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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