Select Committee on Regulatory Reform Minutes of Evidence

Examination of Witnesses(Questions 40-59)




  40. Tenants' groups in the areas which are not involved with PFI where there might be potential for PFI.
  (Mr McNulty) Some at least were involved in the process. We spoke to the Federation of Tenants' and Residents' Associations in Plymouth, Bradford, Bristol, none of whom were involved in PFI.

Mr Cummings

  41. These are organisations, Minister, and I am talking about tenants' groups.
  (Mr McNulty) If you are talking about small, ad hoc tenants' groups up and down the country, then I am—

Mr Bercow

  42. Mr Green, you said a moment ago when you were answering a question from Mr Cummings that the Ardwick tenants are "supportive of the proposals". My concern, not dissimilar to what Mr Cummings is trying to do, is to try to identify the specifics, so what I would like to know is was that support unanimous or was it merely a majority? Was it verbal or was it written and was it formal or was it informal? What I think we want to try to establish is the robustness of the procedure which leads you to make a claim. That is really what we want to do. When we have got that information, we can all reach our own assessments about the merits of the Government's proposals as a whole, but I am concerned about the specifics and, as I say, the robustness of the procedure.
  (Mr Green) It was written and it was formal. We were not given any indication as to whether it was unanimous or majority, but I assume it was a majority view.

  43. How many people are we talking about?
  (Mr Green) We are talking of about a thousand residents affected by the scheme.


  44. On this, the key on the consultation is that with a shortened period of consultation from the normal period that we would have expected from twelve to eight weeks, it affects not only tenants' groups, but everybody else. Do you feel that everything possible was done to make sure that those who wanted to respond were able to respond in that period? You have had a shorter period to be able to come forward with this proposal and not for the convenience of those you were consulting with.
  (Mr Green) Yes, I am convinced that we gave them sufficient time to respond effectively and I think that is borne out by the fact that we did get responses from tenants' groups and also leaseholder groups, so I do not think there was any problem there.

  45. Do you see any other ways, other than the existing PFIs, in which these changes could be used by local housing authorities?
  (Mr McNulty) The way it has been drawn, it has been quite specific to be as broad and as flexible as possible, so I would not foresee at the moment quite any way in which, for example, ALMOs or tenant management organisations would necessarily want to use this particular provision now, but they may well do in the future, which is why it is drawn in those broadest terms rather than just drawn very, very narrowly just as a reaction to the difficulties encountered with these specific contracts. So the short answer is that given the flexibility, it can be drawn far, far wider and be utilised by ALMOs, TMOs and perhaps other vehicles, but I would not foresee that in the very near future, plus these are very early days in terms of those particular models.

  46. As a quick point following on from that, if you see that there might be potential with the position as you see it, how can you be sure that all the necessary protection will be maintained in the future? Is there not a danger that some people might think that you are using this regulatory reform procedure to slip through the potential for PFI, recognising that some people are opposed to PFI and others welcome it?
  (Mr Green) I think it is unfortunate that the proposals we are talking about are proposals to legislation which have been in place for quite some considerable time. It was really the last amendment formulated to enable two specific contracts. It is probably long overdue for change itself so that it fits more with government policy and with more modern-day procurement methods and it is unfortunate that it has got tied in with the PFI aspect in that respect. It is not just about PFI, but it should also help authorities on different levels. For instance, if they want to engage a registered social landlord to manage their housing and a registered social landlord or housing association wants to call on the expertise of specialists in, for instance, sheltered housing, that sort of arrangement would not be able to go ahead without these changes in place, so we are not just talking about big PFI contracts here, but it should help on the smaller issues for local authorities.

Dr Naysmith

  47. Some of these things have been going on for a while, other organisations' management of a particular part of the housing stock, so why should we get into problems now which this legislation will sort out?
  (Mr Green) Probably the official answer is presumably because they have not involved a sub-contractor for delegating their housing management function. The more realistic answer is probably that they may now be doing it already where they are acting illegally, but we do not know.[3]

  (Mr McNulty) When he says "illegally", that worries me, so I'll bring the lawyer in.

  (Ms Millington) The intention of the proposed reform is to widen the way in which the powers of the local housing authority can be delegated to enable the person to whom it is delegated to further delegate. Now, that is constrained by the requirement that they will consult the tenants who are most affected and they will take that person into account and the Secretary of State would in giving approval. It is envisaged that the contracts would contain a lot of elements and because of this, it is necessary for other persons to be involved in carrying out the exercise of these functions.

  48. But it is not delegating things to other organisations, but it is delegating to organisations which can then delegate to other organisations?
  (Ms Millington) Yes, but there are limitations within the structure of the proposed reform to section 27, so there is a requirement for the Secretary of State's approval to further sub-agreements, so it is not a change which is enabled simply by the first approval. There is also a means by which approval is not required to every change or variation of the agreement, so it is a change to enable policy to develop further and for the local authority to enable more complicated agreements to be carried out.[4]

  (Mr McNulty) And bearing in mind that this is still ultimately a local government contract, so it still sits under the internal auditing regimes local government has to abide by and it still sits under the District Auditor regime and the District Auditor is more than aware of the regulations that prevail and the-back-stop of the Secretary of State having the last word in approval, not in every case, but in many cases. Also in terms of any shift or change, I go back to Mr Pike's point about protection under the revised section 27 where any number of key decisions which are made which will impact most directly on tenants, there will be provision for that ongoing tenant consultation, so in terms of protection, we are back to your earlier point, Mr Pike, and I think, if anything, it is enhanced by the Order and the changes to section 27 rather than denigrated or degraded in any way.


  49. It is an issue that we have to be concerned about.
  (Mr McNulty) Yes, absolutely.

Mr Havard

  50. If you did not get these changes, how would the current schemes which are running be affected and why would they be affected because when I read the original section 27, there seems plenty of discretion for the Minister to do a number of things? I am not fully understanding how they would be affected and why they would be affected if you did not have it.
  (Mr McNulty) They would be affected because in many cases, like a whole range of normal contracts let by local government, rather than the delegation being once removed and that contractor doing absolutely everything, there is scope for subsequent delegation. Now, as I understand it, the way things are at the moment, as I think Dr Naysmith said, that happens, but it happens in an extremely rigid fashion and a fashion which does not bring much flexibility to the game for either the local authority, the tenants who are most directly affected or the contractor, so, as Dr Naysmith has already said, there may well be a subsequent sub-let for the windows, but that is part of an overall refurbishment and management contract and if that refurbishment and management contract says, ". . . and the windows will be done three months into the contract", and then you will move on to something else, the sub-contractor has to conform with that specific requirement in the overall housing management contract laid down as a slab and that is it whether it is convenient for the tenants to have their windows done within that three-month window at the start of the contract or otherwise. That is the only extent of any real delegation and rigidity and flexibility thus far. That is kind of over-egged for effect, but it is not that simplistic, having done it myself for many years, not put the windows in, but controlled the contract. That degree of flexibility is far more robust post the Order than it was previously. I think the points about what happens to these extant contracts or contracts which are being developed now if the Order does not get through, as David has already said, they will probably still happen, but in a far less satisfactory fashion certainly for local authorities and probably the contractors than if this Order is secured.

Mr O'Brien

  51. On the question of tenant consultations, the question-and-answer exercise so far has always referred to the consultation with tenants on the future programme, but what about the future consultation for tenants? Is there not a risk that under the arrangements put in place tenants could be bombarded with constant consultation on the management of their homes and, therefore, if we do not explain to the tenants in the first place that there will be continuing consultation, we could find that there will be a loss of interest for our tenants after the contract and that is too late because we cannot do anything about it afterwards, so what about future consultation? Has this been made clear to tenants?
  (Mr Green) I think, in my view, perhaps "consultation" is the wrong word and I would prefer to use the word "involvement". We proceed on the guidance we have issued in these instances on consultation terms. We are more concerned that tenants become involved in the whole process.

  52. So why is that not written in the Order then to start with?
  (Mr McNulty) It is and it says in the Explanatory Document basically how, if the Order is secured, the various range of ways in which consultation becomes a key and central part of the future contracts, but it leaves it to the contractors and the tenants and the local authority to devise how they best seek the way, given their circumstances, to consult and that consultation programme, for future reference, is part of the process—

  53. Is it consultation or is it involvement? Mr Green is saying "involvement" and you are saying "consultation". Now, if it is involvement, then it is not written into the Order. Why?
  (Mr Green) There are several parts to section 27, one of which does enable the Secretary of State to issue statutory guidance.

  54. That is the old one, but we are talking now of a new approach. If we are saying that there will be tenant involvement and the contracts will contain a lot of elements and there are elements along the way which hopefully the tenants will be involved in, therefore, if there is going to be all this pressure applied to tenants after the contract, why is that not put in the Order?
  (Mr McNulty) Well, as Mr Green said, the Order is dealing with only part of section 27, but the part of section 27 which talks about the issuing of guidance on consultation remains. It is not affected by whether the Order is secured or otherwise, as I understand it, and the Explanatory Document, as I say, sets out very, very clearly, number one, the importance of consultation and how within the process that consultation should be achieved. I think there is a kind of continuum, is there not, between involvement and what is more a day-to-day issue and broader consultation which impacts on the wider strategic programme issue. If consultation is devolved down to a proposal for a change in the housing management, you would expect some degree of involvement from the tenants in that process. Whether you are talking about some elaborate consultation process just as to whether you are going to change your housing manager or not, so it is full-blown consultation, would not stop it from being very, very serious involvement and participation for tenants.

  55. The real concern is that if we have all these elements in the contract and you said, Minister, that the local authority contracts will be involved with audit and everything else, so the tenants are going to be responsible, but they are not going to have the authority over the elements in the contract or the local government involvement with the auditors, so all they are meant to do is to consult with the tenants that a decision will be made by the Secretary of State or the contractors themselves or the local authority. Now, all that impact upon the involvement of tenants will derive a situation where the tenants say, "Right, we can't handle this because there is too much involved". Would it not be better to leave it with the local authorities, the elected councillors, the people who have been involved, the back-up services that they have? Would it not be far better to leave it with the elected members and the local authorities than to have all this mismatch of involvement and consultation by which the tenants will be mystified because of the amount of consultation that will be involved?
  (Mr McNulty) If I could be ever so slightly provocative, I would say that would assume that if you did leave it there, every single local authority in the country to an extent, a significant housing authority, would have a wonderfully good record because of their political control in terms of consulting and involving their tenants in housing matters and that is not the case at all. There are very, very good examples of housing participation involving the tenants in processes. It is outside the scope of this Order, but I think there is a good case for saying that in any of the four examples of how we are trying to up the decency standard that there should be more and more education and training to ensure that there is proper and detailed tenant involvement, so they are not just simply being befuddled, as you say, because I think if consultation, as you say, Mr O'Brien, is simply bombarding them, then it is not going to be terribly effective. If there is not some mechanism for developing the local residents' and tenants' organisation and getting them involved in the process and allowing individuals to get involved in the process, then it is not going to be terribly effective.

  56. Why did you not put that on the face of the Order, this question where you said just now that the tenants will be part of the exercise, but we are relying on the old legislation and then the Secretary of State will decide?
  (Ms Millington) Well, there is power to make regulations to provide consultation.

  57. Well, the fact that the tenants will be involved or whether it is involvement in consultation, I think that it would be much better if there was something specific in the Order which the tenants could refer to either to the contractor or to the local authority or to whomever that they would be involved, but as it is now, it is left to the Secretary of State.
  (Ms Millington) You want something saying that they are involved?

  58. Something saying that the tenants will have this right. If that is not going to be there then I think you ought to leave it with the elected members and the local authorities. The Minister says they are not all excellent, but in another forum we are saying that where people are not excellent at it we will give them an opportunity to improve; if not, we will send people in to show them how to do it. Why can that not apply to housing?
  (Mr McNulty) What is left to the Secretary of State is approval of the consultation mechanisms that the contractor and the local authority put in place.

  59. And agreements and sub-agreements.
  (Mr McNulty) Absolutely, especially in the case where, as the guidance suggests, the consultation will come in a number of forms. Where consultation is a delegated function then the SPV, the special purpose vehicle, will consult with tenants about the appointment of a manager and all that and they would then have to put forward proposals together with details of consultations with tenants, the whole lot, to the authority and then they[5] would have to apply for agreement to the Secretary of State. It is more than simply the Secretary of State rubber-stamping if there has been consultation or not, there are stronger processes in place than that and the points about guidance still prevail. The way I see it, we are taking the best of the guidance and everything else from the previous regime and putting it in the body of the new Order and it still has a significant importance in the nature and style of the consultation. What I was saying about the other point, which I think is outside the scope of both the original Bill and the Order, is putting on the face of it that somehow councils should facilitate the education and training of their tenants to get properly engaged in the consultation process. Personally, I think they should, but it is outside the scope of the Order.

3   The suggestion here was meant to be that some housing management work may be being subcontractual at the moment by authorities unaware of the constraints of Section 27. Back

4   This is a reference to the proposed subsection (7)(b). Back

5   i.e. the authority. Back

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