Funding for Kickstart and Pathfinder in doubt as HCA enters talks with coalition over its future
All spending by the Housing and Communities Agency was put on hold this week as the quango entered “intense negotiations” with ministers and officials over budget cuts.
A source at the HCA said the body, which has about £700m of funding for construction waiting to be signed off, was examining “all uncommitted budgets” to try to identify savings.
It is thought likely the body will be expected to contribute to the £6bn of savings to be set out by chancellor George Osborne on Monday. It has a total budget of £6.1bn for 2010/11.
The future of the agency in its current form is also understood to be in doubt; housing minister Grant Shapps criticised it when he was in opposition.
In addition, the Treasury confirmed this week that the review of all spending decisions made since 1 January extended to quangos, meaning a raft of grant allocations made by the agency could be re-examined.
The HCA source said the conversations with ministers and officials included “what constitutes a ‘committed budget’ – there are different tests in terms of strength of commitment”.
In particular, housebuilders will be concerned about reductions to the second funding round of Kickstart. This is worth £550m, but only £110m has been committed. Funding for schemes such as Countryside Properties’ 650-home Canning Town scheme in east London (pictured), which have been approved in principle but do not have a signed agreement, is in doubt. The HCA’s £330m Pathfinder programme for regenerating housing estates in the north of England is also on hold, awaiting the sign-off of budgets for this financial year.
The uncertainy over spending cuts comes on top of a review of the HCA’s property and regeneration business, which began just before the election.
The review is intended to work out priorities for the agency’s large land holdings and interests in regeneration schemes across the country.
This week, the HCA also suffered the latest in a series of high-profile departures, prompting a senior management reshuffle that cut the number of corporate directors from seven to three to save £2m in running costs. John Lewis, the acting director of new ventures and partnerships, will leave, following Duncan Innes, the head of land, Gill Taylor, the skills director, and Eamonn Boylan, the deputy chief executive.
A separate industry source at the HCA said: “There’s a feeling it’s the last helicopter out of Saigon time. The worry is that there is a huge housing pot the coalition can see to make savings from.”
The HCA is not alone in having its spending put on ice – sources said all communities department agencies had been told a spending moratorium was in place.
Negotiations with ministers include what constitutes a ‘committed budget’
Source at the HCA
Peter Andrews, chief executive of the London Thames Gateway Development Corporation, said the freeze was holding up progress on starting the 10,000-home Barking Riverside scheme with Bellway, which was reliant on a £9m grant from the agency. “We’d love to get on site with that scheme but we haven’t been given the authority to progress at the moment.”
All change: How new regime is affecting key sectors
The unveiling of the six winners of the £3bn Procure 21+ framework is awaiting approval from health secretary Andrew Lansley. However, the 11 contractors that were shortlisted have received letters confirming it will go ahead.
One contractor said he expected to win the same number of jobs as in the original Procure 21, but that they would be worth less and would be more focused on refurbishment.
- A source at the project to replace the Royal Liverpool University Hospital with a £400m PFI hospital, which was put out to tender in April, said the team was trying to contact the Treasury to clarify its position.
- The project director at the £280m PFI replacement for Liverpool’s Alder Hey hospital, for which Balfour Beatty and a joint venture between Laing O’Rourke and Interserve were shortlisted in April, said they have heard nothing from the government and were continuing as normal.
Legislation is to be put through this year to create a development corporation in east London to oversee the regeneration of the Olympic park and surrounding area after the Games, according to a source close to the situation.
The body will merge the London Thames Gateway Development Corporation and the Olympic Park Legacy Company. It will be given planning and compulsory purchase powers, and will require primary legislation to set up. It is not clear how the body will be funded.
Chief executive Rob Holden said dates had been agreed to meet ministers over the £16.9bn programme but that for the time being it was “business as usual”. He said: “We haven’t been told to stop or slow.” Chair Terry Morgan, speaking after transport secretary Philip Hammond publicly backed the programme, said he was working on the assumption that it would be completed in 2017, dispite wider fears that the timetable may slip.
Senior officials this week offered ministers a “menu of options” to take forward the proposals suggested in both parties’ manifestos. Both had proposed abolishing regional housing targets and returning power to local authorities. A communities department source said: “It’s not a question of whether it’ll be done but when. However, they have ideas about what they could do straight away and we’re having to advise what’s realistic.”
What the industry thinks of the government so far
Keith Miller, chief executive, Miller Group
We’ll be looking for continuing support for the industry. The government is freezing Building Schools for the Future, which is not helpful, but it is early days yet. They’ve got the levers of power; let’s hope they use them wisely and support capital programmes.
Peter Elston, chief executive, Banner Holdings
The cuts might be good news because there are projects, like a lot of defence work, that have been bundled together to leave firms like Carillion in the driving seat. As a medium-sized contractor we can take advantage as the government unravels frameworks to get more bang for its buck.
Dean Webster, chief executive, Cyril Sweett
In the short term BSF looks under pressure, which could lead to more refurb work for us. If the government reviews how work is procured, it could give it to a wider set of players. But the government must realise the best way to make savings is through operational cuts ,not capital.
Mark Clare, chief executive, Barratt
I hope the new administration recognises that it can’t afford to let housing volumes fall further – there are fears of constraints on supply if schemes like Kickstart are curtailed. We’d like a discussion about how we move to a different planning system that allows more homes to be built, not fewer.