I remind the Committee that if there is a Division in the Chamber while we are sitting the Committee will adjourn as soon as the Division Bill is heard and will resume after 10 minutes.
Debate on Clause 88, Amendment No. 102ZD resumed.
The key point that I was attempting to make before I was interrupted by the Division Bell is that the housing association movement was begun by social entrepreneurs of their day who used their independence from the state to begin to pioneer new and innovative ways of creating social housing. The capital development programme has often been used as a mechanism for stimulating innovative approaches to social problems. This amendment seeks to encourage housing associations to continue to use their capital investment as a means of stimulating social innovation and questions the wisdom of allowing the Secretary of State any further say in what social innovation housing associations may become involved in.
Let me share with the Committee the reasons why this point is particularly important. Objective 6 of the new Tenant Services Authority’s remit is,
“to encourage registered providers of social housing to contribute to the environmental, social and economic well-being of the areas in which the housing is situated”.
The regulator will begin to regulate housing associations’ non-housing activities. The power to encourage is good where associations want to develop and feel that they can skimp these responsibilities, but a weakness is that the clause does not make it very clear what the practical shape of regulation in this area will be.
While some regulation may be valuable, even inevitable given the increasing degree and scope of community investment activities, we must be alert to the costs of regulatory creep. This danger was well identified in the Cave review and reassurances have already been given at a prior stage that this should not be a cause for concern. However, it is worth looking at some of the arguments proposing limits to the size and extent of the regulatory shadow.
First, on enterprise and service innovation, many housing associations have engaged in community development work because they have believed that there is a need for a step change in the provision of all local and neighbourhood services in deprived areas. The greatest challenge is to do this so as to re-energise people and communities in ways that begin to wipe out further cycles of dependency. This is where the impact of social entrepreneurs within the housing associations and the local communities has been greatest. Without the impact and example of social entrepreneurs, the prospect of transforming not just neighbourhood services but the neighbourhoods themselves is diminished. Increased levels of regulation will tend to discourage and dampen enterprise and will tend to make housing associations more cautious. The entrepreneurial spirit will tend to evaporate as it has elsewhere in many parts of the public service.
Secondly, in the most deprived areas it is not just specific services—a community facility here or a training opportunity there—but the whole culture of the neighbourhood that needs to be transformed and needs to transform itself. Additional layers of regulation—it is not as if there is no regulation at all out there at present—will again send out the wrong signal to those who are seeking to change the culture of some of these new emerging places.
Thirdly, there is a need for regulation-free areas. No service area is completely regulation-free but in some areas, provided that the board control is robust, decision-making is resolute and financial viability is not impaired. It is important to preserve as much autonomy as possible. This is such an area. Real service innovation is always in short supply. There is never enough invention to keep pace with social change. All our services are straining under the pressure of ever quicker social change. However, swelling bureaucracy and regulation never seem in short supply, adding burdens and costs but never removing things significantly beyond barely satisfactory or uninspiring services. Is this a service and regulation model that we want to emulate?
Fourthly, regulation cannot promote innovation. Social invention, together with the changes and added value it brings, cannot easily be regulated. Invention is unpredictable and comes in the most unexpected of places. It often comes in places where everyone is certain that there is nothing to find. It frequently takes time to be acknowledged and have its value appreciated and understood. You cannot easily regulate for change and you cannot regulate what will change. Unless we have a system that widely promotes and encourages innovation and experiment, where will the stream of future improvements actually come from? A Highway Code is a great idea, but someone had first to invent vehicles and a highway that they could travel on. Those golden eggs and the geese that can lay them must be able to flourish.
Fifthly, many community activities are initiated precisely because of resident demand and local support from an association’s board. Things are done precisely because local conditions and people determined what the need was, and that it should be met. If these activities are now done because the regulator directs that they should be done, in ways that the regulator deems appropriate, this will tend to undermine the potentially enormous social power of local initiative. There is a world of difference between saying, “We did this because the regulator requires it”, and, “We did this because you wanted us to”. There are existing checks and balances. If an association launches into exotic activities without getting the basic services right, residents will be the first to criticise and express dissatisfaction. This was amply illustrated in the report Every Tenant Matters. Local energy and inventiveness, both at board and neighbourhood level, need to be nurtured. Elsewhere in the Bill the aim is clearly to strengthen governance and resident involvement.
Sixthly, community investment is frequently undertaken with non-housing money. This may be funding obtained through non-housing governmental sources, from charitable trusts or sponsorship from private enterprise. Such funding will generally come with its own conditions, requirements for outputs and audit processes, which an association must demonstrate that it meets. Is a further layer of regulatory audit really necessary? This is duplication which has a cost.
Seventhly, there is a trace of a central controlling tendency in the legislation; just a trace of that baleful tendency to treat everything as if it was ultimately no more than an arm of government. If government, either central or local, wishes to influence the work of non-governmental organisations, it already has many persuasive incentives at its disposal. Government can make funding streams available through specific programmes; can give or restrict access to partnerships; and can increase or diminish the influence and involvement of non-governmental bodies. These signals are read, and organisations and people respond rationally to them. This is the everyday life and work of government and non-governmental organisations everywhere to achieve their objectives.
What additional benefits would there be from more direct regulatory control that would not be outweighed by the damage resulting from constraining the independence of associations? Stronger partnerships emerge from independent parties than from constrained ones. The autonomy of housing associations was once thought to be an important part of their value; it would be disappointing if that insight were lost.
My eighth point is about perverse incentives. Extending regulation to this area may have several unwanted and unintended consequences. Obvious examples are that it could encourage tick-box compliance where compliant mediocrity and uniformity pass muster or might encourage a less ambitious spirit where no one feels he has to stretch once he complies. Regulation also tends to lead to a desire to reduce regulatory risks so that the safe, the limited and the dull are chosen because they cap the risk of exposure to regulatory failure. Can we afford to encourage that spirit where invention is most needed? The “business as usual” and “we meet the regulatory standard” responses often stand in the way of innovation and keep mediocrity in place precisely where making it new is most required.
Finally, the argument from monopoly supply does not apply here. The monopoly argument supporting close regulation applies to many of the services provided by housing associations, ALMOs and local authorities. If we assume that they are all going to be brought under the same regulatory umbrella within a year or two, as the Bill suggests, it is apposite for many core functions, but that argument does not apply in the same way for non-housing activities. There is considerable vigorous competition for non-housing services between the mainstream, the third sector and the private sector. Where competition is stronger, a case can be made for much looser regulation.
These are the nine strands of argument in favour of a loose regulatory touch on community investment activity. The arguments overlap and are linked in various ways. However, the most important strands concern the need to encourage enterprise and innovation. To make the step changes in service provision and housing supply which in large part motivate the Bill, more innovation than ever, and at a greater rate, is going to be needed. This is clear from the recent report from the Smith Institute, The Public Value of Social Housing, which was recently launched by the Housing Corporation. It states that social change and the profile of people now predominantly housed in public housing will give this contemporary housing and regeneration its hardest challenge yet.
To begin to meet this challenge it might be helpful if the Government could require the regulator, when evaluating housing associations, specifically to look for innovation activity and to comment if there is none or not much evidence of it. Social innovation will not happen by magic. It needs to be encouraged in the Bill. This amendment, plus simple little measures like this, can have considerable impact in setting the tone for future house-building programmes.
I shall speak briefly to Amendment No. 102ZD. My noble friend Lady Hamwee has already set out why this amendment, which essentially reorders the fundamental objectives of the regulator, is relevant. It is relevant above all because the other nine amendments are about what the regulator is intended to achieve, but this amendment is about how it operates. In Part 2 we will have many hours of useful debate on several contentious clauses which have broader powers than some of us associated with RSLs—and here I declare an interest—would wish to see.
Although we will debate the provisions later perhaps I may illustrate. We will scrutinise Clauses 191, 192 and 193, which cover standards. We will look at enforcement powers and the triggers triggered by Clause 215 and Clause 248, which deal with management transfer powers. All those things come under the broad purview of fundamental objectives and having a statement right up front on proportionality, consistency, transparency and accountability, as it would be if the amendment were to be accepted, would add much clarity to the later and slightly more contentious issues.
I am very grateful to the noble Lord, Lord Mawson, for so seamlessly picking up our debate where we abandoned it last week and concluding what I thought was a very good debate on a very important clause, Clause 88, which goes to the heart of what the regulator is about.
This is a large group of amendments. I shall be as clear as I can in addressing them but I also want to be as expeditious as possible as we have a challenging timetable today. I start therefore with the remarks of the noble Earl, Lord Cathcart, who spoke to five amendments in this group, including Amendments Nos. 102ZD and 103C, to which the noble Baroness, Lady Falkner, has just spoken, which would raise the regulator’s objective 10 above all its other objectives. The group also includes Amendment No. 103ZA, which would place a requirement on the regulator to ensure that tenants have adequate information about the standards of their housing services, and Amendments Nos. 103E and 104ZA, which seek to ensure a level playing field for all providers of social housing—all in their way excellent amendments and all ones that I cannot argue with in their intent.
Amendments Nos. 102ZD and 103C take objective 10 as it stands and prioritise it over the other nine objectives. The objectives are not random and objective 10, minimising interference, is as important as each of the others. It expresses the balance that we want to achieve between driving improvements among poor providers without increasing the regulatory burden for good providers. By making it an objective, we have not diminished the fact that minimum interference is, of course, a working principle, as it is with other regulators. That goes without saying. We have done something better in this Bill—we have made it clear that it is sufficiently important to be ranked as something that the regulator should positively aim for. That is a very powerful point.
At the same time, given the absence of market power, which we will debate in this part of the Bill, the regulator has to start by asking how he will address the weak consumer position of tenants. That is the right question. The problem with the amendment is that it changes that; it would require the regulator to start instead by asking how he minimises interference for providers. That seems misplaced and sends the wrong signal in the context of what the Bill is trying to do for the first time. I am afraid that tenant confidence would suffer, but I am also afraid that there would be practical consequences, not least because it is vital that the regulator acts early to prevent and resolve serious failures. We do not want that to be inhibited, and this amendment could make that harder. We do not think that it is in the interests of tenants or in the interests of trying to achieve genuine improvements.
Amendments Nos. 103ZA and 102B are about the importance of ensuring that tenants have access to information about the standards of their housing. Again, that is absolutely central to the effectiveness of the Bill. The Cave review made it clear, as did the National Federation of ALMOs, that this is central to giving real meaning to the power of choice. To be useful, information about management needs to be in a suitable format; for example, it should allow comparisons between local landlords, which should be broken down by local authority—and we will come on to that a little later. So we have no difficulty whatever with the principle of the amendment.
Our strong view, however, is that that crucial outcome is already provided for in the Bill. Let us turn, for example, to the second objective of the regulator, which includes ensuring that tenants and potential tenants have an appropriate degree of choice. The noble Baroness, Lady Hamwee, is absolutely right: there cannot be choice without information.
Clause 202 imposes a statutory duty, not just an objective, on the regulator to publish information about the performance of registered providers at least once a year. The clause also requires that to include information likely to be useful to tenants and potential tenants. This is very important, because it ensures that tenants and potential tenants can get their hands on performance information in a form that is useful to them. There cannot be genuine choice without reliable and accessible information about the quality of the alternatives that are available. The clause ensures that this kind of information is regularly available.
Clause 201 will enable the regulator to collect whatever information it needs from registered providers in order to meet its statutory duty under Clause 202, but it can also use other information. It can rely on monitoring powers, including powers to commission surveys, inspections and audits, which are set out in Chapter 6. It is not confined simply to the duties in these clauses. I hope that that is reassuring and helpful.
Amendments Nos. 103E and 104ZA are the final amendments in the group of amendments tabled by the noble Earl, Lord Cathcart, and seek to ensure a level playing field for all providers of social housing. Again, that is a noble intent. The context is that there are, and will continue to be, different actual and potential registered bodies: housing associations; private non-profit bodies, which are often charitable; local authorities, should they own homes in the future; ALMOs; public bodies; and private profit-making bodies, which we are allowing to register for the first time. Those different types of organisation all have different constitutions, forms of governance, status, benefits, duties and rights. There is great strength in that diversity in the mixed economy, provided that they deliver the same best outcomes for tenants and the best use of public resources. The noble Earl can probably anticipate what I am going to say next, which is that, given the above, it is not realistic or desirable to apply the same regulatory powers to all types of provider. There is no point having controls over changes to constitutional bodies other than housing associations.
There is, however, another general point that is well served by the amendment and the Bill. To have a thriving and competitive market for the supply and management of social housing, it will be necessary to deliver the statutory objectives in Clause 88: to encourage and support the supply of well managed social housing, and to ensure that providers perform functions efficiently and effectively. Competition can be a powerful means to important ends, but it is not an end in itself and so should not be in the list of objectives. It will certainly be worked out in the way in which the objectives are implemented.
Amendments Nos. 102A and 108A were tabled by my noble friend Lady Wilkins, who unfortunately cannot be in her place today. Simply, we had a long debate on these issues in the context of the HCA. I talked about how our work on the ageing strategy and lifetime homes will help to support local authorities and housing associations to be more mindful of the rights and needs of their communities. That means building homes and communities that are inclusive and accessible.
I said a few moments ago that the regulator’s first objective will be to encourage and support a supply of well managed social housing of an appropriate quality that is also sufficient to meet reasonable demands. That stresses the importance of inclusivity and accessibility. Good management provides housing of an appropriate quality that is sufficient to meet reasonable needs. That implies that housing needs to be suitable for existing and potential clients, some of whom will be disabled.
I also assure the noble Baroness that the second objective in Clause 88(3) states that the regulator should,
“ensure that actual or potential tenants of social housing have an appropriate degree of … choice, and … protection”.
That covers her desire to see inclusive and accessible homes.
I understand the desire to add more functions to the objectives—the noble Lord, Lord Mawson, also talked about this—so that they explicitly cover specific issues. Nothing divides us on the importance of these issues, but the impact should give cause for concern. We have tried to give the regulator the clearest possible focus and clarity. We need a small number of clear high-level objectives appropriate to meet reasonable demands of providing quality housing. My fear is that if we require him to navigate a complex web of statutory duties, he will be less effective.
The standards in Clause 191(1) already permit the regulator to set out the nature, extent and quality of accommodation. It would already be possible, if the regulator considered it appropriate and necessary to do so, for him to set standards relating to the accessibility of housing after consultation with representatives of tenants and with the Secretary of State. I will make sure that my noble friend understands that point.
We have already dealt with Amendment No. 103D proposed by the noble Baroness, Lady Hamwee, in relation to the overarching nature of objective 10. I do not know whether she spoke to Amendment No. 102C. Would she prefer me to write on that?
At this stage, that is a gracious explanation. I will not reply to the amendment in that case.
I turn directly to the amendment tabled by the noble Lord, Lord Mawson, with which I have a difficulty. I agree with everything he says, because he speaks not only with authority but with genuine wisdom about how social innovation happens. What he said about the role of housing associations in that context is absolutely right. The point about the voluntary sector is that it occupies a particular space in the statutory or individual functions, which gives it an extraordinary power to change things on the ground to enable people to work differently, to relate and come together differently to make things happen. His nine points are well worth reading again, and I shall do so when I read Hansard tomorrow.
The noble Lord will not be surprised to hear me say this. First, he addressed objective 6, which already requires the regulator to encourage social housing providers to contribute to the environmental, social and economic well-being of the areas in which they operate. I will try to put his concerns, which I know are not confined to him, to rest.
We want the non-housing activities to flourish. We recognise how much they have grown and developed in an innovative way in recent years, and we want to see that happening. There is absolutely no intention that the regulator should set detailed standards on RSL voluntary activities, not least because we think that there are enough protections. For example, the Bill prohibits the regulator from setting standards on issues that are unconnected to social housing. The Bill requires the regulator to consult, to act proportionately with minimal interference and to comply with a better regulation code, which says that standards should be outcome-based wherever possible. We have amended the Bill in the other place to ensure that the regulator must have regard to the desirability of housing associations being free to choose how to conduct their business. On the one hand, we positively want to encourage them to do that, and on the other we have put protections in to enable them to do that.
The reason why it is where it is in the Bill is not least because, as the local government Bill went through the other place last year, we were talking about how to strengthen duties of partnership and how we need to keep standards on local well-being so that RSLs can co-operate with local authorities in a reasonable and proportionate way and one that is in keeping with their non-public status. We would like to see that happening within the framework of new partnership agreements and so on, so that they can play a maximum role in society and in their community.
Secondly, I have made the point about having a small number of high-level objects, but the amendment pushes too far in terms of the legitimate interests of the regulator. It widens its scope. The noble Lord talked about regulation creep. I think that this would be a case of objective creep, if it were included. The regulator must act proportionately. I do not believe that adding social innovation to the objectives would help, and in fact I would question whether it would not inhibit or at least make it more difficult for the regulator to deliver balanced and proportionate regulation. There is a real danger that an active role for the regulator would stifle and not support innovation. There is a genuine issue, given the way in which the noble Lord described the dynamics of the best that could happen on the ground. I do not think that would help.
I hope my comments have been helpful to the Committee. I am grateful for that debate and hope that the noble Earl will be able to withdraw his amendment.
This has been an interesting and far-reaching debate. The noble Baroness talked about objective 10 but did not agree that it is in the wrong place. I cannot understand her arguments for that. It seems to sit awkwardly where it is. The whole business of proportionality, as the noble Baroness, Lady Hamwee, said, entails an overarching approach to how things are done, not what is to be done. That point was echoed also by the noble Baroness, Lady Falkner. Putting this objective as number 10 in the list is just not the right place for it. Our amendment places it at the top followed by the nine objectives dealing with what has to be done. We feel that that is a natural progression of events. I cannot understand the noble Baroness’s reasoning. I shall have to reread carefully what she said.
The noble Baroness also did not like our next amendment, on information. I think she said that it should come in somewhere else, in Clause 201 or 203. I shall have to look again at what she said and at those two clauses. However, our amendment follows the Cave recommendation which says that empowerment requires information. That is why we felt it was important to put it in here, in the objectives for the regulator, rather than tucking it away somewhere at the back of the Bill. We thought that was quite important.
Our next amendment, Amendment No. 103E, deals with the level playing field. If we do not have a level playing field then some providers will be at a great advantage to others. Those that have to be regulated will not have a level playing field as they will have constantly to spend time and resources getting the right boxes ticked by the regulator while others are able to get ahead with the project. It is not a level playing field and there should be one. I understand that there are issues about VAT as well. Some have VAT and some do not. That seems cack-handed. If we are trying to get providers to provide social housing they all ought to be on the same footing.
On the amendment tabled by the noble Baroness, Lady Wilkins, to include the word inclusive, we agree with her that although it is just another word, it does sum up an awful lot that needs to be done. That point was debated in another place, where Sir George Young talked about empowering disabled people. The aim of the noble Baroness’s amendment would undoubtedly improve the Bill and ensure that houses are built to lifetime home standards. We quite liked her amendment.
The amendment of the noble Lord, Lord Mawson, is very interesting. He obviously has great experience in his field. He talked about the large sums that the Government will spend on housing and how that should trigger social innovation. It is not just about the building of bricks and mortar but about all the other things that it should encompass. He mentioned regulatory creep and how increased regulation will discourage and dampen enterprise and add to the burden of costs and delays to the projects. The Government need to encourage enterprise and innovation and not stifle it with overregulation. I shall read with interest what the Minister says, but at this stage I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 102A to 103A not moved.]
103B: Clause 88, page 40, line 26, at end insert “and to devise and promote mechanisms for tenants to change providers in the event of poor management”
The noble Lord said: I shall speak also to two other amendments in this group standing in my name. I want to express my thanks to the noble Earl, Lord Cathcart, for his vigilance and for helping me to get all three in the same group. All three amendments focus on the Government’s and the Bill’s objectives to empower tenants, and therefore a legitimate question for the Committee is whether the duties, the roles and the form of the regulation are appropriate to realise this end. Before advancing into more detail, I would like to express my thanks to staff at the Chartered Institute of Housing, the Tenant Participation Advisory Service, the National Consumer Council, the National Federation of ALMOs and others. Many of them would agree with much of what I have said but I doubt whether any of them would agree with everything I have said. We are broadly in the same territory on these concerns and issues. I am also grateful to the Minister and her officials for the time and the courtesy that they have advanced on these matters.
I want to take some of the Committee’s time to go back to Cave to see why he saw tenant empowerment as so important. On page 48, Cave quoted, first, that,
“tenants of affordable housing are particularly disenfranchised. Many are captive consumers, with limited choices and very significant barriers to switching”,
and, secondly, that,
“the relationship between most landlords and tenants is unequal and one-sided”.
Both those quotations are from the National Consumer Council, which Cave is quoting with clear support. A third quote comes from the Chartered Institute of Housing, which said,
“customers are rarely able to make a positive choice about the type of provider that is responsible for their housing. … it can still be very difficult for households to enforce their rights or demand improvements”.
Those of us who for more years than they care to remember have worked to manage, or mismanage, or who seek to improve and empower tenants, well know how true those statements are. They are therefore central to what I hope the Government are trying to achieve.
It is legitimate for the Committee to ask the Government specifically how tenants will be empowered as a consequence of the Bill and through what mechanism. As ever, Governments sometimes know more than they have revealed. Through this process we may therefore be better sighted on what exactly is intended and how this is to be worked out. I very much hope so.
Some of our concerns are perhaps reinforced by the fact that the Government’s consultation on Cave's recommendations was partial, and I could not see what seemed to some of us to be Cave’s critical recommendations in the consultation document issued. I shall illustrate that very briefly although I may return to it. First, Cave clearly saw that we should have a system of co-regulation; in other words, it was not just a top-down central state model but a model of consumer protection and consumer empowerment. Secondly, Cave saw addressing the structural impediments to choice referred to in the third amendment in the group as fundamental. Finally, Cave saw it as essential that there was an expansion of the availability of choice, in practical ways, to tenants; otherwise any amount of information has little meaning in practice because you cannot do anything with it. So Cave saw all those issues as absolutely central to the regulatory model he was proposing. Perhaps I am slow, but I felt that the clarity with which that has come through in the Bill is slightly lacking.
I hope that through this process we will find out where the Government stand on these issues and what their policy is on it. It is particularly important because, as my noble friend Lady Andrews indicated, the Bill says that the regulator has, as one of his or her fundamental objectives, to ensure that tenants have an appropriate degree of choice. That clearly begs the question: “Appropriate to whom?”, in the judgment of the regulator, who may be progressive or may be deeply conservative. I do not use that word in a political sense; I use it in a different sense. Secondly, is it a tenant’s view of what is appropriate, or what have you? It also has the flavour of being a slightly passive view of the world; it is asking whether tenants can choose what they want within the world as it is, as we know it and are used to it. Cave was in a different space; he saw clearly that there had to be mechanisms to promote choice in a great variety of ways, otherwise you would not get tenant empowerment.
As I have signalled, consumer empowerment is to many of us an end in itself, but Cave saw it as central to the regulatory model that he proposed. He said that consumer empowerment had the greatest potential to address the underlying problems of market failure. Of course, he would say that because that has been almost a leitmotif of most regulators of monopolistic services over the past 20 years—the attempt over time to try to change the nature of the market so that the regulator’s detailed involvement is less necessary, because there is more effective market choice operated by consumers. I do not think that we will disagree on that; the debate is about whether, effectively, these clauses and the mechanisms that the Government propose are likely to do that.
As I said, choice is central to consumer empowerment. Cave identified perhaps five areas of choice—although maybe it was four: a choice over the range of services; a choice over the manager; a choice over maintenance; and choice over additional services. I think that there were probably others. In other words, Cave saw that tenants having choice over those areas was fundamental if empowerment was to mean anything.
I shall bore the Committee with one further quotation. Cave quotes with approval what the National Consumer Council, the Audit Commission and the Housing Corporation all said, which was:
“The truth is that, in the absence of effective consumer choice, there would indeed continue to be limited consumer pressure on providers to drive quality and efficiency. Tenants would be in the hands of benign landlords, who would risk drifting into self-serving patterns, as have public service monopolies before them”.
I shall weary the Committee no longer but start to focus this down on to the specifics. The first amendment in my name, which is supported by many of these whom I have quoted, seeks to address what tenants can do in practice if they are dissatisfied with the cost or quality of the housing management services that their landlord is providing in a locality—or they may think that another is better. What we have understood from helpful discussions with my noble friend and officials is that effectively the model proposed for this is that the regulator will set standards and, if tenants are unhappy, they will apply to the regulator and say, “Our housing manager is not meeting those standards—please, regulator, intervene”.
There are three things wrong with that. First, most tenants are dissatisfied at some point with their landlord; it is the nature of life. Often it is for good reasons, but not always. But with the multimillion tenancies that will be subject to the regulator and have a single domain, when we have all had our way, whether sooner or later, it is impossible to conceive of tenants, every time they are dissatisfied with their housing manager and want something done about it, having to go to the nanny central state and ask it to intervene. So it is flawed in terms of process. But it is, secondly, flawed in that it does nothing to empower tenants but empowers only the regulator to sort out the problem. It is clear that you need both those things, but you have to try to get the regulator to work towards empowering tenants at locality, so they can get things sorted out themselves with their landlord rather than going up to the central state.
The amendment specifically says that the regulator should devise, in consultation with social landlords and tenants organisations, a mechanism that would put in place just such choice opportunities for tenants in a locality if either they thought that their landlord was not very good or, equally, if they thought that another landlord nearby was likely to give them a better service. This is not Utopianism. This is exactly what I can do as a common freeholder—I think that is the term—of a block of flats in Pimlico. To put it simply, if we, as a group of tenants, are dissatisfied with the managing agent, we can vote on the matter at an AGM. The landlord’s agent then goes to the market and gives us a choice of alternative providers. We did that two years or so ago. It is perfectly possible, and is part of a normal form of collective choice. The regulator should be able to devise such a system—I will not weary the Committee by going into excessive detail, although I spent at least 10 minutes in the garden on Sunday thinking about it so I shall give a little detail. In effect, there is a mechanism for making this work at a local level. If we believe in empowerment, we want this to happen.
I remind the Committee that I am talking about one of Cave’s key recommendations in paragraph 2.85; these are not the ramblings of a Member of your Lordships’ House with nothing better to do. I therefore have two questions for the Minister. First, does she think that it is desirable in principle for tenants to have such a choice in their locality without having to go to the central regulator? Secondly, if she does believe that that is appropriate—I hope that she does and that she says so as a political statement; it is hardly one for officials—does she believe that the Bill puts a duty, not a power, on the regulator to promote such choices?
The second of my amendments relates to structural impediments; I have said previously why these are fundamental. Cave gave a specific section of his report to the importance of addressing the structural obstacles to consumer empowerment and choice. This is on page 55, for those who wish to address the issue. He says that,
“any regulator has a proper interest in proposing amendments that will help to address identified failures and thereby promote consumer empowerment and choice”.
In other words, it is the central job of the regulator. My concern is that there is no mention in the Bill of the responsibility for what you would have thought was a central issue. No doubt the Minister will say that the regulator has the power to address these issues, but I am saying that there should be a duty to do so.
Cave gives, I think, five illustrations of this; no doubt he could have given more. First, he talks about separating the housing development role from the ownership and management role, so that achieving economies of scale in procurement and financing are not left to ever larger monopolistic housing providers at a local level. Many of us feel that that may have been the story with RSLs for a few years. Secondly, he talks about overcoming the present VAT disincentive to outsource housing management so that tenants can have a choice of housing manager without suffering a taxation penalty. Thirdly, he talks about the contestability of housing services at the instigation of consumers collectively, which we have just talked about. Fourthly, he talks about the rationalisation of management services on estates in multiple ownership. Lastly, he talks about the local management of dispersed housing stock. There may have been another topic.
In essence, Cave, as a good specialist on how to regulate a system, identifies present structural failures. His argument, and mine, is that unless there is a duty on the regulator to work to promote the removal of those impediments, we will still have the same disempowered tenants suffering under the same paternalism of which we are all guilty to a large extent. Does the Minister agree with Cave that it is necessary to work towards removing structural impediments? Clearly it would be naive to think that the regulator can get rid of VAT by himself; we are talking about taking five or 10 years. If she does agree with Cave, why is this not in the Bill?
I will not weary the Committee by talking in detail on Amendment No. 104ZB, because it is another variant of what we talked about before. Given that we are in Grand Committee, these are no more than probing amendments, but I look forward to hearing what the Minister says, and perhaps to having further discussions with her or with her officials, if she wishes, and to reflecting on the position of a number of us who are working on this to see whether we should table an amendment that is sharper and less probing at the next stage of the Bill. I beg to move.
I am partially but not entirely supportive of the amendment. I very much look forward to hearing how the Minister will respond to it.
First, empowerment of residents is a fundamental part of what the regulator should be about, and it is tremendously important in how social housing is run in the future. I have had the privilege of being a judge in the gold awards that are given out each year by the Housing Corporation, for the entire time that the corporation has been organising the awards. Last year, the gold award went to those housing associations best at empowering residents. That meant rather than always thinking about the failures and the problems for regulators that housing associations may bring forward, we see the best and we see really good examples of what can be achieved. We saw absolutely wonderful effects, where organisations genuinely and fulsomely engaged their residents in the management of their estates and their affairs. It was a tremendously uplifting experience. The gold award winner that I remember best was Willow Park Housing Trust in Manchester, where the residents were doing brilliant things. What a way of unlocking the potential of citizens to do great things for each other and for the community of which they are a part. Empowerment of residents is a hugely important prize and The regulator, can serve to enhance resident empowerment, that is a crucial objective in the Bill.
I do not know whether one should say, as in the wording of the amendment tabled by the noble Lord, Lord Filkin, that tenants should have the power,
“to change providers in the event of poor management”,
or whether that is exactly the way that this is best expressed and followed through. It is putting the onus on the tenants to change provider in the event of poor management. That brings with it a whole series of difficulties and problems that would mostly be avoided if the onus is on the regulator to ensure that there is a change of provider in the event of poor management.
The regulator has wider duties than simply to promote the best interests of the consumer. The regulator has to think about the viability of the businesses that are being regulated and the cost to the taxpayer of any decisions that are taken exclusively by consumers. Ofcom, Ofgem, Ofwat, —or even the Tenant Services Authority—will need to balance the views of a group of possibly many aggrieved residents against the disadvantages of changing their managers at any one time. There would be a lot of small print about who would vote, how the decisions would be taken and whether leaseholders living on the same estate would also be engaged. This refers only to the tenants, but we are increasingly thinking in terms of mixed communities, with shared owners and owners, and whether the whole community would be part of changing the provider of the facilities.
How often would residents be able to change their provider and at what cost? There are cost implications of a change of this kind, not least the costs of VAT, as the noble Earl, Lord Cathcart, said. It may be a ridiculous measure, but VAT exists and even if one managed to achieve a 5 per cent saving on one’s management costs through choosing a different, more efficient, leaner and meaner landlord to do the work, there is a 17.5 per cent charge that rather wipes out the 5 per cent gain because of the VAT rules. It is extremely difficult to change VAT rules, even if one has the high moral ground on the issue.
There is the question of making the existing staff redundant and whether they are TUPE’d into the new arrangements. The machinations go quite a long way. In essence, putting an onus on the regulator to intervene where residents made it clear to the regulator that management was poor, and where taking an objective and balanced view the regulator came to the conclusion that poor management required a change of provider, is the best approach.
It is worth remembering also that the housing ombudsman exists and is highly effective. I have been well impressed by the ombudsman’s work in picking up some of the pieces where residents are aggrieved. I think that we would need to play in the role of the ombudsman both in advising the regulator and possibly in acting first before one goes to the full measures that removing that provider and substituting a new provider would imply. So I am entirely supportive of greater empowerment of residents, very much including tenants, but I am not absolutely certain whether the best route is through tenants having the direct opportunity to change providers themselves rather than the regulator having powers and duties to perform in that way.
I am extremely glad that the noble Lord, Lord Best, went first, because I have been wondering how to express my support and my concerns without sounding paternalistic. He has been able to do so. One wants, of course, to empower tenants, and all the language I was wrestling with to try to express my concerns about how to do it was coming out wrong. So I should like to ally myself with his comments. I shall not repeat what he said; perhaps I can just put my star to his wagon.
There are, however, some small points on the amendments as opposed to the objectives—objectives in every sense—of the amendments tabled by the noble Lord, Lord Filkin. I am not convinced that a particular mechanism should be an objective of the regulator. The aim and the outcome rather than the way of doing it is what needs to be expressed in Clause 88. I look forward to the Minister telling us how far Clause 191, especially Clause 191(2)(g), covers points that have been made. This provision covers the standard whereby the registered provider must,
“comply with specified rules about … methods of enabling tenants to influence or control the management of their accommodation and environment”.
I had a little difficulty, too, with the term “structural impediment”. These amendments are about the tenants’ point of view, but the impediments are impediments to the providers. So it took me a little while to understand what that amendment was about. They are not impediments directly to the tenants though they do have an indirect effect.
I am sorry that that is going to read more as opposition to the proposals than I meant. I suppose that it is a concern about the specific amendments rather than the direction in which the noble Lord is seeking to take the thinking, which I very much support.
There is a sort of parallel to this situation; it is not precise in any way at all but I think that it is none the less apposite. Shareholders of plcs have every right to get involved with the management responsible for the company and, if need be, change it. That seems to me the ideal that the noble Lord, Lord Filkin, would like to aim for. I am bound to say that even that, although it may refer to plcs, is a fairly well regulated and understood procedure. Certainly every company has very clear and definite articles to regulate exactly how that would work.
With his great experience of this subject, the noble Lord, Lord Best, is right to raise a cautionary note. The principle is easy to enunciate. The devil is always in the detail and it is the detailed mechanism that one would really have to worry about. Although I am happy to support the noble Lord, Lord Filkin, in the principle of what he would like to aim at—we can all be clear that that is the ultimate objective if we can achieve it—the words of the noble Lord, Lord Best, and the noble Baroness, Lady Hamwee, about supporting with caution are probably the wisest way to go. I shall not add to everything that has already been said because it would waste time and energy. I look forward to what the Minister has to say. I suspect that she will be somewhere in agreement with everything that has been said. But she has the authority and the awful responsibility of having to produce a solution. Perhaps her doing it today is more than we should expect, but we will read her reply with interest.
I support the noble Lord, Lord Filkin, although by the time I finish I am not sure he will think that my support is exactly the sort that he would like. But I shall do my best. My noble friend Lord Dixon-Smith gave the example of shareholders, who have an arm’s-length relationship. In particular, if you are small shareholder, you only have to phone whoever and sell the shares. You do not have to say a word to the company with which you are dissatisfied. In my view, that is not really the same sort of relationship.
Do we really want to aspire to wherever the noble Lord, Lord Filkin, would like us to go? Do we want to do it? If all tenants were fully empowered there would be no need for a regulator. Like the noble Lord, I live as a tenant. For the time being, rather worryingly, I am also the chairman of the tenants. Some of them are very vocal and insist on things being said to the manager, and sometimes they are not so easy to say. The noble Lord is privileged, but the long-term question is whether we intend to make everyone similarly privileged. There can be two schools of thought that do not think that that can be aspired to, and one of them is the practical school of thought. The noble Lord, Lord Best, is not supported, I think, by the noble Lord, Lord Mawson, who would like to have social innovation, which would go very well with the thrust of the amendment proposed by the noble Lord, Lord Filkin.
It is right that there are huge practical problems. What do we do? We start by talking about market failure. We move on to choice and empowerment. Does everyone want to see the end of market failure? There are an awful lot of people with an interest in market failure and in the lack of choice and dependency. This is a two-way street because the dependency can come, as I think the noble Lord, Lord Filkin, indicated, from the top down. But it can also come from the bottom up in the sense of people saying, “If that’s the way they want it, then I’m going to stay dependent”. This is a long-term political issue about our society and it has been extremely valuable for the noble Lord, Lord Filkin, to raise it today. My belief is that we should try to get there. We should never give up on the basis that it is too difficult.
My noble friend Lord Filkin said that anyone who believes in tenant empowerment will support this amendment. I believe in tenant empowerment; I tried to practise it when I was chair of the Housing Corporation. The noble Lord, Lord Best, talked about the Willow Park Housing Trust in Wythenshawe. I remember it well. I remember it being very badly managed by the local authority. It wanted to have a governance structure that was different from the structure the Housing Corporation normally went for. With the support of the tenants, that is what we went for, and we have seen the outcome in good tenant involvement.
The noble Lord, Lord Best, said that the devil is not in the detail, but these amendments present real practical difficulties. We all want to ensure that tenants have real involvement in their homes but, frankly, most of them are more concerned with getting the jobs done—for example, getting the windows replaced—than with knowing who is the chief executive of the housing association.
It is a complex issue. A matter which has not been mentioned so far is the £35 billion of private sector funding that goes directly into housing associations. It does not go to the regulator or the Government but to individual associations. There are real practical difficulties in these three amendments. I shall not deal with the words, as I accept that these are probing amendments, and the noble Lord probably accepts that these words are inappropriate for the Bill. However, what does he mean by “tenants”? Does he mean the tenants’ association, the majority of tenants or a handful of tenants? Then there is the issue of bypassing the regulator, which the regulations permit, in order to change the management of the housing stock. That brings other issues with it. It is the responsibility of the regulator, not of individual tenants who could not guarantee delivering the combined view of the tenants.
There are a number of other issues. One of the reasons why there is £35 billion of private sector funding in this sector is the stability that the regulator has created. I have seen it operate. I have seen failing housing associations being merged into other housing associations without anyone losing his home, and if we are talking about financial failure, that is what we could be talking about. We do not need examples; we can see it in the market at the moment.
My noble friend referred to changing the manager of a block of flats. There is not just the manager but the mortgage holder as well. With all due respect, I suggest to my noble friend that he probably has a mortgage and his next-door neighbour has a mortgage with someone else. In a block of flats, the manager is just the manager. In housing associations, the manager is also the owner of the property and is responsible for funding the mortgage.
I have difficulty with the term “poor management”. If you asked 100 tenants, 99.9 per cent of them would say, “My management is poor”, because there are always areas where housing management can fall down. Mismanagement is another matter. I have difficulty with these three amendments and would like to hear what the Minister has to say.
I shall speak briefly because the noble Lord, Lord Best, and the noble Baroness, Lady Dean, have covered the issues I wanted to cover. I shall make one fundamental point to the noble Lord, Lord Filkin, which was made at Second Reading. It is that we emphasise voice and choice in the Bill, but voice is at the heart of what we need to do. All the amendments are to do with information and knowing what tenants want, and one amendment touches on constraints such as the structural impediments. That is absolutely right, because until we have that information, the providers of housing cannot do anything about it. As someone who is associated with one, I know how difficult it is sometimes to ascertain what the tenants want. It is sometimes very difficult even to get tenants on to your boards in tenant management committees because of vocal people with certain agendas that may not necessarily reflect the agendas of others. However, that is not so pertinent to the issue.
Choice is also key; I would not want to give the Committee the impression that it was not. However, the point ultimately is that there is only so much choice because of the very nature of social and affordable housing. It is not the kind of choice that would be available out there in the market. The noble Lord, Lord Filkin, said at one point that he wanted market choice that was operated by consumers, but you cannot have market choice that is operated by consumers in this sector. It is not possible.
I am also involved in Hyde Plus, the Hyde Group’s think tank—we have actually bothered to set up a think tank—which looks at broader community issues. It looks not only at the people who live in our houses but at the people who live in that entire community, their economic prospects and whether transport is an impediment and crime an issue. We produce reports, which I know are well regarded, which we discuss in the broader G15. Leading-edge housing associations are cognisant of the importance not only of giving people somewhere to live but of helping them to make something of where they live and to contribute to their lives. This set of amendments would not achieve that. We should concentrate less on false choices and more on empowerment, because that is sorely needed in this sector.
That was an excellent debate. I am extremely grateful to my noble friend Lord Filkin for giving us the opportunity to go into these very important issues, which are at the heart of the Bill. He presented his case extremely eloquently, and he spoke passionately about what he wants to achieve. I am grateful that we could talk at some length about the background to this issue and how we see it.
I cannot accept the amendments for many of the reasons that have been put by my noble friends and by noble Lords on the other side of the Committee, but I am persuaded that there is a good reason for taking away what we have and seeing whether we can do something else. If I say that now, perhaps the Committee will forgive me if I go into a little detail about why the Bill achieves the objectives which my noble friend rightly wants to achieve. However, that requires me to address the Bill as it will work. That will take me a little time to do, if noble Lords will allow me.
There is absolutely no doubt about where we stand. The whole Bill is about tenant empowerment and putting in place for the first time things that tenants have never had before: the opportunity to have more choice in the services that they receive and to be involved in management and regulation. Indeed, we heard from my noble friend Lady Dean and the noble Lord, Lord Best, about Willow. That is the sort of thing that we want to see flourishing. This is where we all stand. The noble Baroness, Lady Falkner, talked about false choices. We must avoid this false dichotomy—the notion of two different kinds of regulation: one based on the protection of tenants, which can be parodied as being paternalistic; and one based on enabling choice. In answer to questions asked by my noble friend, the balance that we have achieved here is right because we will enable tenants to exercise choice. The regulator has an objective to enable tenant choice and to improve efficiency. If we had an overriding duty that overpowered the rest of the objectives, I do not think that it would help. The whole Bill achieves that balance of empowerment through influence, involvement and through action—working with the regulator to identify and deal with difficulties and to drive improvement. That is very important, the business of a progressive power to drive improvement.
Objective 2 requires the regulator to enable tenants to have both choice and protection. I then point to objective 3, which is a true empowerment objective, which requires that it enables tenants to have the opportunity to be involved in management of their homes, and objectives 1 and 5, which in different ways offer protection to tenants as well. The noble Lord would argue that, whatever the wording of the objectives—and indeed he has more or less said it—the powers of the Bill are based around a traditional top-down view of regulation, with a dominating role for the regulator. I cannot agree with that, and I do not think that Martin Cave does. When he came to address a small group of noble Lords—I am sorry that my noble friend Lord Filkin was not able to come—he made it quite clear that he was in exactly the same place as us on this Bill and that the Bill achieved what he wanted to see with empowerment and balance. I agree that one has to know the Bill to see that, but we are not in a different place from Martin Cave, and I do not think that, in effect, we are in a different place from my noble friend.
Crucially, tenants will be involved from the first in establishing standards. That is their most powerful role. If we look at Clause 194(1), we see that. Secondly, they will be involved from the first in setting the guidance that the regulator must issue—the policy framework and the use of interventions—as is set out in Clause 212. Thirdly, they will have information that will enable them to form views to provide evidence to raise concerns about how well the landlords are performing. That is provided for in Clause 99. Then there are new strong powers to bring about change in management, in Clause 191(2)(g).
What do tenants get out of the proposed system? We have created a regulatory system that is designed around standards. That is absolutely right. Tenants will have direct influence in not just setting the standards but investigating them and enforcing them. One crucial point is that we are not simply talking about physical standards here—just repair and provision. They will also cover how tenants can drive improvements and continuous change. Tenants will know that there will be procedures for addressing complaints by tenants against landlords; methods for consulting and informing tenants; and methods for enabling tenants to influence or control the management of their accommodation and environment. This is not a passive set of requirements; there is nothing to stop anyone using tenant satisfaction, ambitions or aspiration as standards. These standards must be complied with and can be directly enforced by the regulator.
Consistent with the independence of the regulatory system, exactly what is in the standards depends on the regulator’s decision. That is precisely why it cannot be a top-down process—because it is an essential part of the design that standards must be widely consulted on and developed by stakeholders, including representatives of tenants. That is one measure of regulation, and there will be others. Indeed, this is where the new National Tenant Voice should come in. It is not just another stakeholder representative but a partner for the regulator, which will lobby for tenants and assist in producing standards, deciding when to intervene. Far from being unrepresented, tenants will have more high-level engagement in regulation than any other group. That is absolutely right.
If the level of tenant protection and choice were not sufficient, it has been reinforced; there are only three areas in which the Secretary of State has the power to direct the regulator. One is involvement by tenants in the management by registered providers of accommodation, which is a clear safeguard against any regulator who does not efficiently meet objectives 2 and 3—but again it is just a safeguard.
I also want to mention two more key parts of the Bill where tenants are directly engaged and where the regulator has transparent requirements imposed on him to ensure that tenants are engaged. Clause 212 says that the regulator will set guidance on how it intends to use its powers under Chapters 6 and 7 on standards, monitoring and enforcement. There is a triple duty. It must issue guidance, it must consult stakeholders and it must have regard to its guidance. That means that the tenants will be shaping the detailed way in which the regulator operates. That is active, not passive. Secondly, we have already discussed information, but I emphasise that there is a very strong duty in Clause 202 requiring the regulator to provide performance information in a form likely to be useful to tenants to help them make choices and provide evidence.
I am absolutely clear that when the regulator issues standards, those standards can require a level of engagement which is not only far beyond anything in the current system but which will enable tenants to challenge poor standards of service, give them real influence in shaping the services and enable them to influence and control the management of their homes explicitly.
That certainly meets what Martin Cave wanted to happen. He outlined five areas of choice, and the noble Lord has identified them: choice over where they live; choice over how services are provided; choice over different types of service at different prices; choice over how to progress to ownership; and choice over the management organisation. All of those choices, in so far as they are within the powers of the provider and regulator, are potentially included within standards. The amendment is specifically concerned with choice of provider, by which I understand he means the manager, so I will address the issue of management choice.
Martin Cave recommended that there should be more of a market in social housing management. We have introduced three new powers for the regulator to change management, in addition to the current in extremis power to change the owner. In Clause 246, the regulator may require that an owner tender the management competitively, and the selection panel must ensure representation of tenant interests. It may require the forced transfer of management of homes following an inquiry into whether there has been mismanagement or breach of standards, not just where it is concerned about a provider’s financial viability. It may appoint an individual as manager within an organisation where it is satisfied there has been mismanagement or breach of standards, but without the need for an inquiry, which is in Clause 250.
The regulator can also encourage voluntary outsourcing of management, though there are barriers, and I will come to the VAT issue. It can ensure that good managers are waiting in the wings in case of management transfer through an accreditation system set up under the Clause 214 power. Many public and private organisations will be keen to manage homes.
In short, we agree on so much. We both want management contestability, better management, and involvement and choice for tenants. But two issues have been raised which I need to address. One is how bad things have to get before management can be changed by force. The other is who makes the decision on forcing change; whether it is direct action by tenants or a system moderated by the regulator.
Some stakeholders feel that the bar for forced management change by the regulator under the Bill at present is too high. I want to clarify that. The Bill can require a provider to tender for a change of manager without an inquiry. The power can only be used on the basis of breach of standards or mismanagement, but that covers a very wide range of circumstances and is certainly not limited to when a provider is in serious financial trouble.
The regulator does not have to wait until a serious concern is brought to it by tenants. It is crucial that it can investigate proactively where it has any concerns and can take action if it finds evidence of poor management. That power can be used on any or all homes or services of a provider, and not just if the provider has a poor overall service. It can go into a single estate or the whole set of properties that are owned. It will depend on the circumstances. That will happen if there is evidence of failure severe enough to warrant the use of what is a fairly serious power, but in practice I am sure that the regulator will try to resolve the problems using lesser powers, enforcement notices, fines or compensation. Indeed, those are powers that the corporation does not have. It will be able to address poor management issues before the point where change of manager is the only answer. So I do not believe that the bar in the Bill stands too high, and neither does Martin Cave. He said several times that:
“In extreme cases, management of stock where tenants are persistently neglected or receive a persistently poor level of service could be re-tendered on a mandatory basis”.
That is what we are doing.
The height of the bar depends on the detail of the standards. I reassure Members of the Committee that standards could be set that certainly impact on mediocre performance, perhaps to require progressive levels of improvement. While the immediate priority, fairly enough, is dealing with the worst landlords, I hope that I have convinced the Committee that tenants will be involved in producing standards that can reflect different and rising scales of expectations and experiences. Failure to involve tenants or to meet tenants’ satisfaction can be a breach of standards; “evidence” includes evidence of dissatisfaction. Tenants are very much in the driving seat on that.
Finally, I come to the questions powerfully addressed by the noble Lord, Lord Best, and my noble friend Lady Dean: should tenants have a direct right to sack the manager—or, as my noble friend Lady Dean put it, the owner and mortgage holder—or should the regulator make that decision? I have some problems with the amendment in this context. I am not sure whether the noble Lord thinks it is right for tenants to take direct action outside the regulatory system. However, the Bill gives the regulator three powers to achieve some of that, which the noble Lord will recognise is a huge step forward.
Why do I believe that, in terms of fairness and effectiveness, forced management change has to be moderated by the regulator acting on behalf of and involving tenants? The noble Lord, Lord Best, pointed to what he described as a whole series of difficulties and problems, machinations going a long way. This is not just about tenants and landlords within a closed system. The choice of manager impacts on a wide range of issues. For example, if tenants want a superior quality service that would be costly to provide, it is not right that landlords should provide it simply to satisfy those who shout the loudest and by imposing additional costs. The noble Baroness, Lady Falkner, alluded to this: whose voices should be listened to? We all know some of the issues that that raises. A regulatory system is about a balance between providers and a balance of interests, voices and interventions with careful safeguards. It is not about responding to the loudest voices or best organised groups. That comes through strongly in the Cave report.
Secondly, to pick up my noble friend’s point, the system must maintain stability. We are talking about £35 million of investment. Stability is in everyone’s best interests: tenants, providers and the general community. Uncertainty over whether managers might be spontaneously sacked leads to perverse and difficult consequences of unexpected costs and disruption—maybe even a rise in the cost of capital if lenders perceive greater risk. It is important that we consider this, and Martin Cave raised it when he met with us.
Thirdly, housing associations are independent bodies, often charitable, with a strong record of innovation. Provided that the performance standard is good, they should be able to get on with their business. If they are not permitted to make decisions on how to achieve good outcomes on this basis, there could be issues over their independence. Fourthly, a direct tenant right to sack introduces a system of multiple regulation with a lot of scope for conflict. We are trying to achieve a proper consensus based on evidence and the balance of interests.
On balance, the regulator is best placed to make these difficult decisions. He will be proactive and take tenants’ influence into account, in all the different ways I have described. It is therefore clear why I cannot accept Amendment No. 103D, not least because I do not know what the trigger for management change would be. I do not know who would decide what core management was and how it would be judged.
On Amendment No. 104ZB, I think it unlikely that we could have specified in the Bill the structural barriers that Cave identified. The barriers he was talking about are real and their existence is a key reason for needing regulation. That is why the system of regulation gives the regulator levers to begin to address them. The objectives and the standards, and their interrelationship, will address the barriers. In objective 2 we do not specifically refer to the structural barriers, but I do not see anything in this amendment which would not be covered by objective 2.
The point raised on VAT is very serious. All I would say, in the interests of brevity, is that I cannot change that rule. I am afraid that however much I would like to, I cannot hold out any hope—for reasons that the noble Lord knows full well—that the rule will be changed. I appreciate the reason for his raising it.
The third amendment is essentially about standards. Clause 191(2)(g) mentions,
“methods of enabling tenants to influence or control the management of their accommodation and environment”.
I hope that I have sufficiently explained the workings of standards and especially standards which influence tenants influencing management. I hope I have been clear that standards could include both the appointment of new managers and major proposals. I shall conclude with that, as I take the point raised by the amendment as a way of facilitating debate.
I turn back to where I started. I hope I have clarified why I believe that the system we have means that the regulator will deliver the outcomes that the noble Lord wishes to achieve, and why we think that decisions on mandatory management change need to be under a system of regulation moderated by the regulator. I recognise that there is an underlying anxiety that the regulator might not act in a way that is conducive to the driving up of standards that we want to see. I do not think that will happen, but in order to address the concerns that have been raised, I am certainly willing to consider whether we should introduce an amendment which, while operating within a system moderated by the regulator, would put the onus on it to address directly tenants’ concerns and complaints. I am sorry to have spoken at such length, but I thought it was important to put all that on the record because it is central to the business of the Bill and to what we want to achieve. I hope the noble Lord will be satisfied.
I am particularly grateful for my noble friend’s tone and for the offer she has made to give thought to the kernel of these issues. I respect the fact that she has treated them seriously rather than using tangential arguments to dismiss them. I shall be delighted to work with her on that, if she so wishes.
Not for the first time and not for the last time, I am sure, I find that I agree very strongly with the noble Viscount, Lord Eccles. I think he signalled that he agreed with me. The only sensible thing I can say is that I invite him to join my party rapidly. Clearly, we need him. In a sense, he says from the basis of being a regulator and having deep experience, that you must have mechanisms to change the system. If you do not, ultimately, you will leave tenants disempowered, as they are now.
This debate is deeply imbued with paternalism and welfare-ism. Having been a landlord for more years than I care to remember, do we really believe that some consumers should have as many rights as others? As we are talking of the poor, do we really think that they cannot be trusted to do this? One little joke before I move on: like the noble Viscount, Lord Eccles, I have been involved on boards of collective leaseholders working together and I have found quite as many of the mad, the bad and the sad there as I used to when managing very large-scale council provision and seeking to give tenants the choice over major investment decisions on their estates. We are wrong if we think that there is a monopoly of wisdom with the traditions of the middle class.
Some of the arguments I heard against the need for this, which relied on mechanisms of detailed practice, felt like the traditional views of landlords and providers, rather than as though we were starting from the point of view of the noble Viscount, Lord Eccles—how would we empower tenants to have choice?—which, in time, would have the benefit of giving them a better service. Clearly issues such as protecting the asset and the debt are fundamental. That is why the amendment proposes a system that is proposed by the regulator, because it would have to be copper-bottomed and enshrined in law such that no one could give power to anyone who did not have a prime duty. I do not give too much attention to the argument that this could not be done because the staff might be affected, because we must put the interests of consumers above those of the producers.
I am very grateful to all noble Lords who have spoken in the debate. I am particularly grateful to my noble friend and I look forward perhaps to having the opportunity to explore this further. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 103C to 104AZA not moved.]
Clause 88 agreed to.
104AA: After Clause 88, insert the following new Clause—
“Duty to involve tenants of social housing and members of the public
(1) It shall be the duty of the regulator, in performing its functions, to ensure that tenants of social housing, bodies representing their interests and, where appropriate, members of the public are involved in the exercise of its functions.
(2) The regulator must take such steps as it considers appropriate to secure the involvement of tenants of social housing and bodies representing them in the exercise of its functions in the manner referred to in subsection (1).”
The noble Earl said: This is a fairly simple amendment, the aim of which is to require the regulator to engage and involve tenants, and members of the public where appropriate, when carrying out its regulations and inspections of social housing providers. There is currently no specific duty to engage social housing tenants. We saw the list of duties in Clause 88, but there was no mention of engaging with social housing tenants.
Involving service users and the public is, we are told, a key part of the Government’s strategy for ensuring that people have an opportunity to have their say and to become involved in their local services. The amendment, which is supported by a number of organisations—including the National Consumer Council, the National Housing Federation, the Local Government Association, and the National Federation of ALMOs, to name a few—would also ensure that the regulator had a duty to engage with the National Tenant Voice, a new national body that represents the interests of social housing tenants.
The Minister has said that the Bill will ensure that tenants are at the very heart of the new regulatory system—I think she wrote that in a letter to us recently—but the Bill does not go far enough in meeting the proposals of the Cave report to ensure that tenants are at the heart of the new regulatory system. It is important that the Tenant Services Authority has a duty to engage with tenants in carrying out its functions. I beg to move.
This is another extremely important issue, which is closely related to the long debate that we have just had. From the outset, as part of the Cave report, Every Tenant Matters, we have signalled the inclusive listening culture that I want from the new regulator. The whole purpose of the Bill is to establish a new deal for tenants. Indeed, the second objective is to ensure that the actual or potential tenants of social housing have appropriate choice and protection. The third objective is to ensure that tenants of social housing have the opportunity to be involved in its management. Those objectives frame everything.
I set out in the previous debate the arrangements for consultation and publishing information. Together, those powers and duties form a robust and transparent system so that tenants will know what they can expect from their landlord. Information will be available to them so that they know whether their landlord is meeting the standards, and they will be able to ask the regulator to take enforcement action. The spirit of the amendment is therefore aligned with what we want to see happening. It will need to be founded on a culture which takes tenants’ concerns seriously.
The problem is whether the amendment would achieve its aims. As I have said, we all want to see the regulator involving tenants, but the amendment gives the regulator a statutory duty to involve tenants in its own work, which is partly the problem. The regulator has an objective to ensure that tenants have the opportunity to be involved in the management of their own homes and it may set standards for landlords on this issue. However, the amendment looks at tenant involvement in a different way: it puts an explicit duty on the regulator to involve tenants in the exercise of its functions. I wonder how it would work with all the activities in which the regulator will be engaged. I am not sure precisely what forms of engagement with tenants, which are not already covered, the noble Lord believes are necessary, where the boundaries might be or the nature of the involvement.
There seem to be four areas: namely, that it provides tenants with information about the exercise of its functions; it consults them about the exercise of its functions; it involves them in the inspection of registered providers of social housing; and it involves them in the process of national studies and how that affects them.
I am grateful to the noble Earl for reminding me of the detail in the amendment. It still raises the question of where the boundaries would lie in such a way so as not to overwhelm the regulatory process, bearing in mind that this is a small body. We want to be sure that this focuses on its main tasks. The regulator clearly needs to consult with tenant representatives when setting standards and guidance, which are its principal activities.
The noble Earl raised inspection in particular, which is central to what he said; we will come to that in a later group. However, the Audit Commission, which will do most of those inspections under amendments that I will bring, customarily uses lay inspectors. I am sure that we would expect that to happen and I am equally sure that some of those lay inspectors will be tenants. I will be able to go into more detail when we reach that group.
I can also reassure the noble Earl on the tenant voice. He will know that we are making significant progress with the creation of the National Tenant Voice, which will provide a voice and expertise for tenants at a national level through advocacy, research and support for representative groups. It will work closely with the regulator to drive up housing standards. Therefore, it will be able to do many of the things that the noble Earl would want to see under his amendment.
On another recent development, we currently envisage that the board will comprise the chair, chief executive and seven members. Among the seven members, we want to see at least two with direct experience of being a tenant. On 6 June, my colleague, Caroline Flint, called for two social tenants to come forward to apply for two out of the four new positions on the board of the regulator. That kind of input will be a direct form of involvement and a significant contribution to the board. I hope that with those reassurances on lay inspection in particular, the National Tenant Voice and representation on the board, the noble Earl will feel that the objectives he wants to see in terms of involvement should be satisfied.
Clause 90 [Conflict of interest]:
[Amendment No. 104AB not moved.]
Clause 90 agreed to.
Clause 91 [Committees]:
[Amendment No. 104AC not moved.]
Clause 91 agreed to.
Clauses 92 and 93 agreed to.
Clause 94 [Annual report]:
[Amendment No. 104B not moved.]
[Amendment No. 104BA had been withdrawn from the Marshalled List.]
Clause 94 agreed to.
Clauses 95 to 98 agreed to.
Clause 99 [Information, advice &c.]:
104BB: Clause 99, page 43, line 20, at end insert—
“( ) undertake research in relation to levels of income and the affordability of housing;”
The noble Baroness said: The amendment would add something to Clause 99, dealing with information, advice and so on. I am aware that we have spent quite a lot of time already this afternoon on important matters, but I do not want to suggest that this is unimportant. I will be happy to be told at the end of what need not be a very long exchange that the research in my amendment is covered by the clause and, more importantly, although we do not have the regulator in place, that the Government have in mind that the regulator should pay serious attention to this.
The amendment is about research on levels of income and the affordability of housing. We talk about affordable housing in a rather glib way, without stopping to work out what is affordable. That will vary across the country, as will rents. Doing the arithmetic and bringing the income and outgoings together into the same calculation is not what we are necessarily addressing in this sort of legislation, which is all about words. The Greater London Authority, from which I stood down six weeks ago, has done quite a bit of work on a living wage in London and has taken account of housing costs. A living wage in London, GLA economics says, is a good deal more than the minimum wage.
I want to approach this from the people end as well as the bricks-and-mortar end. Unless attention is paid to what is affordable in reality, with an estimate of the needs of those who are not adequately served by the market—more than an assessment; some detailed, tough work on what is actually affordable—the final words in a Bill that is 222 pages long and growing will not deliver for a lot of the people whom we want to see the Bill deliver for. I beg to move.
I support the amendment tabled by my noble friend Lady Hamwee. It will add a significant amount of research-based evidence to the arguments on the dispensation of grants in particular, and will bring transparency to the decisions taken by the regulator and the Homes and Communities Agency by helping not just the providers but also the consumers of housing to understand why policy goes in one direction versus another.
Amendment No. 105 in my name covers a rather different subject; I should perhaps have pointed that out. It is about the disappearance of the Treasury syndrome. The Minister said that she would write to my noble friend Lord Brooke, who is not in his place. That letter will no doubt come and Members of the Committee will receive copies of it. His point was that not having the Treasury appearing with great regularity in the Bill is a major change from predecessor legislation. If I take two or three predecessor Acts, the Treasury makes about 20 appearances in each. In this Bill, the Treasury appears once, in Clause 97(4), in brackets,
“(given with the approval of the Treasury)”.
I wonder what the brackets are for. Perhaps it is not really meant to be there because it is an exceptional entry.
My amendment only goes to accounts. At the moment, the Housing Corporation and the Urban Regeneration Agency get an annual direction from the Treasury about their accounts. It is detailed and is repeated in their reports and accounts. In answer to the question about why the Treasury is no longer necessary, the Minister said it was okay because accountability was still ensured. I am not certain that accountability is the issue. As I understand it, when Secretaries of State are going to disburse moneys under an Act of Parliament, they do not have any money, so they have to go to the Treasury because the Treasury holds all the funds in its Consolidated Fund. Therefore, the Secretary of State needs to make a call on the Treasury for funds. I would have thought that that should be acknowledged in the Bill, if nothing else is acknowledged. I speculated about why this change of practice has come about. I wondered whether it was something to do with ultimate control and whether there was some issue whereby if you put the Treasury in too often, you would have to conclude that the ultimate control of the body concerned, the HCA and the regulator in this case, would lie with the Treasury. I wondered whether there was some problem attached to ultimate control. We need an explanation about why this change of practice has come about and why it is all right.
When we were dealing with the accounts of the HCA, I asked the same question, and I shall ask it again. Clause 104(2) states:
“As soon as is reasonably practicable after the end of each financial year the regulator shall prepare a statement of accounts”.
My question is, when is that? It could be one year, two years or three years. For the HCA, I think I got the answer that it is six months. That seems reasonable. Clause 104(5) states:
“The Comptroller and Auditor General shall … lay a copy of the report before Parliament”.
Again, when will he do that? Is it one year, two years or three years, or is it a few months after it has been received by the regulator? Is the document a public record?
We have had two rather different but equally important debates. On the amendment of the noble Baroness, Lady Hamwee, I am absolutely of one mind with her and her noble friend on the importance of this sort of research, irrespective of who does it. We need a much clearer idea of the living standards and choices that people make in terms of their income and the demands on them. I have seen some of Peter Ambrose’s important work—he is a professor in housing studies—which is quite well known in this field.
I reassure the noble Baroness that, as she knows, the regulator can already carry out a wide range of studies and research under Clause 99. The scope is limited in two ways. The purposes of the study must be to advance the objectives set out in Clause 88 and must relate to social housing. I am sure that a study of the type proposed would advance objective 2, as it is concerned with the protection of tenants and potential tenants; for example, protection from excessive rent levels. It is also likely that this sort of study would be research on social housing. If it is, the regulator should certainly be able to do it already if it wishes to. I hope that that will satisfy the noble Baroness on that point.
Swerving to the point about the Treasury, I am not sure whether Members of the Committee should look forward to the letter we are promising. I am told that it is now about 30 pages long on Part 1. We are scrupulous in our attention to detail, and honour our promises, but it will be indexed so that Members of the Committee do not have to read all of it. I am sure that it will deal with this point about the Treasury and many of the other wide-ranging issues raised on Part 1.
I can only repeat a version of what I said to the noble Viscount, Lord Eccles, previously. As an NDPB, the regulator is subject to the same reporting and accounting requirements and procedures as any other large-scale NDPB. The accounts direction issued by the Secretary of State, as with other account directions, requires that the accounts must show a true and fair view of the state of affairs at the year end. Subject to that requirement, and set out in the Cabinet Office guidance, the accounts must therefore be prepared in accordance with the accounting and disclosure requirements in Managing public money and the current government financial reporting manual issued by the Treasury, known as the FReM, as amended or augmented from time to time, and subject to paragraph 12(3) of Schedule 1, which makes exactly the same provision for the HCA; and any other relevant guidance or disclosure requirements come into that.
Not only in this but in other legislation, we have arrived at the view that that is sufficient; we have met our duties. Treasury approval of the accounts direction would be sought as a matter of course. The noble Viscount is right: administratively, any proposals to depart from that would need Treasury agreement. I am confident that the question on when this change was made will be answered in this mega-letter. I have no consolation from behind me on the noble Earl’s specific question, so it will also have to be answered in the letter if he will patiently bear with me.
I shall await the letter with interest. It may answer questions on why this practice has become unnecessary, and whether it runs through all legislation or only some types. I hope that the letter answers all the questions and that there will be no need to return to the matter, but it is possible that I may think it right to do so at a later stage.
I was amused by the reference in Clause 97(4) to,
“the consent of the Secretary of State”
to financial assistance,
“(given with the approval of the Treasury)”.
It would be a brave Secretary of State who did something of which the Treasury did not approve.
On my own amendment, the Minister said that she agreed with the point but said that it was important research, irrespective of who did it. I know that that was intended to be inclusive rather than exclusive, but I was hoping, to the extent that her department is able to influence the work of the regulator, that it would encourage the regulator to take on this wider-ranging research as part of achieving the objectives. Although the department and the regulator are not the same, I am sure that the department will have a great deal of influence. I am grateful to her for the assurances that she has given and I hope that that will be undertaken, because for the regulator to succeed his horizons need to be quite broad. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 99 agreed to.
Clause 100 agreed to.
Clause 101 [Charging]:
[Amendment No. 104C not moved.]
Clause 101 agreed to.
Clauses 102 and 103 agreed to.
Clause 104 [Accounts]:
[Amendment No. 105 not moved.]
Clause 104 agreed to.
Clauses 105 and 106 agreed to.
Clause 107 [Direction to the HCA]:
105A: Clause 107, page 45, line 13, at beginning insert “In the circumstances set out in subsection (2),”
The noble Baroness said: In moving Amendment No. 105A I shall speak also to Amendment No. 105B. These are short probing amendments. Clause 107(1) provides that:
“The regulator may direct the HCA not to give financial assistance”.
Clause 107(2), states:
“A direction may be given if”,
and lists certain matters. Are the circumstances set out in Clause 107(2) the only circumstances under which a direction may be given under Clause 107(1) or is Clause 107(2) not exclusive? I have raised this before with the Minister so I hope she can answer briefly. That sounds very impertinent—I did not mean it in that way. I was trying to assist her. I beg to move.
I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 105B not moved.]
Clause 107 agreed to.
Clauses 108 and 109 agreed to.
Clause 110 [Disclosure]:
[Amendments Nos. 106 and 107 not moved.]
Clause 110 agreed to.
Clauses 111 and 112 agreed to.
Clause 113 [Eligibility for registration]:
[Amendment No. 107ZA not moved.]
Clause 113 agreed to.
Clauses 114 to 116 agreed to.
Clause 117 [Fees]:
107A: Clause 117, page 50, line 5, at end insert—
“(6A) Principles do not have effect until approved by the Secretary of State.”
The noble Baroness said: These amendments in my name deal, by and large, with fees. In his report, Martin Cave proposed that the regulator raises money to cover its running costs from regulated bodies. The Government agreed that it was fair that the regulated bodies should meet this cost, as they do in other industries, rather than through continued public subsidy.
Clause 117 gives the regulator the power to set fees for registration of social housing providers. The regulator may make initial registration conditional on payment of a fee. The regulator may also make continued registration of registered providers conditional upon payment of annual fees, which, in practice, means that providers will have to pay a fee every year. We envisage that the regulator’s activities will be funded almost entirely by the registration fees to be charged to applicants to register, rather than grants from the Secretary of State. That will make the new body much more independent from government. In addition, by passing those costs on to the regulated bodies, we will ensure that they keep up pressure on the regulator to drive down costs. In time, we expect the regulator to improve efficiency and to lower the cost of the regulatory regime, much as other utility regulators have been able to achieve.
It is important to stress that we do not expect the costs to registered providers to be too great. The regulator’s cost should be relatively small at about £20 million per year, which reflects the regulation side of the Housing Corporation costs. If that was divided evenly between registered providers on the basis of numbers of homes, it would amount to about £10 per social home per year. We think that offers good value for money.
The regulator has to prepare and publish the principles under which fees must be set, and consult persons it considers representative of the interests of fee payers. This is set out in subsection (5). Those checks and balances should ensure that fees are modest and fair. I understand, however, that some stakeholders are still concerned. We are therefore proposing an amendment to require the regulator to seek the Secretary of State’s consent to the principles on which fees are set. That will replace the requirement in the Bill for the regulator to consult the Secretary of State on these principles.
I hope this change will provide further assurance that the regulator’s powers to set fees could not be used to generate excessive income but only to reflect the reasonable costs of regulation. I beg to move.
I have a query on Clause 117(4) which says,
“The regulator may set different fees, and make different provision, for different cases or circumstances”.
I think I understand why the regulator may wish to be flexible, but I also recognise that, in the case of larger housing associations, particularly those with 50,000- plus units, £500,000 is not an inconsiderable amount, particularly when it is paid out every year. Can the Minister elaborate on why we have this ability to differentiate? Regulation usually means that larger players are able to carry out due diligence and their functions in a manner which is less time-intensive and effort-absorptive of the regulator than smaller players, which, on the whole, require more hand-holding. At the moment, the fees are distributed per unit of housing and I am concerned that that should remain so. Does the Minister envisage any point when the burden might shift disproportionately to some other formula?
The point of specifying the need for some differential is that, of the 1,900 RSLs, the majority are small and, therefore, one has to have regard to their viability and be careful about that. The fact that the Secretary of State will be involved in setting principles will enable that sort of issue, which was raised by the noble Baroness, to be addressed. Nothing says that it has to be proportionate. It has to be a sensible and fair system, which has to be expressed in the principles. It will be picked up in consultation. I am grateful to the noble Baroness for raising that important point.
On Question, amendment agreed to.
107B: Clause 117, page 50, line 7, leave out paragraph (a)
On Question, amendment agreed to.
Clause 117, as amended, agreed to.
The Committee stands adjourned for 10 minutes, as judged by the annunciator, because the clock is not quite right.
[The Sitting was suspended from 5.42 to 5.52 pm.]
Clause 118 [De-registration: compulsory]:
107BA: Clause 118, page 50, line 14, leave out “may” and insert “shall”
The noble Baroness said: In moving Amendment No. 107BA, I shall speak also to Amendments Nos. 107BB and 107BC. These amendments to Clause 118 probe the comment made by the Minister Iain Wright in the Commons Committee:
“It should be remembered that compulsory deregistration is at the regulator’s discretion”.—[Official Report, Commons, Housing and Regeneration Bill Committee, 29/1/08; col. 596.]
That struck me as an odd notion. Does “may” in Clause 118(1) mean “may” as normal readers would understand it, or is it “may” in legislative language—meaning “shall”?
My second amendment would remove the words, “take all reasonable steps” to give a body notice of deregistration, to suggest that a body should always be given notice except when that body has ceased to exist.
The third amendment changes 14 to 42 days. It is not intended to tease the Government, but 14 days seems a very short period indeed. I want to hear why the Government feel that such a short period is right. In Amendment No. 107BB, on a company ceasing to exist, I used the language used in Clause 118(1)(c), although there will always be something, unless the company has been struck off the register. For instance, if it is in liquidation, there will be a liquidator. I beg to move.
I am grateful to the noble Baroness for her point. We take the view that it is right that deregistration is at the discretion of the regulator, otherwise providers might leave regulation by accident or even by deliberate action—for example, by changing their management so they no longer meet the registration criteria. That would not be right.
Amendment No. 107BC extends the period of notice which the regulator must give to a body that it proposes to remove from the register from 14 days to 42 days. The combined effect of Amendments Nos. 107BB and 107BC would be that the regulator must give a body about to be removed from the register 42 days’ notice, except where the body no longer exists. I can see why the noble Baroness thinks there is no point in the regulator trying to notify a body that no longer exists. However, there is no need for the amendment; the provision cannot require the regulator to give notice to a body that is no longer in existence.
Amendment No. 107BC leaves intact the words “at least” before the 14 days. If I have understood the noble Lord correctly, it would not require 42 days, it would require at least 42 days. I wanted to get that on the record because what the Minister said did not mean that. He said that it would require 42 days.
I said that, but it could be up to 42 days. I understand what the noble Baroness is saying.
Amendment No. 107BB removes the words, “take reasonable steps to”. The noble Baroness might consider that they provide a get-out clause for the regulator, an excuse for failing to give notice. However, I assure her that taking “reasonable steps” is a strong test. It would allow the regulator to fail to give notice only in exceptional circumstances; for example if, after making extensive inquiries, the regulator could not trace the provider. As to the length of the notice—the period given to providers before they are deregistered—we think that 14 days is sufficient to enable a provider to make representations to the regulator.
Given that the criteria for deregistration are very clear and are linked with criteria for registration in the first place, I find it curious that the regulator needs discretion in case there is an issue. I believe that there is a good deal of case law about giving notice and what happens if you cannot find the person whom you seek to notify. To take all reasonable steps may be quite a high requirement but it is clearly less than the requirement to notify, as you are not completely disabled by the fact that you cannot find the notifyee.
On whether 14 days is enough, it does not seem a long period for an organisation to make representations to gather evidence and respond, but we are obviously going to disagree. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 107BB and 107BC not moved.]
Clause 118 agreed to.
Clauses 119 and 120 agreed to.
Clause 121 [Appeal]:
107C: Clause 121, page 51, line 26, at end insert—
“(3) The Secretary of State may by order provide for the First-tier Tribunal to have jurisdiction under this section instead of the High Court.”
The noble Lord said: This amendment is our response to an amendment tabled in another place by Lembit Opik MP, and essentially accepts that amendment. Clause 121 provides that a body may appeal to the High Court against any decision of the regulator to refuse to register it, deregister it or refuse to deregister it as a registered provider of social housing. It was suggested that appeals by registered providers and potential registered providers against decisions by the regulator in regard to registering or deregistering them should be directed at a tribunal rather than the High Court.
We said that we would have a look at that proposition, as we believe that there will be a viable first-tier tribunal route in existence. There would be advantages to using that way of resolving matters, including lower costs and a lesser burden for small registered providers, but this would need to be explored in more detail. This amendment therefore permits the Secretary of State by order to transfer these functions to the first-tier tribunal. I beg to move.
I thank the Government for enabling my honourable friend to leave his mark on the legislation. I have a couple of questions. Is it envisaged that an order might provide for a first-tier tribunal to have jurisdiction in some but not all the three cases set out in Clause 121(1)? Secondly, I am not trying to put anything into the Government’s mind or to suggest that a particular position is being taken—I simply do not know. Is it implicit in this that there would be a right of appeal, either generally or on a point of law, from the tribunal to the High Court? If those questions are more easily answered afterwards, I would be happy to receive a letter.
To save on the letter, we intend that they are all covered; that is sensible. However, we would need to consider that further. On the second point, yes.
On Question, amendment agreed to.
Clause 121, as amended, agreed to.
Clauses 122 and 123 agreed to.
107D: After Clause 123, insert the following new Clause—
“Accountability of providers
(1) Every registered provider shall prepare a policy statement showing how it will account to residents for the performance of its functions in relation to social housing.
(2) The policy statement shall be published in printed or electronic form and a copy supplied to the regulator.”
The noble Lord said: We are back on to accountability and impairment. Here, it is the question of the accountability of housing providers, particularly to their tenants or occupants. The Bill does not satisfactorily meet the requirement for housing providers to tell their tenants how they will account to them for the housing that they provide. If the tenants are to have increased rights and obligations, and the right to intervene with management, they must have an adequate source of information. The Bill does not really describe how that is to happen. It seemed appropriate to put in a new clause at this stage to require it.
Amendment No. 110X, which appears much later in the Bill, is about the requirements of those who accredit social housing provision, so that any accreditation scheme will require the accredited person to prepare an appropriate policy statement, stating how they will account to their tenants or occupiers of their housing. It is worth introducing these amendments to the Bill so that it is explicit rather than, perhaps, implicit—the operative word there being, of course, “perhaps”. I beg to move.
The noble Lord has kindly explained the amendments together. Amendment No. 107D would introduce a new clause requiring all registered providers to prepare a policy statement showing how they will account to residents for the performance of their functions in relation to social housing. It would oblige that to be published and a copy supplied to the regulator. Amendment No. 110X seeks to do something similar for managers who do not own homes and are selected through a management accreditation scheme.
These are highly creditable amendments which seek to focus on the key issue in social housing regulation—the relationship between landlord and tenant. The main goal of regulation is to ensure that this relationship works well and to make suppliers more accountable to consumers. In those terms, we welcome the amendments, but they must be carefully looked over. We need to know what exactly the statements would do, how they would be enforced through the regulatory system and how we would ensure that they complemented the regulator’s standards. We would also want to be sure that they did not impose too great a burden on providers.
We are happy to discuss these issues further when considering whether to amend the Bill. I would like to know what an accountability statement is, and what it might include. I can imagine statements which were very bland and unhelpful, or ones which were detailed and perhaps even unrealistic. What sort of issues would the noble Lord seek to include? I would also want to know more about the process of issuing the statement.
Those issues could be addressed in the regulatory system. Does the noble Lord intend that the regulator should set standards on the outcomes that an accountability statement should seek to achieve? Providers could play a useful role in developing such standards, so it need not be a top-down process. The regulator could also issue a code of practice on how it might work. It would be helpful to know a bit more about what is intended. We would also need to consider how that mechanism differs from what is already required in the Bill, except in that it is a direct statutory requirement on registered providers, which is something that we would normally try to avoid in favour of a regulatory solution.
We are setting up a regulator that can set standards on social housing management issues, including, under Clause 191, on methods for consulting and informing tenants and enabling them to influence or control the management of their accommodation or environment. In doing so, the regulator must follow the objectives, including enabling tenants to have choice, protection and the opportunity to be involved in the management of their homes. Those standards must be consulted on and may be enforced. They should be outcome-based. I cannot imagine that they will not include requirements on a minimum level of accountability to tenants. The effect of the amendment, I think, could be simply to fix in law a process by which landlords might meet those standards.
I have mainly focused on Amendment No. 107D, but there is also Amendment No. 110X, which seeks similar policy statements from managers selected by an accreditation scheme. We have not yet got to Clause 214, which seems a long way off given the speed of our progress on the Bill, so I will summarise the aim of that clause. Martin Cave identified a need for more competition for social housing management services to improve management quality. Historically, housing associations have usually managed homes in-house. Some do it well, others less well—and, in some cases, it might be better if they found a specialist manager instead.
If there is to be a change of management, whether voluntary or forced, there need to be good managers ready to take over quickly. We are allowing the regulator to run or approve schemes to accredit managers or accept schemes run by others. The regulator may require a scheme to include certain requirements, for example, that the manager must meet the standards and that there be provision for withdrawing accreditation. Many of the same issues and arguments apply to this amendment as to Amendment No. 107B. There may also be a risk of confusion if both the owner and the manager have to issue policy statements on accountability. I would prefer as far as possible to leave decisions on what is required through an accreditation scheme to the regulator.
In conclusion, we would be grateful if the noble Lord expressed some further views on this issue, not only on the principle, which we can see has positive benefits and is good, but on the pros and cons of the proposed mechanism. We are not saying yes to this, but we are not saying no either. This needs to be an iterative process. If the noble Lord wants to write to us, for a change, or set out in some sort of schema a response to what I have said, we may well find ourselves in the happy position of agreeing on an amendment or on a form of words that satisfies the points that have been properly and pleasantly made in the amendment.
I almost feel like saying, “Before the Minister sits down”, because I am very grateful for that explanation. The noble Lord began by welcoming the amendment and then he took a large bucket and rightly poured cold water over it. I knew that there were questions of detail that needed to be fleshed out if this was to be included in the Bill, so that came as no surprise at all. Then he indulged in some obfuscation and tried to prove that the Bill said it all already. He did not succeed. Then he invited me to write to him, which is almost unprecedented. If that is an offer of discussions before we get to Report, I welcome it, because we need to think about this. It should be explicit. I am sure that we could find a simple form of words that would make Amendment No. 107D more effective.
Amendment No. 110X, which I agree is much further on in the Bill but on the other hand is on entirely the same principle, may be less significant. If we have put it into the Bill once, we do not need to repeat it. I look forward to further discussions, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 124 to 126 agreed to.
Clause 127 [Directions]:
107E: Clause 127, page 53, line 17, at beginning insert “Subject to guidance issued by the Secretary of State,”
The noble Lord said: This is another probing amendment. Clause 127 says:
“The regulator may give directions to registered providers about the preparation of their accounts”.
The regulator is the housing services authority, and I wonder how qualified it is to give anyone advice on preparing accounts. That is the main issue. I understand the Audit Commission having the power to do that, but I never thought of the regulator having the financial expertise to give anyone advice on the preparation of their accounts. I have difficulty with this. We should look at this carefully.
The Secretary of State, on the other hand, has to require all sorts of people to produce all sorts of accounts and includes within his staff people with the expertise to give advice. It might save the regulator a great deal of trouble if he told the regulator how to produce accounts in the first place. That is the purpose of the amendment, which seeks to tease out exactly how the Government see this part of the Bill working. I want the regulator to be responsible for the regulation of housing and not necessarily for the presentation of accounts, although in part the accounts must be sufficiently clear and informative so that everyone can read them, see the real facts of what is happening and, importantly, understand. If that is left to a regulator whose job is to regulate housing rather than accountancy, we might not get it right. I beg to move.
I take almost entirely the point made by the noble Lord, but I thought immediately of a situation that started to develop in the Housing Corporation when I was there and is probably an even bigger issue now. Registered social landlords are now acting in areas where they have no social grants and are outside the regulated area. They want the non-regulated area to be completely separate on their balance sheet; yet that non-regulated area could be the financial risk to the regulated stock that has been funded by public funds. I hope that I am not making things too complicated.
The financial risk on the overall balance sheet could come more from the non-regulated area, although it might not. If something happened, no receiver would say, “I accept that that part of the organisation is not subject to receivership, but this part is”. The paragraph may have been aimed at this. The direct intervention of the Secretary of State should not be necessary, because the regulator should be able to give good guidelines. I have to say, without being too indiscrete, that we have had one or two difficult discussions with some housing associations that tried to tell us that it was nothing at all to do with the regulator, because the money that was raised was entirely outside the regulated part of the organisation and therefore should not be part of the overall group balance sheet. The corporation took the view that it was regulating the group, not the individual entities within the group. Whether that is still the case, I do not know.
The noble Lord’s amendment sounded eminently sensible. As he spoke to it, those kinds of thoughts came into my mind. As noble Lords can see, in the social housing sector enormous amounts of funding have been raised, and it is not a partner to the government grant. It does not have government grant in it at all, some of it.
I speak in support of the amendment proposed by my noble friend Lord Dixon-Smith and also on my amendment to insert the words,
“from time to time determine requirements”.
I shall deal with that technical matter first. In using those words, I am using predecessor legislation rather than the very technical use of the word “directions” and the fact that you must comply with directions.
The points that the noble Baroness, Lady Dean, made are of course entirely right. I suppose that they are dealt with pretty clearly in Clause 127(4), which says that a charity must distinguish in its accounts,
“matters relating to its social housing activities, and … other matters”.
It is clearly necessary for there to be a distinction drawn in the accounts. My problem with the regulator doing it on his own is that it is a handover from the Housing Corporation, which was on both sides of the matter. That is an effect of the de-merger. It understood about the matters of substance relating to social housing, as well as doing the regulation, and therefore understood the matter of the accounts. The regulator will have no such need to have that understanding of accounts for the regulator’s own purpose; he is unlikely to be in any way expert in the matter of accounts and how they should be prepared. It is also the case that the social providers will go through an audit with an auditor, who will be pretty clear about how the accounts should be drawn up.
This is not a situation in which directions are appropriate. You must comply with directions, which must be drawn up very carefully and in great detail. On this occasion, that would not give flexibility to the auditing accountant, to the Comptroller and Auditor-General, who might have some comments to make, or to the Treasury, which might have some comments to make. Therefore it would be better to stay with the words of the previous legislation, which say,
“from time to time determine requirements”.
There have been some interesting contributions during this short discussion. The amendments are very helpful.
The clause allows the regulator to issue directions to registered providers of social housing covering the production of accounts for social housing activities. The purpose of such directions must be to ensure that accounts are prepared in a proper form and to give a true and fair view of the social housing activities undertaken and the use of funds and assets connected with those activities. The noble Viscount, Lord Eccles, has got it right: this is a carryover power or existing power of the Housing Corporation, although it has been amended in this Bill in some respects—for example, to ensure that it applies to profit-making providers as well as non-profit providers.
The regulator may use his discretion power in ad hoc situations, in relation to one provider or more—usually to issue a general direction to all registered providers. Any directions issued to a number of registered providers can be introduced only after consultation with one or more bodies appearing to represent the interests of registered providers.
Amendment No. 107E, in the name of the noble Lord, Lord Dixon-Smith, would in effect give the Secretary of State a power, not a duty, to issue guidance on the form of registered provider’s accounts. We do not agree that this would be a desirable outcome. There is no suggestion elsewhere in the Bill that the Secretary of State should issue guidance on providers’ accounts, nor is this a part of the current regulatory system. Our intention is to set up a regulator with substantial independence from central government directions and guidance. To our way of thinking, the logic of the legislation would suggest that it would be counterproductive to require central guidance on something so technical and detailed.
I agree that when setting directions the regulator may need accounting advice from professional bodies. I do not think that anyone would argue about that. But in more general terms, the regulator is best placed to decide what accounting information it needs. The Secretary of State will not have any specific knowledge or expertise on the sectors’ accounting arrangements.
Amendment No. 108, tabled by the noble Viscount, Lord Eccles, proposes a subtle change in wording in Clause 127(1), which currently states:
“The regulator may give directions to registered providers about the preparation of their accounts”.
The amendment would change that to, “The regulator may from time to time determine requirements to registered providers about the preparation of their accounts”. Our view is that this will not change the effect of the clause. Under the revised wording, the regulator still would be able to give directions to registered providers about the preparation of their financial accounts. But we understand that the noble Viscount’s intention is to question whether the power in Clause 127 could be weakened slightly.
Our argument is that these directions are necessary to ensure that accounts are prepared in a proper form. Without this power to direct, the regulator cannot be sure of getting the information it needs at an early stage to identify financial problems within an organisation. In part, it takes account of the argument raised by my noble friend Lady Dean on the need to have that overall picture and to understand more about the totality of the organisation even where it is not directly, in part of its group activity, dealing with social housing. I am grateful to Members of the Committee for their amendments, which have been very helpful. I hope that that answers the points raised.
I am grateful to the Minister for his response. I am more particularly grateful to the noble Baroness, Lady Dean of Thornton-le-Fylde, and to my noble friend Lord Eccles for their contributions. They have detailed knowledge of the way in which these systems work in the field, which is very important. In fact, the noble Baroness, Lady Dean, encouraged me to the extent that she gave absolute confirmation that my concerns exist in this area of accountancy even if the amendment, perhaps, is not appropriate. I am grateful to them both and to the Minister for the discussion of this little issue. Ultimately, it is very important that the accounting is clear, correct, appropriate and understandable. I shall read the Minister’s reply with some care before I decide whether we need to pursue this subject further. But, for now, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 108 not moved.]
Clause 127 agreed to.
Clauses 128 to 143 agreed to.
Clause 144 [Preparatory steps: notice]:
108ZA: Clause 144, page 60, line 38, at end insert—
“But not the presenting of a petition by the regulator under section 165”
“But not the presenting of a petition by the regulator under section 165”
The noble Baroness said: These are technical amendments that address a technical anomaly between the moratorium provisions in Clause 145 and the regulator’s power to wind up a provider in Clause 165. The two powers are quite separate and are not intended to be related, but the Bill does not make this clear. The amendments ensure that it does.
The moratorium process offers an important protection for tenants and investment in the most serious of situations: when a provider is insolvent. Once the process is triggered, there is a moratorium on the disposal of a provider’s land for 28 working days. This provides an opportunity for the regulator to agree proposals with secured creditors and to put in place a rescue package. These are strong powers for the regulator, and it is an important feature of the moratorium system that they are triggered only by steps that are taken independently of the regulator; that is, normally by the provider or its secured creditors. It would not be appropriate for the regulator to be able to trigger these powers itself.
One of the steps in Clause 145 that triggers a moratorium is the presenting of a petition for winding up a registered provider. There are certain circumstances in which the regulator may present a petition for winding up. That power is most likely to be used when, following a statutory inquiry, the regulator has directed the registered provider to transfer all its land to another person. This allows the regulator to ensure that the provider, which no longer has any land, is closed down in an orderly manner.
These powers have distinct and separate purposes and they should not interact. If the regulator presents a petition for winding up, it should not trigger a moratorium. The amendments make this quite clear. I beg to move.
I have a number of amendments in the group, but I will not speak to Amendment No. 108ZBA. There have been several exchanges with the Bill Team on it, and I am grateful for its explanation.
Amendment No. 108ZBB is a probing amendment to Clause 148 and the effect of the moratorium. It seeks to understand whether a moratorium gives rise to a requirement for the regulator’s consent where there has been a binding agreement to sell land but the transaction has not been completed. We are talking about bigger items of property, but in house purchase terms we would be talking about contract and completion. That is the distinction. This is an important point, because a third party would be affected by something completely outside his control. He might suspect that a moratorium is on the way, but that is different from one being in place.
Amendment No. 108ZBC seeks to amend Clause 151, which allows the regulator to make proposals. I suggest that regard must be had to the interests of the tenants of the registered provider. That is a different way of checking whether Clause 98, which is about evidence, and Clause 88, which is about the fundamental objectives, apply. I believe that they do, but confirmation would be welcome.
Finally, Amendment No. 108ZBD to Clause 157 concerns assistance by the regulator who can lend staff to a provider. This is to probe the employment status of the staff who are lent. For instance, could a member of staff refuse to be lent? I assume that they remain employed by the regulator and that there is no transfer of employment. Confirmation of that would also be welcome.
I am grateful for the noble Baroness’s amendment. We should put these issues on the record. An explanation of Amendment No. 108ZBB would be helpful. During a moratorium, the registered provider’s land may be disposed of only with the regulator’s prior consent. The amendment would waive that, so the regulator would be obliged to consent in those circumstances. The amendment would exclude from that a disposal that had been agreed to but not completed when the moratorium came into effect. I assume that the noble Baroness intends to protect purchasers who may otherwise find that their transaction is delayed. However, this would remove an important protection.
A provider who is on the verge of a moratorium is likely to be in the most serious of financial difficulties. In the final days and weeks before the moratorium is triggered, disposals may be agreed to that are not in the best long-term interests of the provider and its tenants. The moratorium provides an important breathing space at a very difficult time, and it is important that the regulator is not obliged to honour agreements to make disposals that are not in everyone’s best interests—hence that arrangement.
I think the noble Baroness’s sharp question was: when does the regulator’s disposal consent become legally binding? I understand that that happens when the regulator formally issues his consent if the consent is required because of a moratorium. The important point is that the consent can also be given before the moratorium starts or at any point during it. These arrangements do not prevent the regulator from consenting to a sensible and legitimate disposal. That consent may be given even before the moratorium has been triggered. Certain routine disposals are already exempted from this provision by virtue of Clause 149, including the most common forms of residential tenancies and sales under the right to buy and the right to acquire. We need to balance the interests of tenants, providers, creditors and so on. That is a very rare circumstance, which arose only once in the history of the Housing Corporation; so taking account of all that, the risks introduced by this amendment would be greater than the benefits.
Amendment No. 108ZBC concerns the proposals made by the regulator for the future of the provider and its homes. Clause 151 requires the regulator, when making proposals, to have regard to the interests of the provider’s creditors as a whole, and to avoid, as far as is reasonably practicable, worsening the position of unsecured creditors. These provisions specifically highlight the interests of unsecured creditors who might otherwise be overlooked. The regulator has a fundamental objective to protect the interests of tenants. As these proposals have effect only if agreed by secured creditors, the interests of secured creditors will always be considered. Without this provision, however, the interests of unsecured creditors might not be taken into account.
The noble Baroness has addressed the requirement to have regard to the interests of the tenants of the registered provider. She has read Clauses 88 and 98 correctly, and they are covered by that. They are also covered by the regulator’s objectives, which also require it to ensure that tenants have an appropriate degree of protection.
The whole purpose of the proposals set out at the beginning of the clause is to ensure that the property will be properly managed by a registered provider. That overriding purpose seeks to protect tenants by ensuring that their homes stay in the hands of a well managed registered provider.
On Amendment No. 108ZBD and the powers to assist a registered provider, the noble Baroness is quite right. Among other things, Clause 157 allows the regulator to lend staff to the manager of a registered provider during a moratorium. The amendment replaces this with,
“make staff available to the manager”,
and is about the employment status. However, the provision does not affect the employment status of any staff of the regulator. They would continue to be employed by the regulator, and any obligation on them to carry out this work would be no more or less than their obligation to move to alternative duties within the regulator’s office.
I am grateful for all that, and am happy with the responses to the second and third amendments. I am less happy with the points made about the first and about the effect of a binding agreement being in place to sell a property to a third party. The Minister sought to reassure me by talking about the transaction being delayed. As I understand it, however, the transaction could in effect be avoided; if consent was not given, the transaction could not go ahead. I take the Minister’s points, but there is a lot to be said for this being on all fours with liquidation, and possibly administration, in the commercial sector.
I am concerned by the prospect of an “innocent” third party being adversely affected by something completely outside his control. In the world of real property, the agreement and the competition of the agreement are two separate points in the process, although they sometimes come close together. It is no small thing for that well established position to be dealt with differently in this circumstance. Perhaps I might talk to the Minister about this after Committee. She nods; I am grateful.
On Question, amendment agreed to.
Clause 144, as amended, agreed to.
Clause 145 [Moratorium]:
108ZB: Clause 145, page 61, line 39, at end insert “or by the regulator under section 165”
On Question, amendment agreed to.
Clause 145, as amended, agreed to.
Clause 146 agreed to.
Clause 147 [Further moratorium]:
[Amendment No. 108ZBA not moved.]
Clause 147 agreed to.
Clause 148 [Effect of moratorium]:
[Amendment No. 108ZBB not moved.]
Clause 148 agreed to.
Clauses 149 and 150 agreed to.
Clause 151 [Proposals]:
[Amendment No. 108ZBC not moved.]
Clause 151 agreed to.
Clauses 152 to 156 agreed to.
Clause 157 [Assistance by regulator]:
[Amendment No. 108ZBD not moved.]
Clause 157 agreed to.
Clauses 158 to 164 agreed to.
Clause 165 [Winding up petition by regulator]:
108ZBE: Clause 165, page 70, line 36, leave out “properly”
The noble Baroness said: Amendment No. 108ZBE probes the term “properly” in Clause 165, which relates to a winding-up petition by the regulator. One of the grounds is because the,
“provider is failing properly to carry out its objects”.
When I read that, I wondered why it did not simply state that the “provider is failing to carry out its objects”. I wondered where on the spectrum between failing just a little bit and failing substantially, materially or other words of that sort properly falls. It may be somewhere in the middle. As we are talking about winding up, it is appropriate to understand what will trigger the regulator’s powers.
Amendment No. 108ZBF would insert a new clause. I may well be told that the protection already exists. I have provided for the regulator who has discharged liabilities—in other words, made payments—to have a charge over the land to the value of the amount paid out. I know that this is not technically correct. It does not deal with other charges that there might be on the land. However, this is public money, and the regulator should have some security, in the non-technical sense of the word, for that money, although it may come from another mechanism in the Bill. I beg to move.
Amendment No. 108ZBEA is tabled in my name and is in this group. I am concerned with the part of the Bill that deals with the restructuring and dissolution of housing providers in the event that things go seriously astray. This is a probing amendment because after we have fairly thoroughly dealt with the winding up on page 70, we come in Clause 166 on page 71 to the transfer of property. Clause 166(2) states:
“Any surplus property that is available after satisfying the registered provider’s liabilities shall be transferred (a) to the regulator, or (b) if the regulator directs, to a specified registered provider.”
I found myself wondering whether it would involve a conflict of interest if the regulator were suddenly to become the owner of some of these properties. It seems to me that it does, even if it is only a temporary solution. I think that the words,
“to the regulator, or … if the regulator directs”,
ought to come out so that the regulator is obliged to transfer the property to someone else. He would be in a difficult position if anything else were to happen. I tabled this amendment to explore that potential conflict. I hope the Minister will not mind answering it.
These are three forensic amendments. I am not entirely certain that the noble Baroness is going to be satisfied with my response. This is wonderful stuff for lawyers.
The ground affected by this amendment—that the registered provider is failing properly to carry out its objects—was an existing power in the Housing Act 1996, which used the same term. Because it has been used so rarely, I do not think that getting rid of the word itself is going to be of much benefit to man or beast.
The trigger for “failing properly” is a standard phrase, which is also used in the Charities Act. The bar for the use of the power is high; it would obviously be tested in the courts. It has been used by the corporation on rare occasions when the association’s objects have not been addressed or achieved. There is an example, on which I shall not go into in detail but will be delighted to send to the noble Baroness, of when the provision was used. It involved the Railway Street Housing Co-operative, an association of owner-occupiers and tenants in miners’ cottages in Durham. This may bring back to the noble Baroness case law studies from her days as a student, when there were a lot of cases like it. The organisation proved incapable of functioning as an independent, viable and well managed organisation. It was quite an interesting case. However, it is an extremely rare power. It is a consistent form of terminology and, on that basis, we shall have to resist the amendment.
The noble Baroness’s other amendment, Amendment No. 108ZBF, is worth addressing briefly as it raises an important issue. It would add a new clause after Clause 167. Clauses 166 to 168 allow the regulator to transfer land held by a housing association that has been wound up, normally to ensure that tenanted social housing and assets that may have been publicly funded are passed to another association. Therefore, the tenants continue to have the benefit of protection and public assets to protect them. That is again an existing Housing Corporation power.
The amendment deals with a specific situation. The regulator transfers the land of an association that has been wound up to a second association. The first association has liabilities, which is quite likely if it was wound up for insolvency, and they would normally be met by selling the land. However, because the land is social housing, or there are other good reasons to transfer it, the regulator decides to pay off the liabilities itself rather than sell the land. Clause 166(3) explicitly permits it to do this.
This amendment would ensure that the regulator gets its money back by requiring it to take a charge over the land to the value of the amount it has paid. I think that will often be a sensible way forward, and there is nothing preventing the regulator doing that. However, my concern is that it will not always be the best way of dealing with the problem, and this amendment, by requiring the regulator to do that, reduces its flexibility in dealing with complex transactions, which has risks for the assets concerned. For example, the regulator may find it difficult to find a new owner for the land, if that land has liabilities attached. An association that accepted that land would do so despite making a loss, and not every association would be able or willing to do that. It also does not seem entirely fair to attach to the land liabilities that have little to do with it. When making this sort of decision, the regulator will be guided by its objects, which include concern for tenants and public assets, not imposing a burden on public money and concern for the viability of the association taking on the land. That is why we think it important to keep flexibility in the clause.
Finally, Amendment No. 108ZBEA, proposed by the noble Lord, Lord Dixon-Smith, restricts the regulator’s power to direct when transferring property to another provider. Clause 166 provides that when a non-profit registered provider is dissolved or wound up and all its liabilities are paid, the question remains of what to do with its remaining assets—that is to say, social housing. That is clearly a decision for the regulator. Clause 166 sets out the regulator’s powers: the properties are either transferred to the regulator or to another registered provider. The regulator’s first aim will always be to find another registered provider to take over the social housing. We think it unlikely that there would be no registered provider willing to take over the social housing but, in that case, the regulator would have to transfer the property to itself. In effect, it would be acting as the social landlord of last resort. That would only ever be a temporary arrangement while the regulator tried to persuade another registered provider to take on the properties. It is clearly not appropriate that the social housing is lost by being sold off to a private landlord. The noble Lord asked whether there would be a conflict of interest. To my knowledge, under those circumstances, there would not be. It is a temporary, last resort provision, so that should not be an issue.
The amendment is not helpful because it is necessary to have the regulator as the social landlord of last resort. Otherwise, things would be left in limbo in such cases. I will make sure that I am correct about the conflict of interest point, but I am fairly certain that that would not be the case.
I am grateful to the noble Baroness for her explanation, which was much as I expected it to be. I remain concerned that the regulator might have to become the proprietor of last resort, which in certain circumstances may be necessary. I will think about that some more.
Thank you. That is very helpful. On the term “properly”, I am reassured by its use in other legislation. As I have said before, it can cause more problems to alter something than not. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 165 agreed to.
Clause 166 [Transfer of property]:
[Amendment No. 108ZBEA not moved.]
Clause 166 agreed to.
Clause 167 agreed to.
[Amendment No. 108ZBF not moved.]
Clauses 168 and 169 agreed to.
Clause 170 [Power to dispose]:
108ZC: Clause 170, page 72, line 8, at end insert—
“(1A) But a non-profit registered provider may dispose of the landlord’s interest under a secure tenancy only to another non-profit registered provider.”
The noble Baroness said: We have come to a group in which the majority of the amendments are government amendments. I will deal with Amendments Nos. 108ZC, 108ZD, 108ZE, 108ZF, 108ZG, 108ZH and 108ZJ. The amendments vary in length and complexity; so look sharp, even though it is 7 pm.
Amendment No. 108ZC is a technical and precautionary amendment to ensure that if a non-profit registered provider wishes to sell a home that is let under a secure tenancy, it can only do so to another non-profit registered provider. Secure tenancies are slightly different in law to the assured tenancies that are typically issued by registered social landlords. I know that noble Lords understand those differences. Some of the protections of a secure tenancy rely on the status of a landlord as a public-sector landlord, a registered social landlord or non-profit registered provider in future. We would therefore not wish to see a home let under a secure tenancy transferred to a profit-making registered provider. We would not expect the regulator to consent to such a disposal, which would be inconsistent with its objective to protect tenants. The amendment makes absolutely certain of that by explicitly prohibiting such a disposal.
Amendment Nos. 108ZD, 108ZE, 108ZG and 108ZH are related. They represent a significant reduction in the regulatory burden on non-profit providers of social housing by removing the requirement on them to seek consent for the disposal of land except where that disposal is of social housing. It brings the requirement on non-profit providers into line with that for profit-making providers. Those who have followed this debate in the other place will know that, initially, we took a very cautious approach over non-profit providers of social housing—the successors to RSLs. We retained the requirement for them to seek consent for any disposal of land. That requirement has a long-standing history as part of the regulatory system and reflects an historic situation. In the past, RSLs were concerned almost exclusively with social housing. Now, quite rightly, they are involved in mixed-tenure developments and in wider community services and have a wider range of assets that are not social housing. In addition, until now, there has not been a legal definition of social housing, so we had no way to distinguish in statute between social housing and other assets.
Given all this, we accept that times have changed. We have listened to the concerns of stakeholders and were careful to balance the risks. We are now proposing to limit the requirement to seek disposal consent to social housing only under Amendment No. 108ZD. It would ensure that social tenants and investment in social housing are protected while giving registered providers more freedom to manage their other assets. In practice, this power is hardly ever used. Many disposals of land that are not social housing are covered by the Housing Corporation’s general consent. This change will effectively bring that practice into legislation, thereby minimising the burden of regulation. It has been welcomed by the Housing Association. I believe that this strikes the right balance between protecting tenants, protecting public investment and giving landlords freedom to manage their own affairs.
Amendment No. 108ZH would place a requirement on non-profit providers to notify the regulator when they make a disposal for which consent is not required, although the regulator is free to give a direction dispensing with that requirement. At present, the information received by the Housing Corporation about disposals is an important part of its understanding of the financial standing of landlords. We do not believe that it is necessary for the regulator to have power to withhold disposal consent for land other than social housing, but that it should have access to important financial information about major transactions. We have therefore provided this requirement to notify the regulator, which would probably be dispensed with for large numbers of minor transactions. It is about minimising the regulatory burden while ensuring that the regulator can maintain good information about providers’ financial standing. Again, it is about balancing risks.
Amendment No. 108ZF corrects a drafting error in Clause 172, which sets out the exceptions to the requirement to seek consent to dispose of social housing. The first exception is for disposals under the types of residential tenancies most commonly used by registered providers. At present, this exception applies to non-profit registered providers only, which is an error. It would mean that profit-making registered providers would need to seek the consent of the regulator before letting a home to a social tenant. That would obviously be absurd and a serious impediment to their normal business. The amendment therefore deletes the words “non-profit” so that this exception applies to all registered providers.
Finally, Amendment No. 108ZJ is a technical amendment to ensure that the existing system of a disposal proceeds fund for the proceeds of right-to-acquire sales is preserved under the new arrangements. It may help if I set out the background. The disposal proceeds fund is an important part of the legal framework of the right-to-acquire scheme. By requiring providers to place the proceeds of sale, along with any grants for discounts, into the disposal proceeds fund and then requiring the fund to be spent in line with the regulator’s direction, this system enables us to ensure that stock lost through the right-to-acquire is replaced.
Although the Bill makes no substantive changes to the right-to-acquire itself, this group of clauses is necessary to ensure that the system of reinvesting proceeds is maintained under the new organisational framework. The amendment is needed because of the regulator’s greater independence from government, compared to the Housing Corporation. Obviously, the key feature of this Bill is that we are giving the regulator statutory independence with the Government’s powers to direct limited to a few very specific areas. Unlike with the Housing Corporation, the Government cannot rely on a general direction power to require the regulator to achieve government policy.
In the vast majority of circumstances, that is quite right. However, it is important that the Government have the power to direct the regulator on the use of the disposal proceeds fund because it is a key feature of our policy on the right to acquire that proceeds will be reinvested in replacement social housing. That has been achieved until now through the Housing Corporation’s control of the disposal proceeds fund. In future, it will be achieved through the regulator’s control of the disposal proceeds fund. The greater independence means that we need to spell out the Government’s role more clearly. If we are to ensure that the right to acquire remains unchanged, the Secretary of State must have a power to direct the regulator in this very limited area.
I am grateful for the Committee’s patience as I ploughed through that. I beg to move.
I have some amendments in this group, but first may I say how helpful it was to have the Minister’s speaking notes as well as the oral explanation? I shall make an observation rather than oblige the Minister to respond. It is a pity that the last amendment achieves something that I would support but does not say so specifically. The explanation was entirely cogent, and, as I say, we support it, but the amendment is much broader.
My Amendment No. 108ZFA is a probing amendment about the involvement of the tenants. It is the same as Amendment No. 108ZBC in the last group, but I was assured that Clauses 88 and 98 apply there, and I dare say that they do here, too. Amendment No. 108ZGA would amend Clause 174 on disposals. Case 2 in Clause 174(4) deals with small disposals of a single dwelling or a principal residence. My amendment limits the exclusion so that there is no salami-slicing of properties and probes what the Government have to say about how they would protect against that.
Amendment No. 108ZHA amends the clause that deals with what can be deducted from gross proceeds to get to net proceeds. As I read the clause, the regulator could decide to determine every last pound and penny. I suggest that it would be adequate and proper for the regulator to look at categories of amounts—headings—rather than at the detail of the cash spent. It may be a small matter, but it struck me as a heavy burden for everyone involved, not just for the regulator, if there had to an examination of every cent spent.
I am grateful for the noble Baroness’s explanation of the amendments. Amendment No. 108ZFA is about the role of tenants in the disposal consent process. She is right about Clauses 88 and 98 applying. It is also worth saying that any disposal of social housing requires the specific consent of the Housing Corporation and, in future, that of the regulator. Disposals are rare and have significant implications for tenants, so it is right that they have an opportunity to be fully informed. It is Housing Corporation policy not to give consent for a disposal of tenanted social housing except to another registered social landlord, and we would expect the regulator to continue that policy, particularly given its explicit objective of protecting tenants.
In deciding whether to give that consent, the corporation requires the landlord to provide information on how it has consulted tenants and other stakeholders, including local authorities. That seems to be quite right because that sort of detailed consultation is the job of landlords. In future, the role of the regulator is to make sure that that is done, not to do the job for them. It is essential that tenants are properly involved if there is a proposal for their homes to be transferred. The amendment raises some issues because general disposal consents do not apply to particular landlords or properties but set out categories of disposals. I understand that the purpose of the amendment is to enable us to put on record the protections that are available to all social housing tenants.
Amendment No. 180ZGA provides that a purported disposal by a registered provider that requires consent, but for which consent has not been given, is void. There are exceptions to this rule for disposals by non-profit registered providers where the land concerned is not a dwelling or is a single dwelling sold to an owner-occupier. This exception is to protect individual purchasers who buy their home from a registered provider from finding that their purchase is void. The burden of establishing that the vendor is a registered provider, that they are required to seek consent and whether that consent has been given is excessive. However, I understand where the amendment is coming from. The noble Baroness argued that there is potential for abuse of this provision by non-profit registered providers who could evade sanctions against making disposals without consent by salami slicing—selling off properties one by one to individual home buyers. I can see the intent behind that. The amendment sweeps in any disposal, including disposals for which consent was not required or for which consent had been given. Whether a disposal was void could turn on whether any resident in the same development had recently exercised his right to acquire, which seems perverse.
Let me reassure the noble Baroness that I do not believe that there is potential for abuse here, so I do not share her fears. Non-profit registered providers are bound by their constitutions to devote themselves to the provision of housing and related services¸ so there is no motivation for them to abuse the system in this way. We have no record of this happening. If it did take place, it would still constitute mismanagement and would still be grounds for regulatory intervention. This exception is not to the requirement to seek consent, but to the sanction that the disposal is void. If there were abuse, and I think it unlikely, the regulator would have other sanctions available. It would amount to a breach of standards, and the regulator could take appropriate enforcement action. I believe that there is no need for that.
Amendment No. 108ZHA relates to the disposals proceeds fund. The funds can be spent only in line with a determination by the regulator on new social housing. This ensures that homes sold under the right to acquire are replaced. The noble Baroness correctly set out the way that that happens. Before placing the proceeds of sale in the disposals proceeds fund, landlords are able to deduct an administration fee, which is specified by the regulator. The fee currently stands at £701 for a house and £1,576 for a flat to recognise the more complex leasehold arrangements normally involved in flats. The Housing Corporation had and used that power. This amendment, which specifies categories or types of costs but not amounts, would not improve the situation. The Housing Corporation has been happy to use the power and found it useful—I am looking at my noble friend Lady Dean—and I do not think that the amendment would improve it. Doing it this way is a proper use of the system
I am grateful for that. The term “mismanagement” is defined in Clause 274. I am not sure whether, in responding to the second of the amendments, the Minister intended it to be a technical term, but it is defined as,
“managed in contravention of a provision”,
which would not be the case in the salami slicing, or,
“otherwise conducted improperly or inappropriately”.
I am grateful to the noble Baroness for drawing that to my attention. In that clause I was using it not in the legalistic sense, but in the general sense.
On Question, amendment agreed to.
Clause 170, as amended, agreed to.
Clause 171 [Requirement of consent]:
108ZD: Clause 171, page 72, line 13, leave out subsections (1) and (2) and insert—
“(1) Disposal of a dwelling by a registered provider requires the regulator’s consent if the dwelling is social housing.”
108ZE: Clause 171, page 72, line 20, leave out “The exceptions are” and insert “Consent is not required under this section if the disposal falls within an exception”
On Question, amendments agreed to.
Clause 171, as amended, agreed to.
Clause 172 [Exceptions]:
108ZF: Clause 172, page 72, line 23, leave out “non-profit”
On Question, amendment agreed to.
Clause 172, as amended, agreed to.
Clause 173 [Procedure]:
[Amendment No. 108ZFA not moved.]
Clause 173 agreed to.
Clause 174 [Disposal without consent]:
108ZG: Clause 174, page 73, line 27, leave out from “provider” to “to” in line 29
On Question, amendment agreed to.
[Amendment No. 108ZGA not moved.]
Clause 174, as amended, agreed to.
108ZH: After Clause 174, insert the following new Clause—
“Notification where disposal consent not required
(1) If a non-profit registered provider disposes of land other than a dwelling which is social housing it shall notify the regulator as soon as is reasonably practicable.
(2) The regulator may give a direction dispensing with the notification requirement.
(3) Section 173(1) and (3) to (6) applies to a direction under this section as it applies to consent under section 171.”
On Question, amendment agreed to.
Clause 175 [Separate accounting]:
[Amendment No. 108ZHA not moved.]
Clause 175 agreed to.
Clause 176 [Use of proceeds]:
108ZJ: Clause 176, page 74, line 32, at end insert—
“(1A) The regulator may give a direction only with the Secretary of State’s approval.”
On Question, amendment agreed to.
Clause 176, as amended, agreed to.
Clauses 177 to 183 agreed to.
Clause 184 [Unregistered housing associations]:
On Question, Whether Clause 184 shall stand part of the Bill?
The Lord Deputy Chairman will be very disappointed by this response. I ask that the Committee agrees to the removal of this clause. I have tabled Amendment No. 112C which moves consequential provisions into a new schedule. I hope the Committee will allow me to do that.
Clause 184 disagreed to.
Clauses 185 to 190 agreed to.
Clause 191 [Provision of social housing]:
[Amendments Nos. 108A and 109 not moved.]
109ZA: Clause 191, page 81, line 31, leave out “complaints by tenants against landlords” and insert “differences between landlords and tenants”
The noble Earl said: There are three amendments in this group in my name—Amendments Nos. 109ZA, 109ZB and 109ZC. They are fairly straightforward. Amendment No. 109ZA leaves out,
“complaints by tenants against landlords”,
“differences between landlords and tenants”.
There may be troublesome tenants against whom the landlord has a genuine grievance. The Bill should recognise that it is not just landlords who will always be in the wrong. Our amendment is a little less prescriptive, inserting “differences” rather than “complaints”. This has a wider interpretation, although it is hard to think of any major differences between the parties that are not formalised in the form of a complaint. However, the point is that the process should be a two-way street.
Amendment No. 109ZB leaves out “or control”. It is one thing for tenants to influence a management of their accommodation but quite another for them to have control over it. If tenants were granted control, it would bypass the normal structures of management and render management impotent and somewhat pointless. Likewise, in Amendment No. 109ZC, we remove “and environment”. The phrase has a wide meaning indeed. What exactly does it mean? Does it mean the immediate surroundings, the wider surroundings, the ambience, the climate? Leaving it out would restrict the subsection to enabling tenants to influence the management of their accommodation. That is easily definable and less open to misinterpretation than the wording in the Bill. I beg to move.
I have two amendments in this group. First, I congratulate the Government, who are dealing with probably the two most important clauses in this part—Clauses 88 and 191—and are getting away with the most minor of amendments. For my own part, I wonder whether I have missed the wood for looking at the trees too closely.
Amendment No. 109ZD is to probe whether we are restricted to rented property here—and I think that the answer must be yes, when I come to look at it again. Amendment No. 110CA to Clause 194 is about consultation in setting standards. I am suggesting a local authority organisation—possibly the local authority organisation—should be one of the consultees. I suggest that because they are concerned with allocations above all things; they would have a contribution to make and should be included in the debate about standards, given the wider environmental interests, and so on. The criteria for allocating accommodation are among the standards.
I do not think that it is because these clauses are not worthy of more fundamental changes; I think that it is because these clauses are right that we have not had debates on huge issues. But every debate that we have raises interesting issues and enables us to probe a little under the structure of what we are trying to do. It is all extremely useful and certainly keeps the Government on their toes.
To recap, Clause 191 is very important, as it covers the standards that the regulator can issue on housing management issues and which providers would need to comply with. It includes a list on which standards might be issued, and all four amendments address different aspects of that.
I appreciate the intention behind the noble Earl’s first amendment. Procedures for addressing differences between landlords and tenants certainly sound less confrontational than addressing complaints, but I reassure him that there is no practical difference between procedures for dealing with complaints and procedures that address differences. They are all swept up in that same notion, so putting this in the Bill would have no effect. The list of issues in Clause 191 is purely indicative in the sense that the regulator is not obliged to set standards on those issues and is not prohibited from setting standards on other issues. The combination suggests that good intent is not necessary.
Amendments Nos. 109ZB and 109ZC cover other items on the list of areas where standards might be set. They seek to remove the words “or control” from Clause 191(2)(g), which states,
“methods of enabling tenants to influence or control management of their accommodation and environment”.
In some ways, I am sympathetic to this, because the intent of the first amendment, as the noble Earl described it, is to avoid standards being set that force landlords to let tenants take control of management through regulation.
I certainly support tenant management organisations as a really good way—in fact, sometimes the best way—of ensuring the high quality and inclusive management of stock. The regulator may well also support them. I do not believe that housing associations should be compelled to accept them either by statute or by regulation. This is possible under the standards, which are outcome-based. In essence, tenant management is a process to achieve outcomes of good management and tenant involvement. Any standards that we set on tenant control might well address circumstances in which tenants had control, but they would not force the regulator to take any particular route to give them control. In any case, the regulator can set standards on anything that meets the criteria in Clause 191(1), which limits issues covered to the nature, extent and quality of accommodation, facilities and services provided in connection with social housing.
On the next amendment, the question is what “environment” means in this context. This is an important question. I reassure noble Lords that this is not about setting standards on housing association voluntary activities. Under Clause 191(1), the standards are restricted to accommodation, facilities and services provided in connection with social housing. “Environment” in this context is intended to mean the immediate environment: the shared facilities and the grounds of an estate. It is right that tenants have some say about such facilities.
Amendment No. 109ZD, tabled by the noble Baroness, Lady Hamwee, would reword the items in the list of standards so that it referred to registered providers rather than to landlords. She is correct that “registered providers” is the legal term used in the Bill; “landlord” is not defined. In this context, however, the terms are interchangeable. I think that that answers her main question.
I am sorry to say that I missed the other questions that she asked. I will be happy to answer any supplementary questions, but I am afraid I did not hear what she said at that point.
That is a major question. The amendment seeks to add to the list of bodies that must be consulted on issuing or changing standards a body considered by the regulator to be representative of local authorities. Throughout our discussions on the Bill, I have been as clear as I can about how important we think local authorities are, particularly in their role in housing provision across the community and not only as landlords. They now very much have a strategic function in relation to homelessness, and they are tasked with bringing together the public sector, the voluntary sector and the private sector to secure local well-being and so on. Despite that, I do not believe that it is necessary that a body that is representative of local authorities should also have to be consulted on standards. In practice, not just the main stakeholder body but many local authorities and related bodies are likely to be engaged in standards consultations anyway, because that is how the Housing Corporation has worked. Although there was no formal duty to consult them, there has been such a practice.
We currently have a shortlist of mandatory consultees representing only the principal bodies; obviously representatives of the tenants and providers are vital but we also need the Audit Commission, partly because it will be involved in inspecting against standards. I do not think that local authorities, with the best will in the world, really fall into the same category. I am also concerned that by opening that door we will open it to other stakeholders who might feel they have as powerful and representative a claim. I am sorry to disappoint the noble Baroness but I think that we will have to resist that proposal.
I am very happy to deal with unfair questions as well. I was thinking, for example, of organisations representing the voluntary sector that might be partners in various forms of provision and of other partnerships. I am sure that I could come up with a list if it was not 7.30 pm.
I thank the Minister for her response to this group of amendments. My first amendment, Amendment No. 109ZA, is about leaving out,
“complaints by tenants against landlords”,
“differences between landlords and tenants”,
but I have a feeling that the Minister misunderstood what I was saying. I was much more inferring that it must be a two-way passage there. It is not just the tenant’s complaint against the landlord, but what about the landlord’s complaint against the tenant? The amendment as drafted left open which way it went. I think that the Minister may have misunderstood that.
My second amendment, Amendment No. 109ZB, proposes removing “or control”. I think it is my fault but I did not understand what the Minister was saying. We are proposing the amendment because we do not think that the tenant ought to control the management. If you have a management in the business, it ought to do it. If it has it wrong then provide the ability to get rid of it or change it. But you cannot have all the tenants trying to control the management. That is the point of the amendment. I think the Minister was going on a slightly different interpretation of the word “control” and that that led to the misunderstanding.
As for our third amendment, Amendment No. 109ZC, I totally take the Minister’s point about the shared environment, referring back to subsection (1). As it is, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 109ZB and 109ZC not moved.]
[Amendment No. 109ZCA, in substitution for Amendment No. 110ZA, not moved.]
[Amendments Nos. 109ZD to 110ZA not moved.]