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Session 2005 - 06
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Standing Committee Debates

Home Information Pack Regulations 2006

The Committee consisted of the following Members:

Chairman: Hugh Bayley
Brake, Tom (Carshalton and Wallington) (LD)
Cooper, Yvette (Minister for Housing and Planning)
Duddridge, James (Rochford and Southend, East) (Con)
Gove, Michael (Surrey Heath) (Con)
Griffith, Nia (Llanelli) (Lab)
Hands, Mr. Greg (Hammersmith and Fulham) (Con)
Hillier, Meg (Hackney, South and Shoreditch) (Lab/Co-op)
Jackson, Mr. Stewart (Peterborough) (Con)
McCarthy, Kerry (Bristol, East) (Lab)
Pound, Stephen (Ealing, North) (Lab)
Rosindell, Andrew (Romford) (Con)
Shaw, Jonathan (Chatham and Aylesford) (Lab)
Smith, Ms Angela C. (Sheffield, Hillsborough) (Lab)
Spellar, Mr. John (Warley) (Lab)
Stuart, Ms Gisela (Birmingham, Edgbaston) (Lab)
Stunell, Andrew (Hazel Grove) (LD)
Wright, Mr. Iain (Hartlepool) (Lab)
John Benger, Committee Clerk
† attended the Committee

Third Standing Committee on Delegated Legislation

Thursday 20 July 2006

[Hugh Bayley in the Chair]

Home Information Pack Regulations 2006

2.30 pm
Michael Gove (Surrey Heath) (Con): I beg to move,
That the Committee has considered the Home Information Pack Regulations 2006 (S.I. 2006, No. 1503).
It is a pleasure to serve under your chairmanship, Mr. Bayley. In a way, it is curious to be having the debate on the regulations governing the introductionof home information packs today, because the past48 hours have been the most tumultuous that we have seen in the life of HIPs. The idea of such packs was originally raised before the 1997 general election, and the Prime Minister conceived that something similar to them would be a way to deal with gazumping.
Subsequent to that original conception, HIPs have had a bumpy ride through the House. They were introduced in the Homes Bill 2000, dropped before the general election, and then re-introduced in the HousingAct 2004. They have been trumpeted by the Minister, and particularly by her predecessor the right hon. Member for Streatham (Keith Hill), as the answer to all sorts of ills in the housing market. Then, just 48 hours ago, the Minister issued a written statement that was extraordinarily welcome to the Opposition. It explained that the central keystone—the architecture—of HIPs, namely the home information report, would no longer be mandatory but voluntary. By making that change, the Minister brought the whole house tumbling down on the Department’s head. The scheme, or at least the system of information reports, which was to be mandatory to deliver all the benefits claimed for it, was now to be voluntary, and the whole situation was transformed.
Mr. Greg Hands (Hammersmith and Fulham) (Con): I cannot help feeling slightly sorry for the HIP providers, who have also had a pretty torrid time in the last 24 hours. A couple have been on the phone to me today. It seems that the share price of Rightmove, for example, has dropped by 20 per cent. in the last couple of days, thereby wiping £90 million of its market value. It is another victim of this Government chaos.
Michael Gove: My hon. Friend makes a good point. The Association of Home Information Pack Providers is a body that was set up essentially to service the Government’s requirements, but the Government have pulled the rug from underneath it, because the changes made as a result of the written statement on Tuesday essentially mean that the association has been deprived of the market that it sought to service. Consequently, as my hon. Friend rightly points out, the share and equity markets have formed their own judgment about the Government’s wisdom in claiming that HIPs survive in some form or other—they have wiped a huge sum off the share prices of those companies that were due to deliver the packs and reports.
Obviously, markets are markets, and it is not for the Government to insulate people from their own folly, but the Government bear responsibility for creating a scheme, for encouraging home information pack providers to provide a certain product and for subsequently saying that that product, which would have been mandatory, is now voluntary. It will be interesting to see how the Minister seeks to discharge her responsibilities in that regard.
Before we had the Opposition day debate on HIPs, I received an e-mail from a member of the Association of Home Information Pack Providers, in which the member said that the association would stay closely in touch with key spokespeople, Labour MPs and the Minister’s office. I suspect that that close amity was ruptured by Tuesday afternoon’s decision to pull the rug from under their feet. Given the Minister’s strictures about Conservatives being in the pockets of vested interests, will she explain precisely what conversations she has had with the association and others about her past and future plans?
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): Talking of e-mails, I had one in which the Government were chastised for not making the scheme mandatory. It was said that the market would demand it, to which my response was that, if the market demands it, it will happen—that is operation of the market. Surely the hon. Gentleman would agree.
Michael Gove: The hon. Lady makes a good point. She has a sophisticated understanding of markets, as is attested by her recent article in The Daily Telegraph, which took the Chancellor to task for his over-regulation of the economy. I pay tribute to her for making a free-market point once again, and adding grace and lustre to the Government Benches as she does so. However, the key point about the operation of the market is that, if home condition reports are seen as an asset, they will be taken up voluntarily. That case was made by my hon. Friends the Members for Cotswold (Mr. Clifton-Brown), for Poole (Mr. Syms) and for South Holland and The Deepings (Mr. Hayes) during debate on the Housing Act 2004. If there is a demand, that demand will be satisfied; there is no need for compulsion.
We saw the raising of the white flag on Tuesday afternoon and the retreat under fire yesterday afternoon, and this afternoon is the mopping-up operation. I shall ask the Minister a few questions, so that she can give us and the people who have staked so much money on the scheme a greater sense of clarity on how we will proceed in future.
The first issue is the number of home inspectors. The Minister has acknowledged that there are question marks over the number of home inspectors who will be qualified in time for 1 June 2007. The number of home inspectors was a key factor in leading her and her right hon. Friends to climb down. She has made it clear that we would need between 5,000 and 7,500 home inspectors to make the scheme work. How many home inspectors does she believe will be necessary to deliver those aspects of the HIP that she still considers mandatory and worth insisting on?
On the last occasion when the number of those qualified was updated, we were told that fewer than 250 had qualified. How many have qualified now? Can we have a timeline so that the Minister can tell us how many she expects to qualify in each of the succeeding months before 1 June? She has spoken of 4,000 home inspectors undertaking training. How many of those people were simply registered for training, and how many had embarked on a full training course? Of those who had, how much money did they commit to the course? What compensation, if any, will be available to those who, having sunk more than £8,000 into the training course in some cases, now feel that it is no longer appropriate to carry on, because home condition reports will not be mandatory and their services will no longer be in the same demand as they would have been?
Can the Minister also tell us about the certification scheme or schemes for home inspectors? She has mentioned a number of companies competing to offer certification. How many companies have expressed an interest in the scheme? After her announcement on Tuesday, how many companies still retain an interest in it? When does she expect to announce details about who will operate the schemes and how they will operate?
Can the Minister tell us about the HCR database? The original idea was to have a Big Brother-style database featuring HCRs on every home in the country. The Government assured us that access to the database would be restricted to lenders, buyers and sellers, but one question mark in many of our minds is whether the Government will have access to it and use it as part of their process of council tax revaluation by stealth. Enlightenment on that point would be worth while and welcome.
More than that, we need to know something about how the HCR database will operate and integrate with the work of lenders. The concerns of the Council of Mortgage Lenders, building societies and others about its operation also contributed to the climbdown of the Minister and her Department. Lenders said that they would need at least 12 months to ensure that their systems were compliant with the database. We are already less than 12 months away from 1 June, and there are still huge question marks over how the database will operate.
I asked yesterday about the number of people who had applied to run the database. It was reported that four companies originally expressed an interest and two had pulled out. How many companies are still expressing an interest in running it? What are the terms of the tender for which they are applying? What conditions will govern how the HCR database operates?
The Minister made it clear in her statement on Tuesday and in a fiery and characteristically feisty speech yesterday that dry runs to prepare for the introduction of HIPs would carry on. I cannot help feeling that they are curious exercises. It is almost as though the beaten Confederate army of 1865 was still undertaking manoeuvres in 1866. Even after the white flag of surrender has been pulled up, a phantom force tries to carry on the fight as though nothing has changed.
Nevertheless, can we hear more about the dry runs? Will people be provided with HCRs? Will the reports be mandatory in specific geographical areas? If so, will new legislation be required? How will that legislation be passed? If such reports are voluntary in all dry runs, how effective a test of market demand for HCRs will they be? Who will pay for the HCRs in a dry run, if they are provided? Will they be paid for by organisations that are members of the Association of Home Information Pack Providers? If so, how will that be an effective market test?
Stephen Pound (Ealing, North) (Lab): In his short time—I hope that it will remain short—in the House, the hon. Gentleman has earned himself a reputation as a skilful forensic operator. He is known as the stiletto of Surrey Heath. We are interested in his accounts of forays by Sherman and Lee. However, does he not have it in his heart, as a profoundly decent and reasonable human being—a man who has more friends than he probably suspects—at least to recognise that the Government are responding to the situation? Could he not at least say that he approves of yesterday afternoon’s statement?
Michael Gove: I am delighted to accept that kind invitation—issued with customary grace and eloquence—from the hon. Gentleman. I am grateful to him for his kind words, which provide me with the opportunity to repeat what I tried to say in my halting and inadequate way yesterday afternoon. I am delighted that the Minister has seen the force of the Conservative arguments and climbed down.
We, in the modern and compassionate Conservative party, are always delighted when a consensus is forged and division ends. So I took the opportunity yesterday—I am delighted to do so again—to congratulate the Minister on her perspicacity. In particular, I pay tribute to her for grasping a nettle that her predecessor, the right hon. Member for Streatham (Keith Hill), failed to grasp.
Stephen Pound: I shall try not to trespass on your patience too long, Mr. Bayley, but as the hon. Gentleman is wearing a tie, clearly he is not a fully paid-up member of the compassionate Conservative party. I believe that the injunction was to hug a hoodie, not a baldy. Will he contain himself?
Michael Gove: As the hon. Gentleman notes, in the Conservative party, there is a proud tradition of lavishing affection on baldies. We elected two of them as leaders, and now we are trying someone slightly less follicly challenged. However, let me assure the hon. Gentleman that I have no intention of embracing him or indeed the Minister in anything other than a metaphorical sense.
I should like to make some progress, or at least to carry on with the questions that I was asking the Minister. She said that some 14,000 HIPs have been trialled. Of those 14,000, how many contained HCRs? What has the analysis of their distribution led her and her Department to believe? Will she tell us what independent assessment or testing will take place in the dry runs? Will the Government or the Association of Home Information Pack Providers sit as judge and jury of the tests? Or will someone suitably independent run their eye over the dry runs to see what merit is in the Government’s undertaking?
More broadly, the Minister said in her statement on Tuesday that there were significant risks and disadvantages in pressing ahead with the big bang on1 June 2007 and the introduction of mandatory HCRs. However, with uncharacteristic reticence, she did not go into those risks and disadvantages. So that we can better understand what we should do, will she outline what those specific risks and disadvantages would have been and explain how she would seek to mitigate them? For the benefit of the Committee, will she enumerate those risks and disadvantages?
The Minister has made great play of the importance of energy performance certificates. Indeed, the Opposition are delighted that the Department for Communities and Local Government has assumed an environmental conscience. However, what consultation did she and her Department undertake to find the best way of ensuring that energy performance certificates, or any other mechanism, could be implemented to assure compliance with the EU directive? What other schemes might have been adopted, or could yet be adopted, to ensure that we meet our obligations by 2009?
A number of people have put to me a problem with the Minister’s proposal for enabling us to meet our objectives: HIPs necessarily only come into play when a house is bought or sold. Given that the number of transactions every year is significantly less than the total housing stock in Britain and that energy performance certificates will only be issued when houses change hands, how can we be sure that the private housing stock in this country—every private house—receives an appropriate energy performance certificate by 2009, when the directive is due to come into force?
It has been suggested that it might be appropriate to use some other means of ensuring that there is appropriate certification. Would it be appropriate for local authorities—possibly with the issuance of council tax bills—to play some part in ensuring that energy performance certificates apply to all homes? As we know, those energy performance certificates will give all houses a rating from A to G. Will the Minister enlighten us how complex the process of setting that rating will be? How long will it take for an average home—if there is such a thing—to receive an energy performance certificate? Will she tell us what qualification is required to issue an energy performance certificate?
As the Minister knows, the process of qualifying as a home inspector is currently arduous and expensive. As we have mentioned before, it costs at least £8,000. Will it really cost that much to be fully equipped to issue an energy performance certificate? If she could tell us precisely what it will take, we may have a better understanding of whether or not it would be an economically rational choice for individuals to press ahead with home inspector training? Will she tell us whether VAT will be charged on the issuance of energy performance certificates? It will be interesting to know whether or not this is another mechanism for a stealth tax?
Will she tell us what local authorities are specifically doing to lower their charges and to ensure that the market operates—that the private property search groups have the opportunity to gain full access to local authority information and ensure that searches are delivered in a timely way?
On the whole matter of energy performance certificates and local authority searches, one question that has been put to me by others is why cannot such things be required—if they are required—at the point of sale, rather than the point of marketing? Given the importance of ensuring that local authority searches are timely, will the Minister tell us why those local authority searches are needed at the point of marketing? Would it not be cheaper and less bureaucratic to require them at the point of sale?
At this stage, I should like to say that the Minister has been, as I mentioned earlier, feisty and fiery at the Dispatch Box, but also gracious in acknowledging the sincerity of many Opposition Members in seeking to ensure that, if the scheme goes ahead, it does so in a way that will comply with market requirements.
We are asking those questions now because we acknowledge the Minister’s climbdown. We welcome that and are delighted that she has seen sense. We would rather that she went back to the drawing board and thought again. However, we acknowledge that she wishes to press ahead. We wish to ensure that all those who are charged with delivering the scheme have all the information now, so that what the Government seek to deliver can be delivered. We asked questions in the past, as a result of which the Government had to acknowledge that they were not ready to press ahead. If the answers that we, or more importantly the industry and consumers, receive are inadequate, I am afraid that the lack of confidence that people have expressed in home information packs will—if that were possible—only grow.
2.49 pm
Andrew Stunell (Hazel Grove) (LD): Thank you for calling me, Mr. Bayley. I am pleased to serve under you this afternoon. Following the announcement on Tuesday and the debate yesterday, I wondered whether we would go ahead with this statutory instrument. I hope that the Minister will explain why it is still appropriate to go ahead in view of the decision that she has taken. In yesterday’s debate, I posed a number of the important practical questions that arise. Understandably, detailed answers were not available then, but I hope that the Minister will now take the opportunity to respond.
“The Government has powers under section 162 of the 2004 Act to suspend the home information pack duties after they come into force.”
I am not clear what procedure the Minister will use to implement the statement that she made on Tuesday. Will those duties come into force and then be suspended, or will they not come into force? What process does she intend to follow? It makes a difference. If the duties are not to come into force at all, this statutory instrument is nugatory. However, if they are going to come into force and then be suspended, the House should be fully aware of the process that will be followed. That seems to me to be a starting point for the Minister’s response.
During yesterday’s debate the Minister helpfully said that, before proceeding in more detail with the dry runs, she would want some market research to take place this summer. She did not have the opportunity to tell us what that market research would consist of or even which market would be consulted—potential buyers and sellers, the industry or some other group of people who might have useful things to say, such as a better set of spin doctors. What will the market research be? I hope that one thing that it will do will be to re-explore the cost and savings assumptions to which the Minister briefly referred, and which are set out in considerable detail in the regulatory impact assessment. I shall come to that. What is the market research, who is asking the questions and what is the intended outcome?
That leads, clearly, to the nature and scope of the pilot operations, and particularly to their intended timetable. I freely admit that I was a little surprised when I came to pages 46 and 47 of the regulatory impact assessment to find that the process is to be divided into a number of steps: phases 1, 2 and 3. Of phase 1, it says:
“This phase has already begun.”
Perhaps that is a reference to the dummy runs that have, reputedly, taken place. However, in all the information that I have been given, both by providers and by critics, there has been no clear reference to what has been done so far and what the outcome of phase 1 has been. The RIA—if I may call it that—then says that the process will move on to phase 2, voluntary full home information packs. In light of the Minister’s announcement, does that mean what it says, or will the voluntary full home information packs in phase 2 be voluntary half full home information packs? Again, we need to understand exactly what kind of a dry run is being put in place.
The regulatory impact assessment also says that phase 2 cannot start until
“the first Certification Scheme is approved”.
I assume that no certification scheme has been approved. I do not know whether that is the case, but perhaps we could be told, as well as the number of schemes, how soon they will be approved and so on. Clearly, that is crucial to getting to phase 2—whatever that consists of.
Beyond that is phase 3, described as “voluntary tertiary activity”, which
“will enable Lenders and other third parties to test their ability to acquire Home Condition Reports from the Entity-level Registers and assess their use in lending decisions.”
I think that means that it will allow mortgage providers to see whether reports on home condition surveys are sufficient for a valuation. That is phase 3. I thought that that had been tested, nailed down and agreed, but it seems that a lot of questions remain to be answered, not just about the need for a dry run and pilots, but about their basis. I support the comments of the hon. Member for Surrey Heath (Michael Gove); we need to know the location, the baseline from which we will measure success or failure, and the monitoring process that will be used.
Paragraph 201 of the regulatory impact assessment states:
“Results will be monitored and reported through a monthly confidence assessment report to the Programme Board, the Central Stakeholder Group and other interested parties as defined by the Programme.”
I declare myself to be an interested party, although I do not know whether I am recognised by the programme. What will be the process of reporting and who will be eligible to receive the information as a going concern?
I have probably made my next point in passing already: if the certification scheme is to be an integral part of rolling out the pilot studies or, rather, if it is a necessary precondition, we need to know the expected start date. When I first became aware of the lively discussion taking place in spring of this year about the pilot studies, it was suggested to me that they would be carried out in distinct geographical locations, and that they would start in June this year—last month. However, it was not possible to proceed with those, not least because the regulations before us had not been published and approved by the House. Will the Minister tell us whether the intention is still to use distinct geographical areas? If so, where will they be? Or will anyone be able to volunteer, from one end of the country to the other? If so, how will it be possible to evaluate whether there has been a 5 per cent. increase or decrease in the number of transactions, if only one in 100 in each area volunteer?
Of course, the number of volunteers is one of the issues. The regulatory impact assessment was perhaps a little too honest for the Minister’s requirements. Page 16 contains the various options considered. It evaluates in detail three options and then gives two further ones that “were considered”. Interestingly, of the five options, none is that which has been given to us by the Minister. So we have a sixth, unevaluated option, although it might be said to fall broadly between options C and E. When I come to the cost implications, I shall mention that again.
The assessment has this to say about voluntary schemes:
“previous attempts at voluntary reforms have not been successful”.
It goes on to speculate that if 10 per cent. of sellers provided a home information pack, that could reduce the annual cost of failed transactions by up to£35 million. That is the estimate in the RIA—10 per cent. The next sentence reads:
“However this is probably overly optimistic.”
In other words, the RIA says that a figure of 10 per cent. for people volunteering is overly optimistic.
We need to understand the pilot quite clearly. The geographically ring-fenced nature becomes more important. If 30 per cent. of people volunteer, that might be highly detectable across the country, but if the relevant figure is the difference between 5 and 15 per cent. it will not be detectable, owing to variations in take-up in different places. We need to understand things a lot more clearly than is possible on the basis of what we have been told so far.
On the question of HIP inspectors, I was troubled by what was said in paragraph 96 of the report because of the implications now that the scheme has changed. Paragraph 96 says that being a home information pack inspector would be
“particularly suitable for people who want to work but have additional responsibilities, such as caring for children or elderly relatives. As carers tend to be female the career opportunities created under this option could particularly benefit women.”
That has been undermined by the decision that has been taken. The assessment, which is remarkably thorough, explains that the Department has arranged monthly monitoring meetings and monthly reports on the number of candidates in training. It has also arranged monthly monitoring reports on the number of people who receive the qualification and who graduate from the course. So if the assessment is right, the Minister already has a month-by-month report on the number of candidates and the number of qualified people, and I hope that she will tell us those figures. Given the Department’s additional responsibilitiesfor women and their well-being, I hope that she will also tell us what assessment she has made of the impact that the undermining of the scheme will have on employment opportunities for women.
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