Written Ministerial Statements
Thursday 17 February 2011
The Government have today presented to Parliament a consultation document, “A new approach to financial regulation: building a stronger system” (Cm 8012), which provides further detail on the coalition Government’s proposals to reform the framework of financial regulation in the UK following the complete failure of the tripartite system over many years to identify or tackle the build up of risk in the financial system. That failure precipitated the biggest financial crisis for a generation, leading to a run on a major high-street bank and the part-nationalisation of two of the largest banks in the world. We need a wholly new approach. The reforms detailed today will address the fundamental weakness of the regulatory system, created in 1997. This document is available on the Treasury website.
This document expands and further consults on the Government’s proposals, set out last year, to disband the Financial Services Authority and establish a new system of more specialised and focused financial services regulators. The Government’s reforms focus on three key institutional changes: the creation of an independent Financial Policy Committee (FPC) in the Bank of England, the establishment of a new Prudential Regulation Authority (PRA) as a subsidiary of the bank, and the creation of an independent conduct of business regulator, the Financial Conduct Authority (FCA), which was formerly provisionally titled the consumer protection and markets authority. This corrects the failures of the past by creating regulators with clear objectives and the powers needed to deliver them.
“A new approach to financial regulation: building a stronger system” outlines the Government’s thinking on a range of issues, including: the objectives of the new regulatory bodies and the factors which they must consider in fulfilling their objectives; the levers and likely tools the FPC will have at its disposal to protect financial stability; the PRA’s judgment-led approach in regulating firms; the FCA’s more proactive and focused approach to regulating conduct in financial services and markets; accountability measures for the new regulatory bodies; and co-ordination mechanisms which will determine how the regulatory authorities will work together, and with regulated firms. Our reforms will create a stronger regulatory structure which reinforces stability in financial markets and helps deliver better outcomes for consumers.
Following the consultation, the Government will present a further White Paper including a draft Bill for pre-legislative scrutiny in the spring. The Government expect the new regulatory structure to be in place by the end of 2012.
Communities and Local Government
Council Tax Benefit
The spending review 2010 announced that Government would localise council tax benefit from 2013-14, and reduce its costs by 10%. The Welfare Reform Bill, published today, took the first step in that direction by taking enabling powers to abolish council tax benefit. Further changes will follow to establish the new system from 2013-14.
I can confirm that the Government remain committed to retaining council tax support for the most vulnerable in society and that they will be taking forward plans for councils to develop local rebate schemes. This reform is part of the decentralisation agenda. It will create stronger incentives for councils to get people back into work and so support the positive work incentives that will be introduced through the Government’s plans on universal credit.
Full consultation on the system of local council tax rebate schemes will be undertaken in due course, led by the Department for Communities and Local Government. Parliament will have the final say on any new regime in England. The Government will discuss the devolved implications with the Scottish Government, the Welsh Assembly Government and the Northern Ireland Executive.
Combined with other incentives—such as the new homes bonus and our proposals for the local retention of business rates—these changes will give councils a greater stake in the economic future of their local area, so supporting the Government’s wider agenda to enable stronger, balanced economic growth across the country.
Decent Homes Programme
In a difficult spending review the Government were pleased to announce that they will invest over £2.1 billion of capital funding over the next four years to help towards completing the decent homes programme, including £1.595 billion in the council housing sector. Some £0.5 billion will be allocated to continue to fund housing associations that have already taken on the ownership and management of ex-council housing stock. This reflects the Government’s commitment to fairness, protecting the most vulnerable people in our society and as far as possible protecting front line services. This funding will help to refurbish over 150,000 council homes, improving the lives of thousands of residents. It will also help ensure that all councils can deliver a sustainable 30-year business plan under self-financing.
I previously announced that the Government wanted to be fairer in their approach to all, by being less rigid about local structures that would be eligible for funding than the last Government. As a result the Homes and Communities Agency (HCA) published proposals for managing the funding allocation process in a consultation document. Following this the agency sent out an invitation to bid to all councils and ALMOs.
The HCA received bids from 70 authorities for a total of £2.7 billion. Therefore there has had to be a rigorous assessment process conducted by the HCA, in consultation with the Mayor for London, in order to live within the available budget.
Today, I am announcing jointly with the HCA the funding for 2011-12 and 2012-13 and indicative funding allocations for 2013-14 and 2014-15. Not all bids have been funded. Those that have not been funded are where the level of non-decency is not as great, is less long standing, or could potentially be funded by greater efficiency savings by the authority especially within the greater freedoms and flexibilities of the system of self-financing after April 2012. Some bids will be funded at a reduced level in line with the criteria in the invitation to bid and may be funded on a later time scale than bid for in order to live within the budget. Only those bids where the authority has made a strong case for investment need and already demonstrated significant cost reductions will receive levels of funding close to their bid. Although there will be more to do, today’s decent homes funding will go a long way to making all homes decent for their tenants.
A table showing the funding allocated has been placed in the Library of the House.
Local Enterprise Partnerships
I, together with the Secretary of State for Business, Innovation and Skills, would like to inform the House that, following the submission to form a local enterprise partnership, we have today written to the Mayor of London and to London councils inviting them to put their governance arrangements in place.
Local enterprise partnerships will be important drivers of growth in the future, bringing together local businesses and elected leaders to create the right conditions for growth. They see a real power shift away from central Government and quangos and towards local communities and the local businesses who really understand the barriers to enterprise in their areas. This announcement brings the total number of partnerships so far invited to put their governance arrangements in place to 31—nearly 90% of the country. We will continue to work with other areas with a view to establishing further local enterprise partnerships across England.
New Homes Bonus
Today, I am announcing the final design of the new homes bonus. The new homes bonus will fulfil the Government’s coalition agreement commitment to provide local authorities with real incentives to deliver housing growth.
This is a key part of our ambition, set out in the “Local Growth” White Paper, to create a fairer and more balanced economy through encouraging growth. The role of local areas in this rebalancing of growth is crucial—localities are best placed to understand drivers and barriers to local growth and should lead their own development to release their economic potential. In so doing they should be able to benefit directly from the development they bring forward.
On 12 November I wrote to English MPs and local authority leaders announcing a consultation on implementation of this commitment through the proposals for the new homes bonus. The consultation closed on 24 December. We received some 470 responses from local authorities, representative groups, MPs and individuals. The responses gave widespread support to the principles of the scheme and the broad scheme design. After considering all responses I am announcing the final scheme design and implementation. Copies of the consultation response document and the final scheme design document have been placed in the Library of the House.
The new homes bonus is designed to address the disincentive within the local government finance system for local areas to welcome growth. Until now, increased housing in communities has meant increased strain on public services and reduced amenities. The new homes bonus will remove this disincentive by providing local authorities with the means to mitigate the strain the increased population causes. In addition, in doing so the new homes bonus should help engender a more positive attitude to growth, and create an environment in which new housing is more readily accepted.
The new homes bonus scheme will be a powerful, simple and transparent incentive. Commencing in April 2011, the bonus will match fund the additional council tax potential from increases in effective housing stock, with an additional amount for affordable homes, for the following six years. It will ensure that the economic benefits of housing growth are more visible to the local authorities and communities where growth takes place.
But housing growth is not just about new units. It is also about best use of existing stock. For this reason, we have designed new homes bonus to measure increases in effective stock—the change in total number of homes and change in empty homes. Empty homes contribute to blight, are a local eyesore and can be a source of local opposition to new homes. But they can also play an important role in increasing available housing—data suggest the average number of long-term privately owned empty homes over the past five years is around 300,000. Of these between 100,000 and 130,000 are in areas of strong housing demand.
The balance between market and affordable homes is crucial—therefore the bonus will provide an additional £350 for each affordable home for the following six years. This means that the bonus available for an affordable home will be up to 36% more than for a similar market home.
The new homes bonus will be unring-fenced. This flexible funding will allow the benefits of housing growth to be returned to those communities affected by growth in a way which best meets local need. Local authorities will need to lead the debate with their communities to determine local spending priorities.
The Department for Communities and Local Government has set aside almost £l billion over the spending review period for the scheme, including some £200 million in 2011-12 or year one. From year two, funding beyond these levels will come from formula grant.
These radical reforms demonstrate our commitment to seeing a major upswing in housing to meet Britain’s housing need and seeing more homes that people want in the places that people want them. We also want to see greater housing market stability, where house price rises are more in line with earnings growth. However, we will not impose this through top-down targets which attempt to dictate where growth happens, but too often produce little but hostility.
They will be complemented by reforms to the community infrastructure levy, which will incentivise growth by providing authorities with a powerful new tool to secure contributions from development to deliver the infrastructure that communities need to make that growth acceptable and sustainable. The local government resource review will consider how business growth can be incentivised. This framework will encourage local authorities and communities to increase their ambitions for housing and economic growth, and to take the lead in managing the way in which villages, towns and cities develop.
The new homes bonus also sits alongside the existing framework for making planning decisions. Responsibility will remain with local authorities to work within this framework to continue to ensure that development is suitable and sustainable by meeting local needs and national planning policy.
Further information on the new homes bonus final scheme design can be found at: http://www.communities. gov.uk/housing/housingsupply/newhomesbonus.
We will continue to provide advice on the scheme via the Newhomesbonus@communities.gsi.gov.uk email account.
The Ministry of Defence “Supplementary Votes A Estimate 2010-11” will be laid before the House on 17 February 2011 as HC 777. This outlines the maximum numbers of personnel to be maintained for each service in the armed forces during financial year 2010-11.
The Ministry of Defence “Votes A Estimate 2011-12” will be laid before the House on 17 February 2011 as HC 769. This outlines the maximum numbers of personnel to be maintained for each service in the armed forces during financial year 2011-12.
Offender Personality Disorder
I am publishing today a joint Department of Health and Ministry of Justice consultation document on an “Offender personality disorder pathway implementation plan”.
This document sets out the Government’s plans to reshape services, interventions and treatments for offenders with severe personality disorders. These plans would be implemented within the existing resources devoted to this area across the national health service and National Offender Management Service. The proposals take account of the learning from the dangerous and severe personality disorder programme, introduced by the previous Administration, and are aimed to improve identification and assessment, increase treatment capacity, provide additional psychological support in prisons, and strengthen oversight for those released from custody.
This consultation is an important opportunity for professional bodies, service providers in health and criminal justice, patients and the public to comment on how best to ensure continuity of care through the development of effective service pathways across custodial settings and in the community, to improve care, protect the public and make the best use possible of the available resources. This consultation sets out the Government’s initial thoughts and invites views from interested persons or organisations.
The consultation document has been placed in the Library. Copies are available to hon. Members from the Vote Office and to noble Lords from the Printed Paper Office.
Work and Pensions
I wish to inform the House that, today, the Department for Work and Pensions, together with the Department for Business, Innovation and Skills will be launching an independent review of sickness absence in Great Britain.
It is estimated that around 300,000 people (approximately 1% of the employed population) move on to sickness-related benefits (incapacity benefit or employment and support allowance) each year. These individuals make up a sizeable proportion of long-term sickness absences and around half of the total flow on to ESA every year. They constitute a significant cost to taxpayers, in addition to the costs incurred by employers covering absences, and the opportunity costs to the economy in missing out on the contribution of these individuals.
In conjunction with the Minister responsible for employment relations, consumer and postal affairs, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), I have invited Dame Carol Black, the national director for health and work, and David Frost, current director general of the British Chambers of Commerce, to co-chair an independent review of sickness absence to establish how we can mitigate the economic losses, as well providing effective support for those who would benefit from our help. The report will be jointly sponsored by the Department for Business, Innovation and Skills and the Department for Work and Pensions. The review will explore how the current system could be changed to help more people stay in work, thereby reducing costs. In addition, the review will examine whether the balance of these costs are appropriately shared and make recommendations for reform.
The coalition Government are committed to reducing the burden of regulation of business in line with the objectives of the growth agenda. The sickness absence review will be conducted in this context, as well as informing the work of the existing employment law review. As such, the sickness absence review will complement the Government’s ongoing welfare reform agenda.