星空传媒

Two weeks ago the housing Corporation was forced to rename its efficiency index an 鈥渙perating cost model鈥� after its August launch provoked damaging name-and-shame headlines (HT, 1 October, page 13). We have also recently had news that developers receiving approved development grant would face only 鈥渓ight touch鈥� regulation. And on 9 September, the ODPM finally conceded that European procurement rules did apply to registered social landlords (A word to the wise, try the NHS or ODPM websites for good clear English guides. The public sector has been living with European requirements for 20 years).

What are the legal lessons from all this? The hostile reaction to the efficiency index should remind the corporation that any public body with statutory powers has a duty to take reasonable care to avoid what the law calls 鈥渦nnecessary injury鈥� to the people intended to benefit from those powers.

One of the corporation鈥檚 powers is to improve RSLs鈥� performance. If it doesn鈥檛 take reasonable care when publishing league tables and the indices damage RSLs, board members and senior officers, that failure could be costly.

The code of the tabloid hack

Any competent regulator should understand the effect tables have on reputations and finances. The failure to do what any tabloid journalist would do 鈥� phone the subject
to ask for comment before going into print 鈥� seems culpable. This time, the index was so flawed that the immediate anger was soon dispelled but, if there is a repetition, RSLs are not likely to be so tolerant. One can be sure that if the corporation treated private sector developers in the same way, the writs would fly. If they follow past form, those writs would threaten individual officers 鈥� they know where you live and your home is at risk.

Should there be efficiency leagues for developers that get grant? Yes, and they must be subject to the same stringent open-book accountability and performance assessments as RSLs. Failure to do this could lead to judicial review challenges by disappointed RSLs because it gives private developers a competitive edge. The point of giving grant to developers is that it is believed they can produce homes more quickly and cheaply than an RSL, but the playing field should be level for this to be truly tested.

How are the developers to be selected? The Housing Corporation is specifically caught by the Procured Regulations so when it decides to pay money on condition that works and services outputs are achieved, it has to invite bids from Gdansk to Grenada.

A bigger issue is state aid. Should grant be paid at all? European law prohibits and penalises member states from giving subsidy to a private company that has the effect of distorting competition 鈥� recently, small town European airports were banned from giving cheap landing rights to cut-price airlines.

So, if grant is given to a developer for a mixed-tenure development, does that put the developer in a privileged position on the private sale units and distort competition with other local developers?

If the corporation treated private developers in the same way [as they have with their new cost index] the writs would fly

These are issues not just for the ODPM and the Housing Corporation, but also for banks lending to developers on grant-funded schemes. The banks should be looking back to the losses they suffered in the late 1980s and early 1990s on loans to councils that were acting unlawfully.

Levelling things out

The legal solution for the corporation is to comply with the European procurement directives on award of grant to developers, ensure there are level playing fields for private and RSL players and ensure that the accountability and profit regime for private developers does not distort competition with non-grant-aided developers.

With sound, objective legal advice, that should be achievable. RSLs should not be afraid of grant to developers on such a basis as true competition should enable them to learn to improve their performance.

So too should European procurement law. For a short time, it will be a catch-up nuisance but as the ODPM news release states: 鈥淩SLs should reap value for money benefits through improving the competitive bidding processes鈥�. Over the past few years, the lack of competitive bidding processes 鈥� added to recruitment difficulties and a credulous view of the efficiency of the private sector 鈥� has convinced some that the procurement costs of some RSLs are excessive because they have become too reliant on favoured private sector partners.

In contrast, councils, the NHS and other public bodies increasingly insist on competitive bidding to get best value.

RSLs can follow local authorities鈥� partnering arrangements procedures: the partners are EC-selected, there are proper performance requirements and termination arrangements in the contract and the contracts have to be re-tendered at regular intervals. That must be right and healthy.