Communities and Local Government
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- Housing
- Social housing management
- Social housing efficiency
- Social housing efficiency: Frequently Asked Questions (FAQ)
Social housing efficiency: Frequently Asked Questions (FAQ)
How does the Social Housing ETN fit with the LG ETN? Does it impose additional requirements?
There are no additional requirements imposed on Housing Authorities, or a requirement to provide a separate social housing AES. All social housing efficiency gains count towards the local government target. Social Housing efficiencies should be reflected within an authority's AES.
The minimum reporting requirements for LAs in relation to social housing are to report in their AES, as a cash sum, the efficiency gains delivered in the previous financial year in both housing capital spend (roughly equivalent to spend on housing capital works); and housing operating expenditure (roughly equivalent to spend on housing management and maintenance services).
Isn't this all about making cuts in services?
No, this is about achieving better results for the same level of resources. It's about "more from the same".
Do you expect the £835m efficiency target to be exceeded?
We expect the social housing sector to achieve £835million efficiency gains by 2007/08, but we do not underestimate the efforts required to do this. However, greater gains may be possible, and we would encourage local authorities and RSLs to seek to exceed the target to provide even better value for money in their services to the public.
How did you reach the £835million target?
It's based on a 2.5% saving on social housing across the board. Given the savings achieved through various pilot projects we believe this is realistic and achievable.
So we should be looking at making 2.5% savings in every organisation?
No. We are not setting individual targets. It may be that an organisation is already relatively lean in the way it operates, but all organisations should look to improve efficiency as part of continuous improvement.
How will efficiency be measured?
The principles for measuring efficiency gains are set out in the Social Housing Efficiency Technical Note (ETN), available on this website. All organisations will use self-assessment to report their own efficiencies. But this is not a bureaucratic exercise - it's about good performance management within front-line organisations.
The aim is to use, as far as possible, data which is already collected for other statutory, regulatory and performance management purposes.
Inflation runs at higher rates for some elements of housing service costs (eg construction). Are you taking full account of this?
Yes. Inflation is taken into account in each of the different workstreams, and is set out at 3.3 in the ETN. But organisations can influence it too - they need to be imaginative and think about controlling costs. An example of this is adopting the consortia approach which can keep down labour costs through managing the supply chain.
Will my organisation be able to count efficiency gains made in 2004/05 against the 2007/08 target?
Efficiency gains achieved in 2004-05, compared with 2003-04, that continue through to the end of 2007-08 can be counted towards the targets.
How should we be calculating the baseline?
The basic principles for calculating the baseline are set out in the Efficiency Technical Note (ETN) for Local Government available on this website. These are that:
- it includes 2004/5 service expenditure (sum of net current expenditure by service block);
- it includes 2004/5 net capital spend (sum of capital spend minus capital receipts);
- transfer payments, such as gross expenditure on rent allowances or rebates, are not included in the baseline;
- specific one-off grants are also excluded.
Full details of baseline expenditure calculations are given in Annex 2 of the Local Government ETN.
How do we factor in other calculations eg capital spend, upfront costs?
Guidance on these and other issues are also included in the Local Government ETN. Any specific queries not covered here should be addressed to socialhousingefficiency@communities.gsi.gov.uk.
What is the method for retrospective calculation of efficiency gains?
The method to be used by the Housing Corporation for calculating efficiency in new supply is given in the ETN. For the three remaining outputs - namely capital works, management and maintenance, and commodity procurement - the method for RSLs is:
(2003-04 cost of output, multiplied by (inflation index 2007-08, divided by inflation index 2003-04)) minus (2007-08 cost of output).
Under each output below, for each index stated, the 2003-04 figure should be standardised to 100. This is because the different indices may be running from different points in time, and their weightings would be inaccurate if not standardised to a single point in time. Also note that an index does not exist for the pay element under Management and Maintenance. One will need to be constructed by equating the 2003-04 regional pay to 100, and adjusting the 2007-08 pay accordingly.
The inflation index is defined for each output in turn:
Capital works
BCIS 'All-In' Tender Price Index
Management and Maintenance
(BCIS Building Maintenance Index, multiplied by 0.4) + (Annual Survey of Hours and Earnings, Table 7.7a 'Annual Pay Gross' for all employee jobs, median for the relevant region, multiplied by 0.4) + (Retail Price Index, multiplied by 0.2)
Commodity Procurement
(DTI Quarterly Energy Price Index, multiplied by 0.2) + (Retail Price Index, multiplied by 0.8).
For LAs , where an authority believes that greater price savings have been made in social housing over and above the rate of inflation as expressed in GDP deflator terms, these can count as greater efficiencies subject to the authority satisfying their auditor that these are genuine efficiencies, demonstrating the difference in prices and outputs as a result of action taken. The indices set out above may provide useful background information in this self-assessment process. In the absence of requisite information, the default position for calculations by councils remains the GDP deflator, as described in para 3.7 of the Local Government Efficiency Technical Note.
I'm not clear as to the position of the HRA?
The £6.45 billion local government target was set as 2.5% of baseline expenditure, excluding HRA revenue expenditure.
However all efficiency gains you make in social housing, including efficiencies made in HRA revenue expenditure, will count against the local government target.
What is the target split between cashable and non-cashable gains?
Social housing efficiency gains made in the LA se ctor will contribute to the wider local government efficiency target to achieve efficiency gains worth at least £6.45 billion a year by 2007-08 - at least 50% of which must be 'cashable'.
Social housing efficiency gains made in the RSL sector will contribute to the wider Communities and Local Government efficiency target to achieve efficiency gains worth at least £620 million a year by 2007-08. Efficiency gains made in new social housing supply will all be cashable, and will be recycled within the Housing Corporations Approved Development Programme to enable more new social homes to be provided. All other efficiency gains made in the RSL sector will be non-cashable, because money spent by RSLs on these activities is not public expenditure.
What are cashable and non-cashable gains?
Cashable gains represent the potential to release resources for reallocation elsewhere. So efficiency gains realised through greater economies of scale or lower prices are cashable. This includes instances where prices have been negotiated to below the level of inflation.
Non-cashable gains are achieved through such means as improved quality or additional outputs for the same level of resources. So where higher quality goods and services are procured for the same prices (after allowing for inflation), gains are non-cashable.
Why are you only looking for efficiencies in the four identified areas? Surely efficiency applies more widely than that?
The division of the social housing efficiency targets into four workstreams does not mean that social landlords should only focus on these areas, or be taken to imply that work to deliver efficiency gains under each workstream should be carried out independently of work under all other workstreams.
On the contrary, we encourage social landlords to seek efficiencies across workstreams, exploring all possible synergies.
How are you going to validate the self assessed AESs?
From 2006, local authorities' reports of efficiency gains are subject to review by the Audit Commission's appointed auditors - assessing the robustness of the process by which the authority identifies and calculates its efficiency gains.
The AES provided by lead regulated RSLs should be signed off by its governing body. The Housing Corporation will scrutinise and cross-check RSL AESs against the results for the published performance indicators and the operating cost indices. The Corporation's judgement on the AES will be reflected in the Housing Corporation Assessment (HCA) of that association.
Are we going to be penalised if I identify significant efficiency gains which - even if only in the short term - might register a slight drop in particular quality indicators?
No. While our starting point in this process is improving the quality of service we recognise that there must be an element of pragmatism in how we apply the use of quality cross checks. It may be for example that - if significant changes are made to existing processes and procedures - there may be an initial drop in customer satisfaction levels. We would expect organisations however to be able to justify such fluctuations.
What about ALMOS?
Where the LA's housing is managed by an arms-length management organisation (ALMO), the LA will be responsible for ensuring that the ALMO provides a robust assessment of the efficiency gains it has made, and that this is included in the AES.
Where do tenants fit in this?
The involvement of tenants is an important part of any decision that social landlords take. The Audit Commission's Value for Money KLOE explicitly recognises this by requiring high performing landlords to involve residents in service and procurement decisions.
Will you be imposing solutions on local authorities and RSLs that do not meet expectations, or simply fail to comply?
We believe the overwhelming majority of local authorities and housing associations are keen to improve the service they offer to the public.
It is for organisations themselves to explore and implement solutions which best suit their particular circumstances. Our requirement is that they demonstrate a serious commitment to finding the strategic approach which best meets their needs. Where they do not do this, we will consider the measures already available through regulatory and inspection frameworks to address this.
What is the right balance between encouragement, incentives, directions and sanctions to make efficiency gains?
We need to talk and work with local government and RSLs to achieve the target. We want the social housing sector to tell us about best practice that is out there. We are also making available £33million through the Efficiency Loan Fund to help in setting up local procurement consortia. But the real incentive will be the opportunity to recycle savings to fund frontline services.
Where can we get information on best practice?
Some examples of best practice are highlighted on this website. We are looking for further examples of best practice and local authorities and RSLs should send any they have available to socialhousingefficiency@communities.gsi.gov.uk .
The Audit Commission have also been commissioned to identify innovative approaches to efficiency in management and maintenance, to form part of 'efficiency toolkits' to be published later this year. The Audit Commission have established a website portal at
www.audit-commission.gov.uk/housingefficiency/index.asp , where ideas and initiatives are showcased.
Factsheet 8 also offers some useful contacts.
Is Best Value dead? Has it been replaced by efficiency?
No. Efficiency has always been an integral part of Best Value. Under the statutory duty of Best Value, local authorities must secure continuous improvement in their functions and services they provide, having regard to a combination of economy, efficiency and effectiveness.
The Housing Corporation's Regulatory Code expects all RSLs to be using continuous improvement to drive improved service delivery.
The current efficiency agenda, with its emphasis on raising productivity and enhancing value for money without reducing quality, reinforces and complements these requirements.
What is Communities and Local Government doing about its own efficiency?
We are committed to reforming our corporate services and will achieve £25m efficiency gains in these areas. There have been a number of initiatives taken forward: ODPM (now Communities and Local Government) and Cabinet Office internal audit services have merged; in the process of establishing a Human Resources Shared Service Centre with Home Office and Treasury; re-organising and rationalising the Department's Library Service; put in place a new contract for Integrated Facilities Management.
What is the Office of Government Commerce?
"OGC" works with government to improve procurement and project/programme management - it is responsible for implementation of the overall programme.
What is a 'change agent'?
Change agents, or specialist support teams, are the bodies who will help to deliver change in the sector through their expertise and experience.
Within local government, the Regional Centres for Excellence are the principal change agents, to disseminate best practice, promote partnerships, and act as a focus for procurement consortia.
Some national change agents will support local and regional bodies by offering expertise in particular areas. The National Change Agent for social housing procurement is one of these. It will provide specialist support, including standard documentation and advice on structures and models for setting up consortia.
Who is the National Change Agent for Capital Works?
Davis Langdon with Trowers and Hamlins. They won the contract through a OJEU procurement competition.
Davis Langdon currently provide a wide range of management and consulting services to public sector and housing clients. Trowers & Hamlins are a law firm who work extensively in the housing and procurement sectors.
What's the relationship between RCEs and social housing efficiency?
The appointed national change agent will work closely with each of the nine Centres of Excellence as well as other national, regional, and sub-regional stakeholders. Close working with the Regional Centres of Excellence will help to ensure the right links are made between housing and other local authority procurement initiatives at regional level. The Housing Corporation will consider the options for establishing links with the local authority RCEs and for the establishment of an RSL Centre of Excellence.
What is the Efficiency Challenge Fund?
The £33 million Communities and Local Government Efficiency Challenge Fund will provide financial assistance towards the set up costs of new housing procurement consortia. Setting up a consortium has costs which may not be paid back in efficiency gains until after perhaps 2 years. So we think there is need for some early support.
The financial assistance will mainly be in the form of loans, but will include some early grant support for social landlords who want to form consortia.
The loans will typically range from £500,000 to £1.2m.
The size of the grants is not fixed but is not likely to exceed £100,000 each.
Who can bid for the money?
It is open to all social landlords - RSLs, ALMOs and LAs. We will also welcome bids from consortia which include a mix of different types of social landlords.
Who will make the decisions on bids for assistance from the Efficiency Challenge Fund - Communities and Local Government or the NCA?
Communities and Local Government. The NCA will administer the fund and give advice to CLG, but final decisions will be for the Department.
Is there a deadline for applications?
No. Applications will be considered at any time, though we will review the operation of the fund after it has been operating for a time and may change its conditions.
Where can I get more information on the Efficiency Challenge Fund and how to apply?
Bidding guidance is published on this website. Those interested in applying should contact the NCA for further information. Contact details are included in the bidding guidance.
What is 'system thinking'?
It's about looking at the purpose of a system from the customer perspective and removing the parts of the system which do not benefit the customer. It essentially analyses work flows from beginning to end to find areas of wasted effort.
What is Fusion 21?
A partnership organisation based in Merseyside which has reported net savings of 7.5% on capital repairs projects for its members through:
- 'work-smoothing' capital repairs programmes of member organisations into a package over several years, providing clear demand signals to the supply market;
- operating the collective purchase of repairs materials including: agreeing common specifications across member organisations; assembling the supply chain using a partnering approach to secure greatest efficiencies rather than greatest discount; using local suppliers where cost neutral for community benefits; enabling client organisations to purchase range of products on line as required from preferred suppliers at significant cost savings;
- operating the collective purchase of labour for capital repairs projects including: allowing local firms to compete with the big players by separating the procurement of labour and materials; training and providing construction jobs for 570 local job seekers, expanding the restricted local labour pool; providing certainty of demand for selected firms, enabling them to grow their business and maximise efficiencies.
