House of Lords
Tuesday 20 July 2021
The House met in a hybrid proceeding.
Prayers—read by the Lord Bishop of Southwark.
Introduction: Baroness Davidson of Lundin Links
The right honourable Ruth Elizabeth Davidson, having been created Baroness Davidson of Lundin Links, of Lundin Links in the County of Fife, was introduced and took the oath, supported by Lord Keen of Elie and Lord McInnes of Kilwinning, and signed an undertaking to abide by the Code of Conduct.
Oaths and Affirmations
The Earl of Leicester took the oath, following the by-election under Standing Order 9, and signed an undertaking to abide by the Code of Conduct.
Arrangement of Business
My Lords, the Hybrid Sitting of the House will now begin. Some Members are here in the Chamber while others are participating remotely, but all Members will be treated equally.
The social distancing requirements in the Chamber have been removed, but I strongly encourage Members to continue to wear face coverings while in the Chamber, except when speaking, and to respect social distancing in relation to staff in the Chamber.
Oral Questions will now commence. Please can those asking supplementary questions keep them no longer than 30 seconds and confined to two points? I ask that Ministers’ answers are also brief.
Council of Europe Convention on Access to Official Documents
My Lords, I apologise for not being present in your Lordships’ House—I have been since the first lockdown—but I am currently isolating and will not be able to attend the House this week. The United Kingdom Government have no plans to adopt the Convention on Access to Official Documents.
I send my sympathies to the Minister but that is a very unsatisfactory answer, and I wish he was here in person so I could tell him to his face. Does he agree that, with certain limited exceptions, access to official documents is essential for transparency, good governance and a functioning democracy? A number of countries—Ukraine, Estonia, Finland, Hungary, Norway, Sweden and others—have agreed to adopt this convention. Can the Minister give us just one simple reason why the British Government are not doing likewise?
My Lords, the noble Lord always tells me that my Answers are unsatisfactory; I do not always agree with him. As it stands, the convention, which has not been adhered to by the overwhelming majority of EU nations, would not, in our view, allow for the appropriate protection of sensitive information or of journalistic independence, as Parliament intended when it passed the Freedom of Information Act 2000.
My Lords, can the Minister help the House? Can he explain what it is about releasing the official documentation concerning the £37 billion test and trace scheme and the £12.5 billion of PPE contracts—including the VIP route, which has been roundly criticised by the National Audit Office—that might conceivably make the Government reluctant to sign this convention?
My Lords, I have given the House the reasons for the Government not wishing to adhere to the convention. However, the United Kingdom Government are absolutely committed to transparency and the principles behind the convention and recognise the work done by the Parliamentary Assembly of the Council of Europe in this sphere. We routinely disclose information well beyond our freedom of information obligations and in line with many of the provisions of the convention.
I am sure the Minister is entirely apprised of the fact that the Council of Europe is completely separate from the EU. The attitude of the Government on an issue such as this tends to smack of an anti-European thread in the Government, which I am sure is not in the interests of this country. Can the Minister kindly explain why such a universally accepted treaty should not be acceded to by this Government?
My Lords, I have underlined the principle of this Government’s belief in transparency. I refute the idea that there is anything anti-European here. The current adherents to the treaty are Bosnia, Estonia, Finland, Hungary, Lithuania, Montenegro, Norway, the Republic of Moldova, Sweden, Ukraine and Iceland. The majority of EU countries are not signatories. I think that answers the noble Lord’s point that this is some kind of EU line.
My Lords, my noble and learned friend is right to draw attention to this. Although protection for deliberations within public authorities is allowed for in the convention, it does not provide the specific exemption that Parliament felt was necessary in order to protect Cabinet collective responsibility, which is one of the key conventions underpinning our form of Cabinet government. It informed the Labour Government in 2000, at the time this Act was passed, and continues to inform us.
My Lords, the Minister has given quite inadequate answers as to why the Government will not adopt the convention. Can I press him on the issue of transparency and whether the Government would obey the law—their own laws? In February, the High Court confirmed that the failure to publish the details of all the PPE contracts is unlawful. The Government responded that they were working hard to do so. Just how far have the Government got? In March, more than 100 of the contracts awarded last year were still unpublished. Some 93% of contracts awarded to suppliers with political connections have been published late, and it is estimated that nearly £2 billion-worth of contracts have gone to those with Conservative Party links. The Government will not adopt the treaty, even though other countries have published this information. As of today, how many contracts awarded more than 30 days ago have yet to be published by the Government?
My Lords, on the specific question of the number that the noble Baroness asks about, I will have to write to her; I apologise for that. Obviously, the Government hold the principle of transparency as paramount. There are always issues of commercial confidentiality, as all noble Lords will understand. However, we go far beyond the requirements of the Freedom of Information Act in publishing information about the conduct of business within government.
My Lords, I thank my noble friend for his answers and his assurance that there is not an anti-European element to this, which I wholeheartedly accept. However, does he agree that access to official documents is even more important in times of crisis and that there is a need for openness and transparency in public authorities, partly to restore trust but also to expose or reduce any corruption and make the public feel more confident in their authorities?
My Lords, wherever, if ever, corruption exists, it should be mercilessly rooted out and dealt with; I think that would be the united resolve of your Lordships’ House, of the Government and the whole of Parliament. All central government departments are required to publish datasets, including central government contracts, tender opportunities and contract award notices over £10,000, central government spending over £25,000, the gender pay gap data—I will not prolong the list, because other Members wish to ask questions. However, I stress to your Lordships that a great deal of information is voluntarily published by the Government and that we do and will adhere to the law.
I am absolutely thrilled to hear that the Government are, in the words of the Minister, committed to transparency. A few Members of this House—I do not know how many—have been told that MI5 has files on them. Can the Minister therefore, in this spirit of transparency, get those files for us so that we can see exactly what information is held on us? I cannot believe that any of us is a threat to national security—apart from, obviously, the noble Lord, Lord Foulkes.
I could never conceive that the noble Baroness would be a threat to anyone and I rejoice in her kindly words always. The reality is that Parliament agreed in 2000 that it was appropriate to protect sensitive information from inappropriate disclosure and legislated for exemptions in some areas, including absolute exemptions for information relating to security and intelligence agencies and communication with the sovereign. That decision was taken by Parliament, and in the spirit of adhering to the law, the Government continue to follow that provision.
My Lords, I also have an MI5 file, which I discovered after a recent government publication. What distressed me was that all the information in it was wrong. Can the Minister make these files available so that MI5 at least has accurate information about why we are totally untrustworthy?
My Lords, given that England, Wales and Northern Ireland already have the Freedom of Information Act in place, could the Minister comment on whether, after 20 years of that Act, it is due for review to assess its effectiveness and whether it needs to be broadened to cover other bodies?
My Lords, other bodies are covered. If I said that it was time for a review, people would immediately say, “Oh, they are planning to do something different to what we have now.” There are no current plans for a review. Obviously, every piece of legislation is constantly kept under consideration both by Parliament, including your Lordships, and by those responsible for conducting government business, but currently there are no such plans.
Human Rights Due Diligence
My Lords, the Government expect businesses to target their human rights due diligence approaches according to the UN Guiding Principles on Business and Human Rights. We currently have no plans to make this mandatory because there is existing legislation which holds businesses to account on human rights. All UK quoted companies are required to report on relevant human rights issues in their annual reports, and large businesses must publish supply chain transparency statements on steps they take to prevent modern slavery.
My Lords, I thank the Minister for his reply. The European Commission plans to publish its sustainable corporate governance proposal this autumn, and UK companies operating in the single market would fall into its scope. I hear what the Minister says about the Government having no plans, but what consideration are they giving to keeping pace with the European Commission? Does he really believe that the current law is satisfactory to enable business practices to ensure that all commodities and services are subject to human rights and environmental due diligence processes?
My Lords, I draw the Minister’s attention to the policy of the National Investing Bodies of the Church of England on extractive industries, which has an explicit commitment drawn from the UN Declaration on the Rights of Indigenous Peoples to the
“free, prior and informed consent”
of indigenous communities on major projects. Indeed, the Church Commissioners and other Church of England investment bodies engage with investment partners across a range of industries, including where forest clearance is involved. Will Her Majesty’s Government consider the principle of the free, prior and informed consent of indigenous communities as a legislative requirement for companies incorporated in the United Kingdom but operating overseas?
I thank the right reverend Prelate for sharing that research. The UK is committed to supporting indigenous peoples and local communities, who play a vital role in protecting forests. Our proposals in the Environment Bill will require UK companies to conduct due diligence based on the laws of producer countries, in particular those laws that relate to land use and land ownership.
I declare my interests as set out in the register. Does my noble friend the Minister agree that human rights due diligence should not be mandatory for businesses given the modern slavery and supply chain requirements, the welcome shareholder demands for ESG transparency, and the widespread adherence in this country to the UN Guiding Principles on Business and Human Rights?
As I said in my initial Answer, I agree with my noble friend. Human rights abuses are a wide and varied issue, which is why the UK Government prefer the approach of encouraging businesses to follow the voluntary framework of the UN Guiding Principles on Business and Human Rights.
My Lords, the rainforest needs urgent protection—we all know that, as does the Minister. The Government have already made good progress with the Environment Bill, but how will they enforce compliance; for example, on companies which are not in the Retail Soy Group or which do not intend to convert to sustainable products? Does the Minister agree that any UK financial services which clearly support the production or trading of forest risk commodities would be acting illegally and should be caught by Schedule 16 to the Bill?
The noble Earl is perhaps getting a bit ahead of himself, as we are still considering the Environment Bill—it is not in law yet. When it is, as I hope it will be, details on the enforcement regime will be subject to further consultation and regulations will be subject to the affirmative procedure so that the House can debate them fully.
Given the complexity of supply chains and the way business with indigenous populations is conducted, will the Government give an undertaking that human rights should be written into the contracts of the small companies that then sell to larger companies, as well as the need for satisfactory equal pay and the gender lens? This is a complex situation and we need to get a grip of it and have it written into contracts.
My Lords, I hope the Minister will agree that Governments as well as businesses have a moral duty of due diligence on human rights. Can he therefore tell the House what due diligence the Government conducted prior to chartering a flight to deport Zimbabwe nationals tomorrow to a country where human rights are consistently violated? Will the Government now halt that flight and place a moratorium on further deportations until the Zimbabwean Government can demonstrate that they respect the human rights of their citizens and the rule of law?
My noble friend makes a very good point. The UK is working closely with the International Indigenous Peoples’ Forum on Climate Change and the UNFCCC Local Communities and Indigenous Peoples Platform to champion engagement and participation by indigenous groups in COP 26.
A recent G7 communiqué said that the G7 was
“concerned by the use of all forms of forced labour in global supply chains”,
and G7 Ministers have been tasked
“to identify areas for strengthened cooperation and collective efforts towards eradicating the use of all forms of forced labour in global supply chains”.
Can the Minister clearly outline how this engagement will work ahead of the G7 ministerial meeting in October, and what do the Government want to achieve through this process?
The UK was the first state to produce a national action plan to respond to the guiding principles. We have continued to develop our approach, particularly with the Modern Slavery Act. We are working across the UK Government on this, and involving the devolved Governments in proper enforcement of the provisions.
My Lords, Eid Mubarak to all those celebrating. While we are very efficient in detailing the human rights abuses in overseas supply chains that we source from, we do not demonstrate the same enthusiasm when we export our trash to those same countries. What about the environmental and human rights abuses that happen in the global waste trade in which we participate? Can my noble friend see how this sends mixed messages internationally?
Businesses involved in the export of waste are required to take all necessary steps to ensure that the waste they ship is managed in an environmentally sound manner, throughout its shipment and during its recycling. Current penalties for breaching the legislation are a two-year jail term and an unlimited fine. My noble friend will be aware that the Environment Bill will introduce even tougher controls on illegal waste exports, including powers to make it harder for criminals to obtain and export waste illegally.
My Lords, I am supporting a project with Rewired.Earth, which aims to deliver full and proper ESG audits, including through the supply chains. If achieved, this would provide a huge step forward in delivering environmental, social and governance oversight, going a long way to answer the Question of the noble Baroness, Lady Sheehan.
With $110 trillion of worldwide investment already being directed through ethical investing, this would be a great opportunity for the UK. Do Her Majesty’s Government support the premise of ESG audits as a way for the UK financial sector to lead the way across the globe, both in financial investing and by creating a vehicle that can help save the planet?
As the noble Lord will be aware, we have just finished a consultation on the audit reform proposals, which include extending audit to some non-financial matters such as climate change. Of course, we will be very happy to consider all other proposals.
My Lords, in an earlier reply, the Minister said that he is considering enforcement issues. Given that the UK has no central enforcer of company law or regulator of corporations, and that auditors, just mentioned by him, have absolutely no expertise in human rights, how will the Government monitor compliance with and enforcement of any proposed legislation?
We are considering the issue of enforcement in the audit reform consultation that I mentioned in my previous answer. We are extending the powers of the FRC, creating a new audit reform regulator in ARGA and we will be issuing our response to the audit reform consultation later in the year.
Chinese Products and Companies: Human Rights Violations
My Lords, in 2020, China was the UK’s third largest import market, and in 2019, more than 60,000 UK VAT-registered businesses imported goods from China worth about £46.4 billion. We want a positive and constructive trade relationship with China, but we will not sacrifice our values in doing so. In January, the Foreign Secretary announced a comprehensive package of measures to help ensure that no UK organisations are complicit in the serious human rights violations being perpetrated against the Uighurs and other minorities in Xinjiang.
My Lords, given what the Minister just said, why has Hikvision, the Chinese company banned in the United States, which makes the surveillance cameras used to oppress Uighurs in Xinjiang, where the House of Commons has determined that a genocide is under way, and which has installed CCTV cameras all over the United Kingdom, not been banned here? Will he say what the cost of the 1 billion lateral flow tests that this country bought from China was, whether slave labour in China was used to produce them and why they could not have been produced in the United Kingdom?
That was a series of questions from the noble Lord, and I start by applauding his persistence on this important subject. On his questions relating to the US, I shall have to write to him, but I may be helpful to him by saying that ensuring a tough response to modern slavery, which is part of what we are trying to do here, remains a great priority of this Government. The Government have already committed to strengthening the landmark transparency provisions contained in the Modern Slavery Act 2015, following the transparency and supply chains consultation.
I hope I can be helpful to my noble friend by saying a little more about the measures we are taking—which are being implemented by the Government—including strengthening the overseas business risk guidance; a review of export controls; introducing financial penalties under the Modern Slavery Act, alluded to earlier; and increasing support for UK government bodies to exclude suppliers complicit in violations or abuses.
My Lords, I fully support the need for sanctions against China and Chinese products for the gross abuse of human rights in the persecution of the Uighur Muslims and other minorities, and the people of Hong Kong. Does the Minister agree that our actions would carry greater weight if we looked closely at our policies? Does he agree that refugees fleeing the Middle East are human beings, and that jailing them for daring to try to escape their misery is hardly consistent with Christian teachings?
The noble Lord makes an important and, indeed, a moral point. The UK launched the global human rights sanctions regime in July last year, giving us the power to address the very worst human rights violations across the world. We have already used that regime to place sanctions on more than 70 individuals and entities around the world. The noble Lord will know that this, for the first time, includes assets that are frozen and travel bans on four Chinese government officials.
My Lords, according to the latest ITUC Global Rights Index, the UK now has trade deals with dozens of countries with the worst track records in the world for exploiting workers. During debates on the Trade Bill, the noble Lord, Lord Grimstone, argued forcibly against my amendment and that of the noble Lord, Lord Alton, because the FCDO’s Human Rights and Democracy report
“touches on many relevant issues”,
and would be
“enhanced in further reports.”—[Official Report, 23/3/21; col. 766.]
When I read the report that was recently published, it is clear that no enhancement has been made. Trade agreement is not even mentioned once. Can the Minister explain what has happened? Why have not the Government kept their word?
We have taken a lot of action in this respect, and at the UN Human Rights Council in February 2021 the Foreign Secretary called on China to allow the UN High Commissioner for Human Rights or another independent expert urgent and unfettered access to Xinjiang. More countries than ever are speaking out about Xinjiang; China has already been forced through our actions to change its narrative about camps, and its denial of these violations is increasingly hard for it to sustain. We believe that the actions that we are taking are having effect, but it is not, of course, always a fast process.
My Lords, I declare an interest as an officer of the APPG on Magnitsky. The Minister did not manage to answer any of the questions of the noble Lord, Lord Alton, about lateral flow tests. We are exhorted to take those tests twice a week before coming into the Chamber or into your Lordships’ House. Why are all those tests made in China and what due diligence has been carried out to ensure that none has been made using slave labour?
My Lords, I do not have any information in my pack about lateral flow tests. Picking up on what the noble Lord, Lord Alton, said, I will certainly look into that and make sure that I write to him and the noble Baroness on those points.
My Lords, we live in a “chips with everything” world and have recently seen what disruption to the supply of semiconductors can do in closing down vital manufacturing industries in this country. Taiwan is the biggest supplier in the world of semiconductors, and what happens there matters. What plan or strategy do the Government have to ensure that our manufacturing industries can deal with any disruption of supply?
Supply to these markets is obviously important, certainly when talking about the Far East. Looking at that area, although I do not have figures on Taiwan, some crucial goods are imported and exported, and it is therefore important to keep those lines open.
My Lords, I know that the noble Viscount says that he has no information about lateral flow tests, but he must surely know that during the public procurement of those tests for the NHS, only 25% passed through all stages of validation, including assessments of performance and quality standards. Surely the Government must be concerned at the poor quality of imports, often from very dubious sources. Is it not the case that his department must be concerned that the UK becomes self-sufficient?
I cannot comment on that; it is certainly a point that I am taking extremely seriously, as I said to the noble Baroness, Lady Smith, and the noble Lord, Lord Alton. I will take back the three questions on lateral flow tests, which is clearly an important subject.
My Lords, several countries have accused China of committing genocide, and so has the House of Commons. The FCDO said in a Written Answer to me that China is running concentration camps, yet we are encouraging more trade with a country that is behaving like Nazi Germany. Is it not high time that we brought in sanctions to prohibit organisations and individuals doing business with companies known to be associated with the atrocities taking place in Xinjiang province?
I alluded earlier to the named people affected by the sanctions system, which is ongoing and working. On 12 January, the Foreign Secretary announced the series of measures to which I alluded, which includes a review of export controls to make sure that we are doing all that we can to prevent the export of goods that may contribute to human rights violations.
Last week, President Biden released formal guidance for US businesses operating in Hong Kong following the increased restriction of freedoms as a result of the national security law. When will the UK Government issue similar guidance?
The UK has no plans at the moment to issue guidance but I am very aware of the United States export administration regulations, which contain a list of the foreign entities, including businesses, that are subject to specific licence requirements.
My Lords, the global economic power that China has established must concern us all. What assessment have Her Majesty’s Government made of the intentions of that global reach? Is it purely about the economy or is China in fact trying to establish a hegemony that will lead to it being able to dictate to the rest of the world how it behaves?
It might be both of those but if we look at the work being done through the G7, which is the high-level stuff, trade Ministers have committed to work together to protect individuals from forced labour, including mitigating the risks of it. We are convening a technical discussion in order to share lots of data and evidence. G7 leaders are committed to continuing to work together through domestic means and multilateral institutions to protect individuals. That very much relates to my noble friend’s question on China.
National Food Strategy Independent Review
My Lords, we should like to thank Henry Dimbleby and his team for their work on this independent review. We are committed to carefully considering the review and its recommendations and responding with a White Paper in the next six months setting out the Government’s ambition and priorities for the food system. That will support our exceptional British food and drink producers, protecting and enhancing the nation’s health and the natural environment for generations to come.
My Lords, I am grateful to the Minister for that reply. There was considerable dismay in many quarters last week at the Prime Minister’s public perfunctory dismissal of the National Food Strategy’s recommendations on the need for sugar and salt taxes. Can the Minister ensure that all levels of government understand that the sugar tax on soft drinks that this Government—or, I should say, Mrs May’s Government—introduced in 2018 was seen generally as a success? It did not raise prices but instead encouraged manufacturers to reformulate their products on a healthier basis. Why should the principle of that sugar tax not be extended to help ease the country’s obesity crisis and a salt tax be similarly explored, instead of being so summarily dismissed?
The noble Lord is absolutely right to say that the soft drinks industry levy—it is not a tax—has been a great success. The sales-weighted average sugar content per 100 millilitres in fizzy drinks reduced by 43.7% between 2015 and 2019. It is worth looking at how Henry Dimbleby has nuanced his recommendations by proposing a look at wholesale sugar and salt used by the industry to make food items that are becoming a serious problem to the health of this country.
My Lords, are the Government proud of our status as the second most obese nation in the world after the United States, with which, presumably, they have a special relationship? Surely a tax on salt and sugar will reduce obesity and the cost to the NHS and, maybe, even make people happy. Why are the Government not doing it?
The noble Lord raises an important point. The Government have set out a very clear obesity strategy, with particular emphasis on children. Henry Dimbleby’s report is stark in its warnings about the health trends that have been created in this country. They are mirrored in other countries as well, but we have a serious problem. What the ground-breaking obesity strategy sets out is important. It is not just about what we eat but about how we encourage people to eat, through using watersheds in advertising and a range of other means. We are considering this report and all its recommendations, and will publish a White Paper within six months, which may satisfy the noble Peer.
My Lords, I am encouraged to hear the Minister say that the Government want to encourage people, particularly children, to eat better. I ask specifically about the recommendations in the Dimbleby report, and I declare an interest here as one of its advisers. The holiday activity fund ensures that poor children get a decent meal in the holidays; the early start vouchers enable pregnant mums and young kids to get fresh fruit and vegetables; and the extension of free school meals enables all people in poverty to have one decent meal a day. What are the Government going to do about these recommendations or will they again wait for Marcus Rashford to run them up the publicity flagpole, then give in?
We are very grateful to the noble Baroness for her involvement in this report. She knows we have increased the Healthy Start programme; we have provided schools with fruit and vegetables; and we have had an impact particularly on low-income families, in the variety of ways we have supported them. Food and our diet have to be looked at holistically with household income and all the pressures on it. Within a month, we as Ministers will be clear about how to respond to this and will take forward six work streams, most of which will please the noble Baroness, and we will publish that White Paper within six months.
My Lords, the national food strategy is clearly important and timely. It should help us as a country combat carbon emissions and deal with the obesity crisis, so graphically underlined by the pandemic. Like others, I encourage the Minister to bear in mind the great success of the soft drinks industry with the 28% reduction of sugar, inducing change in producer behaviour. I also ask my noble friend to ensure that there is concerted action in this important area across the devolved Administrations.
My Lords, Henry Dimbleby’s report was focused on England, but he worked very closely with the devolved Administrations as well. Our food network and supply chains are interwoven, as they are with the European Union and beyond, so we absolutely will.
My Lords, will the White Paper include ensuring that people without gardens who wish to grow their own healthy food have access to land for allotments without having to pay high fees? Will local authorities be funded to provide these facilities in the interests of public health and to encourage school gardens? Does the Minister accept that children who grow vegetables eat vegetables?
Getting children used to the production of food is a vital part of helping them to enjoy it, so I am absolutely on the same side as the noble Baroness. I would like to see a great many more schemes being developed. It is probably not for the Minister to do this from here, as local schemes are best suited, but I will work with other departments to make sure that that is happening.
Does the Minister share my disappointment that the national food strategy made no mention of the importance of physical education and sport for young people in schools? We are seeing that being very reduced—not in private schools, but it is still being reduced in our state schools. Surely for a youngster starting off, getting the opportunity to learn about sport and physical education means that they will be much healthier, whatever they eat.
The noble Baroness is right that this is not my ministerial responsibility, but what we are doing in Defra to encourage people to get outside, to learn outside and to enjoy the outside is really impressive. We are working with other government departments to help her ambitions come true.
My Lords, the national food strategy proposals are evidence based and are further steps towards correcting the UK’s diet, which is the worst in Europe. The Prime Minister’s dismissal of a salt and sugar tax is a political decision. Can the Minister assure the House that, in future, scientific evidence will form the basis of decisions affecting the health of the whole country?
The report highlights some key questions for the UK’s trade policy. The UK cannot work to transform its own food system and support people to make food choices that are better for their health and the environment if we allow foods to be imported that are produced to lower safety, environmental or welfare standards. I ask the Minister how the Government will heed the report’s warning on the worrying precedent that the Australia deal could set on food standards for imports.
Australia is a country that shares our values and it is important that we have a free trade agreement with it. The noble Baroness will be pleased that it contains a chapter on animal welfare, which is often overlooked in criticisms. I assure her that the Government’s commitment to standards will be underpinned throughout all the trade agreements we sign.
Would the noble Lord accept and consider two points? It is not just sugar or salt but the combination of the two that often makes many foods moreish, if not addictive—Chinese takeaways and tomato ketchup, for example. Secondly, it is not just obesity that we should worry about, as another noble Lord said, but the chemical and psychological effect on mood and behaviour. Anyone with children knows the hyper-effect of sugar on children’s moods.
One of the most fascinating parts of the report was when it spoke about satiety. The junk food cycle is based on the desire to eat more than we need to feel sated. That is a real problem and a cycle that we have to break if we are to tackle obesity and other wider health issues.
My Lords, the time allowed for this Question has elapsed.
Minimum Energy Performance of Buildings Bill [HL]
A Bill to make provision to increase the energy performance of buildings and for connected purposes.
The Bill was introduced by Lord Foster of Bath, read a first time and ordered to be printed.
Motion to Agree
I remind the House that, under Standing Order 68, reports from the Conduct Committee resulting from an investigation under the Code of Conduct are non-debateable.
My Lords, I beg to move that the third report of the Conduct Committee be agreed to. As your Lordships are aware, and as has just been said, the House, by Standing Order 68, has decided that such a report is decided without debate, so I will confine myself to a brief introduction.
On 3 November last year, the House agreed to a recommendation from the Conduct Committee, consistent with the independent reports of Naomi Ellenbogen QC, as she was, and Alison Stanley, that all Members of the House be required to undertake Valuing Everyone training—a study course—by 1 April this year. Nearly all Members did so by the deadline.
The House recognised that some Members might, for exceptional reasons, not be in a position to undertake this. In a report on 18 May, the commissioner identified seven Members as falling within this category. She held that a further 47 Members were in breach by failing to take the course by the deadline, but she accepted sufficient remedial action, arrangements or promises made by them to undertake the course in the immediate future.
The four Members who are the subject of the present Conduct Committee report did not proffer any exceptional reason for not taking the course. Of the four, one, although in breach, then explained to the Commissioner that she was willing to undertake the course; she has now done so. A second, the noble Lord, Lord James of Blackheath, has very recently, since the Commissioner’s report was published, also agreed to undertake the course and has signed up to do it tomorrow.
The second Motion in my name before the House therefore relates only to the two remaining noble Lords, Lord Kalms and Lord Willoughby de Broke, who have not appealed the Commissioner’s finding that they breached the Code of Conduct, and have continued to refuse or fail to undertake the course. This second Motion therefore seeks to restrict their access to staff of the House and other Members of the parliamentary community, as well as facilities, until they undertake the training. The Committee believes that this is a proportionate sanction which balances the importance of protecting staff with the undoubted right of the two noble Lords to continue exercising their core parliamentary functions.
I include a further word on Standing Order 68, under which the two Motions in my name fall to be decided. The report recommending the new Standing Order was agreed in a full sitting of the House after nearly two hours of debate on 30 April 2019. Members who are the subjects of reports by the commissioner have a full right of appeal to the Conduct Committee, a right which I stress again that neither noble Lord has exercised in this case, but certain sanctions can only be imposed by the House itself on recommendation of the committee. The Standing Order was designed to promote an objective and independent process protecting complainants who cannot speak for themselves and ensuring that future complainants know that their conduct will not be debated on the Floor of the House. A similar Standing Order exists in the House of Commons.
The amendment in the name of the noble Lord, Lord Cormack, is a matter for the House. There is little that I wish to say. Standing Order 68 will apply on 12 October, as the House will be no more or less legitimate then than it is today. Delay would not change the appropriateness of the sanction but could convey an unfortunate message about the House’s willingness to enforce its own agreed code. I beg to move.
Amendment to the Motion
My Lords, I have put down this amendment for one simple reason. By voting for it—and I intend to test the opinion of the House—we will give ourselves time to reflect on the wisdom of Standing Order 68 and to decide whether it is in accordance with natural justice to impose penalties on those who have done no personal wrong or injury to anyone within or outside the House but who are being punished because they have not followed, within a prescribed time and in a difficult year, an instruction to follow a training course on how to behave. Standing Order 68’s constraints, within which I am having to speak, do not permit of others to speak in this debate. However, I know that many in your Lordships’ House share my concern.
The Standing Order prevents discussion. I know that a number of colleagues share my feeling that in the high court of Parliament we should not be forbidden from exercising our judgment on the recommendations of a small group of colleagues and outsiders who are deciding sanctions on a small group of other colleagues. We may debate at length the recommendation of every other Select Committee but, to those reports from the Conduct Committee, we can only say “content” or “not content”.
This final week of term is a very full one, and our brief September sitting is very crowded, with four long days devoted to the vast and important Environment Bill. In October there should be a chance to look at how we regulate and organise ourselves, perhaps reflecting on Harold Macmillan’s famous reminder that:
“Quiet, calm deliberation disentangles any knot.”
I submit that we have tied ourselves in a very restraining knot. I urge that we begin to untangle it today. Do we really want to treat former captains of industry and others as recalcitrant schoolboys and say: “Because you didn’t do your prep, you can’t go to the tuck shop or the library,” especially as the Library has a number of books on good behaviour?
I urge those of us who share my concerns to vote for this amendment, which does not pass any judgment on the report that the noble Lord, Lord Mance, has moved, but which gives us an opportunity, during the forthcoming recess, after a very tiring and difficult year, to reflect, “Have we got this right? Is this the way to treat colleagues?” I beg to move.
To resolve that, in accordance with paragraph 159 of the Guide to the Code of Conduct, and without prejudice to their ability to carry out their parliamentary duties, Lord Kalms and Lord Willoughby de Broke be denied access to certain facilities of the House and be restricted in their access to certain services, as set out in paragraph 18 of the 3rd Report from the Conduct Committee; and that these arrangements shall continue until they have completed Valuing Everyone training.
Medical Devices (Northern Ireland Protocol) Regulations 2021
Motion to Approve
Medical Devices (Coronavirus Test Device Approvals) (Amendment) Regulations 2021
Motion to Approve
I beg to move.
Amendment to the Motion
At the end to insert “that this House welcomes that the draft Medical Devices (Coronavirus Test Device Approvals) (Amendment) Regulations 2021 introduce a quality approval process for all COVID-19 tests sold in the UK; but regrets that the regulations assume a change in policy by not making guaranteed provision for the continuation of free NHS COVID-19 tests and will therefore rely on private sector testing for which fees are charged; further regrets that private sector tests do not appear to be integrated with the NHS test and trace system, including legal requirements to report and self-isolate; notes with concern that Her Majesty’s Government have previously stated that regular testing is an essential part of the easing of coronavirus restrictions; and calls on Her Majesty’s Government to guarantee that reliable, high-quality, free NHS tests remain available to all beyond 19 July to support the effective management of COVID-19.”
My Lords, noble Lords who have read the record of the debate on this SI in Grand Committee will not be surprised that this regret amendment has been brought to the House today, given the Minister’s inability to answer the questions posed by noble Lords or indeed to reassure us over our concerns. Since then, we have had a weekend of further chaos on testing, tracing and isolating, which we will discuss tomorrow when the House takes the latest Statement on the matter. I understand that it is the 49th such Statement; it is certainly the 49th in the Commons.
For complete clarity, as the amendment states, I say that we on these Benches are in favour of guaranteeing and improving the quality of Covid tests. We also recognise that the private sector has a role to play in providing tests for those who wish to travel abroad on holiday and for business purposes. My amendment highlights the issues that were of concern to the Grand Committee and which prompted many questions, based not least on the excellent report from the SLSC, that I am afraid went unanswered.
I thank the Minister for his letter yesterday, which provided much-needed clarity on some of the issues raised and contained the kind of details that would have been helpful in last week’s debate. These regulations are not being introduced with the urgency characteristic of previous points in the pandemic, and they must be introduced and debated in a considered fashion.
This is a public health pandemic and surely no barrier, particularly a financial one, must be put in place that hinders testing and tracing, yet there has been deep unease that lateral flow tests were guaranteed to be free only until the end of July and that people could subsequently be charged under plans being considered by the Government. The Minister’s letter includes welcome confirmation that free NHS tests and universal testing will continue until the end of September. That raises the question of why the Minister could not give us that answer last week in Grand Committee. He should have been well prepared for it given the public interest, media reports and indeed the SLSC report on this instrument, which specifically raised concerns about changing policy and recommended that free testing continue. Can he confirm when that decision was made and when it will next be reviewed?
The noble Lord, Lord Scriven, asked some thoughtful questions about the supply of tests and their reliability. He asked the Minister to explain the Government’s intention on charging for tests, particularly for employers who want to institute testing regimes to bring their staff back into their premises and to protect the public and their customers while doing so. He eloquently made the point that businesses have lost significant revenue over the last week and have asked whether it is right to expect them to meet further costs at this stage. Since April, companies have been able to order rapid lateral flow tests for their workers. While we now know that individuals can still claim free tests through the NHS, at least until the end of September, there seems to be confusion as to whether the scheme for companies has closed. The Government’s website says the cut off for new orders was 19 July—the UK Government’s freedom day in England—as the requirement for masks and social distancing ended. Can the Minister confirm whether the scheme for businesses will also run until September? Does he agree that responsible employers who are ensuring their workers are regularly undertaking lateral flow tests should be congratulated on their approach rather than suddenly being asked to source tests from a private provider, which would dramatically increase costs?
My noble friend Lord Rooker, the noble Lord, Lord Moynihan, and the noble Lord, Lord Lansley, all raised the issue of the missing impact assessment, which the Explanatory Memorandum said would be published in time for the parliamentary debate, which was on Monday 12 July. Again, the Minister failed to answer this question during Committee, but his letter of 19 July reveals that the impact assessment has been red-rated by the independent Regulatory Policy Committee and withheld. Noble Lords will be aware that red-rated impact assessments are deemed not fit for purpose. This is deeply concerning. In his letter, the Minister further committed to publishing the impact assessment as it currently stands and a supporting statement “shortly”, and therefore before the parliamentary vote, following the opinion of the RPC, outlining the areas where further improvements can be made. Here we are, over a week later, about to vote—possibly—yet this important documentation has still not been published. Can the Minister explain why this has not happened, despite his assurance? Where does the buck stop for this latest failing?
Finally, the noble Lord, Lord Scriven, and I are very concerned about the seeming lack of link between test and trace and the proposed new private testing regime. While the noble Lord’s letter to me notes that it is
“vital that we introduce a regulatory regime to ensure COVID-19 tests available on the market are of sufficient quality and produce accurate results”,
it does not offer assurance in detail about how this regime and the NHS Test and Trace will work together to provide a comprehensive safe regime that the UK can depend upon. I sincerely hope that the Minister can provide some much-needed clarity.
There are many matters to regret here: the impact, or lack of it, the policy changes, the process and the timeliness. This was not an urgent matter, the Minister said. It could have been done over a month or so, and it would have definitely benefited from that. I beg to move.
My Lords, I am very glad to support my noble friend in her Motion. I want to put two points to the Minister. The context of this SI is the poor quality of many tests. Paragraph 7.2 of the Explanatory Memorandum makes the point that, during public procurement of lateral flow tests for the NHS,
“only 25% passed through all stages of validation including assessments of performance and quality standards.”
That is a pretty shocking statistic. Can I take it that most of these tests came from China? We had an Oral Question on this from the noble Lord, Lord Alton, only a few minutes ago. That being so, can the Minister assure me that Uighur slave labour in Xinjiang was not used in the manufacture of those tests?
I want to go on to the issue of poor-quality tests in general. In Grand Committee, the Minister said he would not settle for low-quality CE-marked tests that manipulated their instructions for use or constructed their own rigged validation. This, of course, is a very interesting insight into the way that devices are regulated at the moment, through the current CE marking process. In relation to most Covid-19 tests, this essentially involves a self-certification process, in which manufacturers affirm that their products meet the relevant standard. Many of the CE-marked products that have been reviewed previously have had insufficient or poor data sets that do not accurately reflect how a test product performs. This data and evidence do not facilitate accurate assessment of the product by the end-user and can be misleading.
This seems to me to raise two points. First, we should do everything we can to ensure the manufacture of high-quality tests in this country, rather than rely on imports from countries whose human rights record is nothing but utterly deplorable. Secondly, it must call into question the whole future of CE marking. I want to ask the Minister whether we can take the action being taken by the Government—essentially applying their own standards to these tests, because the current CE marking is not sufficient—as a precedent for the future. Does it lay the foundations for a new regime in relation to the regulation of medical devices?
I thank the noble Baroness, Lady Thornton, for giving us the opportunity to have a discussion around this; I will support her amendment. I am very pleased to follow the noble Lord, Lord Hunt of Kings Heath, and to echo some of his remarks and questions.
In doing so, I return to a Question that I put during Oral Questions, in an earlier part of our proceedings today, where I specifically asked about the number of lateral flow tests that have been produced and where they have come from. My interest in this originated during a hearing of the International Relations and Defence Select Committee, when were told by a witness that he was delighted that a package had arrived at his home containing a lateral flow test and that it had originated in China. This prompted me to ask a Written Question about how many of these tests had been produced in the People’s Republic of China. The Answer I was given was staggering: we had bought not 100,000 or 1 million, but 1 billion. I also asked, in that same Question, two other things: how much this had cost British taxpayers and which companies, both British and Chinese, were involved in these deals. I did not get an answer to the second two parts of my Question, so I tabled a further Written Question, asking again. It stands on our Order Paper today as having the greatest longevity of any unanswered Written Question. It was tabled on 12 May and it was due to be answered by 26 May; it is now 20 July. It is grossly discourteous to the House for Written Questions not to be answered in this way—it would have maybe saved the Oral Question having to be asked earlier on.
At the heart of that Question is the issue of due diligence. I echo something that the noble Baroness, Lady Smith of Newnham, asked during our earlier exchanges. The duty is on the Government, not on individuals, to ascertain, as the purchaser of these lateral flow tests, what the supply chain transparency is. I should mention two things here: I am a vice-chair of the All-Party Group on Uyghurs and I have a Private Member’s Bill before your Lordships’ House on supply chain transparency. What due diligence has been done in establishing the provenance of these lateral flow tests, and why have we not had answers? Perhaps the Minister can give the answers to us now. Who are the companies that have been involved in the purchasing of these tests and what has been the cost overall?
I would also like to ask the Minister something that was put to him on 12 July by the noble Lord, Lord Rooker, in Grand Committee. It is always a pleasure to find myself on the same side of arguments as the noble Lord, Lord Rooker. When I took my seat in another place, over 40 years ago, it was the noble Lord, then as Jeff Rooker MP, who welcomed me; I am glad he has lost none of his bite.
The noble Lord asked the noble Lord, Lord Bethell— I read the Minister’s reply and he did not appear to answer him in that debate, so I simply reiterate the noble Lord’s question:
“why do we need to buy the NHS Test and Trace kits for the lateral flow test, the one being given out by local chemists, from one of the Chinese Communist Party-approved companies? How do we know they are not made with slave labour? What kickbacks go to that corrupt political party? What efforts are being made to get them made in the UK—dare I say Europe—or, indeed, Commonwealth countries? We now have the capacity to check the tests in laboratories. Why have we not done something about manufacturing capacity? Why are we reliant—we appear to be reliant—on the fix of the Chinese industrial structure, which is controlled by the Communist Party or it cannot operate?”—[Official Report, 12/7/21; col. GC 430.]
That is at the heart of this question and of the debate today. It is not a trivial issue. One billion of these tests have been purchased by the UK. Just think what the costs of that will be: if it is 50p a time, that is half a billion pounds; if £1 a time, that is £1 billion. We have a right to know.
This is a point that the noble Baroness made in her remarks earlier: there needs to be not just due diligence but transparency. As far as I am concerned, there has not been sufficient transparency. We are right to press on this, just as it was right earlier to raise the issue of Hikvision. These are cameras that have been put up in our town centres and high streets all over this country, in NHS hospitals and in schools, and they are manufactured in Xinjiang. They are the same cameras being used to monitor Uighur people, 1 million of whom are incarcerated in camps. That company has been banned in the US but not here, and I would be keen to hear from the Minister what the Government—because he will be speaking for the whole Government—are doing to enforce such a ban in the UK.
My Lords, we on these Benches support the principle of this SI. Of course we want to see a mandatory standard for tests. I do not think anyone who spoke in Grand Committee argued against the principle of the SI, but there are concerns about a few issues in it. The Minister replied to the issues raised in Grand Committee with soothing words rather than convincing answers, hence the noble Baroness, Lady Thornton, has tabled her amendment to the Motion today.
I want to raise a few of the issues that the Minister either ignored by not answering or used soothing words about but did not give convincing answers to. The first question is: if we are to have a mandatory standard for tests, why have we got new Clause 39A, which is an exemption from the mandatory tests and standards that can be applied at the stroke of a ministerial pen? What is the point of having a mandatory standard for safety if the Secretary of State, at the stroke of his or her pen, can decide to do away with that? In what circumstances and for what reasons would the Secretary of State wish to bring in tests that would lower the mandatory standard, and how would the public know that they were purchasing a test that did not meet the statutory standard that had been set?
I want to address the issue of openness and transparency, as raised by the noble Lord, Lord Alton, and the noble Baroness, Lady Thornton, regarding the validity of the standard of the test as well as human rights issues. Where is the research in public on the validity of the standard of the lateral flow tests, particularly the one from China brought in via Innova, the main intermediary for a Chinese company? This test, as raised in Grand Committee, was given a class I notice in America, and an FDA email says it is not effective and gives the instruction:
“Destroy the tests by placing them in the trash”.
That is the same lateral flow test bought for billions of pounds by the UK. Again, there were soothing words from the Minister in Grand Committee about this: he said that the Government were working with the FDA. That might be true but having two differing positions— the Government saying that the test is safe while the FDA says to throw it in the trash—is not working together. Could the Minister elucidate on why the British Government still feel these tests are safe when the FDA says they should be thrown in the trash? Which part of the FDA’s analysis do the Government disagree with?
The key issue for me is the one that the noble Baroness, Lady Thornton, has already raised: this is not linked into the total public health system to deal with the virus. The key issue is not the standard of the tests themselves but that it should be linked into test and trace. To say that we are going to have a high standard without linking it into the test and trace system is like saying you want the best electric car in order to be environmentally friendly, buying it and then, once you get it home, realising that the nearest charging point is 100 miles away. This is not fit for purpose. To be so, tests must be integral and integrated into the test, trace and isolate part of the public health response to coronavirus.
I ask the Minister, as I and others did in Grand Committee: if someone carries out a private test, how does that link into test and trace? There is no mandation anywhere in UK law to say that a private test, once proved positive, has to be fed into the test and trace system. All the evidence suggests that the way to deal with the virus most effectively is to break the chains of transmission within 48 hours. If tracing is not told that you have tested positive, there is no way to have an effective public health response. So, even if you have the best standard of tests, with no tracing or isolation the chain of transmission will continue.
When I and others asked in Grand Committee, the Minister said that this is also a significant public health policy change. I am not aware of any infectious disease anywhere in the UK or in the world where a market approach to the testing of infectious diseases has become the bog-standard approach, but that seems to have been the Government’s policy after September.
The Minister mentioned Germany in Grand Committee, saying that that country had moved to a specifically private-led testing system. There are two differences in the German system. First, it is controlled by state subsidies; to do it, the companies get a state subsidy, which has now been reduced significantly so the level of private testing is levelling off. Secondly, and most importantly, there is a mandatory requirement in German law to report positive cases from those positive tests to the national Covid test and trace system in Germany.
This statutory instrument, while well intentioned, is riddled with weaknesses. It is not linked to the test and trace system and will not help keep the country safe. It will not have the desired effect, and we will end up with a system that basically has a good standard of tests but then does not do the next, vital part, which is to trace people and then support them in isolating.
That is why we on these Benches will support the amendment to the Motion tabled by the noble Baroness, Lady Thornton—unless the Minister can come up with convincing answers this time, not just soothing words.
My Lords, I thank the noble Baroness, Lady Thornton, for her support for the regulations in the round, for her supportive words about the role of the private sector in the round and for raising many important points in her amendment to the Motion, stressing the vital role of NHS testing as we continue to manage the pandemic.
I want to clarify that these regulations are not connected to the future of free NHS testing. This SI, as noble Lords have noted, is solely focused on ensuring the quality of any Covid test in the UK and that they are of the same standards as I would procure for the NHS.
It is self-evident that poor-quality tests, when used privately, could pose a risk to the health of not only the individual but the public. All that is necessary for entry of Covid test products into the UK market is controlled by EU CE marking, which, as noble Lords noted, is currently a self-declaration process for most Covid-19 tests on the UK market. The performance declaration made as part of this EU marking does not need to be independently verified ahead of sale of such tests. There is no legally binding agreed process for establishing performance. That just is not good enough. It became clear as I sought to procure tests at scale for the national effort that many kits that had passed a CE mark were not fit for the real world. I say to the noble Lord, Lord Hunt, that it is not right that the quality of tests correlated to any particular nation; this applied to all nations.
I say to the noble Lord, Lord Alton, that we have audited the supplies of medical devices and there are no current slavery or human rights concerns. We do, however, remain vigilant. I regret that his question on sourcing has not been answered, particularly because there is a very large amount of public material on the procurement framework, the suppliers to it and the arrangements we make to run that framework. I will address that gap with speed, and with regret.
I reassure the noble Lord, Lord Scriven, that there is a very large amount of published material on the internet on the validation of tests, including the protocols and the results from Oxford University and Porton Down, which conducted the validation of the tests. These validation protocols have been assessed by a very large number of experts, and I would be glad to send him links to the protocols and the assessment processes. I reassure him that our tests have been tested against alpha, beta, gamma and delta variants and successfully detect all of them.
The noble Lord, Lord Alton, referenced “kickbacks” to the Communist Party. I very kindly and respectfully ask him to remember that British officials have operated a remarkable procurement programme during the pandemic at the very highest standards of integrity. I gently ask him to provide evidence for such accusations before making them in the House.
To the question of why we buy so many tests from China and not from Britain, the simple answer is that they pass our protocol and meet the requirements of the procurement framework regarding quantity, speed and product design, for example. We buy them to ensure a good deal for taxpayers and effective tests for the public.
I completely agree with the noble Lord, Lord Hunt, that we need a strong UK manufacturing base. I reassure the noble Lords, Lord Alton and Lord Scriven, and others who have raised this point that we have a major programme on this, with subsidies, expertise and support available. I would be glad to arrange a briefing session to run noble Lords through all the measures we have in place to support the UK diagnostics industry. I believe the high-quality regulations we are discussing today provide the certainty business and investors need to invest in the UK diagnostic system. We need this market to provide additional capacity at the time of the pandemic, to ensure that we have outstanding testing capability while also encouraging innovation.
I was keen to take an evidence-based approach to developing this policy, so we ran a very successful consultation that had a broad range of respondents. Some 73% agreed that mandatory validation of tests prior to entry to the market was the best approach; 88% of those agreed that this should be legally backed; 71% agreed that a validation process would not significantly reduce supply; and 79% agreed that mandatory validation processes will increase safety.
In April this year we launched the universal testing offer, so now anyone in England can access free LFD self-tests by ordering online or collecting then at over 9,000 pharmacies across the country. To reassure the noble Baroness and all noble Lords concerned about this, our recently published road map out of lockdown made it clear that we are keeping in place key protections, including free testing for people with symptoms, but we are standing down the workplace testing regime, as the noble Baroness, Lady Thornton, rightly pointed out, from 19 July.
On the rationale for regulation, I welcome the support of the noble Baroness, Lady Thornton, for NHS tests, which have always been of the highest standard. The objective of the legislation is to ensure that the same high standards for tests that we see upheld when the Government buy them are equally reflected in the testing market for all consumers. That market already exists in this country; over 1,000 providers are already going through the UKAS accreditation process. These tests are being used to enable activity across many areas of the economy, including travel, film, TV production and sport. It is critical that we put in place processes to ensure that these tests are high quality and accurate: that is what this law does.
On the integration of private tests and the NHS test and trace system, I reassure the noble Lord, Lord Scriven, and the noble Baroness, Lady Thornton, that significant work has already successfully linked private sector testing results with the NHS Covid app, the JBC and test and trace. When a test is conducted by a testing provider, whether public or private, the result of that test, whatever the outcome, is legally required to be reported to PHE as a notifiable disease by the provider. To the noble Lord, Lord Scriven: this is true for a private test or a public test, and I would be glad to send him a copy of the long-standing regulations that make this law. This must be done within 24 hours for all positive tests. Any self-administered test provided by the Government can be reported via our online portal by members of the public. Any positive test reported to PHE will be passed on to our contact tracing system.
The draft impact assessment has now been published in the interest of transparency, as has an impact statement. It is a living document, and we want to make the best analysis available. We intend to update the impact assessment and address the RPC’s comments ahead of the introduction of the second SI in the autumn. I would like to put on record my thanks to the RPC for working so closely with us and at such pace on this matter.
I want to ensure that all tests are available in the UK, whether they are offered by the NHS, a charity or a private provider, and whether they are supplied by a British diagnostic firm or an overseas firm. I thank the noble Baroness for giving me this opportunity to respond to her important points. I beg to move.
My Lords, I start by thanking the Minister. I feel for the Minister, and I wish him well in his self-isolation, and I congratulate him on his immediate and unfussy decision to obey the ping and the trace system. I hope he is going to have a great summer, because I think he has earned it.
I thank the noble Lords, Lord Hunt, Lord Alton and Lord Scriven, for their support and the questions they have asked. I apologise to the House that we did not put this amendment down in the first place. It should have come straight to the floor of the House rather than going through the Grand Committee first. It was only the gathering concern in Committee that led me and other noble Lords to the conclusion that we needed further discussion about this.
It is not up to the noble Lord, Lord Alton, to prove the veracity of the sources of any goods we purchase through the NHS or anywhere else. If it is being bought by the Government, it is up to the Government to demonstrate that those supply lines are not exploitative and do not use slave labour. That is part of the transparency we are calling for. I do not think the Minister answered very well on that matter.
I am concerned that workplaces, as I suspected, will now have to pay for the testing regime we have. I am somewhat reassured by the noble Lord assuring us that tests have to be fed in through the test and trace system wherever they happen, but I am concerned that, given that workplaces will now have to purchase all those tests, the system will break down quite quickly over the summer. We still have many questions and regrets, so I wish to test the opinion of the House.
Arrangement of Business
For Report on the Leasehold Reform (Ground Rent) Bill, I will call Members to speak in the order listed. Short questions of elucidation after the Minister’s response are discouraged. Any Member wishing to ask such a question must email the clerk. The groups are binding. A participant who might wish to press an amendment other than the lead amendment in a group to a Division must give notice in debate or by emailing the clerk. Leave should be given to withdraw amendments. When putting the Question, I will collect voices in the Chamber only. If a Member taking part remotely wants their voice accounted for if the Question is put, they must make this clear when speaking on the group.
Leasehold Reform (Ground Rent) Bill [HL]
1: Clause 1, page 1, line 5, after second “a” insert “single”
Member’s explanatory statement
This amendment excludes leases of multiple dwellings from the definition of “regulated lease”.
My Lords, I take this opportunity to thank all noble Lords who have participated so far in the debates on the Bill and who have met me to discuss the policy and principles behind it. These discussions have led directly to the first set of amendments under consideration today. The government amendments in this group provide greater clarity in two key areas—rack rents and intermediate long leases—addressing issues that emerged both at Second Reading and in Committee.
First, government Amendment 1 inserts the word “single” into Clause 1 to put beyond any doubt or ambiguity the fact that the Bill is intended to apply only to a lease of an individual dwelling. My noble friend Lord Hammond has noted, both in this Chamber and in various meetings, that, as drafted, the Bill could perhaps be interpreted as also applying to cases where a lease is made up of multiple dwellings, held collectively.
Where a lease is for multiple dwellings, such as a where a business has a lease for all or part of a building, the intention of the policy is that there should be no restriction on such leaseholders arranging their finances with the superior landlord in a manner that suits the commercial needs of both parties. This amendment clarifies that the Bill is intended not to capture such leases but to protect individual leaseholders.
Noble Lords will have heard me say many times that this is narrowly focused legislation. Ending this legitimate practice is not, and never has been, the intention of this Government. By amending this clause so that it refers to a long lease of a “single” dwelling, we ensure that this legislation does not inadvertently put an end to this business model. The addition of this word provides welcome clarity on this matter, and I hope that the amendment will attract support from across the House.
Government Amendments 2 and 38 concern the exemption from the provisions of the Bill in cases where a leaseholder has taken up a long residential lease without the customary payment of a premium and instead pays a full rent for the term of the lease. As I am sure your Lordships are aware by now, the purpose of the Bill is to protect the large majority of leaseholders who pay a substantial premium on the granting of a lease, often with a mortgage, from further rental charges. Our guiding ambition here has been to put an end to the otherwise continuing unfairness of such leasehold arrangements.
It has been brought to my attention by noble Lords, particularly my noble friend Lord Hammond, that a small number of long residential leases are let where no premium is paid for the granting of the lease and where, instead, a market rent is paid by the leaseholder. I thank once again my noble friend Lord Hammond for drawing our attention to this issue with the drafting of the Bill. It is perhaps no surprise that a former Chancellor should have such attention to detail, and we are grateful to him.
Although such arrangements would still be possible for a lease of 21 years or less, we understand that there are occasions when such arrangements may take place with leases over 21 years—a commonly understood definition of a long lease. I reiterate that it is not the intention for the Bill to apply to long rental leases such as these, so, for the purposes of clarity, the Government have tabled these amendments. They provide that regulated leases will be only those leases granted in exchange for a premium; as a consequence, we have also defined a “premium” in government Amendment 38 as
“any consideration in money or money’s worth for the grant of a lease, other than rent”.
I trust that this allays the concerns of the House on the matter of market rents for long leases.
Amendment 3, in the name of the noble and learned Lord, Lord Etherton, would remove new leases where there is a “deemed surrender and regrant” from the provisions of the Bill. I am grateful for his explanation that his amendment is to address concern that landlords may be reluctant to change a lease, even where requested to by a leaseholder, if this would result in a deemed surrender and regrant because this would mean that the peppercorn limit would apply.
The noble and learned Lord has explained that the two common circumstances where a leaseholder may request that a lease is varied are a change to the demise —for example, to include additional land or property—or to change the term. I will address the concerns about the change to the demise first. We agree that such variations would usually take place in a way that results in a deemed surrender and regrant and that the Bill would discourage that because the resulting new lease would need to be for a peppercorn ground rent.
However, the same outcome can also be achieved with the agreement of the leaseholder by the grant of an additional separate lease, meaning that the ground rent can remain on the unaltered existing lease. This might also be done by altering the lease and extending the lease for a single day. This would then be caught by Clause 6, thereby allowing the ground rent for the existing term to be retained. As we have discussed previously, any extension would be at a peppercorn rate. We believe that this is an achievable workaround that means that variations for the leaseholder’s benefit can be introduced without detriment to the landlord’s existing rights.
However, the noble and learned Lord’s concern that the amendment is needed to enable variations to the term of the lease leads me to the main reason why the Bill is drafted as it is. It includes deemed surrender and regrants within the definition of a “grant of a lease” to avoid a potential loophole. Without this provision, a lease could be varied to change the term; for example, to the usual process of a lease extension. Such a variant would constitute a deemed surrender and regrant.
We have been clear that this Government do not want monetary ground rents in new leases, except in very limited exceptions, as provided for in Clause 2. We have been careful to ensure that lease extensions are not excepted, using the provisions in Clause 6. This amendment would undermine that and, indeed, the whole purpose of the Bill, and, therefore, I hope that the noble and learned Lord will not move it.
I now turn to Amendment 5, tabled by the noble Earl, Lord Lytton, which, if accepted, would mean that a large swathe of dwellings would no longer be subject to the peppercorn ground rent limit. I have listened carefully to the noble Earl’s explanation, but I remain unconvinced. The Government agree that landlords should of course be able to recover the costs they have incurred in providing and maintaining the building and any services provided. Legitimate service charges remain the proper and accountable way to do this. The amendment would in fact enable unlimited ground rents for many new leaseholders, with no ability to challenge them. As such, I hope that the noble Lord will not move his amendment.
The noble Earl, Lord Lytton, has also tabled an amendment to the Government’s Amendment 38. Amendment 39 seeks to amend the definition of “premium” and ensure that any repairs that may need to be carried out under a market rent lease would not be considered to be a premium for the purposes of the Bill. I reassure the noble Earl that we understand his position and that it is not the Government’s intention that the cost of such repairs would fall within the definition of a premium. However, I am advised that further research is needed with lawyers to determine whether an amendment is necessary for the avoidance of doubt at a later stage of the Bill.
I thank the noble Earl, Lord Lytton, for raising this issue, which I am of course happy to continue discussing. I hope, therefore, that he will not move Amendment 39 at this stage. I also ask that the noble Earl does not move his Amendment 5, and that the noble and learned Lord, Lord Etherton, does not move his Amendment 3.
I wish to speak to Amendment 3, in my name. I am extremely grateful to the Minister for speaking to me about my concerns about Clause 1(4). It is important that today, we have had an acknowledgement that Clause 6, which I understand is the way the Government intend to deal with preserving the right of a landlord to continued receipt of ground rent for the duration of the original lease, does not extend to a situation where the tenant requests, and the landlord might otherwise agree, subject to this Bill, to grant an extended demise or an extended grant of property.
At the moment, the Bill does not address one of the two circumstances in which, in the normal course of events, there will be a deemed surrender and regrant by operation of law, which operates irrespective of the intention or awareness of the parties. The Minister says that it does not matter because the landlord can always agree with the tenant to grant a separate lease of any extended area of land which the tenant wishes to include in the lease, and that the landlord would otherwise be willing to grant. This leaves a very messy situation. Clause 6—which, with respect, is not entirely straight- forward—is intended to deal with the second situation whereby there is a deemed grant and surrender, and that is where there is any extension to the duration of the lease.
The second normal circumstance is not addressed at all. It is an everyday occurrence, not an unusual one, for a tenant and a landlord to agree informally to changes in the area of the lease. Therefore, subject to the solution that is proposed, which is a separate lease of this grant of extended land included within the lease, there is nothing in the Bill that addresses this. This can be dealt with quite simply, either by taking out Clause 1(4) or by extending Clause 6 to include this second situation, which is the granting of greater land than is currently within the original lease. It makes absolutely no sense to include something dealing with the one but not the other, when those are the only two circumstances which would normally give rise to a deemed grant and surrender. It leaves a lacuna in the Bill, in that there still may well be a landlord who is not aware of the terms of the Bill and who may not appreciate that granting, in accordance with the tenant’s request, a greater piece of land to them has the effect of removing the ground rent to which the landlord would otherwise be entitled.
Although I very much welcome what the Minister has said about many of the amendments he has tabled, and his explanation, legally speaking we are left with a very untidy situation. There is now a distinction between the two circumstances in which there is a deemed surrender and regrant, one being expressly dealt with in Clause 6, and the other not at all. That could lead to a landlord with no awareness of the situation—and with no intention of doing so—losing the benefit of the ground rent under the original lease.
My Lords, it is a pleasure to follow the noble and learned Lord, Lord Etherton, and I thank the Minister for introducing this group of amendments, in which I have two: 5 and 39. I declare my property interest but hasten to add that it does not involve long leasehold; I also declare my interest as a property professional. I particularly thank the Minister for meeting me this morning at short notice; I very much appreciate that and I think it is fair to say that we had a frank and generally constructive conversation. I am indebted to the British Property Federation for the comments it sent me, to the Wallace Partnership Group for its observations on the Bill, and to the Homes for Later Living group, which is a retirement homes specialist.
The pivotal point here is the question of who takes on the responsibilities of property management and things such as safety oversight, particularly in complex buildings. I am thinking of developments such as Salford Quays, but there are others in the pipeline, including King’s Cross and Battersea, that will come on stream and are in the process of evolving even as I speak.
The British Property Federation believes—and I agree with it—that most leaseholders in these large, complex, often urban developments will not want to take on the sort of responsibilities implicit in the management and future-proofing of the common areas and common parts of buildings in these multi-occupied developments. Hardly had I considered that point when it was pointed out to me that a poll by Savanta found that only 31% of people would willingly take on the management of their apartment block, even when faced with the option of saving on ground rent. I have some experience that reinforces this, so much more so when we come to the scale of some of these urban and often redevelopment situations that are truly industrial in their complexity.
A buy-to-let investor is hardly going to have interest in participating in the day-to-day running of an estate. Freeholders, with a nil or peppercorn rent and no other interest beyond the maintenance and management charges that may be taken away from them by right to manage, are hardly going to have an interest in taking on costs that they might not be able to recover. By that I mean costs on things such as long-term capital expenditure on visual improvements or repurposing parts of the development—matters that are not a service charge and therefore there is some question as to the degree to which they could be recovered. With no skin in the game, how is the freeholder going to finance or forward-fund these things? For practical purposes, the Bill ends up providing us with the opportunity for non-responsive freeholders.
If leaseholder-led arrangements fail or the leaseholders want to hand back the management process, an effective freeholder is traditionally there as a backstop to take on the responsibilities. Curiously, under the Bill that onus will persist, with the freeholder having a peppercorn rent. I question whether the liabilities will in fact be shouldered in that way or can be imposed in practice.
I do not intend to press either of my amendments, but it is worth my while going into Amendment 5 in a little more detail. The amendment would make leases that meet certain criteria excepted leases and therefore still able to operate on a ground rent principle. Freeholders would thereby be incentivised to invest in the property in the long term and to bring their expertise, their ability to deal with complex developments at scale and their property management skills and safety oversight.
As buyers of individual long leaseholds, consumers would still have the choice at the market-wide level as to whether they wanted to live in a block run by a freeholder and pay a ground rent or to purchase a flat in a communally run block. Consumers would also retain the right, as they have now, to enfranchise or exercise their right to manage and take over the block, which the Government have said they will seek to make easier as they work on a second leasehold reform Bill.
I propose the choice of a functioning leasehold system in larger and particularly complex apartment building arrangements because, as I say, there is good evidence that a lot of leaseholders do not want the responsibility of running these blocks. It must be pointed out that service charges relate to current expenditure. They do not customarily cover future investment, improvement or adaption and may potentially be challengeable by leaseholders.
A point about retirement developments was rather eloquently made by Homes for Later Living. These often have specialised development models, including extensive communal facilities, so although they are not the same as these large, mixed-use commercial redevelopments, they have some of the same problems.
I do not believe that the Bill adequately covers what I refer to as the orphan freehold syndrome. In saying that, I do not espouse a particular solution—not even the preservation of freehold tenure under a long leasehold situation. I take that as read. I am trying to deal with the Bill’s consequences and the importance of long-term stewardship of buildings and places: the constant upgrading, adaption, repurposing and enhancements that go on all the time. In my opinion, it needs a purposeful freeholder or body that can respond to the obligations embodied in the covenants between landlord and tenant, and indeed the freehold covenants that may affect the block more widely. To do that, it needs to be solvent, motivated and competent.
Buildings are of increasing complexity, and so is their day-to-day management. In many cases we are dealing with matters of extraordinary technical and interactive complexity. These bring new challenges. The Building Safety Bill will of course add significant new ownership and management responsibility in due course. There is no certainty that by default there will be a competent and motivated freeholder as last man standing.
I was going to make a passing comment about managing agents, but I simply say that the report by the noble Lord, Lord Best, on the regulation of property agents is still not brought into effect by the Government. It ought to be, because the competence of agents is a factor here.
There are several large ground rest investors. They often invest in pension savings and ground rents and have a very long-term perspective. Long Harbour and Wallace Partnership are two of those. Some of the great estates will be household names, such as the Grosvenor Estate, Cadogan and Howard de Walden in London. They all have very long-term objectives and on the whole are credited with managing their estates, particularly the common parts, very effectively. That is where this amendment comes in.
Were commonhold in place at the moment, in the sense of being widely used, that might deal with some of my concerns, but the British Property Federation points out that it gets particularly messy in mixed-use contexts where there are layers of different ownership and phasing of development delivery. I gather that the BPF is in constant consultation with the Government, and I hope that that will bear fruit.
At the moment, the Bill creates what I describe as an open-ended transition. It proposes the hollowing-out of the freehold as a policy but solely on ground rent terms, leaving the obligations and rights of the freehold interest in some sort of economic, if not legal, limbo. I think it demands better than that.
I appreciate and recognise that this amendment runs counter to the Government’s policy. I ask noble Lords not to spend too much time concentrating on the precise wording but to recognise that there is a matter that the Government need to address and that this is simply the vehicle I have adopted for raising the issue. It must also be a matter of general public interest that the freeholder, so long as it persists as a party to leasehold and freehold arrangements, is competent, motivated and solvent. I simply ask the Minister to reflect on that issue.
Amendment 39 is fairly self-explanatory. It seeks simply to clarify what government Amendment 38 extends to and to ensure that, where a long leasehold is entered into with rent and the tenant undertakes to do certain upgrading and improvement works, the rent will not end up being peppercorned by default. The Minister helpfully said that this matter requires further consideration. I agree, and I am perfectly happy to leave it in the capable hands of the Minister and his department.
My Lords, my noble friend Lady Grender is very sorry that she is not able to be present, having led for this side of the House in the previous stages of the Bill. She has put into my somewhat inadequate hands the job of taking us to the next stage. I thank the Minister for his very helpful approach to all sides of the debate so far—in the preceding stages and, indeed, right up to this morning, as the noble Earl, Lord Lytton, has commented.
These government amendments are examples of clarifications that have emerged as a result of our discussions; I am sure we would all agree that they are leading to an improvement on the Bill in its original form. Not all of us brought to bear the knowledge and background of a former Chancellor of the Exchequer, which was credited by the Minister a few minutes ago, but, even so, we have been treated with courtesy and respect, and we very much appreciate that.
I turn briefly to the proposals tabled by the noble and learned Lord, Lord Etherton, and the noble Earl, Lord Lytton. The noble and learned Lord made the point that an untidy situation will be left should his amendment not be adopted by the Government. The noble Earl, in his extremely technical presentation of the difficulties and intricacies of leases on big developments, has also shown very clearly the further unfinished business that the Bill by no means addresses. Because of my own interest in the Building Safety Bill, I picked out his suggestion that that Bill—in its current form, at least—could put on to property owners obligations that they will no longer be funded to support should various scenarios sketched out by the noble Earl come to pass.
The Minister’s initial response was that he could not accept Amendment 5; I take that to mean that neither does he accept the arguments that the noble Earl has just presented to your Lordships’ House. It seems to me that, if not here then at some later stage, he will have to answer and have properly investigated the question of whether the Building Safety Bill, if enacted in its present form, would lead to an unacceptable outcome because it would mean that the obligation to inspect, certify and rectify would be placed on the shoulders of a person or body without the means to do it.
The Minister has very helpfully said that he will consider the practical consequences outlined by the noble Earl in relation to Amendment 35. I will be very interested to see how that proceeds. He gave us a little hint that something might come up at a later stage of the Bill. I hope that that will be the case.
In conclusion, I say only that the Minister has been presented with strong evidence from every side that this is an incomplete Bill. It does not tackle the whole problem even in terms of its own limited reference point. I am grateful, as I think the whole House will be, that improvements are being made, but further improvements are needed and the urgency of proceeding to the second stage of leasehold reform is underlined every time one of your Lordships contributes to this debate.
My Lords, the amendments in this first group, like most that have been tabled on Report, are technical amendments that do not alter the central provisions of the Bill but none the less aim to improve its application. Amendments 1, 2 and 38, each tabled by the Minister, deal with the definition of “regulated leases”. Specifically, they exclude leases of multiple dwellings, with Amendment 2 adding that a regulated lease is considered such only
“if it is granted for a premium”.
Can the Minister confirm whether there have been any impact assessments or informal consultations on the application of these changes?
Amendment 5, tabled by the noble Earl, Lord Lytton, probes the relationship between the Bill and “large and complex buildings”. He gave a large and complex explanation of his amendment. In there somewhere, I think he said that the commonhold might present a solution to the complex problem raised, but it is probably a little more difficult than that. These Benches fully support the removal of ground rent for all leaseholders, but I hope the Minister can confirm what support and engagement are ongoing with this impacted group.
The noble and learned Lord, Lord Etherton, has probed the provision on “deemed surrender and regrant”. I look forward to further clarification from the Minister on this as well—to tidy up the somewhat contradictory nature of the legislation in Clause 1(4) and Clause 6, as the noble and learned Lord explained.
I thank noble Lords for their ongoing engagement and for the substantive points raised. I want to pick up on the issue raised by the noble Earl, Lord Lytton, of orphan freehold syndrome, in particular with regard to complex leases. I point out that leaseholders can collectively exercise the right to manage; they can appoint a managing agent to discharge the stewardship function that the noble Earl outlined.
The noble Lord, Lord Lennie, asked whether we carried out an impact assessment for the two technical changes, which really preserve what is happening today and were not meant to be captured by the provisions of this narrow Bill. We have not carried out any impact assessments. We are looking to continue a practice that we see as being sensible, on occasion. It was never meant to be captured as part of this Bill, so it is not something that requires a full impact assessment as such.
Once again, I commend Amendments 1, 2 and 38 in my name. These changes address important points raised by noble Lords in previous debates on the Bill. I thank noble Lords for recognising that they do so. I think they will agree that they improve the legislation—indeed, as a direct result of the scrutiny in this House—and that it will not have effects beyond those intended. I have listened carefully to the noble Earl, Lord Lytton, on his two amendments; I remain of the view that Amendment 5 is inconsistent with the intent of the Bill and that the case for Amendment 39 needs further consideration.
I have actually changed my position a little in the course of listening carefully to the noble and learned Lord, Lord Etherton. I agree that we have covered a lot of the issue of informal lease extension but not change of demise. You could hypothetically look at ensuring that there was no disincentive to landlords to do that by having the same practical approach: ground rents could still be levied on the existing term of the lease, and then it would fall to peppercorn where there has been a change of demise for any future period. So I will take that thought away and consider tabling an amendment at a later stage. I hope that noble Lords will not move their amendments.
My Lords, can the Minister confirm that the definition of rent in the Bill is not intended to include other fees and charges, such as event fees and indexed service and management charges, which the Law Commission has concluded play a key role in supporting consumer choice in the UK retirement community sector? Do the Government still intend to implement the Law Commission’s recommendations in this area?
My Lords, I can confirm that the definition of rent does not include the items that the noble Baroness, Lady Greengross, mentioned. I cannot state, at this stage, exactly how we will take forward the legislation for the next stage beyond the measures that we have already announced, which are to make enfranchisement easier, to adopt full-throated commonhold—we have already created a commonhold council—and to look at issues around the right to manage, but I am sure that we will be able to give the noble Baroness a response in due course, and that will play a part in the next stage of reform.
Amendment 1 agreed.
2: Clause 1, page 1, line 5, at end insert—
“(aa) it is granted for a premium,”Member’s explanatory statement
This amendment provides that a lease will only be a regulated lease if it is granted for a premium. “Premium” is defined in Lord Greenhalgh’s first amendment to Clause 22, page 13, line 28.
Amendment 2 agreed.
Amendment 3 not moved.
We now come to the group beginning with Amendment 4. I remind noble Lords that anybody wishing to press this or anything else in this group to a Division must declare that in debate.
Clause 2: Excepted leases
4: Clause 2, page 2, leave out line 21 and insert “relevant authority”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s second amendment to Clause 22, page 13, line 28, allows the Welsh Ministers to make regulations under Clause 2(6)(b) in relation to premises in Wales.
My Lords, all the amendments in this group relate specifically to Wales. This legislation applies to Wales as well as England, and it is our intention that it works in the best way possible for leaseholders in both England and Wales. We have been working with colleagues in the Welsh Government to understand how the Bill might impact leaseholders in Wales. I take this opportunity to thank Ministers and officials within the Welsh Government for their constructive engagement on the legislation.
Amendments 14 to 24, 45 and 46 make a common-sense change to the legislation that I hope all noble Lords will agree is appropriate. They would see breaches in Wales taken to the relevant residential property tribunal—the leasehold valuation tribunal—instead of the First-tier Tribunal. These are pragmatic amendments, and I hope that they will have support of noble Lords from across the House.
The other amendments in this group confer powers on Welsh Ministers that would, as the legislation is currently drafted, be exercised by the Secretary of State. We have carefully considered which of these powers it would be appropriate to confer and which should be restricted. For instance, we share the concerns that my noble friend Lord Young of Cookham raised at Second Reading about the potential for different commencement dates in England and Wales. This would cause unnecessary confusion for both leaseholders and developers working in both jurisdictions. However, there are areas where we believe that powers should be given to Welsh Ministers to allow them to align these reforms with the housing policy that they are pursuing for Wales.
First, Amendment 4, read with Amendment 40, would give Welsh Ministers the power to update definitions of excepted leases in relation to community housing. This would give the Welsh Government more flexibility and allow them to ensure that this legislation is fit for the purpose of Welsh community housing schemes, including work related to co-operative housing. These amendments recognise the importance of the devolution settlement and are intended to facilitate the Welsh Government in exercising their powers in relation to housing policy.
Secondly, Amendments 11 and 12, read with Amendment 40, would allow Welsh Ministers to increase the size of the penalty in line with changes in the value of money. This would allow them to ensure consistency of approach with other penalties in their competence. For example, they could increase the penalties for breaching the provisions of this Bill in line with increases to other housing-related penalties set by the Welsh Government, even if the UK Government decided not to increase the penalty in England. Conversely, the Welsh Government could decide not to increase penalties even where they were raised in England. However, it is important to note again that any increase, whether in England or in Wales, would only be in line with inflation. It is therefore unlikely that we would see a large gap open up between the levels of penalties in the two jurisdictions.
Amendment 13 would enable the Welsh Government to produce their own guidance for enforcement authorities to achieve the best fit with the Welsh context. This recognises that the Welsh Government’s understanding of the different local authority structures in Wales would ensure the effective implementation of this legislation there. The Welsh Government would also ensure that the guidance is translated into Welsh. We will, of course, work closely with the Welsh Government to ensure consistency across all guidance on enforcement.
I mention at this point that we no longer intend to move Amendments 31 to 34, 36 and 37, related to conferring the powers for Welsh Ministers to make consequential amendments in relation to the Bill. As noble Lords will know, consequential amendments are essential in ensuring consistency across legislation. While we have made every effort to identify where existing legislation needs to be updated in drafting the Bill, we need to ensure that further changes can be made when needed.
Not moving these amendments today does not mean that we are no longer seeking to provide Welsh Ministers with the appropriate powers. However, following discussions late last week with the Welsh Government, we both agree that further engagement is required to ensure that we achieve the right result in setting out how Welsh Ministers and the Secretary of State should exercise their respective powers under Clause 20. To that end, we intend to continue our constructive discussions over the summer and reach an agreeable position to bring forward any appropriate amendments at a later stage. The Welsh Government want to ensure alignment of this legislation, including within the context of their ongoing codification of Welsh law. Our continued joint working should ensure that this can be achieved.
Amendment 35, the final amendment in this group, provides that the default procedure for regulations made under the Bill by Welsh Ministers is the negative procedure.
Taken together, the amendments in this group will ensure that the Bill works in the Welsh context. They recognise the interconnected nature of property law and housing policy and give reasonable powers to Welsh Ministers to adapt this legislation to ensure the best fit for Wales. The amendments that we have not moved will continue to be discussed and do not have a significant impact on the operation of the Bill as currently drafted. I beg to move.
My Lords, I welcome these technical amendments to recognise the role of the Welsh Government in these matters. While I will not go through each in turn, I would appreciate clarification on a few broad points.
First, the Government stated that provisions are not within the legislative competence of the Senedd Cymru. Can the Minister confirm whether the Government received any advice to the contrary, and whether this was anything to do with the decision to withdraw the amendments that were originally scheduled? Secondly, why were the amendments not included in the initial draft of the Bill? Thirdly and finally, can the Minister detail how the Government have engaged with both the Welsh Government and the wider Senedd during the passage of the Bill?
I am sure the Minister will agree that the principle of devolution has become a cornerstone of our modern democracy; that is exactly why I welcome these amendments. I look forward to clarification on the questions that I have put to the Minister.
My Lords, I will have to write to the noble Lord on exactly what occurred. I know that this issue raised its head only very late last week. I am happy to outline that and put a copy in the Library in response to those questions.
We want to ensure that this legislation works for both England and Wales. This group of amendments achieves this by giving certain powers to Welsh Ministers that would otherwise be exercised by the Secretary of State. We have worked closely with the Welsh Government on this issue and I hope that these amendments will have your Lordships’ support.
Amendment 4 agreed.
Amendment 5 not moved.
6: After Clause 2, insert the following new Clause—
“Leases with an option of redemption
(1) In this Act a lease with an option of redemption means a lease which meets the following conditions—(a) it is a long lease of a dwelling,(b) it is in force on the “relevant transition date”, and(c) it is not an excepted lease.(2) The “relevant transition date” is the day on which this section and the other relevant provisions of this Act come into force in relation to leases of that kind.(3) After the relevant transition date the tenant has an option to pay a capital sum to the landlord, on payment of which the rent payable under the lease shall be a peppercorn rent.(4) The capital sum in subsection (3) shall be calculated in accordance with a formula specified by regulations made by the Secretary of State.(5) The option to pay a capital sum to the landlord set out in subsection (3) may only be exercised within two years of the relevant transition date.”
My Lords, this amendment repeats one I put forward in Committee. It is obvious that the Government’s policy suggests that the ground rent arrangements that apply at the moment are unfair to many people. This Bill prevents that kind of arrangement being made for the future but does not cover many people suffering from the present disadvantage.
It has been made clear to me by the Minister—indeed, fairly clear from the start—that dealing with the existing position is quite complex. The Competition and Markets Authority has dealt with it, and we have seen some arrangements that have come out of that. I was particularly pleased to notice that one at least of these arrangements looked quite like what I had proposed in the new clause in Amendment 6—paying off what remained of the obligation according to some formula.
I move this amendment only to emphasise the need for early implementation of the next stage. I am sure that the Government wish to move quite quickly, but I think we need as a House to make sure that that is made quite clear to the Government. I know that among the other proposals is one to make it easier to move to commonhold. Long ago when I was Lord Chancellor, I was keen to promote the idea of commonhold, because I had been brought up under a system of tenement property where people owned their own property. I was keen to seek to avoid the idea of leasing all the property. Of course, commonhold was difficult, but it has come in as a reasonable proposal now, and I would be very keen to see it being easier to get there than it has been in the past.
I very much welcome what the Government are proposing in this area. I am supported very much in that by my noble friend Lord Young of Cookham who did the much more difficult task of tabling a very full amendment in Committee for dealing with the matter. I left the main difficulty with the Minister, which I think is always quite a wise thing to do.
I simply move this amendment for the purpose I have mentioned and do not propose to insist on it at all.
My Lords, I support the amendments in this group and I am grateful to the Minister for finding the time to have a meeting with me. It was very helpful.
I shall come on to another amendment I have later. For this group, the noble and learned Lord, Lord Mackay, mentioned the need to speed things up. I entirely support that. We should get the rest of the Law Commission’s report on the statute book as quickly as possible. The noble and learned Lord’s amendment and that from my noble friend Lord Lennie are fundamental in trying to, shall we say, stem the tide of very unfair practices that seem to have developed in some parts of the market. I do not know how widespread it is, and I am quite surprised that the CMA has not been more helpful because its role, after all, is to look after the interests of consumers. Sometimes I feel that it possibly does not do that, but we can discuss that another time.
I have the pleasure of being on your Lordships’ Built Environment Committee that has just started one inquiry—out of two—into housing. At our meeting this morning, I was struck by three of the witnesses all saying that security of tenure was one of the biggest problems in housing. Whether it is leasehold or rental, it does not really matter very much. It is important to understand that people need to have some comfort that they can continue to live where they are living if they want to, and that the amount that they pay cannot go shooting up because of the wishes of the owners or other people involved in a way that could not have been foreseen when they took out the lease. It is not good when people are locked in—there are many press comments about it—and cannot sell. What do they do? That is before you get into the problem of cladding, which again is outside this discussion.
I am not sure whether my noble friend’s amendment or that of the noble and learned Lord is the best one. They both try to find some way of providing financial comfort to those who have been caught in this sudden upsurge—to me anyway—of increasing ground rents or other similar charges.
When we do these stages, it is funny that the Minister answers before the amendment has actually been proposed—but that is another thing we will get to. I look forward to my noble friend speaking on this matter, as he is much more knowledgeable than I am on it. I shall also be very interested to hear what the Minister has to say. It is really important that something like this is done very quickly, long before the next stage of the Law Commission’s report becomes a Bill.
My Lords, I am largely supportive of this group of amendments, particularly the one moved by the noble and learned Lord, Lord Mackay of Clashfern. It always seemed to me that some of these clauses, particularly relating to escalating ground rents, were unfair, with hidden implications that were not apparent to purchasers at the time when they were entered into. The CMA intervention is welcome but the ongoing blight continues. This is certainly an evil that causes me to support this amendment very much.
I also support Amendment 9. This seems to be a logical provision against pre-emption and creates, as I see it, greater transparency, which really should be the hallmark of landlord/tenant relationships in this area.
It is unfortunate perhaps that I am speaking before Amendment 26 has been spoken to. I see it as potentially retroactive, and think it might remove the value of an asset without fair compensation. In its specific scope, it would not distinguish between a fair and reasonable ground rent and one that was flagrantly unfair. I do not in any way defend leasehold interests as such, but if we go down this road it has much wider public interest and property law implications.
Again with Amendment 30, I would have liked to have spoken after the noble Lord, Lord Stunell, whom I believe will speak to it, but, from a technical standpoint, the question of rent is a payment that in this instance the tenant makes to the landlord for the bits of the property which exist but which are not within the tenant’s specific demise under their leasehold. It is not a service charge. Are we at risk of getting rent and services provided for rent confused—in other words, the use of property as opposed to a tangible benefit in terms of the service charge? In general, however, subject to those points, I support this group of amendments.
My Lords, I will speak to Amendments 7, 8, 9 and 30. I will focus most of my remarks on Amendment 9, but I cannot speak without first saying that the amendment tabled by the noble and learned Lord, Lord Mackay of Clashfern, which I see as essentially introducing an early buy-out option for existing leaseholders, is the next necessary step and should have been endorsed by the Minister and incorporated in this legislation. It is yet another of the unfinished bits of business dogging our debates on the Bill. Like others, I am looking forward to Amendment 26 being presented by the noble Lord, Lord Lennie, which, as far as I understand its meaning and intention, has essentially the same purpose of moving forward the implementation of leasehold reform for that cohort of existing leaseholders who will be left out of this legislation. As such, in principle, we support that strongly.
Amendments 7, 8, 9 and 30, tabled by my noble friend Lady Grender and myself, are various alternative approaches to ensure that if the limited circumstances of this Bill are as far as the Minister is prepared to go, it is at least not a cause of exploitation of existing leaseholders who may be very close to agreeing an informal lease extension. The process of informal lease extensions is a well-accepted norm in the leasehold industry and, as was discussed extensively at previous stages of this legislation, one which comes into play when the existing lease is within sight of its end. That may be some distance away but nevertheless the value of the lease is declining rapidly, and perhaps its mortgageability on resale is compromised because there is not a sufficient existing term of the lease. If a completely new lease is not to be entered into, an informal lease extension may be negotiated between the leaseholder and the proprietor.
The noble Earl, Lord Lytton, described Amendment 9 as an anti pre-emption provision. Perhaps his three-word soundbite says it all. The risk at the moment is that an owner—or, should we say, one of the less-scrupulous landlords—may see this as an opportunity to preserve the value of his asset by offering an informal leasehold extension on terms which would be applicable under the current legislation now to pre-empt the possibility of that extension value declining to nil once the new legislation comes into force.
The Government have set their face against either of the approaches set out by the noble and learned Lord, Lord Mackay of Clashfern, at least at this stage, and I suspect that they will strongly resist the amendment proposed by the noble Lord, Lord Lennie. That is a pity and comes despite the evidence that has been put on the table by the Leasehold Knowledge Partnership and the examples given by my noble friend Lady Grender in Committee, which were referred to extensively at Second Reading. That leaves precisely the problem that I have outlined. An informal leasehold extension may very well be useful to both parties when the leaseholder is shortly to sell or is making arrangements prior to disposal, but clearly it is dangerous if the leaseholder simply wants to continue their lease.
It is also dangerous if the condition for entering negotiations is that the lawyers will be appointed by the owner, and it is dangerous if the new terms which are inserted into that leasehold extension are not drawn properly to the attention of the leaseholder. The evidence shows that it is not unusual for escalator clauses to be built into those leasehold extensions, which are not transparent and not brought clearly to the notice of the leaseholder who is going to sign. The risk is that unscrupulous landlords can see very clearly that, after Royal Assent, their golden goose will be stuffed. If I can mix my metaphors, they have an incentive to offer new lamps for old when it comes to extensions. To offer informal leasehold extensions to unsuspecting leaseholders locks them into a new, unfavourable set of terms when, if they had waited, under the full enactment of the Bill they would have been eligible for its new provisions limiting the ground rent to a peppercorn.
We have tried to fix this statutorily. Amendments 7 and 8 set this out in different ways, but Ministers resisted our efforts strenuously. We have had discussions with the Minister, which I have very much welcomed. He has been very generous with his time and with his officials’ time in working on this problem. Amendment 9 is therefore really quite modest in its intent and its impact. It simply proposes that landlords should have an obligation to alert their leaseholders in advance of these changes coming into force of informal leasehold extension terms being altered by this new legislation. It is a proportionate safeguard which is not onerous on landlords but gives leaseholders a clear sight of the forthcoming changes before they commit to less favourable terms under the existing law. It does not prevent those to whom the balance of advantage still lies with a speedy signature on the existing terms for an informal leasehold extension from choosing to do so, but it seeks to protect the unwary from making a costly mistake which ultimately, as in one or two of the examples which my noble friend Lady Grender brought to the House in Committee, may lead to them losing that property entirely.
I intend to test the opinion of the House on Amendment 9 when the appropriate moment arises.
My Lords, I will speak primarily to Amendment 26 in my name, which would ensure that the Government bring forward legislation to end ground rent for existing leaseholders. I also add my thanks to the Minister for making himself and his officials available and for seeking to explore whether there is any chance of a solution to this. There was not, although he described this problem as “a top priority for the Government”. That is something that the noble Lord, Lord Young, heard when, in the other House, he was trying to deal with the question of hereditary Peers in this place. He was persuaded not to move an amendment by the then Government and was promised that legislation would be forthcoming. That was 20 years ago.
Millions of people are trapped in these contracts and the Government must end the feudal system for them as well as for new leaseholders. That is the whole purpose of this amendment—to make life equal for all leaseholders. Almost 5 million properties in England are leasehold dwellings—around one in five of all homes —and the House will be aware that many of them, if not all, are seeing their ground rent increase at incredible rates. The noble Lord, Lord Blencathra, memorably described this in Committee as a legal racket. That is what it is: it leaves a loophole available which sees rents increasing without any explanation, for no service whatever to leaseholders. It is creating immense misery and financial difficulties and there is no reason for the Government to maintain the system when they have already acknowledged how outdated ground rent is.
That is why the amendment would ensure that the Government bring forward early legislation within 30 days to end the practice once and for all. The amendment of the noble and learned Lord, Lord Mackay, identifies the same issue and tries to deal with it, but I am afraid I do not believe it goes far enough. Ground rent must be ended for leaseholders, including those in existing arrangements, and for that reason I will be testing the opinion of the House on Amendment 26 at the appropriate time.
I confirm the support of these Benches for Amendment 9 in the name of the noble Lord, Lord Stunell, and I also welcome other amendments he has tabled to probe aspects of these provisions. Amendment 9 raises the crucial point that leaseholders must always be informed of arrangements, and I hope the Minister will accept that point. With that, however, I will leave it to the Minister to respond.
My Lords, several issues have been raised in relation to existing leaseholders in previous debates and engagements, and I thank noble Lords for their close examination and engagement with the Government on these issues. However, as I have stated previously, this Bill is deliberately focused tightly on only new residential long leases.
As noble Lords will know well by now, the Government are approaching their leasehold reform programme in two stages. First, the ground rent Bill before us today is intended to look ahead and transform the economic relationship between leaseholders, freeholders and developers. A comprehensive leasehold reform Bill will follow during the course of this Parliament to end unfair practices in the leasehold market, ensure that consumers are protected from abuse and poor service, and reinvigorate commonhold.
Noble Lords are understandably keen to know precisely when this second and more comprehensive leasehold reform Bill will be introduced. They will of course understand that scheduling of legislation is a complex process, and that consideration must be given to the Government’s wider legislative agenda. It is therefore simply not possible to make such concrete commitments at this stage. However, your Lordships should rest assured that the Government have no intention of going slowly when it comes to leasehold reform, which is one of the Secretary of State’s top priorities.
Amendments 6, 7, 8, 26, and 30 ultimately seek to widen the scope of the Bill so that it applies to existing leaseholders. Amendment 6, moved by my noble and learned friend, Lord Mackay of Clashfern, would allow existing leaseholders to pay a capital sum to reduce their ground rent to a peppercorn. As I have laid out in previous debates on the Bill, while we are sympathetic to the aims of this amendment, the Government do not believe that it is necessary. Existing legislation already allows leaseholders of flats to reduce their ground rent to a peppercorn on extending their lease through the statutory route. Meanwhile, leaseholders of houses can buy the freehold of their property and so eliminate ground rent altogether.
In January of this year, the Government committed to allowing existing leaseholders to buy out their ground rent without the need to extend the term of their lease: for example, where their lease is already long. For the purposes of calculating the premium payable for this, the ground rent will be capped at 0.1% of the property value, making it significantly cheaper for leaseholders with onerous ground rents. We will also introduce an online calculator to simplify the process of enfranchisement and ensure standardisation and fairness. We believe that these measures will achieve broadly the same effect as my noble and learned friend’s amendment, so I cannot accept it today.
Amendment 7, in the name of the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, would restrict ground rent for existing leaseholders who enter into non-statutory lease extensions to 0.1% of the value of the landlord’s interest in the dwelling. It is important to state for the record that the peppercorn requirement will apply to the newly extended portion of the lease once an extension has been granted under the voluntary route. In addition, for the period of the lease that reflects the term that remained on the original lease, the ground rent cannot be higher than in that lease. There will be no opportunity for a landlord to use the point of lease extension to increase ground rent.
I have discussed Amendment 8 with the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, and we are of course all of the view that we do not wish to see exploitation of this legislation. However, it cannot be right that we take away the option of a non-statutory lease extension which would enable the leaseholder to pay a lower premium in return for continuing to pay some ground rent on the remaining term of their lease, with limitations as set out in the Bill. Where a leaseholder wishes to follow this route, Clause 6 allows for a monetary ground rent to continue to be paid on the remaining part of a lease—that is, the “pre-commencement lease”. This can be common where the leaseholder wishes to agree this approach with their landlord in return for a reduced premium payment.
The “voluntary” or non-statutory process is a more flexible route to lease extension and can in some cases actually be more cost effective and quicker for both the leaseholder and the freeholder. Naturally, therefore, as I am sure we would all agree, we do not want to remove that option from the Bill. I can reassure the House that as part of taking forward the Law Commission’s recommendations on leasehold enfranchisement we will be considering the matter of non-statutory extensions further, and when the time comes we will again seek input from noble Lords on this important issue.
Amendment 9 is also in the name of the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender. Attempting to amend the Bill as proposed in the amendment will not guarantee the outcome that the noble Baroness, Lady Grender, wishes to see, and the Government continue to consider this issue a matter of implementation detail rather than something to change on the face of the Bill. Amendment 9 would require all landlords to inform leaseholders of the changes introduced by the Bill before entering a formal or informal renegotiation or extension of an existing lease. Where a landlord failed to do so, they would face a penalty of between £500 and £30,000. However, the drafting of this amendment means that it would cover only the period from Royal Assent to the commencement date.
I appreciate that consumer rights and awareness is of particular concern to the noble Baroness, Lady Grender, and indeed the noble Lord, Lord Stunell, and I would be very keen to work with them and others on the issue of implementation. We have concerns that, while we recognise the need to ensure that leaseholders are aware of their rights and are not rushed into a lease extension before this Bill can take effect, we also need to ensure that any penalties are fair, justified and as far as possible are not incurred accidentally. Were the fines set out in the amendment to apply immediately upon Royal Assent, there is limited time to ensure that landlords are aware of the requirements and could end up receiving a fine for extending a lease in line with a request from a leaseholder.
We agree with the principle of this amendment, and I have discussed with the noble Baroness that we would like to work with her on the implementation of the Bill. This will include, for example, provision of comprehensive information to conveyancers, landlord representatives and leaseholder groups to ensure awareness of the new ground rent limits.
I have had constructive conversations with the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender, about how we might get the word out about these upcoming changes. Several solutions were proposed and I was particularly taken by the noble Lord’s suggestion about engagement with the legal profession to ensure that it can best advise its leaseholder clients. I have asked my officials to consider how we might take forward these proposals. This is important not just so that leaseholders are aware of their rights but so that landlords know what is required of them and do not inadvertently receive a large fine. However, we do not believe that financial penalties should apply as proposed by the noble Lord’s amendment, and I hope that he will not move it.
Amendment 30, again in the names of the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender, would put a requirement on landlords to write to their leaseholders to justify the payments by reference to the expenses to be met from the ground rent, or else to confirm that the ground rent is not used to pay any expenses. We agree that transparency is vital in the leasehold sector. However, we do not believe that this is the appropriate way to ensure that existing leaseholders are better informed about ground rents. As noble Lords know, ground rents are charges paid with no clear service in return. Most leaseholders will be aware of this and it is unclear what benefit they would get from receiving a letter from their freeholder or managing agent to that effect.
However, we are working to prepare the sector and leaseholders alike, assessing where better advice and support can be provided through ongoing regular engagement with the sector and our delivery partners. However, I acknowledge the broader concerns raised by the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, in their Amendments 7, 8, 9 and 30 about pre-commencement leases and the consumer awareness challenges in the run-up to this legislation coming into force. It is a noble intention, and we are agreed that leaseholders should have the right information to hand when making important decisions about whether to extend or vary their lease.
I am grateful to noble Lords for raising their concerns about the implementation of this Bill. I understand that it is noble Lords’ desire, as it is mine, to improve the Bill and see it delivered as smoothly as possible. That is why my officials are working carefully to craft an implementation plan that takes account of these concerns, as outlined by the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender, to do what we can to ensure that leaseholders are aware that this change in the law is coming and that they are equipped with the information they need to make the decision that is right for them.
This is a good opportunity to inform your Lordships that I can today commit to the House that the commencement date for this legislation will be within six months of Royal Assent, an issue which my noble friend Lord Young raised on numerous occasions. This issue was raised multiple times at previous stages and, while writing the date into the Bill would be inappropriate for reasons that I hope noble Lords will understand, I am pleased to make that commitment today.
More broadly on consumer awareness, the Government are pleased to hear the recent update published by the CMA on 23 June, whereby settlements secured with a leading housing developer and an investor in the leasehold sector have committed them to changes that will benefit thousands of leaseholders by refunding homeowners who saw their ground rents double, and allow leaseholders to buy the freehold of their properties at a discount. One of those companies has also committed to extending the timeframe that prospective buyers are given to exchange contracts after reserving a property, and to providing people with more up-front information about the annual costs of buying a home.
I am sure that noble Lords will also be pleased to hear that that includes ensuring that all marketing materials provided to consumers before the signing of a reservation agreement clearly and prominently state a greater level of information of benefit to the leaseholder—for example, the tenure of the property, the ground rent payable and any circumstances that may potentially lead to an increase in service charges. These landmark commitments will ensure greater transparency for leaseholders, thereby helping future buyers to make informed decisions without feeling pressured by time constraints. The CMA has made excellent progress, and that is just the start. We support the ongoing investigation and believe it will send a clear signal to others in this sector to follow this lead or face legal action.
Finally, Amendment 26, tabled by the noble Lord, Lord Lennie, would require the Government to produce draft legislation within 30 days to reduce ground rents to a peppercorn in existing long residential leases. I have listened carefully and appreciate the noble Lord’s sense of urgency in wanting to address issues faced by existing leaseholders. I can reassure the House that the Government are working at pace to bring these reforms forward. However, I must once again state that arbitrary deadlines are not useful in this context. It is, frankly, not possible to publish a Bill to the timescale proposed by that amendment. The reforms we are planning are a once-in-a-generation shake-up of the leasehold system, with the effects being felt for years to come.
I have outlined some of the changes, including on enfranchisement, transparency, a commitment on commencement and the ongoing work of the Competition and Markets Authority. I hope that the information I have given satisfies noble Lords that we take the issues facing existing leaseholders very seriously and that we are working at pace to deliver the improvements that all noble Lords here today want to see. As they will no doubt appreciate, this ambitious reform programme is complex and has many interdependencies. Therefore, while being mindful of the need for progress, it is important to take the time required to get it right. It is for these reasons that the Government cannot accept these amendments and I urge that they be withdrawn or not moved.
My Lords, I am greatly obliged to the Minister for his answers and, so far as I am concerned, the commitment to bring the legislation into effect is an important one that we were given some time ago. So far as my amendment is concerned, I am keen that the new proposals come forward quickly but their nature is such that it would be impossible to formulate them in a clear timescale of the kind suggested. However, that is for others say. I beg leave to withdraw my amendment.
Amendment 6 withdrawn.
Clause 6: Permitted rent: leases replacing pre-commencement leases
Amendments 7 and 8 not moved.
9: After Clause 7, insert the following new Clause—
“Duty to inform the tenant
(1) Before entering a formal or informal renegotiation or extension of an existing lease, the landlord must inform the tenant of the changes introduced by this Act, if the sections of the Act in relation to prohibited rent are not yet in force.(2) An enforcement authority may impose a financial penalty on a person if the authority is satisfied beyond reasonable doubt that the person has breached the duty in this section.(3) The amount of the financial penalty under subsection (2) is to be such amount as the authority determines but—(a) is not to be less than £500, and(b) is not to be more than £30,000.(4) This section comes into force on the day on which this Act is passed.”Member’s explanatory statement
This amendment would require landlords to let tenants know of the upcoming changes to ground rents to try and prevent lease extensions before the changes in this Bill are implemented.
My Lords, we now come to the group consisting of Amendment 10. Anyone wishing to press this amendment to a Division must make that clear in the debate.
Clause 9: Financial penalties
10: Clause 9, page 7, line 10, leave out “£5,000” and insert “£30,000”
Member’s explanatory statement
This amendment increases the maximum penalty that an enforcement authority may impose.
My Lords, in constructing a penalty regime for any landlords who breach the provisions of this legislation, we wanted to set the penalty at a level that was proportionate but acted as a deterrent. As the average ground rent is around £250 per year, we felt that £500 would be a reasonable and proportionate minimum penalty. Once again, I remind noble Lords that this would be paid in addition to repaying the prohibited rent with any interest due, and that £500 is a minimum penalty amount. Breaches across multiple leases could also be penalised, resulting in heavy fines.
However, both at Second Reading and in Committee, noble Lords felt that the balance between proportionality and deterrence was not quite right. The noble Baronesses, Lady Grender and Lady Jones of Moulsecoomb, and the noble Lord, Lord Naseby, were among those who made very strong arguments that the proposed regime was set at too low a level to act as a serious enough deterrent to freeholders, particularly larger freeholders with high annual turnover. In addition, while local authorities should not design their enforcement strategy to function as a revenue stream, we have been clear that we believe that any penalty recovered through the enforcement process should cover the cost of that enforcement.
I have listened carefully to the arguments made in Committee in favour of higher financial penalties and considered the impact that changing these amounts would have. We have concluded that the maximum should be raised to £30,000 which, as some noble Lords may know, is in line with this Government’s Tenant Fees Act 2019. However, we intend to keep the minimum penalty at £500, in recognition that this is proportionate where, for example, a small freeholder charges a non-peppercorn rent.
For those noble Lords who think we are a soft touch, I note that this is the first example of a minimum penalty in leasehold law. This amendment will significantly strengthen the enforcement regime and further deter freeholders from attempting to breach this legislation. I beg to move.
My Lords, I enthusiastically welcome this amendment from the Government. I am very pleased that the Minister has seen the strength of the arguments put forward by noble Lords from all around the House on this issue. It is not just that the original figure would not have been a significant deterrent for those determined to carry on with bad practice. Worse than that, it was not going to be sufficient to fund or permit trading standards to carry out their enforcement duties. The enforcing body around the country is short of funds and staff, and a new burden placed on it to enforce this provision without the means to do so was a recipe for failure. I am delighted that the Minister has seen the compelling strength of the view that my noble friend Lady Grender and others advanced passionately and congratulate him on persuading his colleagues around government of the need to move forward on this as he has.
My Lords, the sole amendment in this group increases the maximum penalty to £30,000 per lease, in line with other housing legislation—namely, the Tenant Fees Act. I am pleased that the Minister has brought forward this change following concerns raised in Committee, but I trust that the sum of £30,000 has not been decided purely based on precedent —not just because there is not a direct precedent to compare it to. The use of £30,000 penalties in this legislation will apply to freeholders, many of which are incredibly wealthy businesses. Does the Minister believe that £30,000 will be sufficient deterrent in such cases? As I said, I am concerned that this figure has been chosen because of the so-called precedent. Can the Minister dissuade us of that notion by confirming that an impact assessment has been carried out and, if so, tell us when it will be published?
We welcome an increase in the maximum penalty, but I am not entirely confident that it will be sufficient deterrent. I look forward to the Minister’s assurances.
My Lords, I point out that the maximum penalty would apply per lease and, for highly complex buildings, that soon multiplies to a substantial amount of money, so we believe that we have got the balance right in meeting the need for deterrence while recognising that some freeholders are not in the class of those that own considerable amounts of property. The amendment should be broadly welcomed and will strengthen the enforcement regime as a result, responding directly to the points made at various stages of the Bill. I believe it significantly strengthens the legislation.
Amendment 10 agreed.
Amendments 11 and 12
11: Clause 9, page 7, line 37, leave out subsection (9) and insert—
“(9) The relevant authority may by regulations amend this section so as to change the minimum amount or the maximum amount.”Member’s explanatory statement
This amendment, with Lord Greenhalgh’s second amendment to Clause 22, page 13, line 28, enables the Welsh Ministers (instead of the Secretary of State) to make regulations changing the amount of the minimum and maximum penalties for breaches of Clause 3 in relation to leases of premises in Wales.
12: Clause 9, page 7, line 39, leave out “Secretary of State” and insert “relevant authority”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendment to Clause 9, page 7, line 37.
Amendments 11 and 12 agreed.
Clause 12: Enforcement authorities: supplementary
13: Clause 12, page 9, line 3, after “Act” insert “in relation to a lease of premises in England;
(b) the Welsh Ministers about the exercise of its functions under this Act in relation to a lease of premises in Wales.”Member’s explanatory statement
This amendment requires enforcement authorities to have regard to guidance issued by the Secretary of State in relation to enforcement action in England and by the Welsh Ministers in relation to enforcement action in Wales.
Amendment 13 agreed.
Clause 13: Recovery of prohibited rent by tenant
Amendments 14 to 16
14: Clause 13, page 9, line 24, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s amendment to Clause 17, page 11, line 17, requires applications for the recovery of prohibited rent paid under a lease of premises in Wales to be made to a leasehold valuation tribunal (instead of the First-tier Tribunal).
15: Clause 13, page 9, line 36, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendment to Clause 13, page 9, line 24.
16: Clause 13, page 9, line 39, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendment to Clause 13, page 9, line 24.
Amendments 14 to 16 agreed.
Clause 14: Interest on amount ordered to be paid under section 13
Amendments 17 and 18
17: Clause 14, page 10, line 4, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment and Lord Greenhalgh’s amendment to Clause 14, page 10, line 5 are consequential on Lord Greenhalgh’s amendments to Clause 13, and enable a leasehold valuation tribunal to order interest to be paid on amounts of prohibited rent that it orders to be repaid to the tenant under that Clause.
18: Clause 14, page 10, line 5, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
See the explanatory statement to Lord Greenhalgh’s amendment to Clause 14, page 10, line 4.
Amendments 17 and 18 agreed.
Clause 15: Application to First-tier Tribunal as to effect of section 7
Amendments 19 to 22
19: Clause 15, page 10, line 19, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s amendment to Clause 17, page 11, line 17, requires applications as to the effect of Clause 7 on the terms of a lease of premises in Wales to be made to a leasehold valuation tribunal (instead of the First-tier Tribunal).
20: Clause 15, page 10, line 22, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendment to Clause 15, page 10, line 19.
21: Clause 15, page 10, line 24, leave out “Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendment to Clause 15, page 10, line 19.
22: Clause 15, page 11, line 1, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendment to Clause 15, page 10, line 19.
Amendments 19 to 22 agreed.
Clause 16: Assistance
23: Clause 16, page 11, line 12, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendments to Clause 13.
Amendment 23 agreed.
Clause 17: Interpretation of enforcement provisions
24: Clause 17, page 11, line 17, at beginning insert—
“(1) For the purposes of sections 13 to 16 and the Schedule, the “appropriate tribunal” is— (a) in relation to a lease of premises in England, the First- tier Tribunal;(b) in relation to a lease of premises in Wales, a leasehold valuation tribunal.”Member’s explanatory statement
This amendment defines the “appropriate tribunal” for the purposes of Lord Greenhalgh’s amendments to Clauses 13 to 16 and the Schedule.
Amendment 24 agreed.
25: Clause 17, page 11, line 19, at beginning insert “except in relation to section 16(1)(b),”
Member’s explanatory statement
This amendment corrects the drafting of Clause 17(b) to reflect the fact that the right to apply to a tribunal for a declaration as to the effect of the Bill on the terms of a lease does not extend to a tenant’s guarantor.
My Lords, I will speak very briefly on government Amendment 25, which is a minor technical change to correct a small drafting error.
Clause 17 defines “tenant” for the purposes of Clauses 10, 13 and 16. Clause 16(1)(b) enables an enforcement authority to assist a tenant in an application as to the effect of Clause 7—that is, in regard to the effect of a term reserving a prohibited rent on the terms of a regulated lease. This amendment rectifies a discrepancy in the Bill, in that the assistance provided under Clause 16 would not extend to the tenant’s guarantor, as a guarantor does not have the right to apply for a direction as to the effect of Clause 7. This amendment ensures that there is no discrepancy between the clauses of the Bill. I beg to move.
My Lords, obviously we welcome this amendment to the drafting error in the original Bill. Can the Minister explain briefly what the consequences would have been if it had not been identified? I mean briefly; I do not want a whole essay on the subject. Is there a risk that similar errors could be identified in other legislation which relates to guarantors?
I thank the noble Lord for testing my knowledge of the consequences of a small technical amendment. I am just glad that we picked it up; I will have to write to the noble Lord on what the consequences would have been had we not done so. This happens from time to time. I am fairly new to the House but, when we find these errors, there are plenty of opportunities to correct them before the Bill receives Royal Assent.
Amendment 25 agreed.
26: After Clause 18, insert the following new Clause—
“Ground rent for existing long leases
Within 30 days of the day on which section 3 comes into force (for any kind of lease), the Secretary of State must publish draft legislation to restrict ground rents on all existing long residential leases to a peppercorn.” Member’s explanatory statement
This amendment aims to ensure that the Government introduces further legislation to remove ground rent for all leaseholders, whereas the Act currently only applies to newly established leases.
My Lords, we now come to the group beginning with Amendment 27. Anyone wishing to press this or anything else in this group to a Division must make that clear in the debate.
27: After Clause 18, insert the following new Clause—
“Review of the financial impact of the Act
(1) Within 6 months of the day on which this Act is passed the Secretary of State must carry out a review of the financial impact of this Act on leaseholders.(2) The review must make a recommendation as to whether further legislation should be introduced to extend the ban on ground rents to existing long leases.(3) The recommendation in subsection (2) must take into account the potential financial impact of an extension of the ban on ground rents on those leaseholders and tenants who have been charged for the cost of fire remediation work.”Member’s explanatory statement
This amendment would require a review of the financial impact of this Act and make a recommendation as to whether a further extension of the ground rents ban could benefit existing leaseholders, especially those facing bills for fire remediation work.
My Lords, I speak to Amendment 27 in my name and those of my noble friends Lady Grender and Lord Stunell. I draw the attention of the House to my relevant interests in the register as a member of Kirklees Council and a vice-president of the Local Government Association.
Amendment 27 asks that:
“Within 6 months of the day on which this Act is passed”
“carry out a review of the financial impact”
on leaseholders. Reviewing the impact of legislation is important, especially in instances such as these, where changes to an already complex situation are likely to result in unforeseen consequences—despite many noble Lords and the Minister doing their utmost to ensure that all aspects are fully considered. The amendment then goes further to ask that the review actively considers and makes a recommendation about “further legislation” —either for or against it.
Subsection (3) of the proposed new clause makes specific reference to those leaseholders and tenants who have been charged for “fire remediation work” consequent to the Grenfell tragedy. Noble Lords will notice that I am taking the opportunity provided by this Bill to raise again very grave concerns many of us have for those leaseholders and tenants who are, through no fault of theirs, at the heart of the cladding scandal.
The fact that up to 1.3 million households are at a very considerable risk of bankruptcy as a direct result of serious construction failings must never be allowed by decision-makers to remain unresolved. Leaseholders have done everything right and nothing wrong, yet they are being expected to pay for the failures of construction, developers and materials manufacturers.
I recognise that the Government have provided over £5 billion towards remediation but the total cost is anticipated to be over £15 billion—the vast proportion of which is being passed via so-called service charges to leaseholders. We are not talking about charges that are in any way affordable. For example, Pippa in Leeds has a bill for £140,000. The highest bill I have seen was reported in the latest article on this issue in the Sunday Times: a staggering £204,000.
Perhaps the Minister will be able to provide advice on how these leaseholders are to pay the bills that have landed on their doormats. He will be aware that a leaseholder’s major asset is their flat and that, currently, has no value. It is not only the costs of remediation that are pressing down on leaseholders, there are service charge increases—consequent, again, to the cladding scandal.
I have heard from a leaseholder today, who says: “I am knee-deep in service charge admin. I am being harassed with bills that I know are inflated and incorrect, and with huge penalties for late payment. No one should have to live like this. It takes a toll on every aspect of your life, and that is before consideration of planning bills.”
It is not only leaseholders who fear the worst. The Investors Chronicle has reported in the last two weeks that this may become the next PPI scandal. Flat sales are in decline. They affected flats are neither sellable nor mortgageable. Before long, the Government will have to take action to save leaseholders from bankruptcy and homelessness and the housing market in flats from collapse. This amendment simply asks the Government to take stock within six months and, in doing so, to be cognisant of the leaseholders whose dreadful plight I have described. The leaseholders have done everything right and nothing wrong, which is a phrase I cannot attribute to developers, constructors, material manufacturers or the Government, as the final regulator. Between them, they have responsibility for this absolute scandal.
I will listen carefully to the Minister’s response. However, if he is not inclined to accept this simple amendment, I give notice of my intention to seek the opinion of the House. I beg to move.
My Lords, I welcome the opportunity to speak to the amendment just moved by the noble Baroness, Lady Pinnock.
I am a fan of what I see as post-occupation evaluation. I welcome the amendment for that alone. I would more comfortable if it did not just refer to leaseholders, because the whole dynamic—as regards the ongoing interaction between leaseholders, freeholders, management and so on—is ever moving. That needs to be seen in the round. It should include not just the financial matters referred to in the amendment but a more holistic measure in terms of the sense of place, security, ability to control or influence outcomes and user contentment. I suspect that the Government have a system anyway for reviewing the effects of legislation, but I ask whether that is frequent enough to meet the noble Baroness’s objectives. In general, I support the other amendments in this group.
The noble Baroness referred to the driver behind this being the tragedy of Grenfell. Although the process of evaluation and what has come out of it may be seen, in government terms, to be moving at lightning speed, it has not been nearly fast enough for leaseholders and those who pay service charges. The consequences of that have been amply exposed by the noble Baroness and are ongoing. This is truly a tragedy for many households, which have walked unknowingly into a situation created by the neglect of others. The auguries are not particularly good. The proposal, as I interpret it, to leave the power in the hands of leaseholders to claim—admittedly on a longer timeframe—against those who did not observe basic construction standards creates an almost insuperable hurdle.
It is appropriate that I pay tribute to those outside the House who have promoted the polluter pays principle. I know that this matter has been brought to the attention of the Government, and it would place the basic strict liability on those who failed to make the grade in construction standards. My question is: when are the Government going to act on it? I consider the matter of such importance that if the noble Baroness decides to test the opinion of the House, I shall be voting with her.
My Lords, this is a devastating case, again, of unfinished business. We have talked several times about unfinished business in respect of reforming the whole leasehold system. The noble Baroness, Lady Pinnock, has spoken with great passion about the need to deal with the unfinished business of getting the damaged blocks discovered since the Grenfell fire put back in a safe and workmanlike position. That is a terrible story, which is still unravelling and still producing—I think we can say—shock and amazement as the evidence comes out of the inquiry at Grenfell. As the noble Baroness, Lady Pinnock, said, it is not an isolated failure. I ought to have started by reminding the House that I was the Minister with responsibility for building regulations between 2010 and 2012, which was well before this but is nevertheless relevant.
There was a failure of regulation, a failure at every level of the supply chain, a failure of the designers and a failure of those responsible for monitoring progress. Of course, the fallout is not simply that one building was found to be dangerous and defective and burned at the cost of 72 lives, but that more than 400 other buildings have been found to be equally defective or worse. As is so often the case, once you begin to look, you see plenty else. The British Woodworking Federation estimates that 600,000 defective fire doors are installed in buildings in this country. In that context, it is good to know that the Government have come forward with a compensation scheme, allocating £5 billion. Perhaps the Minister can tell us whether the guidelines for applying for that compensation have yet been published. My last understanding is that they have not, but maybe he can bring some information to your Lordships’ House today.
It has to be right that this House considers the situation facing those leaseholders and, in so far as we can, safeguards their position. This is actually a very modest amendment; it calls only for a review within six months, not for the spending of government money, so there is nothing for Ministers to shy away from. It would simply make sure that this legislation, relevant to the ongoing tragedy of Grenfell and the ongoing battle that hundreds of thousands of leaseholders are facing with enormous bills—which the noble Baroness, Lady Pinnock, eloquently spelled out—cannot be passed by your Lordships’ House without serious consideration.
I know that the Minister has repeatedly found himself at the Dispatch Box having to say essentially the same thing: “This is not the time; this is not the place; this is not the right legislation.” We have to reply to him: “Well, when is the time? Where is the place? Where is the legislation?” We need to see some answers. Certainly, this is a matter we wish to press in the oncoming vote.
My Lords, I will speak to Amendments 28 and 29, in my name, and welcome Amendment 27, moved by the noble Baroness, Lady Pinnock, and also in the name of the noble Lord, Lord Stunell.
Amendment 28 is intended to raise four issues, which I have focused on at previous stages of the Bill: lease forfeiture, transfer fees, redress schemes and enfranchisement. This amendment is intended to probe, and, while I will not introduce each issue again, I hope that the Minister can provide clarification in the following areas. On lease forfeiture, can the Minister confirm that legislation will be forthcoming to prevent possession being taken over small debts? On transfer fees, has the Minister made an estimate of how many freeholders are placing charges on the sale of properties? On redress schemes, will the Minister consider a trial for the most serious of leasehold abuses? Finally, on enfranchisement, what assessment have the Government made of the obstacles currently in place?
The intention of Amendment 29 is to raise the need for the Government to champion commonhold arrangements. The House will be aware that the Mayor of London is committed to furthering commonhold, and his manifesto pledged to trial the arrangements in London. Can the Minister confirm what support will be offered to the mayor as part of these pilots? Will he make a statement on the Government’s policy on commonhold?
Finally, I turn to Amendment 27, which calls for a review of the relationship between the Bill and those facing bills for “fire remediation work”. Unfortunately, the Government have again ignored those people during the drafting of this legislation. This Government’s continued mismanagement of the remediation work is one of their most shameful aspects. I hope that the Minister will use this opportunity to finally change track and at last deal with the issues of remediation costs being charged to leaseholders for building safety faults. Rather than another betrayal of their promises to leaseholders, we need legal protections to ensure that millions of pounds of building safety remediation costs are not passed on to innocent home owners and tenants.
My Lords, this group of amendments calls for a variety of impact assessments to be produced. It is, of course, very important that we understand the impact that this legislation will have. That is why we have already produced an impact assessment, which I would encourage all noble Lords to read.
Amendments 27 and 28 would both require impact assessments relating to how this legislation would impact on issues facing existing leaseholders. As throughout the passage of the Bill, I understand noble Lords’ desire to assist existing leaseholders. Noble Lords will be well aware by this point that this is just the first of a two-part legislative programme, with further leasehold reform due later in this Parliament.
We have considered the impact of the Bill on existing leaseholders, and this is informing the process of policy development, ahead of future legislation. This is within the broader context of the important work being done by the Competition and Markets Authority to address unfair terms and mis-selling. As discussed previously, we are committed to measures to help existing leaseholders through significant changes to the enfranchisement valuation calculation, making it cheaper for many leaseholders to extend their lease, buy their freehold or buy out their ground rents.
Noble Lords can rest assured that my officials have been listening very carefully to all of the points that have been raised during the debates on the Bill. However, producing detailed impact assessments is likely only to distract from the important work that is being done on leasehold reform.
The noble Baroness, Lady Pinnock, again raised historic fire and building safety remediation costs. I was struck by the very high bill of around £204,000 per leaseholder that was quoted. This may be a building in Manchester, but I would be very keen to know further details and to understand the approach that has been taken. Very often, when I have inquired and understood the situation, I have found that the most proportionate response is not necessarily considered by the building owner—but I would be very interested to look into that case in more detail.
In response to the noble Lord, Lord Stunell, I say that we are very aware of the polluter pays Bill and the work that is being led by Steve Day of RAQ. We are looking at it very carefully to see whether it could further enhance the proposed Building Safety Bill. Of course, we have already looked at strengthening redress by extending the statutory limitation period in the Defective Premises Act 1972 from six to 15 years, applied retrospectively. This could provide further support to ensure that it is the polluter who pays. We are looking at that very carefully, as I said.
Also in response to the noble Lord, Lord Stunell, on the Building Safety Bill, I say that the first £1 billion of this has of course been in play and spent. In fact, the fund is very much overcommitted. Further details around the further £3.5 billion will be published in September, but works are not being delayed because of that. I am happy to provide assurance that the further expenditure will therefore be outlined at that stage.
Obviously and clearly, the Bill is about future leases and applying ground rent at the peppercorn level. It is not about existing leaseholders and the bills that some of them are facing with regard to historic fire safety costs. Opportunities to address fire safety and related issues will be plentiful, as the Building Safety Bill makes its way through this House.
I will move on to Amendment 29, in the name of the noble Lord, Lord Lennie, which would require an impact assessment on the levels of commonhold ownership within 60 days of the Bill passing. Noble Lords will know that levels of commonhold ownership are currently very low. Despite being introduced almost 20 years ago, there are fewer than 20 common- hold developments across England and Wales. This Government are committed to increasing the take-up of commonhold so that more home owners can enjoy the benefits of freehold ownership. We have established a Commonhold Council—a partnership of industry, leaseholders and government—to prepare consumers and the market for the widespread take-up of full-throated commonhold.
Under the commonhold tenure, it is already the case that ground rents cannot be charged. However, commonhold has struggled to compete with leasehold because it does not generate additional income streams for developers or landlords through ground rents. Therefore, the Bill will help to level the playing field for commonhold. There are other challenges that include some legal shortcomings or ambiguity, and we are considering the Law Commission’s recommendations on how we can improve the law to strengthen the commonhold tenure.
While the market adjusts to an increase in commonhold properties, the vast majority of flats are likely to continue to be developed and sold on a leasehold basis. This legislation will ensure that owners of new long residential leasehold properties will not have to pay a monetary ground rent and will share this important feature with the owners of commonhold properties. As such, the Bill and our work on commonhold share the common objective of providing future home owners with more fairness and transparency. Having carefully considered the impact that this legislation will have on our policy towards commonhold, we have concluded that both should be pursued together. It is also worth noting that the benefits of commonhold go far beyond the issue of ground rents.
While I sympathise with the good intentions behind all three of these amendments, and thank the noble Lords for tabling them, I remain of the view that the benefits of any of these impact assessments would not be proportionate to the time and resource needed to satisfy all the requirements in these amendments. Both in this Chamber and in various meetings, noble Lords have impressed upon me, time and again, the need to introduce our leasehold reforms at speed, and I agree with them. These amendments would inevitably slow down the pace of reform, with little, if any, tangible gain for leaseholders to make up for this. It is for that reason that I ask noble Lords not to press their amendments.
My Lords, I thank all noble Lords for their contributions and support on the very important issue I have raised again today. I particularly thank the noble Earl, Lord Lytton, for his supportive contribution. He is a recognised expert on these issues, and he expanded on my points. He has raised them before, and I certainly think the Government need to listen carefully to what he has to say.
The Minister has been handed the impossible task of defending the indefensible. Unfortunately, he always has to rely on the fact that future Bills will help solve this problem—but the future will never come soon enough for leaseholders struggling now. They have these bills now and will have to pay them by the end of the year.
As my noble friend Lord Stunell said, this is just a modest amendment. All it seeks is a review of the Bill’s impact in six months, with special reference to leaseholders who have been adversely and gravely affected by the consequences of the Grenfell tragedy.
I apologise to the House for not having moved my amendment formally at the end of my initial speech. I beg to move it now, but I also have to say that, having heard what the Minister said, I wish to seek the opinion of the House on this matter.
Amendments 28 to 30 not moved.
Clause 20: Consequential amendments
Amendments 31 to 34 not moved.
Clause 21: Regulations
35: Clause 21, page 13, line 2, after “Parliament,” insert “if the regulations are made by the Secretary of State, or
(b) Senedd Cymru, if the regulations are made by the Welsh Ministers,”Member’s explanatory statement
This amendment provides that the default procedure for regulations made under the Bill by the Welsh Ministers is the negative procedure.
Amendment 35 agreed.
Amendments 36 and 37 not moved.
Clause 22: Interpretation
38: Clause 22, page 13, line 28, at end insert—
““premium” means any consideration in money or money’s worth for the grant of a lease, other than rent;”Member’s explanatory statement
See the explanatory statement for Lord Greenhalgh’s second amendment to Clause 1, page 1, line 5.
Amendment 39 (to Amendment 38) not moved.
Amendment 38 agreed.
40: Clause 22, page 13, line 28, at end insert—
““relevant authority” means—(a) in relation to a lease of premises in England, the Secretary of State;(b) in relation to a lease of premises in Wales, the Welsh Ministers;”Member’s explanatory statement
This amendment defines “relevant authority” for the purpose of Lord Greenhalgh’s amendments to Clause 2, page 2, line 21 and Clause 9, page 7, lines 37 and 39.
Amendment 40 agreed.
We come to Amendment 41. Anyone wishing to press this amendment to a Division must make that clear during the debate.
41: Clause 22, page 13, line 29, at end insert—
“(2A) A sum expressed to be payable in respect of rates, council tax, services, repairs, maintenance, insurance or other ancillary matters is not rent for the purposes of this Act merely because it is reserved as rent in the lease.”Member’s explanatory statement
This amendment clarifies that service charges and similar payments are not to be treated as rent only because they are reserved as rent in the lease.
My Lords, before coming to the detail of this amendment, I want to stress the importance of the broad definition of “rent” as it appears in the Bill. Your Lordships are aware of the Government’s position. We believe it is vital for the effectiveness of the Bill that the definition of ground rent is drawn up in such a way as to head off the potential for avoidance measures by the small proportion of landlords who are intent on abusing the leasehold sector for their own financial gain. Any attempts to change this approach would do little more than provide a fixed obstacle around which a nimble landlord may divert with relative ease, certainty and confidence.
Alternative versions for the definition of a rent that stray away from this approach have been considered but they all reached the same conclusion and were found to be lacking. It is precisely because of the broad definition of rent in the Bill that any landlords and their investors seeking to charge what is in essence a ground rent by any other name will need to think very carefully if they believe the definition provided in the Bill offers an easy workaround—it does not. That is to say, if a landlord were to attempt to charge a ground rent by any other name and that charge provided no meaningful benefit or service to the leaseholder, that charge may be considered within the nature of a rent for the purposes of the Bill, and a tribunal or enforcement authority could consider the case for enforcement against that landlord.
I believe that Amendment 41 will provide further clarity regarding the meaning of a “rent” for the purposes of the Bill. Noble Lords will recall that there was a good deal of debate over that definition in the Bill in Committee. My noble friend Lord Young made reference to the Law Society and raised his concerns that the wide definition of rent contained in the Bill could give rise to unnecessary litigation as the lawfulness of certain charges being able to continue as being “reserved as rent” was not wholly clear.
I have listened carefully to the arguments made by my noble friend and others and am not unsympathetic to the views expressed that tighter wording of what is considered a rent would provide even greater clarity for both leaseholders and landlords. The amendment therefore provides that valid charges, even if they are “reserved as rent” in a lease, are not intended to be captured by the provisions in the Bill just because they are “reserved as rent” within a lease.
It is not our intention for valid charges, such as the charging of insurance or service charges, to be adversely affected by the Bill. Neither is it the purpose of the Bill to address the practice of reserving as a rent charges that are not in fact rent. The amendment simply clarifies that, just because a charge is reserved as a rent, it does not automatically follow that it is a prohibited rent for the purposes of the Bill.
I reassure noble Lords that the amendment does not give a green light for landlords seeking to avoid the measures of the Bill to merely reserve any charge as a “rent”. As I have described, the definition of a rent is drawn deliberately as widely as possible and will capture any charge that is in fact in the nature of a rent, whatever it is called. I beg to move.
My Lords, I always welcome efforts by Ministers to clarify the law, although I sometimes struggle to understand exactly how the law has been clarified. It has been suggested that this is, if you like, a step of relaxation or at least inclusion that will permit landlords to get away with—I think that is the technical term—bad practice. I am sure the Minister will reassure me that that is absolutely not the case and, far from opening a door, it is trying to make sure that the door is firmly shut.
I fear that the technicalities of this will be worked out in the law courts over time, whatever provision the Minister puts in the Bill or takes out of it. I wish him luck and I hope he has succeeded in what he hopes to succeed in. I guess we shall find out, when we do the evaluation in a year or two, how accurate that is.
My Lords, we could not have had more different responses to the government’s amendment. I would like to assure the noble Lord, Lord Stunell, that this is indeed a clarification around enabling landlords to continue to pass legitimate valid charges. It will not promote the practice of continuing ground rents by another name, and I made that point very clearly in outlining this in my speech. I am sorry it was quite technical; obviously, people with legal eyes helped me to formulate the syntax but I give that assurance. But the noble Lord is right: only time will tell how the legislation will work in practice.
In response to the noble Lord, Lord Lennie, I have never heard anything quite so overwhelmingly positive about an amendment that I have moved—perhaps we are reaching a new era in understanding. I am not aware of this being relevant in any other part of our approach to the reform agenda that we are putting forward. However, leaseholder legislation covers many decades. Despite having studied some land law in the 1980s, I am not in a position to give a very detailed legal answer on that point.
Amendment 41 agreed.
We now come to the group beginning with Amendment 42. Anyone wishing to press this or anything else in the group to a Division must make this clear in the debate.
Clause 23: Crown application
42: Clause 23, page 14, line 5, leave out paragraph (c)
Member’s explanatory statement
This would remove the Duchy of Cornwall from the definition of Crown Land since the Duchy describes itself as a private estate.
My Lords, in moving the amendment in my name, Amendment 42, I will speak also to Amendment 43. This returns to the subject of the Duchy of Cornwall, which we discussed at some length in Committee. The Minister responded very helpfully, at col. GC 362, setting out the current exemptions from existing legislation for the right to buy. He also mentioned that the Crown Estate had given a parliamentary undertaking that it will not seek any special arrangements. He mentioned the comments on the Law Commission report about the concerns that the Duchy of Cornwall had on enfranchisement itself. Not much has happened since then.
The Minister did say that he would write to the Duchy of Cornwall. I would be interested to know whether he has written, whether he will put a copy of the letter in the Library and whether he has had an answer. If he has, it will be the first that any Minister has published—a first certainly for any noble Lords who have written. As I have mentioned before, the Duchy of Lancaster and the Crown Estate respond very helpfully and in a timely manner to letters from me and others; that does not apply to the Duchy of Cornwall. Mind you, the Duke of Cornwall is visiting the Isles of Scilly today; maybe that will remind him that there needs to be an answer, but I am not holding my breath.
The Duchy of Cornwall has confirmed, in its latest annual report, that it is in the private sector. On that basis, I would like to reinforce my argument: if it is in the private sector, as it says it is, then it should obey the same rules, laws and everything else that the rest of the private sector has to. There are many other private estates—earlier today, somebody mentioned the Grosvenor Estate—and they will all comply with the legislation, I am quite sure. Therefore, it seems to me that, in respect of this particular clause, the Duchy of Cornwall should be removed from it, which would turn it into the private estate that it says it is.
Amendment 43 reinforces the arguments about Crown land not including land belonging to the Duchy of Cornwall. This is the continuation of my probing amendment. I certainly will not seek the opinion of the House, but I will be interested to hear whether the Minister has made any progress on this, because it will, I hope, have much more effect on the next Bill, which we hope will come soon. I beg to move.
My Lords, I welcome the amendment of my noble friend Lord Berkeley, which returns the House’s attention to the application of ground rents charged by the Crown, such as the Duchy of Cornwall. It is a bad day to be away from the Scilly Isles, but there you go. My noble friend is probing the issue again, after clearly incomplete answers in Committee. I look forward to the Minister’s response.
Since the Minister was also unable to provide answers to my questions during Committee, I hope he will be able to do so on this occasion. They are these. First, can he confirm how many Crown properties this relates to? Secondly, do the Government intend to engage the residents of these homes?
I now turn to Amendments 42 and 43, brought to your Lordships’ House by the noble Lord, Lord Berkeley. I understand that it is his wish for the Duchy of Cornwall to be considered as private land and not Crown land under this Bill. Irrespective of the definition, both Crown land and private land are captured by the Bill. This Bill will therefore apply to the Crown Estate, of which the Bill stipulates the Duchy of Cornwall is part. As I am sure noble Lords are all aware, the Duchy of Cornwall is a private estate which has a Crown exemption. However, the purpose of this Bill is not to decide how these estates are defined; rather it is to get a better deal for future leaseholders to prevent them being exploited by ground rent in the leasehold market.
The Duke of Cornwall’s estates will be treated as any other private landlord under the provisions of this Bill and will no longer be able to collect ground rent in future leases. I will clarify again that this Bill is narrowly focused on ground rents and not all leasehold matters. That is why, in response to the noble Lord, Lord Berkeley, we have not yet written to the Duchy of Cornwall about the issues around enfranchisement and other matters, but we will be doing so as part of the second stage of the legislation. I will obviously keep noble Lords informed if we get a response, but the noble Lord, Lord Berkeley, seems rather sceptical of that. Nevertheless, we have made that commitment and will write at that stage.
The Government have committed to an ambitious, large-scale reform programme, and we will deal with all these other issues not related to ground rents in the near future. I am very sorry that, on two occasions now, I have not been able to give a precise response to the noble Lord, Lord Lennie, but I will make sure that we get the information to him at the earliest opportunity, in writing, and lay a copy in the Library—I believe that is precisely what you have to do in these circumstances.
The Government will consider the concern of the noble Lord, Lord Berkeley, regarding the Crown Estate exemptions from the parliamentary undertaking on enfranchisement rights for leaseholders in the next stage of the leasehold reform programme. I can also reassure the noble Lord that the Government will consider his concern in tandem with the Law Commission’s recommendations on the issue of enfranchisement rights for leaseholders. On that basis, I ask the noble Lord to withdraw the amendment.