowed to fail.

So a system where devolution has reached its apex will be characterised by diversity, but we have to remember that we had a diverse system to begin with. We’ve coped with it well enough so far. Policies in one place may simply not apply in another- I think we can probably cope with that, although newspapers will no doubt be up in arms about postcode lotteries. It certainly won’t look federal, because there will be swathes of the country where devolution doesn’t apply. Those areas may feel hard done by unless they have some individual offer-whether it is a form of control or a guarantee of only their MPs setting the rules for those areas.

If the government doesn’t like the look of that they could try and put the genie back in the bottle by limiting the ambitions of devolved areas. If that’s the case, we could see something much more like the old metropolitan county councils, which would be a crying shame. This would be a two-tier system, with perhaps limited additional powers (the current agreements plus a few more, if they’re lucky), but mostly just conglomerated powers from the existing councils underneath them.

Diversity is not a bad thing, it can lead to experimentation and finding out what works. Areas that are not the same shouldn’t be treated the same (that would be an oversimplification). Some slight form of competition might be beneficial.

But we do need to have a sensible discussion about where we want to set the limits and what we need to do with the areas where devolution doesn’t apply. If nothing else, that will let the areas ripe for devolution go for it without being held back by a small number of interested parties.