MoD dismisses housing doubts

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THE MINISTRY of Defence yesterday dismissed reports that its scheme to transfer 70,000 service married quarters to the private sector was behind schedule, threatening pounds 500m of income and savings on which it is counting.

If the expected savings are not made through the housing scheme they will have to come from elsewhere - principally the hard-pressed defence procurement budget, with further pain for British industry. The MoD said: 'Work is going on apace and we hope to meet our objectives. These reports are pure speculation.'

The expected pounds 500m savings in 1995-96 are an important component of pounds 2bn savings over three years which the MoD believed it had achieved with the housing scheme and the recently announced Defence Costs Study.

The plan relies on the markets to raise about pounds 500m to buy or lease the services married quarters, thus releasing MoD from the cost of running them and providing a lump sum. But doubts have been raised about whether the markets will put up that much money, especially as the married-quarters estate is not a particularly attractive proposition commercially.

The MoD said yesterday that details of how the estate would be transferred had not been finalised. David Hart, a businessman and friend of Michael Portillo, has put forward a scheme to transfer houses to the proposed housing trust on a 30-year lease. But the MoD said yesterday it was one of many.

'We might lease them, we might sell them. You wouldn't expect anything concrete at this stage. Even if one of these ideas doesn't work, that doesn't mean they all won't. We still expect to transfer next year. I don't want to comment on details of the Hart proposal.' Some MoD sources indicated that Treasury rules might be a problem with some proposals.

The work is being carried out by an 'embryonic' housing trust, chaired by Michael Robinson, a former housing director of Bristol City Council. The trust must devise a suitable scheme and recommend it to ministers. If they accept it, the MoD would then negotiate the terms and costs of transfer with the housing trust, which would adminster the estate and provide housing for service personnel and their families.

However, all possible schemes depend on the City, housing associations and other organisations putting up money to buy or lease the estate. Any quarters not needed for service personnel could be leased to civilians. Problems could arise, however, because some are in secure areas, others in remote areas, and most are fairly unattractive places to live.