Select Committee on Regulatory Reform Fifth Report



PROPOSAL TO REPLACE PHRASE "AS AGENT"

  58. We are also satisfied that the necessary protection currently given to tenants and others by the phrase "as agent of the authority" would be maintained by the proposal to amend section 27 by the insertion of new subsections (13) and (14). As currently drafted, new subsection (13) would (subject to new subsection (14)) provide that "anything done or omitted to be done by or in relation to a manager, in, or in connection with, the exercise or the purported exercise of any management function exercisable by the manager under a management agreement shall be treated for all purposes as done or omitted to be done by or in relation to, the authority". This would ensure the preservation of an authority's accountability to third parties for the exercise of management functions by a manager.[48] New subsection (14)(a) expressly allows the agreement between the parties to deal with rights and duties as between themselves, thereby ensuring that the manager, rather than the authority, takes on the risks and responsibilities of providing the services themselves[49] (which is, as the Department points out, a crucial aspect of PFI contracts).[50] We were pleased to note the Minister's confirmation that, from the point of view of the tenant who wishes to complain about the provision of housing management services, "the council is still the landlord and the final arbiter and the key democratic focal point."[51]

Drafting of these provisions

  59. Notwithstanding our conclusions above, we are concerned about the drafting of these provisions. The fact that necessary protection is maintained, and in particular the important question of "where the buck stops" in respect of the provision of local authority housing management services, is very far from being clear from the proposed order as it is currently drafted. Even the Department itself had considerable trouble explaining what subsections (13) and (14) were supposed to mean.[52] The important question of local authority accountability for the provision of housing management services should not be tied up in obscure legalese. If necessary protection is to be maintained, the relative roles and responsibilities of those involved in providing housing management services should be quite clear. Bearing in mind particularly our duty under the Standing Order to consider whether a proposal is drafted in plain English,[53] we therefore recommend that the Department either redraft these provisions in a more readily comprehensible fashion, or convince us that it is not possible to do so in a way which preserves legal certainty.

GUIDANCE FOR PFI HOUSING PROJECTS

  60. In its chapter on the maintenance of necessary protection, the Department also adds

For housing PFI projects the Department is keen to see tenants involved at an early stage in the projects including the provision of any necessary training in PFI documentation etc. The Department has put in place non­statutory guidance for authorities pursuing housing PFI projects and other, similar arrangements. This includes among other things the requirement that mechanisms should be built into any agreements which ensure that tenants' views are taken into account and responded to throughout the contract period. The Secretary of State/National Assembly for Wales will take the results of the consultation into account when deciding whether or not to give approval.[54]

The guidance referred to may be found at Annex F of the explanatory statement.

Fair balance

  61. We are satisfied that the proposals strike a fair balance between the public interest and the interests of the persons affected by the burden being created. We are content with the Department's explanation, in its later memorandum, of how the proposal meets this test.[55] Insofar as this proposal is concerned, we consider that the public interest lies in ensuring the effective and efficient delivery of local authority services. Local authorities, who are affected by the burdens being created, have a similar interest, but they also have an interest in not being subject to excessive burdens. The "fair balance" test is therefore similar in practice to the "proportionality" test which we consider above, and we are satisfied that it is met.

Desirability

  62. We are also satisfied that the extent to which the order removes or reduces one or more burdens, or has other beneficial effects for persons affected by the burdens imposed by the existing law, makes it desirable for the order to be made. Once again we are content with the Department's later explanation of how this test is met.[56] New burdens would be imposed on local housing authorities, but only in the context of the removal of a restriction on those authorities in the way they may delegate their housing management functions. Consultation responses from local authorities confirm that they consider it desirable that this order should be made.[57]

Rights and freedoms

  63. The proposal would not prevent any person from continuing to exercise any right or freedom which he or she might reasonably expect to continue to exercise. In particular, the Department is keen to emphasise its determination to ensure that tenants' rights to consultation are not affected. Under the existing requirements of the Housing Act 1985, tenants are required to be consulted on matters of housing management where there is a proposal to change housing management policy and practice. The retention of the requirement to seek the Secretary of State's approval for any changes to managers and management agreements is a means of ensuring that this right is recognised and acted upon. The Department also states that the changes have been framed so as not to impact adversely on tenants' rights under the "right to manage" regulations.

Costs and benefits

FINANCIAL COSTS AND SAVINGS

  64. The Department states that there will be no costs associated with the changes proposed to be made. The savings associated with the proposed order derive from those savings identified in each housing PFI project which will be enabled to proceed. The value for money savings vary from project to project depending on their size and scope. The Department reports that the savings associated with existing projects range from £0.12 million to £13.3 million in net present value terms when compared to authorities' estimates for undertaking the work of the PFI projects themselves. It also states that enabling the current PFI projects to go ahead would bring about increased capital investment to local authority properties worth £760 million[58] and improvements to approximately 30,000 homes. In addition it would mean that the expenses incurred by both local authorities and the private sector to date would not be wasted. Comments received to the consultation exercise quote figures of £1 to £2 million in respect of bidders' costs and £1.5 million on the part of authorities.

OTHER BENEFITS

  65. The Department claims that the proposed order would have a number of other benefits for local housing authorities:

66. The Department also claims that the changes would have a number of other benefits for other parties. It considers that the proposal would benefit tenants as follows:

  • Tenants will benefit from the arrangements by virtue of the increased investment in their properties and environment, and better value for money from their rent.
  • Tenants will also benefit from the knowledge that services will be provided to set standards for the length of the contract period, that their rights to consultation are being retained and that they will remain tenants of the local authority. There will be similar benefits to leaseholders where they are part of such schemes.
  • Where PFI and other similar contracts are concerned, tenants will have the opportunity to be involved in the process of specifying the requirements, evaluating bids and having a say in monitoring the contracts.
  • Tenants will have the security of knowing that the housing and services will be maintained at the levels laid down for the length of the contract (in PFI arrangements, these will be for periods of thirty years).

We note in passing—as did some of the respondents to the consultation on this proposal—that these last three points in particular are perhaps less benefits of the proposal itself than of the arrangements which the Government intends should be put in place once the proposal is implemented. Whether, and how, tenants might also be enabled to gain these benefits even if the proposal were not implemented is debatable.

67. The Department considers that the proposal would benefit business in the following ways:

  • Businesses will benefit by being able to bid for the functions as consortia in the form of Special Purpose Vehicles, which will give them the flexibility to appoint sub­contractors who offer value for money.
  • Businesses will also benefit from entering into long­term arrangements where payment is made by the authority on a regular basis for thirty years in return for achieving certain standards in housing and services.
  • Smaller businesses will benefit through the opportunity of being appointed as sub­contractors.

68. The Department also notes that "a number of contracts envisage other benefits such as regeneration of the area, overall improvements to the estates, reductions in crime, greater tenant involvement, provision of work and training locally etc.", and comments, "Perhaps the major benefit which cannot be quantified is the improved quality of life for tenants where they are a part of these projects."[59]

69. A Regulatory Impact Assessment has been completed and may be found at Annex A of the explanatory statement. We are satisfied that the proposal has been the subject of, and taken appropriate account of, estimates of increases or reductions in costs or other benefits which may result from the implementation of this proposal.

Conclusion

  70. We conclude that the proposal should be amended as recommended in paragraph 59 above before a draft order is laid before the House.


48   Appendix B, para A8, final paragraph. Back

49   ibid Back

50   Explanatory statement, para 4.8. Back

51   Q81 Back

52   See Appendix B, section A6; Qq 79ff., 84f. Back

53   Standing Order No. 141(6)(h) Back

54   Explanatory statement, para 9.8. Back

55   Appendix B, section A10(a). Back

56   Appendix B, section A10(b). Back

57   See Chapter Twelve of the explanatory document. Back

58   The Regulatory Impact Assessment (Annex A to the explanatory statement; para 20) says £740m. Back

59   Explanatory statement, para 6.7. Back


 
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