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24 May 2006 : Column 514WH—continued
The Government say that the pack will have “very little impact” on the number of completed sales taking place each year, yet research has suggested that up to 30 per cent. fewer properties would come to the market if the seller had to pay for a pack. Even if only 10 per cent. of properties were taken out of the supply side of the market, the likely result would be inflationary to house prices. In turn, the decline in the volume of homes coming to the market would doubtless exacerbate many of the problems in the housing market, such as having too many empty homes, and
increase the pressure for more new homes to be built, because of supply shortfalls of existing homes in the market.
It is tempting to think of the housing market as constantly rising, as it has been over the past decade, but even more alarmingly, HIPs will have a deeply negative impact in the event of a falling housing market. Liquidity will dry up. Those facing negative equity who might be forced by their financial circumstances to sell—thanks to a job loss during a recession, for example—will be hit with a charge of up to £1,000 to create the HIP, on top of all the other miseries involved in a distress sale of one’s ownhome. Others affected could include those needingto downsize in the event of changed personal circumstances, such as job relocation or disability.
The potential cost of the HIP is made worse because the pack has no shelf life. As some of the information to be contained in it is date-sensitive, such as local authority searches, the pack will need to be updated, at further expense to the seller, especially in a slow market. No responsible estate agent, surveyor or lawyer would recommend that a purchaser should rely on a potentially outdated report. I foresee that when the market is slow, a lot of money will be spent on updating the pack.
As to enforcement, as we know, the duty to provide a HIP lies with the estate agent. However, the penalty for not doing so is only £200. If the transaction fee for the estate agent is a few thousand pounds, the temptation to skim the HIP or not provide it at all may be too great. That links into enforcement, which presents a further problem. According to my information, enforcement will be down to council trading standards officers, who are thin on the ground these days.
In my experience in Hammersmith and Fulham under the outgoing and very incompetent Labour council, it is tough to get such officers to investigate things such as prima facie examples of dodgy builders who, having given promises about loft extensions, make off with tens of thousands of pounds from old ladies. Generally, the trading standards officers are not interested in knowing. The fine for not providing a HIP is only £200, and my expectation—it is only that—is that many in trading standards will simply not bother to pursue the matter.
Mr. Ian Liddell-Grainger (Bridgwater) (Con): I thank my hon. Friend for his help in preparing my ten-minute Bill, which, as he is aware, comes back in October. I am sure that the Minister will be interested in one of the problems that we both faced—the number of HIPs providers there in the first place. There are so few. Does my hon. Friend agree that not only can we not enforce HIPs, but they cannot be provided in the first place? The people to provide them are not there, and such people cannot be trained before HIPs come into operation.
Mr. Hands: I agree absolutely. I was alarmed to see reports in The Times on Saturday about how few trained HIPs officers there are.
Bob Spink (Castle Point) (Con): Given that situation, does my hon. Friend not think that it would be
eminently sensible for the Minister to delay the onset of HIPs by holding a meaningful pilot so that we can see their impact on the housing market and consider how we can develop more HIPs consultants?
Mr. Hands: I thank my hon. Friend for that intervention. It would be helpful to have a real pilot, although I was not going to go down that route, given the limited time available. My personal view is that HIPs should be abolished entirely rather than reformed.
I come back to trading standards. I have also not heard of any additional funding for local authority trading standards to finance effective policing. I bring another interesting consequence of the HIP to the attention of the Chamber. Statistically, the majority of properties in Britain will have changed hands in 20 to 25 years’ time, and the Government will then have an extensive and detailed database of all those properties. It would be cynical to suggest that that could form the basis of a tax, but the temptation would be there; in the hands of the current Chancellor of the Exchequer, there would certainly be the potential for a new Domesday Book in this country, although I doubt whether he would have that job by then. On a similar issue, anybody—not only those genuinely interested in buying the property—will be able to access the information given in a HIP. I see a field day for snoopers intrigued by the homes of their outgoing or incoming neighbours.
Finally, I turn to the likely impact on my constituency of Hammersmith and Fulham. It has a huge number of flats, which make up 71 per cent. ofits homes. That compares with a national average of19 per cent. Even without HIPs, the young professional flat owner gets a very raw deal under new Labour; that is part of the reason why Hammersmith and Fulham turned a dark shade of blue earlier this month. In marginal wards, the number of flat owners is even more stark. In North End ward, 88 per cent. of homes are flats; in Avonmore and Brook Green ward, the figureis 86 per cent.; in Addison ward, it is 79 per cent.;and so on.
Such areas are characterised by people who have bought a one or two-bedroomed flat. They already pay hugely more in taxes generally, but when it comes to a home sale under HIPs, the buyer in my constituency will already be whacked by stamp duty of 3 per cent. or occasionally 4 per cent. on the price—cash that they need to find up front. The seller will now also be hit by an up-front tax of up to £1,000 to buy a HIP.
I spoke to one prospective HIP provider yesterday, who thought that for the larger firms, the turnaround time to build the HIP might be as short as four to five days. However, it would take weeks or even longer if the property were leasehold, as there is currently no provision to force a managing agent to supply the information. Yet that is crucial in my constituency and across London, where there are tens of thousands of leasehold properties.
The problems really begin when it comes to getting information out of a managing agent. I spoke to a London estate agent yesterday who told me that HIPs are particularly feared in London because of the large number of leasehold properties. Managing agents are
often notoriously unresponsive unless their financial interests are directly threatened; they have no real incentive to provide the relevant information for a HIP. Rightly, the big fear is that they simply will not deliver it on time, the market will get slowed up and the reputation of HIPs in general will start to suffer in London, which could have a disastrous impact on the reputation of the whole scheme.
There are well-rehearsed arguments against HIPs, and I have not detailed all of them, as I am sure my colleagues would agree. I am yet to see, other than directly from the new billion-pound-a-year HIP industry, any real answers from the Government to those concerns. I and my constituents want to see not more promises but, if hon. Members will excuse the pun, a complete HIPs replacement.
4.41 pm
Michael Gove (Surrey Heath) (Con): It is a pleasure to serve under your chairmanship today, Mr. Bercow. May I thank my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) and the Minister, who is in her place, for giving me permission to speak in this debate?
As my hon. Friend said, home information packs mark a significant state intervention in the property market, with potentially disruptive consequences for consumer confidence. That is why I would like to give the Minister the opportunity today to try to reassure consumers. Her work is formidable; if one examines the scale of opposition to HIPs, one will see that nearly every interested group in the property market has deep worries about the implementation of the scheme. Independent estate agents, and indeed the National Association of Estate Agents, have outlined deep opposition to the scheme. Only this week, 80 per cent. of building society chief executive officers have said that they believe that HIPs will have a negative impact on the housing market.
Why does the Minister believe that that is so? Building society chief executive officers say that HIPs will add costs to the home-buying process, not reassure prospective buyers or speed up the process, and reduce the number of properties in the market. If those with a direct stake in the effective functioning of the market are so worried, what can the Minister say to reassure them? It is not just building societies; the Law Society has also signalled its concern, as has the Royal Institution of Chartered Surveyors.
The Council of Mortgage Lenders has also tried its best to ensure that the scheme will work, but only this week it spelled out its concerns again. The majority of lenders have made it clear that in a significant number of cases the home condition report, to which my hon. Friend referred, will simply not be enough to guarantee a loan; an evaluation or survey will be required. There will be additional costs for both seller and buyer, additional taxation for the Chancellor and additional pain in the market.
The Minister is fond of saying that consumer groups favour the home information pack. Will she tell us which groups—in the plural—actually favour the pack? As far as we can see, only one organisation representing
consumers has made representations in favour of the pack. Will she tell us on what statistical basis she can say with confidence that consumers welcome it?
Talking of a statistical basis, the evidence basis for the introduction of the HIP is, as I am sure we all know, the “Key research on easier home buying and selling” document produced by the Department of the Environment, Transport and the Regions in 1998. However, that evidence was based on fewer than30 transactions. Will the Minister tell us what evidence base she has for her belief that HIPs will bring the benefits of which her Department has boasted?
Talking of rigorous evidence, my hon. Friend referred to the need for a dry run. In an answer that the Minister was kind enough to give me, she said that a dry run would operate on an entirely voluntary basis. Indeed, we understand that it will be overseen by the HIPs providers themselves. How can the providers sit as judge and jury in their own case?
In November 2004, the Lord Rooker indicated that a compulsory dry run would take place in a local area. Has that promise now been abandoned? Will clear benchmarks and criteria be published by which we can judge the success of the dry run or will providers of the packs simply be encouraged to give them to buyers, say they have been a tremendous success and allow the Department to proceed willy-nilly without the firm guarantee of consumer confidence that we need? If we are to have a successful dry run we need home inspectors. How many home inspectors are qualified? We know that there are only 200, because of the extensive investigative work of Valerie Elliott, the consumer affairs correspondent of The Times.
The Minister says that 4,000 home inspectors are in training. It takes only five days for someone who knows something about property to qualify. However, before Christmas 1,750 people were in training, and five months—not five days—later, only 200 have qualified. What guarantees do we have that there will be enough home inspectors and that those people will have any real background in the construction industry, surveying or any of the skills required to provide consumer confidence? Those matters go to the heart of ensuring that the housing market functions effectively.
The Minister will be aware that there is a new consensus, led by my right hon. Friend the Member for Witney (Mr. Cameron) and my hon. Friend the Member for Tatton (Mr. Osborne), on the need to increase housing supply and help first-time buyers. It would be a tragedy if that new consensus were disrupted by the introduction of an ill-thought-through intervention in the market. I invite the Minister to join me and the right hon. Member for Birkenhead (Mr. Field) and the hon. Member for Norwich, North (Dr. Gibson), who have signed my early-day motion, and to forge a new cross-party consensus to find a voluntary way forward.
John Bercow (in the Chair): Order. The hon. Gentleman’s elastic interpretation of two minutes must not be replicated by the hon. Member for Cotswold (Mr. Clifton-Brown).
4.46 pm
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): I take your stricture absolutely, Mr. Bercow, and I amlooking carefully at the clock. I congratulate myhon. Friend the Member for Hammersmith and Fulham (Mr. Hands) and declare to the House an interest in the matter as a chartered surveyor.
I want to raise one or two points that have not yet been raised in the debate. My hon. Friend the Member for Surrey Heath (Michael Gove) referred to Valerie Elliott’s article quoting the figures obtained fromthe Minister’s Department, showing that there are currently only 196 trained inspectors, and that 4,000 are in training and 7,000 are needed for the 1.5 million sales that take place each year. The problem is obtaining inspectors of the right quality.
That brings me to my next point. Many of the inspectors will be of low quality, and have low-quality training. It takes five years to train a chartered surveyor. The people involved will be trained in a year and will be required to carry out at least four home surveys a day, whereas I as a chartered surveyor would probably deal with only two a day, because I would be much more thorough.
The next question to arise is how the inspectors will obtain professional indemnity insurance, especially given that that is likely to be expensive because of their low quality and because purchasers will be able to sue them if their inspections are deficient. Also, how does the Minister think that the energy efficiency reports system will be ready to come into full operation for1.5 million houses next year?
I end with a quote from Valerie Elliott, who says in her article that there could be
“a year of panic selling to avoid the extra costs that will be incurred with the pack”
“likely to be followed by a stagnant market”.
I recommend to my hon. Friend the Member for Surrey Heath that when he is in the Minister’s place in four years’ time he should drop sellers packs and instead concentrate on speeding up the efficiency of electronic searches and conveyancing. That will do more to help the market than the home sellers packs will ever do.
4.48 pm
The Minister for Housing and Planning (Yvette Cooper): I congratulate the hon. Member for Hammersmith and Fulham (Mr. Hands) on securing today’s debate and choosing such an interesting and important subject.
Opposition Members are opposed to home information packs. That is obviously not news; I know that many of them have been opposed to them for a long time. It is perhaps a shame, however, that they have not taken advantage of their change of leader and change of direction to the compassionate conservatism that the hon. Member for Surrey Heath (Michael Gove) is very proud to proclaim at every opportunity to have a rethink about this policy issue. They may claim to be compassionate Conservatives, but they are still clearly not consumers’ Conservatives. They are still, on this issue, the party of the vested interest.
The hon. Member for Surrey Heath said that there was concern on the part of interested groups. That is certainly right; there is concern from groups with vested interests. There is concern among groups that make money from the current process and do not want to innovate and to change the way in which they operate. We recognise that those concerns exist. However, it is also right for us to take consumers’ interests seriously. The biggest consumer group in the country, Which?, has been campaigning for home information packs for a long time. Frankly, Opposition Members are unwise to set themselves against such a major consumer interest group, because that independent voice has been calling for the change for a long time.
Michael Gove: I asked the Minister directly if she could name more than one consumer group that supported the introduction of home information packs, and what the evidence base was. Apart from the Consumers Association, can she name any other groups?
Yvette Cooper: Let me give the hon. Gentleman the evidence base to which we refer. The Consumers Association conducted a survey in which it asked 1,000 people who had bought or sold their homes at the end of 2003 how useful they thought it would be to receive a HIP, including details about the condition of their property, and 82 per cent. said that they thought it would be very useful. A year later, in a follow-up survey, 1,824 people were asked for their views on HIPs, but on the assumption that they would have to pay for them. They were specifically asked whether they would be in favour of HIPs if they had to pay for them as sellers, and 78 per cent. said that they would be a good idea. Not only has Which? done its consumer research; it has considered the process in some detail.
I shall respond to some of the points made in the debate. We have to start from the perspective that the current system is not working. It is madness, as we waste £350 million a year on failed transactions. That is the case partly because people make an offer based on limited information. They then start paying for more information through searches and a survey, and the legal fees start ratcheting up—and then the sale falls through. Along comes another potential buyer who has to pay again for all that information. That can happen again and again. Such duplication is hugely inefficient.
Mr. Hands: Will the Minister give way?
Michael Gove: Will the Minister give way?
Yvette Cooper: I shall give way once more, but I have ensured that all hon. Members have had time to speak in the debate, and I want to respond to the points that have been made. I shall give way once now, but I shall not give way again until I have made some progress.
Mr. Hands: Does the Minister accept that her figure of £350 million is nevertheless massively less thanthe figure of anything between £700 million and£1 billion—the cost of the HIPs industry—and that the net loss to the consumer will be more than double?
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