If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

It is likely that there will be a big vote today; during a large vote on the previous occasion some of us had difficulty getting back within 10 minutes. Would the Committee be a little more flexible if we cannot get through in that time?

I am sure that that can be easily accommodated.

Clause 191 [Provision of social housing]:

[Amendments Nos. 110A and 110B not moved.]

Clause 191 agreed to.

Clauses 192 and 193 agreed to.

Clause 194 [Consultation]:

moved Amendment No. 110C:

I have one amendment in this group, Amendment No. 110FA, which is to add to Clause 199 on inspection a requirement that the persons used to carry out the inspection include tenants of social housing.

I seem to recall that the Minister said previously that this was intended, but I could not pin that down. She is nodding again, but as the National Consumer Council and the Tenant Participation Advisory Service in particular have asked for something along these lines, perhaps I should say a couple of words. Other regulators use service users to assist as lay inspectors, but there is no systematic arrangement; it is left to the regulator. The Chartered Institute of Housing has done some work on this issue and has ideas about an approach whereby tenant scrutiny can contribute to the regulator’s work and, indeed, to national benchmarking. I understand that the Public Administration Select Committee in the Commons has rightly supported user-led work of this kind. It is pretty obvious that tenants will bring a particular perspective and have opportunities to talk to other tenants and managers, and will assist in evaluating what is going on. I was glad to see the Minister nodding. No doubt she will say something in a minute.

I should also say a word about the raft of amendments to which the Minister has spoken. Others may want to say more.

I am aware that there is concern about the use of the Audit Commission on the basis that it is a monopoly service. I would find it a little difficult to argue that point, given that local authorities have to cope with this. There is, however, concern about fees. Although the Audit Commission may well provide value for money, and I am not arguing about the merits of what it does, it is not tested on fees that it charges because there is no competition; there is no tender process. That has struck me from time to time over the years as something that the local government has just shrugged its shoulders about and taken on board without much protest. Sometimes, possibly, we should say, “Hang on a moment. We’d like the Audit Commission to be involved but it could be a very expensive situation for us”. I simply wanted to put that point into the debate.

I shall talk to government Amendment No. 110E. It requires the regulator to employ the services of the Audit Commission as the inspecting body of housing associations. The regulator may not appoint any other organisation to carry out an inspection unless the Audit Commission has declined the role. While we respect the Audit Commission’s expertise, and we think it likely that it would in any case be appointed to carry out many or most inspections, we question the blanket requirement to use the Audit Commission in every case.

The noble Baroness, Lady Hamwee, has already mentioned fees; I want to mention four other issues. First, how can the regulator, the inspecting organisation or the sector as a whole be certain that there is value for money when the inspector is a monopoly provider appointed without any tender or selection process? Any of the regulated bodies would quite properly be slated for acting in such a way. Secondly, if the Audit Commission not only is a monopoly provider but also has the ability to stop any other potential provider, where is the quality control? Who can challenge poor performance and do anything about it? Thirdly, and similarly, what incentive does the Audit Commission have to organise its business in an efficient, economical way if it is a monopoly supplier of an essential service? Fourthly, the regulator will be obliged to appoint the Audit Commission even if the inspection relates to a specialised area in which the commission may have no expertise. In such a case the regulator will be able to turn to a more qualified inspector only with the Audit Commission’s consent.

I support my noble friend Lord Cathcart. I have a slightly different point. I thought that the regulator was supposed to be strong, independent and capable of looking after his or her own affairs. You would not expect a highly competent regulator not to know how to get relevant inspections when needed. All the points that have been made go together with that. Supposing that our roles were reversed and we had put such a clause into a Bill that we were putting forward, I have a feeling that it would be called unnecessary. That is indeed what I think it is.

I, too, wish to speak to Amendment No. 110E. I agree wholeheartedly with the comments of my noble friend Lady Hamwee and indeed those of the noble Earl, Lord Cathcart. The fees issue is particularly pertinent. We talked on the previous day of Committee about the funding of the regulator. We are told that some £20 million will be provided by RSLs, some of which will be quite small, to pay for the regulator’s costs. Now, a monopoly provider will be providing a service that, in effect, will inspect the people who are paying in a rather circuitous way for it to be inspected.

I have had concerns in relation to other clauses—notably Clauses 192 and 193—over the use of the word “may”. I notice that in proposed new subsection (3)(a) of Amendment No. 110E, the regulator,

“shall invite the Audit Commission to carry out the inspection”.

This is one bit of text where I should have preferred to see the words “may invite”, and the amendment should be worded so as to build in the flexibility that we all want to see. On most occasions, the Audit Commission will be the right body to carry out the inspection. That will probably be the de facto position; nevertheless, the word “may” would provide for some leeway where the Audit Commission specifically did not have the expertise or where a more competitive bidder was able to do the work. I hope that the Minister will reflect on that point.

As this is the Committee stage, perhaps I may put a question that I had intended to ask when I spoke before. I apologise for that. Clause 199 is about inspection and later we come to a number of clauses concerning inquiries. There are specific requirements relating to charities where the scope of their work could be the subject of an inquiry and notification has to be given to the Charity Commission. I imagine that the regulator would be in touch with the Charity Commission on anything other than a very routine inspection, but can the noble Baroness explain what the relationship might be with charities at the start of the regulator’s powers—that is, in the foothills of an inspection, rather than at the peaks of an inquiry?

My intervention will be brief. The words “tenant”, “social housing”, “local government” and “managers” have been mentioned, not least by the noble Baroness, Lady Hamwee. I am always grateful to the Minister for her eloquent expositions. In the context of her argument, perhaps I may recommend a book that deals almost entirely with the subject of social housing—or council housing, as it used to be called. It is entitled Estates and is by a very able young woman, Lynsey Hanley. It deals in detail, first, with the origins of the right to buy and then the rise of housing associations, allied to which are requirements concerning inspections. Miss Hanley writes a memoir of her young life on a Birmingham council estate.

My noble friend may recollect that a Cabinet Minister, Sir Keith Joseph, had the habit of constructing lists of books that might be read by particular divisions in his department. The very able colleagues who advise my noble friend may wish to study in detail this book by Lynsey Hanley, which has been very well reviewed. Indeed, my noble friend may have read it and may even be able to recommend it to the Grand Committee.

It is always good to start on a literary note. I have read Lynsey Hanley’s book but I was not convinced by the entire argument. She was very harsh on some of our present estates but community spirit flourishes even in poor and unpromising circumstances. However, it was an interesting account of what has happened and is relevant to much of what we are about in bringing to life the Homes and Communities Agency and the regulator. The HCA is there to enable us to create better places for people to live by bringing together all the agencies in a positive and quality-conscious way—thanks, not least, to my noble friend Lord Howarth—and to give tenants a better deal. If Lynsey Hanley was sitting in this Committee, I hope she would be encouraged. I am sure that my erudite colleagues behind me have read the book.

Perhaps I may start by dealing with the group of amendments relating to the lay inspectors. On Amendment No. 110FA, I am happy to reassure the noble Baroness that lay inspectors are a valuable resource and an excellent way of ensuring that inspections have active tenant involvement and investigate problems from the perspective of the service user. For several reasons, the amendment is not necessary because there is nothing to prevent the inspectors from being involved in inspections under either the current or the proposed systems. The current definition of “inspector” in Clause 199 does not exclude them or require them. I take the point that the amendment is to enable us to discuss this issue. As I said when I introduced it, Amendment No. 110R covers a person who is authorised in writing by the Audit Commission where it is the inspector. Any person authorised by the regulator covering social housing, where the commission is not the inspector, would include lay inspectors.

The Audit Commission has an excellent record on lay inspection. Tenant inspection advisers have been used by the commission since housing inspections in the local authority sector started in April 2000. The Housing Corporation recruited tenants to help carry out inspections of housing associations prior to the transfer of the HA inspection function to the commission in April 2003. TIAs are used on all housing management inspections, including inspections of housing associations, ALMOs and other housing services with a customer-user focus. Even some inspections of a local authority’s housing strategy service use TIAs to carry out mystery shopping. That tradition will be carried forward and is enabled by the Bill.

Turning to the lively debate we have just had on the Audit Commission, perhaps I may respond to the issues raised by noble Lords on the main amendment, Amendment No. 110E. I cannot deny that the Audit Commission is a monopoly but it brings consistency of inspection, great efficiency and expertise. We have allowed for cases where it does not have the expertise needed by giving the regulator a choice under Clause 192. On housing management issues, the Audit Commission has what is needed in this complex and large area of work and I am sure that it will be able to carry out its task superbly. However, if it feels it does not have the necessary expertise, it is a sufficiently confident enough body to say so and to require the regulator to look elsewhere.

The noble Viscount, Lord Eccles, made the point that this was unnecessary because a competent regulator should be trusted to decide. He put this argument because we are dealing in notions of trust and transparency. However, it is worth repeating that we are trying to avoid a proliferation of inspections. As I have said, inspections beyond its competence should be and can be declined. We have to have that measure in the Bill for those reasons.

On fees and costs, at the moment the cost of inspection is about £1.8 million. Because we are removing that heavy-handed routine inspection of everyone every five years, those costs will certainly go down. The fee levels will be a matter for the regulator to work out in consultation. We are requiring the regulator to pay the Audit Commission’s cost, which, as I said, will be lower, but the Audit Commission is itself accountable to the National Audit Office, so there is value for money and accountability built into the system. I hope that that will reassure the noble Earl, Lord Cathcart. Yes, it is a government body, but it is accountable to the National Audit Office.

On the type of inspection applied to charities, the Charity Commission is the statutory consultee on standards, so it will be well represented. In answer to the question of the noble Baroness, inquiries will always be about mismanagement. It will be proper for the Charity Commission to be notified if there are mismanagement concerns about a particular charity. Inspections are likely to be more routine, but we would expect that if the inspection raised a particular concern in relation to a charity, the regulator would let the Charity Commission know of that concern. As a statutory consultee, we think that there will be quite a lot of traffic between them.

I hope that I have addressed most of the questions raised by noble Lords. Otherwise, I shall have to write to fill in any blanks.

On Question, amendment agreed to.

moved Amendment No. 110D:

Before giving my reasons why Clause 195 should not stand part, I need to go back to our debate on Clause 49, which is the clause empowering the Secretary of State to give general directions to the HCA. I summed up my position on Amendment No. 96 by saying:

“Non-departmental public bodies operate most successfully when they have a high degree of independence within the terms of their Act of Parliament. The more that there is in the Bill that makes their position clear—and does so to everyone who deals with them—the better”.

In contrast, I said:

“The more there is an opportunity for the rules of the game to be changed in the middle of play, the less successful the body will be”.—[Official Report, 10/6/08; col. GC 186.]

It would be good to hear today that the noble Baroness shares that view and agrees with that conclusion. However, in her response to Amendment No. 96, in what I now read as a hot and cold reply, she said:

“the power of direction ... is likely to be used sparingly ... for ensuring that the agency delivers effectively against its objects”.

She also said that my amendment,

“would restrict the ability of the Secretary of State to influence the behaviour of the HCA”,

and that the power was needed,

“to restrict or control certain important activities”.—[Official Report, 10/6/08; col. GC 183.]

There is much else besides which is in conflict with the professed policy that the HCA is to be strong and independent. It is even worse for the regulator in Part 2. All his rules can be changed in the middle of the game if Parliament accepts Clause 195.

To reiterate, the power of direction with which public bodies must comply has been used for two purposes. The first is administrative, typically in accounts directions, while the second enables action to be taken to deal with issues that either could not have been foreseen during the passage of a Bill—the Dome, for example—or later, under an Act, when a non-departmental public body or a Secretary of State faces a crisis needing urgent action—the Dome again. Therefore the second use is as a backstop or reserve power. This has been frequently agreed by Ministers in recent times as the position of directions.

It is for these reasons that directions are subject to no parliamentary procedure; they come to Parliament for no form of scrutiny. Administration is de minimis—crises demand urgent action. Indeed, Parliament has no established right even to see directions, which is just about all right if they remain administrative or urgent matters of last resort. Of the four directions cited by the noble Baroness at col. 183 on 10 June in Grand Committee, three were related to the Dome and one to Stratford City. These were specific, complex issues outside the normal experience and, I expect, the powers of English Partnerships. They accurately illustrate my point because they were indeed used as backstop or reserve powers.

The second important matter we need to remember about directions is that increasingly they are being included to cover situations that fall between the purely administrative and matters of last resort. We can see this as a steady infiltration into the middle ground of a non-departmental public body’s objects and the way in which it achieves them. Clause 195 is a classic example of direction creep. Thirdly, we need to remember that directions can be a form of secondary legislation to be used, as the noble Baroness, Lady Hamwee, told us, instead of orders and capable of being utilised without parliamentary scrutiny. Why is this happening? It is because it is convenient. A clause such as Clause 195 needs little thought. Its breadth means that, combined with no scrutiny either before the event, as with the scrutiny of orders by the Delegated Powers and Regulatory Reform Committee or when the Act is in operation, the discretion of the Secretary of State is unrestrained. However, such untrammelled flexibility comes at a price, and a steep one at that. All pretence of independence is exposed and nobody who deals with the regulation either can or ever should believe that he or she is his or her own man. It is the Secretary of State who calls the tune however and whenever he or she wants.

Let us look at the detail of the clause. The paragraphs set out in subsections (1) and (2) cover just about everything in Clauses 191 and 192; indeed, is anything left out? Subsections (4) and (5) ensure that we have to go back to a zero base. Everything needs to be considered afresh. Indeed, the amendment put forward by the Minister increases the duty to consult. Since the process of consultation is open to manipulation, there is nothing to stop the Secretary of State from coming out exactly where and how he or she went in.

Finally, in Clause 195(8) we have a fig leaf: publication. Publication to whom, and how? On the department’s website, I suppose. How detailed will the responses under Clause 195(8)(b) be? Not very, if experience is any guide. Then there is the direction itself. Just what can we do with that when we read it on the website? It is a fait accompli. Maybe—no, indeed, not “maybe”; since the Secretary of State started the game again from a zero base and needs must justify the intervention, the rules of the regulator’s game will have been significantly changed. If that were not to be so, the clause would have real sense or meaning.

I return to where I began. The more there is the perceived opportunity for the rules of the game to be changed in the middle of play, the less successful the regulator will be. Whenever directions have been put forward in this way—it has happened with the lottery funds, for example—the point has been taken and the powers brought back more into line with the usual and acceptable uses: administrative and last resort. That should happen again. Clause 195 should be dropped from the Bill.

My name is also down in support of my noble friend. I need not take as long because he has explained the detail of it far more clearly than I would have attempted to do. I feel a profound sense of disappointment because the Government are displaying all their greater weaknesses. We have 18 pages—from page 29 to page 38—the first nine establishing what I would call the legislative background to the establishment of the regulator and the following nine establishing a freestanding independent regulator who will be empowered to do his job. Then we go on through the Bill with a lot of detail about how things will work, and so on. Finally, 35 pages later, we have this measure, which throws a blockbuster into the whole thing. I accept that it may never be used, but it says, “We don’t actually have any faith in everything we have written up until now. We don’t have any faith that it will work or that the people who have the regulator’s job might do it correctly, and therefore we have to have an absolute reserve power to amend it as and when we think fit”. That is very peculiar, and I cannot say I like it.

It is interesting that the Delegated Powers and Regulatory Reform Committee drew attention to this matter in its eighth report. It says,

“it is not clear that section 76 of the Housing Associations Act 1985 is a relevant precedent, as suggested by the memorandum”.

If that committee says that, we need to pay serious attention to it. It goes on:

“we would consider that the exercise of a general power of this kind should be exercised by statutory instrument subject to the negative resolution procedure. We invite the Minister to explain more fully to the House why the arrangements in the bill for the setting of standards is appropriate”.

If I do nothing else, I give the Minister the opportunity to explain that—thereby, hopefully, satisfying one curiosity of the committee.

We have had much discussion of the Cave review—rightly so—and, as the Minister pointed out, much of the Bill derives from its recommendations. Therefore, this clause comes as a surprise. I think that it drives a coach and horses through Cave’s intentions. Perhaps I may remind noble Lords what Cave said about concerns over policy passporting. He said that the,

“inadequate separation of policy and regulation (leading to the unacknowledged implementation of policy by regulation)”,

is not of itself necessarily detrimental in respect of certain regulated items so long as it is done—these are the key words—in a “structured” and “transparent” way. My problem with this clause is that, having tried to build up the structure and to build in the transparency, it now takes all that away through these directions. Cave goes on to say at paragraph 2.60:

“It is right that regulation should be used to achieve policy objectives. But current and future social housing providers need to have more regulatory certainty about the extent and cost of policy burdens. The process for introducing and adapting policy requirements needs to be more structured, transparent and equitable. Achieving this will significantly reduce both the policy costs and the administrative costs which regulation imposes on social housing providers”.

In Clause 195, the powers are so broad that they go against these intentions. I argue that subsection (1) allows the Secretary of State to give direction in relation to any standard whatever. In subsection (2), the Secretary of State needs only to form an opinion that his direction relates to core standards—and we have already observed that core standards are extensive and broad. I recognise that the Secretary of State has a duty to consult several interested parties, and subsection (4) goes so far as to detail a list of those parties, but I hope that the Committee will note that it omits a duty to consult representatives of secured creditors. So far as I am aware, I have no interest here, but I thought that that was rather curious, given the interest that secured creditors may well have in the directions. Finally, subsection (6) allows for the Secretary of State to disapply the requirement to consult in relation to specified matters. In other words, basically the subsection says that there is no need to go beyond the direction that in the Secretary of State’s opinion was the right one.

The noble Viscount, Lord Eccles, reminded us that directions can take the form of secondary legislation. I rather liked his use of the words “untrammelled flexibility”. That well describes this clause, and I have great sympathy with the view that Clause 195 should stand part of the Bill.

We need to give credit where it is due. When this debate opened, the position in relation to the independence of registered social landlords was in greater jeopardy than it was with the clause that we have before us now. When this debate started, the intention was that the Secretary of State would have the power to direct the regulator in all respects in relation to every standard that the regulator might, or might not, dream up. That extensive power has now been much curtailed thanks to hard work by the National Housing Federation and particularly by colleagues in Committee in the other place. I pay tribute to Nick Raynsford and Sir George Young—probably the two most distinguished post-war housing Ministers, with the exception of those occupying such posts today. They carefully worked their way through the clause and we have ended up with one in which it is simply the quality of accommodation, the rent and the involvement of tenants in the management of their organisation’s affairs on which the Secretary of State could direct the regulator.

In early discussions on this matter, I remember the example used to illustrate the extent to which the Secretary of State—through, no doubt, the wishes of the then Minister of Housing—might reach out with the respect agenda in requiring housing associations to behave in particular ways toward tenants behaving anti-socially, when ASBOs might be issued. That was the concern of the Minister at the start of our discussions. A little later, we had a change of Minister. The successor Minister is, I know, very keen that registered social landlords use some of their powers to help tackle worklessness, but neither of those matters is directly concerned with the provision of housing. The ways in which registered social landlords might go about those tasks, even though they are very important, will vary, and the Government will not always get right the way that they might prescribe activity under those headings. I was extremely pleased that the Government backed down and recognised that, in most respects, the regulator should be left to decide these standards on their own.

Some have gone further and said that the regulator should be confined to the same three core areas of activity as registered social landlords. However, I know from my experience that a Housing Minister is much more likely than a regulator to come up with an exciting, new, innovative policy that is not entirely related to the ways in which housing associations and other social landlords might wish to behave. Regulators are in my experience rather more constrained and are concerned directly with the regulation of the function of the organisation. I feel much less threatened now by the independence of this sector than when the Bill started out.

I went to the annual general meeting reception of the National Council of Voluntary Organisations yesterday. The Minister for the Third Sector, Phil Hope, gave an excellent speech, telling us that the independence of the voluntary sector was its most precious asset. The ability for organisations to run their own affairs, for their own boards to take charge and be independent and autonomous, is the essence of this sector, of which the housing associations, registered social landlords and social housing providers are part.

It is well worth our considering these amendments and seeing how best we can improve and enhance the independence of the organisations to which the regulator’s work refers, but we also need to pay tribute to government for retreating from the opportunity to make much more draconian interventions.

I am grateful to the noble Viscount, Lord Eccles, for enabling us to have a short and important debate. This is an important part of the Bill. I appreciate that he has consistently raised these issues as we have gone through this process, for which I give him credit. As I said earlier, I put a high value on the independence of the regulator from government, just as the Cave review recommended.

Perhaps I may give the Committee a little background. I am grateful to the noble Lord, Lord Best, for what he said. He put his finger on an important aspect of this debate and gave credit where it was due to those in the other place who took seriously the concerns raised by the housing associations and addressed what we required, and did not require, the Secretary of State to do.

The Government’s considered response to that is the reason for the clauses being the way that they are now. In the original drafting the power was too open-ended—essentially, it permitted the Secretary of State to set standards on any issue—but that was never our intention. There were limitations on the power in any case: the Secretary of State could not give directions requiring the regulator to act contrary to its fundamental objectives, including objective 10, or regulate anything unconnected to social housing. However, it became evident that those conditions were neither clear nor sufficient enough to allay the concern and we agreed to amend the Bill at Report stage so that it better reflected our intentions.

As I have said, that was always our intention. Why would it be otherwise? What is the point of setting up a regulatory system if it is not independent from government? That is the whole point. We have done that and this regulator is far from being just an agent for government directions. This clause covers none of the provisions in Clause 192 and a very limited range of issues in Clause 191. Other than directions on standards and a role in selecting the board, the Government will have virtually no control over the regulator. I invite the Committee to consider how that compares with the Housing Corporation, the costs of which are paid and the targets set by the Government, who also have the power to direct it on any issue. My noble friend Lady Dean paid tribute to that. It is a draconian power which is very different from what we are offering in the Bill.

We have sought throughout to strike the right balance between the regulator’s independence and the need for the Government to have a say in certain key issues on which standards are set and which are fundamental to how tenants and social housing can be managed in terms of rents, physical housing standards and tenant engagement.

On the point made by the noble Baroness, Lady Falkner, I refer the Committee to paragraphs 5.12, 5.13 and 5.14 of the Cave review, which states that,

“the regulator should be independent of government with that independence defined by statute. But there are certain defined matters for which the government should have the power to issue directions to the regulator. The first of these areas relates to housing standards”.

It continues:

“The second key area for government direction relates to rent levels”.

The Government have a clear interest in setting a strategic rents policy. We have to ensure that rents are not set too high and that they are fair, both for the benefit of tenants and, frankly, because otherwise we end up paying huge amounts in housing benefit.

We also have to acknowledge—Cave certainly did—that some improvements of physical standards have required huge amounts of public money, in particular under the Decent Homes policy, and the regulator should not be able to require them without government approval. I am referring to the £20 billion which has gone into that element of our economy.

I accept that the standards defined in subsection (2)(a), (b) and (c) are quite rightly core standards. When I referred to the powers being rather broad, I was interpreting the words “in the Secretary of State’s opinion” in subsection (2). I do not understand why the word “opinion” is there. If the clause is to address those standards, it should say so; it should not leave it open to a particular Secretary of State’s opinion.

It is hard to divorce that from the necessity of having the Secretary of State involved in that part of the process, for the reasons that I have explained.

I should first apologise to the Grand Committee; I completely forgot to say that I am a member of the Delegated Powers and Regulatory Reform Committee, to which the Minister referred, but my views go rather beyond what was in its report. What I have said and will say is my personal view, not the view of the committee. I remain in a difficulty.

The problem is that we are discussing two completely separate things. I come to the practical one first. I quite understand that there will need to be conversations and leverage of some sort—there is plenty about, of course—if things are not going as well with the regulator as the Secretary of State considers that they should or if the Secretary of State identifies improvements that the regulator could make. No one can have any objection to there being a proper dialogue, guidance or whatever. It is the words “must comply” which provide the difficulty. That means that in a state of disagreement, the regulator must comply, because he will have received a direction.

The second issue is completely different. It concerns the relationship between secondary regulation and the power of direction as used by Secretaries of State and the relationship with Parliament. As with orders, Parliament gets the opportunity to scrutinise, not on a website, but in a legal document, what is being proposed. It also has the chance to debate either by Prayer to annul or needing an affirmative resolution what is written in that legal document. Everybody then knows that it has really been thought through and that it has been the subject of parliamentary scrutiny so that the opinions and prospective opinions of Parliament have been taken into account before the order was laid. This is not so with directions, and that is why directions, which are subject to no parliamentary scrutiny or procedure, have always been reserved for particular uses, not for general use. While I have the greatest respect for the positive report of the noble Lord, Lord Best—I understand about progress on the practical matters and I welcome it—it does not go to the point of the formality of receiving a direction which must be complied with but which has not been subjected to parliamentary scrutiny in any form. If I may say so, that is a different issue.

I remain of the opinion that what is set out in Clause 195 could be achieved by perfectly acceptable means within the relationship between the regulator and the Secretary of State, but should not be achieved by directions. That is my position and I am certain that in one way or another I shall return to the matter.

Clause 195, as amended, agreed to.

moved Amendment No. 110DZA:

This is a good opportunity to raise this serious issue in Committee and to make sure that tragic deaths like that of Rhianna Hardy can be avoided by other children. I welcome the opportunity to put on record what we are doing and how we are helping housing associations, and intend to help them, to fulfil their obligations. We are united in our determination to do everything possible to ensure that such deaths do not happen again. Since the appalling accident and others like it, the Health and Safety Executive produced a comprehensive safety note explaining the symptoms of and remedies for the problem. The safety note also set out best practice for the installation of hot water systems. The Housing Corporation arranged for that alert to be distributed to every housing association, so that they would be fully informed about what they should do and look out for.

The department is updating the Decent Homes guidance, which will refer landlords to the HSE safety note to ensure that advice is taken into consideration by landlords when preparing investment plans, so that they can look at what they need to change. The noble Baroness knows that we brought forward proposals to widen the requirements relating to hot water safety in Part G, on hygiene, of the building regulations. Those proposals for consultation were published on 13 May and we will implement any changes early in 2009. I think that that was the review to which the noble Baroness referred. I will write to her about the issue of retrospection, because that raises more complex issues than I can address in the Committee.

Essentially, the proposed changes, if implemented, would seek to ensure that hot water systems, including the cylinder, the cistern and controls, are robust and do not let the system overheat to the extent that it fails, because that is the technical failure that has been causing the problems. As the noble Baroness knows, safety standards for existing dwellings are dealt with by the Housing Act 2004 via the Housing Health and Safety Rating System, the HHSRS; but duties under the Health and Safety at Work Act 1974 can also be applied and enforced in respect of the providers of rented housing when the conduct of the undertaking results in risk to tenants. That can help by ensuring that the HSE notice is distributed to all RSLs and that would also set standards for the condition of properties that would encompass compliance with health and safety matters. So the two systems working together can close that information gap. The landlords of existing rented stock have a duty of care to tenants and safety alerts make them aware of possible hazards from water heaters.

That series of actions is very practical and is targeted on RSLs to ensure that they are fully informed. I understand the intention in the amendment to put the issue on the regulator’s agenda in the form of a review. I do not think that that would be the right way forward, because the combination of the scrupulousness of the HSE and the building regulations is focused much more on consequential routes for addressing this. The issue goes much further than the social housing sector, as the noble Baroness knows. The regulator will not have direct authority over compliance with safety standards, because that comes under the HHSRS. Rather than requiring the regulator to carry out such a highly specialised review during its 12 months, we must bear in mind that in order to be fully effective and in order to choose some of these outcomes, he needs to be fully focused on the statutory objectives. So, current regulatory practice illustrates the role that the regulator might play. In fact, under Clause 191, one of the objectives of the regulator is to ensure that tenants enjoy an appropriate degree of protection. The clause empowers him to set standards on the quality of accommodation, facilities and services provided by registered providers, so if it is appropriate for the regulator to cover this issue, we need to note that he does have sufficient tools to do so. However, neither we nor he would want to duplicate the arrangements that are in place.

The Housing Corporation also regulates by means of a regulatory code which sets out fundamental obligations on housing associations in order to meet the corporation’s regulatory requirements. Under the code, RSLs are required to comply with the law, including safety standards, to ensure that the homes their residents live in are well maintained and in a lettable condition. The regulator can also help by facilitating and encouraging awareness of problems and legal obligations. I think that we have in place a system of safety and protection, access to information and ongoing work that, it is hoped, will help to ensure that we do not see another tragic accident in the future.

I am grateful for that response. When the Minister writes to me, will she be able to give me any idea of how much is being done on the ground? She talked about mechanisms for spreading the word, and that is fine, but only so far as it goes. However, I do not expect her to have been briefed on that for today, but I would like to know. Having said that, and thanking her for her offer to write, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 196 and 197 agreed to.

Clause 198 [Survey: supplemental]:

moved Amendment No. 110DA:

My notes to respond to this amendment are rather longer than the words used by the noble Baroness to move it, and I apologise for that. However, I think that what I have to say will allay any suspicions. The effect of the amendment would be to make it impossible for the regulator to charge an individual provider the cost of a survey unless the regulator could prove that its suspicions when starting the survey were justified. A survey allows the regulator to enter a property to see whether a provider has improved the home or carried out maintenance to the agreed standard. It is an existing Housing Corporation power and is one of the ways in which the regulator can investigate a breach of maintenance standards either in response to tenants’ concerns or on its own suspicions. It can check, for example, that a roof has been mended or a boiler installed. A regulator which prioritises accommodation standards for tenants would use this power.

It is not our intention that the Government should pay the regulator’s running costs and it is anticipated that the regulator will raise almost all of its income from fees recovered from registered providers. Clause 177 allows the regulator’s costs to be met largely by fees imposed on the whole provider sector. It is likely, for example, that an annual fee will be paid by all registered providers. Additionally, specific powers in the Bill allow the regulator to charge individual providers on the “polluter pays” principle. If the regulator were not allowed to charge individual providers for a survey, it would have to absorb the cost. That means, in effect, that the other providers would ultimately pay through increased fees.

If the concern is that the regulator will use this power irresponsibly, I can offer some comfort. The regulator cannot charge more than the survey costs and can charge part or none of its costs if it thinks that is appropriate. So the regulator cannot possibly profit from running a survey. It must follow objective 10, which prevents unnecessary regulation, and it can charge none, part or all of the costs to respond to individual circumstances.

We want a proactive regulator, not one that responds at the last minute in cases of serious abuse by a provider. If the regulator cannot charge for a survey unless it can prove its suspicions are justified, we fear, not unreasonably, that it will either be discouraged from carrying out surveys proactively unless it is very certain in its concerns or, more likely, it will charge the costs to all providers in general rather than only the individual provider whose stock it surveyed. A question of fairness is involved in this issue.

In order for the amendment to work, the regulator would have to set out its suspicions publicly before the survey. That would add to bureaucracy. It may not be easy to tell, based on the survey alone, whether its suspicions are justified. I pose the question: what happens if the regulator considers its suspicions are upheld but the provider disagrees? Would there be legal challenges? This could end up costing more than the survey fees. That would benefit no one as all providers have to pay for the regulator to defend such cases in their annual fee. Overall, it would discourage the regulator from charging for surveys whatever the result and place the cost instead on the annual fee. By reasons of equity, that would not be fair. We would rather leave the choice of whether to charge directly to the regulator. I hope that answers the noble Baroness’s points.

It answers the point, but not in a way which leaves me wholly happy. Here we have another situation where we are relying on the regulator to be reasonable. There is nothing here to say that the charge should in any way relate to a reasonable assessment of the need for the survey. I hear what the Minister has to say. It is most reassuring that this is not novel. If providers have not experienced problems in the past, common sense might apply. No doubt providers will read this report—this came out of my own head; I was not asked to raise the issue—and if they have a concern they will seek a way of taking forward a narrow but important point of fairness.

Because we rightly started from the tenants’ point of view, I have been concerned throughout this part of the Bill that, where there is an issue, it is easy to forget and overlook the need to be as even handed as possible with the providers. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 198 agreed to.

moved Amendment No. 110E:

moved Amendment No. 110F:

moved Amendments Nos. 110G to 110L:

moved Amendments Nos. 110M to 110R:

moved Amendment No. 110RA:

I am happy to give the sort of assurances that both the noble Baroness and London Councils are seeking in terms of what we are looking for in these clauses. These are probing amendments about the purpose and effect of Clauses 201 and 202 about the way information will be provided, collected and published.

I want to focus on Clause 202, which really is the key clause, but the principles I shall set out reflect Clause 201 and Amendment No. 110RB as well. The clause states that the regulator is required to publish performance information at least once a year, but it also stipulates that that must include information likely to be useful to tenants, potential tenants and local authorities. We added that clause to the Bill in the other place because we wanted to clarify what the regulator had to do as a minimum to meet the recommendations of the Cave review regarding information for tenants.

It is true that the regulator has clear statutory objectives to ensure that tenants have chosen the opportunity to be involved in the management of their homes, but it is clear to me that in order for consumers to exercise genuine choice in any sort of market they have to have sufficient information about the alternatives on offer. They can hardly have any form of choice without information that enables them to compare how their landlord performs in their areas against other landlords. Part of the purpose of Clause 202 is to meet that need.

It is not just about information for existing tenants. Potential tenants of social housing also deserve to be able to compare landlord performance in their area when they enter the social housing system. That gives them some useful information and useful choices. I agree that performance information is going to be of critical use to local authorities. They have an obvious interest in knowing how well landlords in their area are performing.

London Councils has argued that there needs to be a clause requiring this performance information to be broken down by local authority area level. I agree with that. I assure the noble Baroness that Clause 202 in effect requires the performance information published by the regulator to be broken down by local authority area level. If information has to be at that level in order to be useful to local authorities—as I, the noble Baroness and stakeholders believe it does—then that is what the regulator will have to provide in order to meet its duty under this clause.

It is reasonable, given that we are all agreed on this, to ask: “Why don’t we just say in the Bill that the performance information that is published should be broken down by local authority area?”. In addition to the argument I have just put, we have here a clause that allows the right sort of flexibility. Instead of drafting Clause 202 in the way we have done, if we had drawn up a clause that had this sort of detail we would inevitably have ended up with a clause that had to cover every other aspect of the nature of the information—whom it should be available to, how it should be provided, how it should be accessed; all sorts of exhaustive requirements. That would have been very difficult and would have left the regulator with little room to respond to changing needs.

I hope the noble Baroness will accept that that is the intention. That is certainly how we want to see the clause being interpreted and implemented. It is not merely limited to requiring that the performance information should be broken down by local authority level; it could cover other types of performance information that is of use to tenants and local authorities as well.

The same principles apply to the first amendment in the group. Amendment No. 110RA would require registered providers, when submitting performance information to the regulator under Clause 201, to break down that information by each local authority. Again, I can provide the assurance that the noble Baroness seeks. I hope that having that on the record will reassure local authorities that they will get the information in the most useful form as they need it.

That is indeed a helpful interpretation of the words “likely to be useful”. A point that has just occurred to me is whether deciding what information is likely to be useful would be one of the matters that the regulator has to consult on when he sets standards, as provided for in Clause 194. The Minister will know from our discussion a couple of days ago that I believe that local authorities should appear in the list of consultees. Those representing the interests of tenants are consultees, so there is obviously a fairly close link here.

This is something that will be set out in guidance and we shall certainly be consulting on it.

That is helpful and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 201 agreed to.

Clause 202 [Publication of performance information]:

[Amendment No. 110RB not moved.]

Clause 202 agreed to.

Clause 203 [Inquiry]:

I should point out that if Amendment No. 110S is agreed to, I shall not be able to call Amendment No. 110SA for reasons of pre-emption.

moved Amendment No. 110S:

I have written a note to myself which states “Welcome this group”, and I am happy to be pre-empted, if that saves time.

It does save time and I thank the noble Baroness.

On Question, amendment agreed to.

[Amendment No. 110SA not moved.]

moved Amendments Nos. 110T and 110U:

moved Amendment No. 110UA:

It is an extremely important point. If the new clause is not correct, it is extremely close to it. From these rather empty Benches, I put on record our support for the amendment.

I, too, support the amendment, while suggesting that it might be extended beyond the tenants and the properties managed by the provider to those others who live in mixed-income communities—the shared owners, part owners and owners who are in the same block but managed by the single social housing provider.

I, too, support the amendment. I hope that the Minister will speak positively about the principle, if not literally every word of the amendment. I cross-reference what we are seeing in the Minister’s own department. John Healey as Minister for Local Government has called for powers for community calls for action, whereby the community is enabled to initiate change when it thinks that something is wrong. Hazel Blears, the Secretary of State, sees community empowerment as being a fundamentally important part of progressive politics. The amendment is four-square with that thrust of policy. Therefore, I hope that it will be given a warm welcome.

If one thinks of our debates in this Committee about tenant empowerment, one will see that the amendment is very helpful. The wording may not be perfect—I do not suppose that the Minister would admit that the wording of any amendment proposed by any Member was ever perfect, because I suspect that her Bill team would feel offended if she did. I hope that she will none the less support the principle and thrust of the amendment and perhaps bring back her own.

I add my support. Tenants need a clear way in which they can make complaints and be listened to, and the amendment provides one of them. That does not necessarily mean that the wording is right—the clarity of subsection (8) is a problem—but I am sure that we could find a way through that. However, it needs to be clear to tenants what they have to do to make a complaint and what has to happen in response. The amendment does not tie the regulator to saying what it will do and when and how; it leaves it with the flexibility that it needs.

My noble friend should feel well pleased by the response to his amendment. I align myself entirely with what the amendment tries to do. It provides a good opportunity to discuss broadly what the Bill means to tenants. We anticipated some of that debate when we addressed the issues raised the other day by my noble friend Lord Filkin.

My noble friend has put forward one mechanism for doing what he seeks. We, too, have put much thought into addressing how we make effective provision for the issues raised by tenants. It is very much work in progress for us. He will probably agree that designing a classical system for complaints to the regulator is not easy, and I appreciate the work that has gone into crafting the amendment.

Perhaps I may just run over the broader argument. There is a whole set of powers and duties in the Bill, and essentially they add up to a new system which for the first time allows for tenants to be more involved in the regulatory process. Essentially, Martin Cave suggested that evidence from tenants should contribute to the regulatory process, and it is that point that the amendment seeks to address. In recommendation 12, he said that the regulator should develop a range of ways of triggering interventions in consultation with providers and National Tenant Voice. That was addressed to the regulator. He also said that triggering mechanisms should ideally be based on a combination of desktop analysis, references from tenants and other bodies, including local authorities, and whistleblowing.

I have a great deal of sympathy with the amendment. I agree that the regulator should be responsive to tenants’ concerns and use evidence from them to justify its interventions, as Clause 98 permits. However, I think that Cave was proposing that tenants or selected tenant groups should be given a new statutory right to require the regulator to take specific action in relation to tenant concerns. When he talked to us on 2 June, he said quite clearly that his intention was to provide for a “conveyer belt” of information to be sent to the regulator so that it could better decide what to do.

Let us look at the key features of a duty to address complaints. If the regulator is to be compelled to address them—bound by a specific duty instead of being trusted that it will seek evidence in an inclusive way—then there is immediate pressure for us to define what we expect it to do. What sort of complaints should it handle? We certainly all agree on one issue: a regulator can hardly handle every tenant complaint from 4 million social homes. We have always thought—a belief that I think is common around the Committee—that it should not be the regulator’s job to deal with most tenant complaints. They should be dealt with, first, by the landlord and then, if necessary, by access to the ombudsman. That is the correct route. Therefore, the regulator should be involved only where a tenant concern suggests a systematic failure to deliver. That might be on the basis of very few tenants who have identified a really serious problem, or it might be on a more general set of evidence. However, the whole issue is really about feeding evidence from tenants into the regulatory process.

On the second issue of deciding when to act, Cave was very clear that these choices were especially difficult for any regulator. He said that it was for the regulator to determine how to act. Why would we have a skilled regulator with responsibility to balance its objectives if we did not trust it to make decisions on the process of handling and using evidence? I am absolutely clear that it has to be possible to treat evidence in a transparent, inclusive and fair way, but it is difficult to define an entire complaint procedure in statute. That is partly where the problem lies because inevitably one ends up with an inflexible and bureaucratic set of structures. We have tried to do it. Officials have spent a great deal of time looking at how the necessity for that instinct can be translated into something proper and proportionate.

I turn to the details of the amendment. It requires the regulator to consider any complaint by a “designated body” or “locally recognised representative body” suggesting mismanagement by a provider which is detrimental to tenants. I am not at all clear why the amendment is concerned about a system of designation. The only power that a designated body seems to have is the right to make a complaint, which the regulator has to consider. It shares that right with locally recognised representative bodies. It is not clear here who recognises whom. There are some issues concerning the idea of designation. I am a little concerned about the idea of the centre designating some tenant bodies as conduits for information and not others. Since I have spent a lot of time in this Committee saying that this is not a centralised and bureaucratic structure, I am concerned that this is centralised, bureaucratic and rather burdensome. I want to explore the implications of the issue of designation.

The amendment also says that the regulator should publish a response within 60 days saying what it intends to do and why, and that allowing the regulator to decide what to do requires the regulator to issue guidance to complainants on the presentation of complaints. It is not clear to me how that works, but all that will follow consultation. The amendment would also enable the Secretary of State by order to designate bodies representing the interests of tenants of social housing and would require her to publish criteria on designation. That is where the weight of the bureaucracy falls.

The proposal has many good features. It has sound principles, such as the need to issue and consult on guidance, and the attempt to limit complaints that come to the regulator by filtering them through responsible bodies. I do not want to labour the point that I think the amendment in this form will not work; Members around the Committee have made it clear that they have issues with the content and the detail, but they are in favour of the amendment in principle. We should think hard about whether we want to create something that is inflexible but that also risks confusing tenants about who is responsible for addressing their concerns and sets up an unnecessary and rather divisive system of centrally designated tenant representatives. There would be risks in that, including legal challenge.

This is where we end up. We have to be careful about the detail. We need to be concerned also about the burden on the regulator in terms of the wide range of objectives. Changing the system in any respect would require primary legislation because I do not know of any other regulators or public bodies with complaints systems that are so rigidly defined in law. I remember, when I was a Whip at the Department of Health, having agonising discussions about complaints procedures and how one could arrive at something that was successful but was also proportionate and effective.

We have been considering how we can achieve these shared desired outcomes, giving the regulator more flexibility but also making it clear to the tenants how they can complain, what they can expect and how they will be treated in that process. I am inspired by what Cave said: that the regulator, not the Government or Parliament, should develop the detail of how the regulator should use evidence from key complainants to build a case against poor providers and of how he can work with the tenant voice and others.

I sincerely hope that I can come back on Report with a way forward that will go some way towards meeting the concerns of the noble Lord as reflected in the amendment and ensure that, in a system moderated by the regulator, he is obliged to try hard—and to succeed, but in a flexible way—to establish a system that is generally responsive to the category of complaints that I have set out and will provide proper accountability to all stakeholders. With that commitment, I hope the noble Lord will feel confident that he can await Report stage, where we will continue the debate.

I am grateful to the Minister for that last point and I certainly look forward to her propositions for what lies behind the amendment. Somewhere in the middle there she lost me, however. Maybe I can help her, or her officials, a little on what I intend here and what I do not. This is not about individual landlord/tenant issues. It is about general mismanagement—she used the term “systemic”—by the social housing provider that needs to be drawn to the attention of the regulator.

The Minister rightly points out that Cave says that all sorts of evidence will be coming in to the regulator and he will have to make up his mind what he does and does not pursue. There will need to be systems for that and how the evidence will be presented, and that will be communicated back down the line to tenants and their organisations. However, that is a somewhat passive way to treat tenants and their organisations. I thought that the regulator and the spirit of Cave wanted to encourage the active engagement of tenants in improving the quality of social housing provision and thus to provide an ability for them to initiate action. Tenants would not simply provide evidence of which the regulator may or may not take account or that would allow it to make up its mind on whether to intervene or not in areas where they perceived bad mismanagement, but there would be a formal system whereby tenants can put the problem on the regulator’s desk. This would not constrain the regulator in what it could do about the situation, but it would have to respond one way or the other and indicate what it was going to do. There would be no constraint on the judgment of the regulator as to what is important or otherwise, or on the remedy or intervention, but it would mean that there would be an active role for tenants in their organisations.

I was trying to help the Government and the regulator in the area of designation. There are many organisations which purport to speak for tenants both locally and nationally, and just because a bit of headed notepaper arrives in the regulator’s office, it does not necessarily mean that it is from an organisation that is any sense representative. There are two criteria: national organisations with which the Government, the regulator and the new agency will engage—a relatively short list that could be regarded as a designated list—and, at the local level, housing providers themselves who recognise serious residents’ or tenants’ organisations within their estate or management block. There is a relatively easy way of doing this which does not have to be too formal. I do not regard it as bureaucratic or overly centralised. It is intended to limit the organisations that make use of it to those bodies which are judged to be truly representative.

I thank all noble Lords who have supported the principle of the amendment. I anticipated there would be some drafting problems but the principle has received widespread support. I agree with the noble Lord, Lord Best, that people who live on social landlord estates also ought to have rights. Earlier I moved an amendment in rather broader terms to that effect. This is an area in which, without making regulation general in a way to which the noble Baroness objected previously, we could at least enable people to raise issues of management when they live on an estate that is managed by a social provider. You would not necessarily have to give them more general rights or extend the regulator’s remit as far as my earlier amendment sought. I thank the noble Lord, Lord Best, for his suggestion and I hope that my noble friend and the department will take it on board. However, I take heart from the fact that she is going to reconsider the matter and bring something forward. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The suggestion is that we take a short break. With the leave of the Committee, I suggest that we reconvene at 5.57 pm.

[The Sitting was suspended from 5.47 to 5.57 pm.]

Clauses 207 to 210 agreed to.

Clause 211 [Companies: change of articles]:

moved Amendment No. 110V:

moved Amendment No. 110W:

moved Amendment No. 110XA:

I am going to speak on Amendment No. 110XD concerning Clause 228, which is about the £5,000 penalty. Our amendment would replace subsection (3) with the words,

“Where the order changes the amount specified, other than to update it for inflation, the order will be subject to the affirmative procedure”.

That would remove the right of the Secretary of State to amend by negative order the amount specified in the Bill, £5,000, as a penalty, and instead make it subject to the affirmative procedure. The Executive should not be able to vary this already substantial amount without parliamentary scrutiny. This kind of order is too important and potentially too controversial to be passed by the negative procedure. The amendment would put in place a recommendation from the Delegated Powers and Regulatory Reform Committee on page 4 of its report. The committee points out that a similar unlimited derogation in the Communications Bill 2002 was amended to adopt the committee’s call for those powers to be subject to the affirmative order. I hope that the Minister will follow that with this amendment.

It might make sense if I were to start by addressing the amendment the noble Garl has just spoken to. Clause 228 ensures that the penalty fine cannot be raised above £5,000 unless the Secretary of State amends the amount by order. Noble Lords seek to ensure that the order is affirmative. That follows a recommendation made by the Delegated Powers and Regulatory Reform Committee, and I completely agree. We propose to do the same by way of Amendment No. 116C, which amends Clause 318(3), a general clause on the procedure to be applied to orders. Amendment No. 116C adds orders under Clause 228 to the list of those that must be approved by resolution in each House of Parliament. I am grateful that he, both formally and informally, and the noble Baroness, Lady Hamwee, have pointed out that there is an error in the numbering. I thank them for helping us with that.

I turn to the amendments laid by the noble Baroness, Lady Hamwee. Amendment No. 110XAA, which is on objectives—

There is a Division in the Chamber.

I cannot wait!

We will adjourn the Committee. I think we are all aware that there will be quite a press in the Lobbies, so I suggest that, rather than setting a specific time, we all come back as quickly as we can and start again then.

[The Sitting was suspended for a Division in the House from 6.07 to 6.17 pm.]

I shall continue from the point where I was interrupted by that very exciting vote. Perhaps I may assure the noble Baroness that there is no need for the amendment because objective 10 already applies to this clause, as it does to every function of the regulator. However, she asked why we need these subsections in their current form. The clause imposes a very stringent test on the regulator. It is necessary to clarify what “proportionality” means in terms of enforcement, for example, as opposed to standard-setting or information, which is why the clause is there.

Taken together, this clause and objective 10 provide that the regulator must seek to regulate in a manner which minimises interference and is proportionate, and that when the regulator decides to take enforcement action, he must give particular consideration to all the issues mentioned in subsection (2) of this clause.

I turn to Amendments Nos. 110XB and 110XC, which concern mismanagement in relation to social housing—a very important issue. Perhaps I may briefly describe what “mismanagement” is. It is about how the affairs of the registered provider are conducted. In most cases, it will relate solely to the registered provider’s management of its social housing, but the mismanagement ground could apply, for example, to general financial mismanagement which is not directly linked to social housing. It covers standards under Clauses 191 and 192, other breaches of Part 2 and misconduct issues.

It is important that “mismanagement” is considered not just to be mismanagement of social housing—that is, breach of Clause 191 standards—otherwise, the regulator would have to sit on its hands when faced with serious financial problems in an association. We do not want that because there might be a risk of insolvency of the provider, which would not be in the interests of protecting assets or tenants. Moreover, wider governance issues could also ultimately have an impact on tenants, and that is why we want the regulator to catch such issues early. It also needs to be able to challenge mismanagement on other non-social housing issues, such as the failure to submit accounts. As it is important that the regulator tackles issues such as that quickly, probably by an enforcement notice or a penalty, it will rely on accounts to be assured that the provider remains financially stable. Failure to provide correct information may be an early sign of serious governance problems. The amendment would make that harder to challenge. I want the regulator to be able to take proportionate early action to avoid mismanagement of social housing, financial and other affairs.

Amendment No. 111ZZA seeks marginally to change the definition of mismanagement in Clause 274. That definition includes at the moment breaches of standards, breaches of any requirement set out in Part 2, and improper or inappropriate behaviour. Mismanagement and misconduct are existing crimes for action by the Housing Corporation in the Housing Act 1996. The formulation in this Bill is designed to cover the same circumstances as in that Act, but the main difference is that we have included misconduct within the overall definition of mismanagement. That is why the words “conducted improperly or inappropriately” form part of the definition. Misconduct could, for example, include tolerating serious mismanagement of staff and not keeping proper financial records.

There is an important difference between conduct that is improper and that which is inappropriate. “Improperly” means conduct contrary to law, rule, convention or propriety in relation to the conduct of the business, while “inappropriately” means in a manner that, while not necessarily improper, is not appropriate having regard to all the circumstances. An example of this might be poor judgment of risk: making risky investments or failing to carry sufficient insurance. That is behaviour inappropriate to the task in hand—what has to be done in order to safeguard the situation. We need the definition because such actions would not be covered by “improperly”. I agree that “inappropriately” is a fairly general term, but it does have an interpretation. I hope, therefore, that it is proper and appropriate to include both of these expressions.

I think that I have now responded to all the amendments in the group.

I thank the Minister for her response. I have to say that I am not wholly persuaded about Amendment No. 110XAA in that there is a particular need to spell out aspects of proportionality in Clause 215, but I have heard the explanations. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 110XAA not moved.]

Clause 215 agreed to.

Clause 216 agreed to.

Clause 217 [Grounds for giving notice]:

[Amendment No. 110XB not moved.]

Clause 217 agreed to.

Clause 218 agreed to.

Clause 219 [Warning]:

On Question, Whether Clause 219 shall stand part of the Bill?

Clause 219 is part of the group of clauses which relates to the use of enforcement notices. It requires the regulator to give the registered provider a pre-enforcement warning before issuing an enforcement notice. I propose to remove this clause and Clause 220, which deals with provider representations, on the grounds that the requirements are excessively bureaucratic. I am sure that the Committee will warm to that. The regulator should not have to issue a notice warning a provider that it is about to issue a notice. A number of minor consequential amendments remove references to Clauses 219 and 220 from other clauses.

I do not propose to do this with any other enforcement power. It is absolutely necessary that the regulator is required to issue a warning notice and to allow 28 days for representations when it considers the use of a penalty notice or compensation award. Several stakeholders have expressed concern that that is too bureaucratic, but the enforcement notice is a different matter. It does not carry a penalty for its breach. Without a pre-enforcement warning and a period for representations, the enforcement notice will be a useful way of dealing with genuinely urgent cases. I do not wish the regulator to be forced to go through an unnecessarily lengthy process.

The eight amendments in the group are consequential. They remove the requirement that the regulator, before issuing an enforcement notice, issues a warning notice. They allow 28 days for the provider to make representations.

Clause 219 negatived.

Clause 220 negatived.

Clauses 221 to 225 agreed to.

Clause 226 [Grounds for imposition]:

[Amendment No. 110XC not moved.]

Clause 226 agreed to.

Clause 227 agreed to.

Clause 228 [Amount]:

moved Amendment No. 110XD:

moved Amendment No. 110Y:

moved Amendment No. 110YA:

The noble Baroness has drawn attention to a complex issue. I shall not be able to give her satisfaction but I hope I can explain what I see as the real difficulties in trying to solve this.

The amendment specifies that the regulator can give compensation not only to current tenants of social housing but to applicants who have applied for housing. The noble Baroness knows from her long experience how complex the allocation system is. Local authority allocations are governed by Part VI of the Housing Act 1996 and registered social landlords’ allocations are subject to Housing Corporation regulatory guidance, which can cover how they allocate their own stock and how they co-operate with local authorities. It is usual for RSLs to accept 50 per cent or more local authority nominations on the empty units in their own stock. Most allocations are, therefore, for the local authority. That process falls under the statutory homelessness duties, which are always for the local authority. So we already have a complex, interrelated system.

Under the Bill, compensation can be given only where there is a breach of standards or a breach of a voluntary undertaking by a provider to resolve a breach of standards in its own way. Standards in the list at Clause 191 can be set on the allocation of social homes by providers. Therefore, it is perfectly possible for the regulator to set and enforce standards on allocations, including in areas such as how the provider should co-operate with the local authority. Given that that is possible, it may address some of the underlying problems that the noble Baroness has raised in the amendment.

When setting and enforcing standards under Clause 191(3), the regulator must consider the desirability of the provider being free to run his own business, which echoes a recurring theme in our debates in Committee. It will need to be careful that its standards do not prohibit charities making arrangements to house specific groups in order to meet their objects. That is one reason why the regulator must consult the Charities Commission because we would not want to inhibit that. However, when setting allocation standards, the regulator also needs to consider objective 2 to ensure that actual or potential tenants have an appropriate degree of choice and protection, and so the potential tenant is brought into the frame. I agree that it is the role of the regulator to be able to address general or systemic allocation problems but I do not think that a compensation power is the best way to deal with them. Better results will be achieved through enforcement notices, penalties or, frankly, by changing a manager.

I am concerned that the regulator might spend valuable time judging individual cases for compensating people who feel that they should have been, but have not been, offered a home. The notion of the potential applicant is also very wide. There are so many potential applicants for social housing that we run the risk of imposing a major burden on the regulator of having to judge individual cases, and the existence of the power would in itself generate pressure to award compensation to potential tenants who had lost out. I can see that resolving individual cases could become a heavy burden.

I have other practical concerns. As I said, responsibility will normally lie with the local housing authority, not the housing association or other provider. The regulator is not responsible for regulating the allocation functions of local authorities. Indeed, it seems rather unfair on housing associations and other providers if the only potential tenants who can get compensation are those who are rejected by an association. That brings us back to the level playing field argument.

I am also, quite reasonably, concerned about public resources. What should a potential tenant who has been denied a home for an indefinite period be paid? It is not as easy as working out the compensation due, for example, for a leaky roof. We could get into an extremely expensive frame of reference because social housing is such a valuable prize that the sums might be so large that the regulator would often not be able to make awards, because under Clause 240 by doing so he would jeopardise the viability of the provider or prevent it providing services to its existing tenants.

I think that the noble Baroness will accept that these are issues that the regulator can and should deal with where a registered provider is at fault, but through means other than compensation awards. However, she has identified a complex situation and so, in order to make clear to noble Lords how the allocation system works at present, I should like to write and explain the background to the sort of judgments that go into the making of allocations and the relationship between local authorities and providers. On that basis, there will be a better understanding of how complicated this challenge to the providers would be.

I welcome that further explanation. At this juncture, I want to make a few points. The amendment refers not to an enormous number of potential tenants but to someone who has actually applied. It is not intended to be everyone who, if they thought about it, might have applied and been rejected. To answer a point that was not quite made, I understand the desirability of not having a system that allows someone to make a quick buck by applying where there is no hope of being allocated housing, but I should have thought that the fairly full provisions that come under the heading of compensation—10 full clauses—form an adequate safeguard for how individual claims, including claims of this sort, might be dealt with. I agree absolutely, of course, that enforcement generally is desirable, but it does not assist the individual. I look forward to hearing further from the noble Baroness and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 237 agreed to.

Clauses 238 to 240 agreed to.

Clause 241 [Warning]:

moved Amendment No. 110Z:

moved Amendments Nos. 110AA and 110AB:

moved Amendment No. 110ABA:

I, too, support the amendment. Triggers are an important lever for the regulator when dealing with mismanagement. Most RSLs will accept that that is the case. We recognise the precedent laid out in the Housing Corporation zone rules, which are fairly strong. The amendment leaves in paragraph (b) but takes out (a) and (c), and thus meets the criteria by leaving them broad enough for negotiations to take place. Paragraph (b) allows for the inquiry to be undertaken or, as the noble Lord, Lord Best, has so eloquently argued, to allow for remedies to be put in place. To have triggers of this order of magnitude seems slightly disproportionate, which is why earlier we argued so strongly for the insertion of “proportionate” at the front of the objectives.

I support the noble Lord, Lord Best. He has set out the issue far more eloquently than I could, so I shall not try to do so. However, what he described is rather like a court trying someone for murder, finding him innocent of murder but guilty of shoplifting, and then deciding, “Well, we’ll hang him anyway”. I think he is saying that we must let the punishment fit the crime.

I could not disagree with that. I am grateful to the noble Lord for moving his amendment, as I hope it will enable me to provide reassurance about the proportionality that we have provided here. The amendments raise issues of principle. I shall set out some technical explanations as to why we are taking this approach, but they are serious issues that affect a range of the regulator’s most serious enforcement powers. I should stress that most of the existing powers are held by the Housing Corporation. The most important of these is the ability to transfer land, which in the past has been used most sparingly in cases where a provider is not viable in order to pass its assets, including social housing, to another provider before winding it up. The amendments would also affect the regulator’s powers to restrict providers’ dealings and to suspend or remove the officers of a provider during or following an inquiry. They would also affect some new powers, such as those relating to the transfer of management, appointing managers and amalgamation. These are mainly new powers taken to meet Cave’s recommendations that the regulator should intervene more flexibly and proactively in the interests of tenants. The amalgamation powers were added in another place following a proposal by colleagues of the noble Lord, Lord Dixon-Smith, and the noble Earl, Lord Cathcart, for a more flexible approach to the regulated transfer of land of industrial and provident societies.

The problem I have with the noble Lord’s amendments is that I see them as making these powers rather more difficult to use. His argument is essentially that the regulator should not be able to use its more serious powers, such as those in relation to the transfer of land, on the basis of a trivial breach of standards; nor should it be able to transfer land on the basis that the transfer would be likely to improve the management of the land or that it would be likely to improve the management of some or all of its social housing. The noble Lord also queried how action could be taken on the basis of a breach of standards or improved management when an inquiry under Clause 203 can be held only where the regulator suspects that there has been mismanagement.

First, I need to reassure the noble Lord, just as my colleague in another place sought to reassure housing associations. The power relating to the transfer of land and the other powers here could never be used on the basis of a trivial breach of standards or simply because the regulator felt that it might be a good idea. We have just discussed Clause 215, which requires the regulator, when using enforcement powers such as these, to consider not only the desirability of providers being free to run their own businesses—a very important protection—but also the materiality of any breach. That means whether it is serious, whether it is recurrent and whether it is urgent. It applies not only to whether to intervene but to which power to use and how to use it. The regulator will have to have regard to the fundamental objectives, and objective 10 requires it to minimise interference and be proportionate. There will be a materiality test and a proportionality test to satisfy before the regulator can use these serious enforcement powers. Furthermore, the regulator would have to issue, consult on and have regard to guidance on the use of its enforcement powers. It is simply not possible to use a power as extreme as that relating to the transfer of land on the basis of anything less than the most serious of breaches.

I want specifically to address the point that the regulator should not be able to use a transfer of land power or appoint new management simply on the grounds that the land or management would be improved by the change. Perhaps I may explain why it is necessary that this should remain. Again, this is not a new ground for action; it is part of the current system under the Housing Act 1996. If we removed it, it would make the transfer of land power and other powers much harder to use than at present. Perhaps we would consider removing it if the powers were currently too easy to use or were being abused. However, the reality is that in practice it is very hard to use transfer of land powers. For example, the regulator would be depriving the provider of its property and the Human Rights Act would be engaged. This simply would not permit these powers to be used on non-serious grounds, and I believe that it would be extremely unwise to limit them beyond the overarching safeguards in the Bill. It would undermine the regulator’s power to act in extreme cases and increase the risk of insolvency.

As I have said, the Housing Corporation rarely uses transfer of land and uses it only where all else fails. In fact, in a recent case it spent several years working with an association to improve its capacity and encourage a voluntary solution, but to no avail. This is a last resort, partly because I hardly have to say that the individual cases are time-consuming, extremely expensive and highly contentious, and there must be a watertight case before there is any legal challenge. The Secretary of State must give approval, and that is not given lightly, and it needs to find a stable organisation to transfer to, one that will accept the liabilities which transfer along with the land.

The Housing Corporation and, in future, the regulator, do not act only on the basis of mismanagement, rightly in my view. Mismanagement is retrospective, but what is important here is that the regulator must also be concerned with the future management of homes and the best interests of tenants and the public. In all of the last four transfer of land cases considered by the corporation’s board, it concluded that transfer was justified on both of the acceptable grounds for action: that mismanagement had taken place and that the management of the land would be improved if it were transferred.

The noble Lord made the point that an inquiry may be held only when the regulator suspects that the affairs of a provider may have been mismanaged, so why should action be taken on any other basis? Let me be clear that the test for starting an inquiry is retrospective, but that does not mean that the aims of the inquiry set by the regulator or its findings are restricted to whether there has been mismanagement. Other concerns may be uncovered during the inquiry that the regulator needs to take into account when deciding what action to take. It is possible that it might even conclude that there had been no mismanagement in relation to the matters under investigation, but nevertheless it needs to act. Each case must be decided on its individual characteristics.

The status quo works. It gives the regulator flexibility within the overall framework of checks and balances, and it is fair. Housing associations have strong protections both in the Bill and in the courts. An arbitrary reduction in this power might be justified if there had been any unfair or arbitrary exercise of those powers or if they were unconstrained, but there have not been. Transfers so far have shown benefits for tenants and public money. Restricting this power so heavily may instead result in a severe and substantial prejudice which would only be to the advantage of the worst providers, those playing a long game and seeking to wear down the regulator in terms of time and cost.

I hope that I have convinced noble Lords that it would not be advisable to alter or restrict in the way proposed the grounds on which the regulator’s most serious powers may be used, and I hope that putting this explanation on the record will allay the concerns that have been expressed.

However, the amendments are not limited to that because they would also apply many powers that currently are used only for non-profit providers to profit makers. I shall come on to the issue of how to apply the transfer of land powers to profit makers in a moment. We have laid amendments to do this in respect of their social housing, because that is vital. We have already amended the Bill so that in the main it treats non-profit and profit-making registered providers in the same way, but there is no point in applying powers to profit makers in exactly the same way when they cannot apply or are inappropriate. What matters to tenants is that they have similar outcomes, even if the process is slightly different. We should not take unnecessary and disproportionate powers over any private sector provider. For example, there is no point in applying the powers on amalgamation to profit makers. This power applies only to industrial and provident societies and it is extremely unlikely that profit makers will have that organisational structure, and in any case it is simply not possible to merge only a profit-making provider’s social housing because all the provider’s assets would be bound to form part of a merged body. It would not be appropriate for the regulator to measure assets that are not connected to social housing.

I am also reluctant to extend the powers in Clauses 255 to 260 to profit makers. Clauses 255 to 257 prevent an association making poor financial decisions such as selling assets without the regulator’s consent during or immediately after an inquiry. As I have said before, we can restrict the disposal of social housing by a profit maker because consent can be refused. I think it would be excessive to go further and enable the regulator to usurp shareholders’ powers by suspending or sacking a profit maker’s directors, especially as social housing is likely to form a small proportion of their business.

We have tried to come to a fair and sensible position in relation to the grounds on which the most serious powers can be used and how they apply to profit makers. I think we have the balance right between protecting tenants and assets and being too intrusive. I have had to go into great detail, but I hope that the noble Lord will feel able to withdraw his amendment.

[The Sitting was suspended for a Division in the House from 6.58 to 7.08 pm.]

I am grateful for noble Lords’ support for the amendment and for the comments of the Minister, in particular those on bringing profit-making alongside non-profit-making. I understand her reasons for that not always being appropriate and was grateful for her guidance.

I turn to the substantive point incorporated in many of my amendments. The Minister addressed fully the transfer of land, to which Clause 252 relates. I have always known that the Secretary of State’s consent is required under Clause 253(4) before a transfer of land can be imposed, so that is not the most serious of the ways in which the regulator’s powers are being extended beyond cases where mismanagement is proved. I was concentrating more on Clause 248, on management transfer, and Clause 250, which gives powers to appoint the management and staff of the organisation. I was less than entirely satisfied by the Minister’s response on those points. It is likely that that I will return to the matter later. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 110ABB not moved.]

Clause 248 agreed to.

Clause 249 [Section 248: supplemental]:

moved Amendments Nos. 110AC to 110AD:

moved Amendments Nos. 110AE to 110AF:

moved Amendment No. 110AG:

moved Amendment No. 110AH:

moved Amendments Nos. 110AJ to 110AM:

moved Amendments Nos. 110AN and 110AP:

had given notice of his intention to move Amendment No. 111A:

moved Amendment No. 112ZA:

moved Amendment No. 112ZB:

moved Amendment No. 112ZC:

We can have nothing but sympathy for the Minister as she gets another battering over these ghastly and hated information packs. She is very brave—she puts on a smiling face and says that they are all wonderful and it is all going well—but in reality the truth is very different. I declare an interest as a consultant to an estate agency in London, an interest I have declared on many occasions.

My noble friend Lord Dixon-Smith referred to the Sir Bryan Carsberg report which has recently been published. It confirms what many of us said when the legislation was being rammed through Parliament against better judgment. The result of the HIP legislation has been to delay property coming on to the market in some parts of the country; there is absolutely no doubt about that. I agree that that has not happened as much in central London, but in less expensive areas of the country, where people do not have the same capital value in the house and, in many cases, have less income, the extra cost of a HIP obviously defers property from coming onto the market. That in turn restricts the free flow and operation of the market. I said at the time of the housing boom that that was going to happen.

In times of boom one does not think that things can go bad, but we have seen housing declines in the past and we are facing another one at the moment. Any extra expense such as this will delay property coming on to the market because many people are not prepared to pay for the home information pack. The Minister may reply that many agents are absorbing the cost—which is true in some parts of the country—but the corollary is that they are not negotiating on fees. So what the vendor might win on the swings, he is losing on the roundabouts.

There is clear evidence from all the investigations I have done, and from talking to the various purchasers and vendors that we deal with, that the home information pack is not providing any useful service to either the vendor or the purchaser. There is evidence that it is delaying the whole property procedure, as my noble friend Lord Dixon-Smith said, and it is not actually reducing the costs.

Let us take the question of searches. I remember the Minister trumpeting how nice it was that we were going to get searches up front. A lot of us agents had been doing that before, because it seemed to be a sensible way to market property. In a declining and difficult market, however, property can stay on the books for a long time. Let us say that you are a solicitor acting for a purchaser. If the search is more than three months old, you will require the purchaser to get their own new search. The purchaser’s solicitor has a liability and a duty of care towards the lender, and no bank or building society is going to lend unless the searches are more recent than three months. So the great idea that it will be a wonderful thing to get searches up front is not proving at all effective because more and more, as the housing market becomes more difficult, the purchasers are having to fund their own searches, just as they always did in the past.

If I were to summarise the reaction from all the vendors and purchasers, it would be, “This is just another government tax on property. It’s one of the things we have to put up with, but it’s really not helping the procedure at all”.

I did not think I would get away without having a debate on HIPs in the course of a Housing Bill. I am not surprised, but if the Committee will forgive me, I will not rehearse the full story of the introduction and management of HIPs over the past year, because it would take a long time. What I will say is very simple. There can be no doubt that the current home-buying and selling process needed to change. I think we would all agree on that. It is protracted, confusing, opaque and stressful, and the biggest losers have been first-time buyers, who are already at a disadvantage.

Over the past year we have seen HIPs bed down. Around 700,000 HIPs have been produced along with energy performance certificates. We have seen the market adapt. Consumers are beginning to see the benefits. There has been a reduction in the cost of local property searches by an average of £30. We said that HIPs would stimulate and help the market, and they have.

I hear what the noble Earl, Lord Caithness, says about the way they are affecting the market. We have commissioned substantial research on this, and we have no such evidence. Given what else is happening in the housing market in terms of ability to borrow and buy, I would be very surprised if HIPs made any difference, but I will send the noble Earl the current research we have.

To maintain confidence among all those involved and to make the benefits of HIPs evident and useful, we should ensure that we build on what is working. That is what we intend to do, and we are doing it with the industry. We have a much closer and better relationship with stakeholders, and we are working with consumers. We are doing our best to make a real benefit of this. We recognise from the area trials and our early operations that more needs to be done to facilitate and support the take-up, and we are working with the industry to ensure that consumers can benefit fully from HIPs.

We are reflecting on the recommendations in the Carsberg report, but in the mean time we will continue to work with the industry to improve information for the consumer in this process. Given where we are with the energy companies, we are also making the most of EPCs. The committee will know that we are phasing in EPCs across all sectors of buildings. All homes marketed for sale in England and Wales since December 2007 have required an EPC to be available to prospective buyers.

HIPs are an important issue that we have addressed many times in this House. Frankly, however, I cannot add a great deal to what I have just said. I hope the Committee will understand that I listen to noble Lords, and I appreciate the opportunity once again to update the Committee on where we are.

I sometimes wonder what it will take to get the Government to admit that perhaps they were wrong. I think that it will happen only when they hit the ground at the bottom of the cliff on a date in the future that we cannot predict. I am not particularly surprised at the noble Baroness’s response. I am marginally pleased that she is concerned about the Carsberg report, given the cautious nature in which reports of that kind are couched. I regard the wording as considerably, if not completely, damning. Therefore, I think that there is an issue here that we will need to pursue further but, for now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 278 and 279 agreed to.

Clause 280 [Authorised assessors]:

moved Amendment No. 112A:

Obviously we welcome the competitive sentiment behind the noble Earl’s amendment, but ultimately we disagree and part company with him in what it seeks to achieve.

For the benefit of noble Lords who are not familiar with the area, I ought to begin by explaining what an accreditation scheme is. It provides for assessor certification by the training and licensing of people who will carry out assessments. We currently have schemes in place through contractual arrangements but in due course we will replace them with schemes set up under the powers conferred by the Bill. We are committed to ensuring that there are transparent and open processes for the selection of any accreditation scheme or schemes and for the establishment of a competitive market for accreditation schemes and assessor services. However, as I am sure the noble Earl will agree, it would be highly unusual to have this level of detail set out in primary legislation. It could fetter the Secretary of State in acting in the best interests of the public.

More pragmatically, we are also considering a number of different models for setting up accreditation schemes and may want to adopt the approach used in energy assessor schemes for issuing energy performance certificates. The approach adopted in this instance does not limit the number of such schemes and therefore there is no competition between organisations to set up accreditation schemes. Such competition as there is will be in the marketplace for accreditation services, to the ultimate benefit of the consumer. Accordingly, we believe that the amendment, well intentioned as it is, would not have the desired effect of ensuring that the Secretary of State’s discretion is exercised in the public interest. Moreover, it would be undesirable to stipulate how the Secretary of State is to exercise discretion in this matter. I can assure the Committee that the principles of transparency and openness, and the harnessing of competition for the public good will remain the basis for any selection process when it is taken forward. As a result, the amendment is not the right way to proceed. Having accepted our commitment to introducing transparent and open selection processes, and to promoting competition, I hope the noble Earl will feel able to withdraw his amendment.

He asked for some precise information. With regard to the publication of the contract, it is in the public domain and I shall send him a copy. The contract expires in 2013. I apologise for getting the institution name wrong but these things do happen, as I am sure they did when the noble Earl was in government. As to the value of the contract, I am more than happy to write to the noble Earl about that.

I am grateful to the Minister for his reply. He seems to agree that it is in the interests of the environment, home buyers and the housing industry that there should be competition for both the provision of assessors and their accreditation. It is a pity that we have to wait five years but it is perhaps better to continue with the Bill than to upset the process in the mean time because the Government seem to have their heart in the right place on this issue. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 112B had been withdrawn from the Marshalled List.]

Clause 280 agreed to.

Clauses 281 to 284 agreed to.

moved Amendment No. 112C:

In view of the hour, I suggest that the Committee stand adjourned until Monday at 3.30 pm.

The Committee stands adjourned until Monday at 3.30 pm.

The Committee adjourned at 7.48 pm.