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
113Fees Question
proposed, That the clause stand part of the
Bill.
Sir
George Young: This clause gives the regulator power to
levy fees. Before I go any further, it would be helpful if the Minister
would indicate whether this is modelled on any existing legislation. My
understanding is that the Housing Corporation does not require housing
associations to register, so the costs involved in
clause 113 are not costs that housing associations currently have to
bear. If one was unkind, one could call this a stealth tax because
housing associations are not-for-profit social businesses, as we have
just heard; they re-invest their surpluses into the community and their
rents will be controlled by the Government and the regulator. That
means that rents paid by tenants would either have to increase in order
to pay the fees that are proposed under clause 113, or existing income
would be moved away from service provision to pay for regulation, or
associations might build fewer homes. The estimated cost of £20
million amounts to a charge of about 20p per week per property, which,
I am advised, could be used to build 7,000 homes a
year. 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
114Proposals:
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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