The government has invested so much in HIPs that it cannot stop now. But, asks Raymond Perry, will a new prime minister make the difference?


Economists have long been familiar with the sunk cost fallacy. A natural aversion to losing resources, both financial and emotional, already invested in a project may lead to a determination to press on long after it becomes apparent that a disastrous mistake has been made. Sometimes referred to as the Concorde Effect, all the signs are that this has become a significant factor in the saga of the home information packs (HIPs).



In the Gazette last November, I wondered if the government might scrap HIPs at the last moment - without foreseeing quite how accident-prone the Department of Communities and Local Government would be in attempting to implement the policy (see [2006] Gazette, 30 November, 14). Much wear and tear was caused by assorted revisions to the proposed regulations. This culminated in the humiliation of the last-minute delay forced on the government as a result of the judicial review instigated by the Royal Institution of Chartered Surveyors (RICS).



Even so, the government insists that HIPs will be introduced on 1 August. Secretary of state Ruth Kelly has told The Guardian that she expects HIPs to apply to all houses by the end of the year.



But given this determination, the unasked question is why the government delayed their introduction at all.



The order in the RICS judicial review proceedings made by Mr Justice Collins only applied to one part of the HIP - the energy performance certificate (EPC). The order made clear that the court saw no reason why the government's policy in relation to improvements in selling properties should be interfered with. The government was free to go ahead with HIPs (less the EPC) on 1 June. Instead they were delayed as well.



When the government comfortably won the vote on the opposition motion to annul the regulations on 16 May, despite much hostile publicity, all seemed well. But in an odd twist of fate, Mr Justice Collins had already made his order earlier the same day. As part of the jinx that seems to surround the implementation of HIPS, somehow news of the order did not reach Parliament before the debate. This resulted in housing minister Yvette Cooper dismissing the judicial review proceedings as completely groundless at a time when the order had already been made.



Once aware of what had happened, the government had to negotiate with the RICS. On 22 May, Ms Kelly, announcing that they had 'reached a resolution of the judicial case' with the RICS, had the embarrassing task of announcing the postponement. HIPs were to be delayed for two months and would initially only apply to homes with four or more bedrooms. This last change was widely derided as unworkable.



The RICS responded that the proceedings had been stayed - not settled - and on terms which included a 12-week consultation period. And it was prepared to return to court if necessary. So the possibility of a further hearing remains and the potential for further delay still looks high.



The sunk cost fallacy - the government having invested too much political capital in the scheme to abandon it now - is one explanation of the determination to press on with HIPs despite all the political damage they are causing. But in business there is a time when the Concorde Effect is minimised. This comes immediately after a change of management.



At the end of June there will be a new prime minister and a major cabinet reshuffle. The administrative blundering that has dogged the introduction of HIPs is having a damaging effect on the government's reputation for competence. As HIPs were held back on 1 June, Gordon Brown will have the ability to abandon HIPs altogether and just proceed with EPCs alone. Will he do it?



Raymond Perry is a partner at Davies and Partners in Gloucester