Housing and Regeneration Bill

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Clause 22

Financial assistance
Alistair Burt: I beg to move amendment No. 76, in clause 22, page 11, line 33, leave out subsection (4) and insert—
‘(4) The terms and conditions on which financial assistance is given shall, in particular, include provision as to—
(a) the circumstances in which the assistance must be repaid, or otherwise made good, to the HCA, and the manner in which that is to be done including arrangements in respect of interest and security;
(b) the circumstances in which the HCA is entitled to recover the proceeds or part of the proceeds of any disposal of land or investment in respect of which the assistance was provided.
(4A) Any person receiving financial assistance shall comply with the terms and conditions on which it is given, and compliance may be enforced by the HCA.’.
We now turn to the financial provisions governing the Homes and Communities Agency and a series of clauses on which one or two of my colleagues wish to catch your eye, Mr. Benton.
My amendment puts down a marker on the breadth of the powers. The clause is staggeringly wide, and we will all want to know where to apply for the assistance. The clause states:
“(1) The HCA may, with the consent of the Secretary of State, give financial assistance to any person.
(2) Financial assistance under this section may be given in any form.”
In view of the substantial powers in the clause and the agency’s power, it is not unwise to ask the Minister for guidance on how the powers will be used and what accountability there will be.
I will not dwell on the matter, but I will simply say that, as the Minister will be aware from Question Time in the House today, concerns are being raised in the news about the London Development Agency and the problems associated with the giving of large amounts in the circumstances that are being investigated. That, understandably, raises in the public’s mind concern about the power of the Government or their agencies to handle large sums of public money and to distribute it. To try to ensure that before we get to the stage of worrying about where the money has gone, who might be responsible and whether it is being misused, there should be sufficient checks in place to ensure that that is not an issue, or at least no more of an issue than it is in the normal run of affairs involving public bodies that must be accountable with proper audit.
That is the reason behind my amendment, which, in some cases, would provide guidance. It would assure the public that there would be provisions to ensure that the Secretary of State had regard to the repayment of money and to the setting out of circumstances. That would protect the HCA in cases when there might be a problem recovering the money.
If we can move slightly beyond the amendment to the clause as a whole, I should be grateful if the Minister would assist us. The clause states that financial assistance may be given to any person. Precisely who is intended? The main recipients might be obvious, but who are the unlikely recipients? Where should this money be going? Surely it is very broad to indicate that financial assistance of “any form” may be given to “any person”. As I said earlier, where do we all apply? There must be some rules that the Minister is already considering, so let us have some sense of what they might be. I fully appreciate that they must be in line with the objects of the agency, as set out at the beginning of the Bill, but I think that we are entitled to find out a little more.
Again, I stress that the width of the powers given to the agency to distribute finance, as well as the width of the powers given to the agency right the way through the Bill, must be set against the exceptional powers of an agency that can acquire land, develop it and sell it on. Again, I suggest that if one looks at the issues surrounding the housing market renewal initiative in Liverpool—concerns have been raised by Committees of this House about how that initiative has been used and question marks have been placed against the Housing Corporation and the way in which it has handled its responsibility up there—the public are entitled to know just how these powers will be handled and what might happen if things go wrong. That is the sentiment behind the amendment and I would be grateful for some guidance from the Minister.
The Chairman: Before I call further speakers, can I suggest to the Minister that he responds to the hon. Member for North-East Bedfordshire, who referred to the clause in general, when we come to the clause stand part debate? I call Mr. Öpik.
Lembit Öpik: If we are to have a clause stand part debate, I would like to keep my remarks until then.
Mr. Wright: We have had a short debate, but this is an important clause and an important amendment. I understand what the hon. Member for North-East Bedfordshire was striving for by tabling the amendment, but I suggest, with the greatest of respect, that it is not needed.
I like the way in which these themes are emerging in our discussions, but the amendment, which is based on the corresponding section in the Leasehold Reform, Housing and Urban Development Act 1993, would require the agency to attach specific terms and conditions when providing financial assistance, rather than allowing the flexibility, as is currently the case, to attach such terms and conditions as it feels are appropriate in the circumstances.
Subsection (4) allows for that flexibility. It should be remembered that the agency might be dealing with small local bodies as well as large national bodies when it provides assistance. I think that the hon. Gentleman would probably agree that the terms and conditions attached would no doubt be different in each case. Also, let us not forget that subsection (1) requires the agency to obtain
“the consent of the Secretary of State”
prior to giving that assistance.
The hon. Gentleman asked for further clarification about who would be able to access funding. I would like to put on record that I suggest that assistance would go to agencies that were focused on improving the supply and quality of housing and also on the regeneration of communities. They will be able to access funding from the HCA, and I suggest that that would include registered social landlords, housing associations and local authorities. We have talked a lot this afternoon about the importance of local authorities. We have talked throughout our discussions about the importance of local authorities stepping up to the plate so that they are able to deliver the housing needed in their area. I imagine that they will be able to secure financial assistance from the HCA to do so.
Mr. Syms: The Minister has mentioned agencies and local authorities. Under the provision, would it be possible for money to go to private building companies and development companies?
Mr. Wright: It is certainly not inconceivable. Yes, it could be possible. I would suggest that “any person” could receive financial assistance in that respect, but it must be given in full accordance with the agency’s objectives. I would suggest that that wide power is needed to enable the agency to meet its objectives. Therefore, I do not really see any merit in placing the agency under a duty to include the conditions in the amendment on each instance that it provides financial assistance. The agency will be accountable for the way in which it handles its finances, and it will therefore be able to account properly for its financial transactions. On that basis, and given the discussion that we have had, I hope that the hon. Gentleman will feel able to withdraw his amendment.
Alistair Burt: I am grateful for the Minister’s response. We have now introduced a slightly different word in that he said that the clause was “based” on legislation, as opposed to being modelled on it. I am very interested to know what the distinction between the two might be. The amendment is based on legislation to reflect the existing provisions relating to the powers of English Partnerships, as set out in section 164 of the Leasehold Reform, Housing and Urban Development Act 1993. The Minister has extended those powers, and I was seeking clarification, which he has given partially, on allowing greater flexibility to the Homes and Communities Agency.
I humbly suggest that further work is needed on the production of information— either from the agency or the Department—about the intention behind these powers, how they will be used and what safeguards there should ultimately be. If the safeguards are not in the Act, clear guidance ought to be laid down. If the Minister can say that there is a commitment to consider providing further guidance on how these powers should be used and explain why he has moved away from the model to a different base, I will probably be prepared to withdraw the amendment.
Mr. Wright: I am grateful for that. The way in which the clause has been drafted represents a modern approach. As I suggested earlier, the clause allows the agency, when giving assistance, to have the flexibility to set such terms and conditions as it considers appropriate. I reiterate the point that I made a moment or two ago about the sort of organisations that will receive financial assistance. That could be RSLs or housing associations. As I said to the hon. Member for Poole, it could be private companies. It is important to put it on record that the way in which that occurs will not compromise state aid rules. Given that this is a modern drafting approach, and given my hope that I have clarified some of the hon. Gentleman’s concerns, I hope that he will withdraw the amendment.
Alistair Burt: With that further assurance from the Minister, I am happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Sir George Young: I have a very short question to put to the Minister in connection with clause 22(1), under which the HCA
“may, with the consent of the Secretary of State, give financial assistance to any person.”
Clearly, that consent will not be needed, and should not be needed, for every single piece of grant that is given. I am after the HCA’s level of delegation below which it will not have to apply to the Secretary of State for consent, and above which, because of the size of the transaction and the nature of the commitment, reference to the Department will be needed. It will be helpful if the Minister can shed some light on the degree of financial autonomy that the HCA will have under subsection (1).
Looking slightly further ahead, I assume that when we get to clauses 49 and 50, under which the Secretary of State can give directions and consents, one of the consents that he might give would be a derogation in connection with clause 22(1). It would be helpful to have a feel of the confidence that the Minister has in the HCA by knowing the level below which it will be free to dispense public money without reference to the Department.
Lembit Öpik: My point relates to the clause as a whole. It is obvious that the HCA can carry out its work only if it has substantial access to funds and wide latitude to allocate the funds pretty much as laid out in this clause. My great concern is that the Government are notoriously bad at negotiating with the private sector. Time after time, in my life as a local councillor in Newcastle upon Tyne and now as a parliamentarian, I have observed the private sector taking advantage of the naivety of the public sector in negotiations. That is not because the private sector is evil, but because it is motivated to secure the best deal that it can. It sometimes gets a better deal than it could ever have imagined or hoped for when it works with the Government. I therefore ask the Minister what kind of safeguards will be in place to ensure that clause 22—and, indeed, chapter 3 as a whole—does not signal a green light to opportunity and untold profits at the cost of the taxpayer through the HCA. I cannot see a way of avoiding the important financial freedoms the HCA has, but I sincerely hope that this will not be yet another illustration of the Government acting naively in the face of very shrewd operators and costing us billions.
5.30 pm
Mr. Syms: I have similar concerns. This is an extremely widely drawn clause, and probably rightly so. In order to deliver the Government’s objectives, one clearly needs all the levers here: grants, loans, indemnities, and so on. I do not see how to get hundreds of thousands of homes without involving the private sector and the public sector in some kind of partnership. Who would audit this particular body? Would it be the Audit Commission? Who keeps an eye on all the deals being done under the auspices of the HCA? I really would like to know that, because this could involve joint companies, PFI schemes and a whole range of things in a number of developments in order to meet the Government’s targets, and I am concerned as to what the audit trail will be and how we will keep an eye on what is going on in various developments.
Mr. Wright: This is an important debate, and an important clause that sets out the idea that we need to spend money in order to achieve our objectives of 3 million new homes by 2020; but we cannot throw public money away. Clause 22 enables the HCA to provide financial assistance to any person. This power is deliberately wide. Financial assistance is defined to include grants, loans, guarantees or indemnities, investments or incurring expenditure for the benefit of the person assisted. It is mainly through the provision of funding—through, for example, the Housing Corporation’s affordable housing programme, English Partnerships’ regeneration funding streams, and funding for specific programmes such as growth areas and decent homes—that the agency will be able to drive forward regeneration and housing delivery. As we discussed in relation to clause 5, the agency will have the power to build homes directly should it prove necessary, and I was taken by the discussion that I had with the right hon. Gentleman on that basis, in which he probed and questioned me on that. As I made clear, the new agency will not be as well equipped as the house building industry or registered social landlords to play an active role in construction, which is why it will have to be involved with RSLs and private companies. Its role will be focused primarily on providing funding, facilitating work between partners and undertaking projects that make the building of homes in some areas attractive to, and possible for, developers. The agency will build on the successes of the investment programmes of English Partnerships, the Housing Corporation and the Department for Communities and Local Government through an end to funding silos and increased funding flexibility, as I mentioned during the clause 1 stand part debate.
The financial assistance may be given on such terms and conditions as the HCA considers appropriate. This power is absolutely vital to the power of the agency to deliver its objects. A number of members mentioned specific concerns relating to funding delegated limits and the audit trail of the agency. As to whether the HCA would always need to go to the Secretary of State for consent to spend money, there is likely to be a general consent. In relation to the point on clause 10, we will probably have a fairly substantial debate on clause 50 in a later sitting. I note the crucial part in all this played by the agency’s tasking framework and financial memorandum in terms of governance architecture. I have had dealings with some regional development agencies in respect of that financial memorandum and I had responsibility for delegated limits at One NorthEast. I imagine that there will be a similar system for funding delegated limits in conjunction with Government accounting rules and ensuring that good value for money is provided.
Mr. Syms: I presume that the homes and communities agency will be both Government-funded and raise money from other sources such as loans.
Mr. Wright: Yes, we will move on to borrowing powers later. The hon. Gentleman also asked about the audit arrangements. As a former auditor, I find this incredibly interesting, so I give notice to the Committee that I will be talking at some length about the agency’s auditing arrangements. Let me make it clear: the Comptroller and Auditor General will be responsible for auditing the external audits of the agency. That might be outsourced to a big four firm or whatever, and I imagine that the agency will have an internal audit function to ensure that there is value for money and effectiveness in terms of how it spends and accounts for its cash. That is an important point—I imagine that the audit functions will work in entirely the same way as in the regional development agencies.
Lembit Öpik: I admire the Minister’s optimism and faith in the audit process. Just about everything that the Government do is audited, apart from, apparently, the European Union, but that is another story. My concern is that the audit trail can highlight money that has been wasted, but is unlikely to warn us of money that is about to be wasted. Therefore I ask the Minister again what assurance we can have that the HCA will not end up becoming a massive opportunity for the private sector to make money out of the state by sharp negotiation and the naivety of the Government, as has sometimes been seen in such negotiations?
Mr. Wright: In earlier sessions, we spoke about the importance of a good chief executive to provide strategic direction for the agency. I also suggest that an important and strong director of finance or public resources will be key to the implementation and introduction of rigorous financial controls and procedures to ensure that agency money is not wasted. With regard to governance arrangements, I expect that the Audit Commission will have a clear role in ensuring that it is reassured with regard to how the money is spent. That governance framework is key. Again, the importance of the internal audit function, working together with the Audit Commission and providing strong leadership through a chief executive or director of finance, will be key to ensuring that money is not wasted by the agency.
Mr. Love: As a former member of the Public Accounts Committee, may I commend to my hon. Friend the good work carried out by the National Audit Office? May I also bring to his attention the fact that the National Audit Office has had difficulty with the Housing Corporation in relation to following the trail of public money that went from there to other housing bodies that were independently audited by other organisations. It is important to reassure the Committee that whatever arrangements are followed with regard to the HCA, it will be able to help whoever audits the HCA to follow that money trail wherever it may lead, and whatever auditing functions it has.
Mr. Wright: I agree with what my hon. Friend says. I am also a former member of the Public Accounts Committee and I really enjoyed my time on it. I suggest that this will be a very high-profile organisation, and in terms of the Prime Minister’s pledge to provide 3 million new homes by 2020, and the key role that the agency has to play in that, it will be entirely appropriate for the board to consider this a major risk in terms of its outputs and outcomes. I will suggest that the director of corporate resources or the director of finance——whatever they may be called——in conjunction with the internal audit function, should ensure that there are absolute, robust procedures in place. They should be able to carry out an audit trail and see where the money has gone and what outputs and outcomes will be provided, so that, for example, the money provided will have created 150,000 homes in a particular year. If I was on the board, I would be insisting that that was the case.
Lembit Öpik: I know that the Minister seeks to provide assurances. For the benefit of the HCA, when it is set up, will he agree on the record that he expects would that the finance director will have overall responsibility and be accountable for the expenditure of the HCA as a whole, and that therefore he or she must be in charge of a financial framework that guarantees that even locally based expenditure decisions are clearly fed into the system, so that it is reasonable to expect the man or woman at the top to have a good handle on the expenditures of the HCA?
Mr. Wright: I understand the hon. Gentleman’s concerns, but the chief executive will be the accounting officer of the agency and will be directly accountable to the Secretary of State. There is a robust and rigorous level of transparency and financial accountability.
Mr. Raynsford: May I put it to the Minister that this is extremely complex territory and that we should be wary about making assumptions in this Committee about the particular role of the NAO as against other bodies? Clearly, there will be partnerships with local authorities that are subject to the Audit Commission, rather than the NAO. Some of the difficulties that my hon. Friend the Member for Edmonton referred to were in territory where there was doubt as to whether it was appropriate for the NAO to be auditing organisations that were of local significance and subject to another audit framework. It is absolutely right that there must be robust audit arrangements and I hope that when we come to consider the directions and the consents under clauses 49 and 50 we may pursue this, but may I counsel against being too precise at this stage about the exact arrangements that will be in place because of the extreme complexity of the arrangements that the agency will be involved in?
Mr. Wright: As ever, my right hon. Friend has made an extremely pertinent point. I reiterate the point that I made earlier on, which is the importance of the tasking framework and the financial memorandum. There will be cake and it will be up to the chief executive and the board to ensure that there are robust, accountable and transparent procedures in place so that the agency receives value for money. I hope that I have reassured hon. Members.
Question put and agreed to.
Clause 22 ordered to stand part of the Bill.
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