Housing and Regeneration Bill

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Mr. Raynsford: As the Minister has said, and as I conceded in my opening speech, his amendments would go further than my amendment in a number of respects. However, I seek clarification in one area of uncertainty. Is it possible, even with the hon. Gentleman’s amendments, particularly the latter two in respect of the rules and status of industrial and provident societies and companies, to convert from being a profit-making body to a non-profit-making body? As drafted, the Bill clearly allows the opposite.
Subsection (9) provides explicitly for circumstances in which a profit-making body becomes a non-profit-making body. Even with the amendments, would it still be possible for a non-profit-making organisation to change status and become a profit-making organisation? Would it be able to get through all the hoops that my hon. Friend has set? Moreover, could the organisation do so if it argues that the purpose of that change is not to distribute profit but enable it as a private company to raise money more effectively on the open market than it could as a non-profit body?
Mr. Wright: I am aware that the Committee wants to make progress and I am tempted to give my right hon. Friend the Member for Greenwich and Woolwich the short answer. However, at the risk of incurring wrath, I shall give the long answer.
I come to amendments Nos. 219, 257 and 258. The short answer is yes. I am certain that the amendment would close the loopholes. Amendment No. 219 has the same purpose as amendment No. 196, but could be used to prevent a disposal of assets. It would have the effect that disposal consent may not be given to a non-profit registered provider if the regulator believes that consent is being sought to enable disposal of assets to members.
Clauses 188 and 190 require the regulator’s consent for changes to the constitutions of non-profit providers that are either industrial and provident societies or companies. Amendments Nos. 257 and 258 prohibit the regulator from agreeing to any such changes that would turn a non-profit provider into a profit-making body that could thus distribute significant dividends and/or profit. Clauses 188 and 190 render such rule changes or changes of articles without the regulator’s consent ineffective. I can confirm that the amendments would prevent non-profit organisations becoming for-profit organisations. However, going the other way, I am happy for for-profit organisations to become not-for-profit organisations if that is the strategic objective of a particular organisation.
Mr. Andrew Love (Edmonton) (Lab/Co-op): I thank my hon. Friend the Minister for his explanation. He dealt with the constitutional arrangements and the discussions between the regulator and the particular RSL that wants to convert to profit. However, as my right hon. Friend the Member for Greenwich and Woolwich said, tenants have expressed considerable concern about transfer. Hon. Members have tried to reassure tenants that, when they transferred to an RSL, they were not transferring to the private sector. If my hon. Friend the Minister allows such proposals to go ahead, we would, in effect, be breaking the promise that was made to the tenants that they would not end up in the private sector. Can he give those tenants some reassurance?
Mr. Wright: I hope that I can. As I said, I do not want RSLs to convert to profit-distributing organisations, whereby people can have good share options. I find that absolutely abhorrent in the social housing sector. People could get flash cars as part of the share options, and so on. We must be careful and make sure that RSLs, or not-for-profit providers under the Bill, have a clear status. They are not public sector bodies for the purposes of public sector classification. They will be able to provide and draw on loans and borrowings from the private market to improve and facilitate the building of social housing. That is clear and it is important that we get that message across. I would like hon. Members on both sides of the House to ensure that it is clear to tenants, who may be worried about terminology such as profit and for-profit, that we are ruling out categorically the idea that chief executives and chairs of such organisations can have stock options. That is abhorrent, we do not want to see it and I hope that the hon. Gentleman will take that message from the Committee.
Mr. Raynsford: I am grateful to my hon. Friend for his assurances. I particularly note that he does not want to see RSLs converting from their current not-for-profit status to profit-distributing companies, and I note his assurance that with his amendments there would be no scope for RSLs to convert to profit-making and profit-distributing status. With that reassurance and the reassurance that he has given my hon. Friend the Member for Edmonton about the consultation with tenants, I am happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 111 ordered to stand part of the Bill.
Clause 112 ordered to stand part of the Bill.

Clause 113

Question proposed, That the clause stand part of the Bill.
I looked through the comprehensive impact assessment for the Housing and Regeneration Bill to see whether I could find where the impact of the clause was dealt with. I now know what the Minister was doing on 9 November. On 9 November he was reading every page—there are 248 of them—of the impact assessment and then signing:
“I have read the Impact Assessment and I am satisfied that (a) it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and (b) the benefits justify the costs.”
Confident that the Minister is more than familiar with the document, I wonder whether he will indicate where the impact of clause 113 appears. I looked on page 104, which has the impact assessment for implementation of the Cave review of social housing regulation, and a wide variety of impacts are assessed, including competition, small firms, legal aid, sustainable development, carbon assessment, other environment, health impact, race equality, disability equality, gender equality, human rights and rural proofing, but nowhere could I find where it said what the impact would be on tenants. I may have overlooked it; it may be on a page that has escaped my attention. I see that the Minister is doing just what I have been doing over the last 20 minutes, which is trying to find it. Will the Minister say whether this is a new power, how the housing associations will pay for it and how it meets the obligations of the regulator? I see that, on page 122, those obligations include to
“reduce and manage the burden of regulation”.
This seems to be a new burden on housing associations. Will he say where, in the comprehensive briefing that we have been sent on the Bill, the impact of clause 133 appears?
11.15 am
Lembit Öpik: I have one slightly different concern. Once fees are introduced, that introduces the prospect of a body being regarded as a profit centre rather than an administrative organisation. There is precedent for that. The Civil Aviation Authority is required by the Exchequer to make a return on its activities. Given that the Civil Aviation Authority is primarily there as a safety regulator, it has often struck the general aviation community as unreasonable that the CAA returns what amounts to a profit to the Exchequer for its safety work. What assurance is there that the Government or the Exchequer will not be tempted to require some kind of return from this organisation, thereby making its entirely valid and justified regulatory activities into an unjustified profit centre?
Mr. Wright: I confirm to the right hon. Member for North-West Hampshire that this is modelled on modern regulatory regimes. It is fair that the costs of regulation should be borne by those who are regulated. That happens in the utilities sector and we propose a change in the current regulatory regime so that it also happens in the social housing sector.
Sir George Young: The Minister has mentioned that it is modelled on what happens at the moment. Do housing associations pay a fee like that to the Housing Corporation?
Mr. Wright: No they do not. We are moving away from the current situation to take into account the wider regulatory principles that are, as I said, that the costs of regulation are borne by those who are regulated. That is consistent with the Cave review. Martin Cave proposed that the regulator should raise money to cover its running costs from regulated bodies, and I will return to the point made by the hon. Member for Montgomeryshire with regard to that matter.
I am anticipating a debate on this issue during this sitting, and I suggest that the approach will make the new regulator more independent from Government, as it will be responsible for its own funding. It will help put pressure to make costs move downwards and be more efficient. Those who are being regulated will want to ensure that it is providing real value for money. The right hon. Gentleman has said that at the moment, regulation costs about £20 million per year. That is the regulatory part of the Housing Corporation and it amounts to about £10 per social home per year. That is good value for money, and the new regulator will probably drive down costs even further.
I draw the attention of the right hon. Gentleman to clause 113, in particular subsection (7) where it says that the regulator must prepare and publish the principles under which fees must be set and consult on them. It says:
“In preparing (or revising) the principles the regulator shall consult—
(a) the Secretary of State, and
(b) persons appearing to the regulator to represent the regulator to represent the interests of fee-payers.”
That point is important and addresses the issue raised by the hon. Member for Montgomeryshire. This is not meant to be some sort of profit centre. The Treasury will not expect a rate of return from the regulator. It is meant to cover costs of regulation as opposed to the regulator’s other activities. Clause 113(6) says:
“The principles may provide for specified expenditure or potential expenditure under section 94 or otherwise to be disregarded for the purpose of subsection (5)(a).”
It is not supposed to provide revenue for the Treasury; it is to cover the costs of the regulator.
Lembit Öpik: For the avoidance of doubt, can the Minister confirm that there is no intention, and that it will never be an intention of his Administration to seek to secure return for the Treasury from the activities of the regulator?
Mr. Wright: It is difficult to say never Mr. Gale. Should a circumstance arise whereby the Treasury wanted to make some sort of return—I draw on my earlier point about the regulator—given that we are trying to minimise unnecessary regulation and bureaucracy, and make sure that costs are driven down so that more resources are available for the provision of higher standards in social housing, I imagine that a huge hue and cry would be made. I cannot anticipate circumstances in which the Treasury will want a rate of return because the whole point is that the regulator will be covering costs.
Lembit Öpik: I will not pursue the matter further, but that is exactly what I was afraid of. The CAA has to deliver a return to the Treasury. I am concerned that the regulator will also have to do so. I accept that the Minister does not want to cause himself trouble with the Treasury, so it seems best if I pursue the matter through a series of parliamentary questions to the Treasury.
Mr. Wright: I reiterate what I said earlier. It is not our intention that the provision will be a revenue-raising exercise. It is meant to cover costs. I am disappointed that I cannot reassure the hon. Gentleman further, but the principle is clearly such that the regulator receives its income from those that it is regulating and, at the moment, there are absolutely no plans to make sure that there is a rate of return in that regard.
Sir George Young: I asked the Minister a specific question that he has not as yet answered. Whereabouts in the impact assessment does the impact of the measure feature, given that it is of importance to tenants?
Mr. Wright: I draw the right hon. Gentleman’s attention to page 117 of the impact assessment, where reference is made to the costs to regulated bodies in terms of the Housing Corporation currently spending
“around £20m pa on regulating RSLs.”
It also states:
“In moving to the new regulatory regime a stand alone Regulator will need to adapt its approach and skill mix. On the basis of the existing cost of regulation this is estimated at an additional £2.8m, and would deliver cost savings in the long term.”
I hope that that deals with the right hon. Gentleman’s concern. As for my having a busy 9 November, I read a substantial part of the information before that date, which is when I signed the impact assessment.
Question put and agreed to.
Clause 113 ordered to stand part of the Bill.

Clause 114

Proposals: effect
Mr. Wright: I beg to move amendment No. 191, in clause 114, page 46, line 42, at end insert—
‘( ) After removing a body under subsection (1)(a) or (b) the regulator must take all reasonable steps to notify the body.’.
The Chairman: With this it will be convenient to discuss the following:
Amendment No. 106, in clause 115, page 47, line 5, at end insert ‘or’.
Amendment No. 107, in clause 115, page 47, line 6, leave out paragraph (b).
Government amendment No. 192 to 195 and 197.
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