Housing and Regeneration Bill

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Clause 174

Mr. Wright: I beg to move amendment No. 230, in clause 174, page 68, line 26, leave out ‘non-profit’.
The Chairman: With this it will be convenient to discuss Government amendment No. 231
Mr. Wright: The governance and viability of registered providers will be a central concern of the new regulator. A poorly run or non-viable provider will inevitably be bad for tenants and might become insolvent—something that has happened in recent weeks. That should be avoided if possible and cannot be allowed to impact on the security of tenants’ homes. Clause 174 gives the regulator the power to set standards for registered non-profit providers relating to the management of their financial and other affairs. The amendments will also permit such standards to be set for profit-making providers, but only in respect of the social housing that they own, because, for example, the regulator might need to ensure that profit-making providers make adequate financial provision to cover future repair costs of social housing.
As I have mentioned on a number of occasions—certainly this morning—during the Committee’s deliberations, we expect social housing activities to form a much smaller proportion of the overall business of registered profit-making providers than of existing RSLs. As a result, it would be disproportionate for the regulator to set standards for governance and viability for all of the affairs of a profit-making provider. Shareholders and other owners hold to account the board of a share-distributing, private company. However, to the extent that threats to governance and viability might jeopardise the necessary protections we are seeking to secure for social housing tenants, the regulator should have a more limited role in setting standards for the proper conduct of a profit-making body’s social housing business.
The hon. Member for Montgomeryshire is not here, but he raised a number of issues this morning about amendment No. 230. He asked how it relates to clause 123. The point is that good housing management might require a provider to put aside enough money for repairs, as I mentioned earlier, to which the ability to make accounting directions is relevant. The provider might need contingent liabilities on a range of things that need to be addressed, and it is necessary for accounts to show that. Financial viability standards for profit-making providers are likely to involve ensuring sufficient money or liability to make repairs a practical concern. I hope that the hon. Member for St. Ives will pass that on to the hon. Member for Montgomeryshire. This is a sensible group of amendments that will ensure that tenants of social housing are adequately protected. I hope that hon. Members will accept them.
Andrew George: I have discussed this matter with my hon. Friend the Member for Montgomeryshire, who welcomes the amendments, which are in the spirit of those to which he spoke in this morning’s sitting. I welcome the amendments. My only question to the Minister concerns the restrictions in amendment No. 231, which states:
“In respect of profit-making registered providers, standards may be made in relation to the management of their affairs only so far as relating to the provision of social housing”.
In that respect, presumably by defining social housing as that part of the stock provided by the profit-making registered provider, can a local authority have some influence on allocations to those properties? Perhaps there is another definition of what the social housing element of the profit-making provider is. I encourage the Minister to expand his definition of the extent to which regulation should apply to profit-making providers.
Surely, in some circumstances, the public sector and the taxpayer have an interest, for example when a property is occupied by a tenant who is in receipt of housing benefit, when some form of grant aid has contributed to the renovation or upkeep of a property, when public money has been spent through a disabled facilities grant to enable it to be used by someone who has a particular need, or when a property is sub-let by a local authority. The latter circumstance is common these days in areas of high housing demand stress. A private sector provider of rented accommodation could make a property available, perhaps on a short-term basis, to a local authority, so that the authority can meet its local housing obligation.
It would be helpful if the Minister explained a little more about the extent to which amendment No. 231 will apply to profit-making providers. How will the measure apply? To what extent can the measure be extended to ensure that the tenants of profit-making providers of such housing are protected by the regulations?
My basic premise on for-profit providers is that it is sensible for the regulator to have assurance that they will not go bust and leave tenants high and dry. The regulator needs to ensure that the financial and governance arrangements for that particular provision of social housing are adequately addressed. I do not see that as moving any further towards the regulation of the private rented sector, but I stand to be corrected.
Andrew George: I am genuinely probing the Minister. Will he enlighten the Committee, if only for my benefit, as to the kind of stock that is provided by profit-making social housing providers and the basis on which it is provided? The remainder of that stock is not determined. I agree entirely that social housing has been debated and defined previously, but if profit-making providers provide housing other than social housing, what type of housing is it and why is it not being brought under this regulation?
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Mr. Wright: Again, the hon. Gentleman was not here this morning when I talked about a sort of murkiness of providers. I meant that in the best possible sense, not in a corrupt manner. I meant that previously, from 1974 onwards, social housing was provided by housing associations and market housing by private sector developments, and that we now have much more cross-fertilisation, for want of a better term. I also pointed out that private sector developments might provide money and housing that would be available on the open market, and might cross-subsidise by providing social housing in addition to grants from the Homes and Communities Agency and other such public funding. That cross-fertilisation is important. The regulator needs reassurance regarding the financial viability of that element of social housing.
My hon. Friend the Member for West Ham wanted to intervene, and I do not know whether the moment has passed. [Interruption.] The moment has passed. Given that different types of provider are coming into the social housing model and that we want more and better-quality social housing, I hope that the hon. Member for St. Ives will agree that the regulator needs to be reassured as much possible. Given the boundaries of the regulator’s objectives—particularly objective 10, on minimising interference—I hope that the hon. Gentleman is reassured that tenants will not be left high and dry if a provider goes bust.
Amendment agreed to.
Amendment made: No. 231, in clause 174, page 68, line 27, at end insert—
‘( ) In respect of profit-making registered providers, standards may be made in relation to the management of their affairs only so far as relating to the provision of social housing.’.—[Mr. Iain Wright.]
Clause 174, as amended, ordered to stand part of the Bill.
Clause 175 ordered to stand part of the Bill.

Clause 176

Mr. Wright: I beg to move amendment No. 232, in clause 176, page 68, line 38, after ‘standards’ insert
‘or issuing, revising or withdrawing a code of practice’.
The Chairman: With this it will be convenient to discuss Government amendments Nos. 233 and 238.
Mr. Wright: Government amendment No. 232 requires that consultation take place when codes of practice are issued under clause 175, and when standards are issued under clauses 173 and 174. Government amendment No. 233 requires that, along with other named bodies, the regulator must consult on standards and codes of practice—if amendment No. 232 is agreed to—with bodies appearing to it to represent the interests of secured creditors. I hope that the Committee agrees that lenders have a strong interest in standards because they wish to ensure that providers will remain a low investment risk.
Sir George Young: I agree entirely that one should consult registered providers. Why, then, has the Minister not tabled similar amendments to clause 177(2), which contains a similar list of consultees, and to clause 193?
Mr. Wright: Let me consider that more closely; the right hon. Gentleman might have got me on that.
Government amendment No. 238 amends clause 178(3), which permits the regulator to “revise or withdraw standards” following consultation. The amendment adds:
“Standards may be expressed by reference to documents prepared by others.”
The amendment explicitly recognises that other bodies or stakeholders acting as a group may propose and consult on documents that the regulator may then approve and issue—for example, a standard device by providers that has been approved by the regulator and been through the necessary consultations. That would increase their involvement in and sense of ownership of a standard. I hope that the Committee accepts the amendments and that, not withstanding the pertinent point raised by the right hon. Gentleman, we can move onwards.
Andrew George: I know that we are not debating it at present, but Government amendment No. 235, which relates to the clause, states:
“A direction may disapply the requirement to consult under section 176 in relation to specified matters.”
It would be helpful if the Minister said what type of specified matters the Government have in mind in tabling that amendment, particularly in relation to the amendments he has moved on this clause.
The Chairman: Order. Under the circumstances, it would be more appropriate to wait until we get to that amendment.
Mr. Wright: I have said all that I need to say. I am happy to address the points on Government amendment No. 235 as we move forward, and I will look at what the right hon. Member for North-West Hampshire has said.
Amendment agreed to.
Amendment made: No. 233, in clause 176, page 68, line 41, at end insert—
‘( ) one or more bodies appearing to it to represent the interests of secured creditors of registered providers,’.—[Mr. Iain Wright.]
Clause 176, as amended, ordered to stand part of the Bill.

Clause 177

Direction by Secretary of State
Mr. Wright: I beg to move amendment No. 234, in clause 177, page 69, line 8, at end insert—
‘( ) In deciding whether to give a direction the Secretary of State shall, in particular, have regard to the regulator’s fundamental objectives.’.
The Chairman: With this it will be convenient to discuss the following amendments:
No. 49, in clause 177, page 69, line 8, at end insert—
‘provided that any such directive is consistent with the regulator’s fundamental objectives as defined in section 86.’.
Government amendments Nos. 235 to 237.
Mr. Wright: This is an important clause. We have been made very aware of that today, and I hope that the Committee will recognise, from the points that I have made in earlier discussions and deliberations on amendments, that I am going to look at this issue comprehensively. I hope that interested parties, stakeholders and Members will be involved in that process.
Government amendments Nos. 234 to 237 and amendment No. 49 refer to clause 177, which permits the Secretary of State to issue directions to the regulator, to set a standard or to advise on the content of standards with which the regulator must comply. It is also required that the Secretary of State consult on the directions and publish them. As I have said, I am aware of concerns and I will try to do something about them; the amendments are likely to be consistent with whatever final position I bring forward.
Government amendment No. 234 and amendment No. 49 seek to achieve the same goal—to ensure that any directions given by the Secretary of State do not conflict with the regulator’s fundamental objectives, as given at clause 86. We can all agree that that is an important control on the Government’s ability to tell the regulator what to do, and in mitigating against the risk, which we have mentioned many times in Committee, of policy passporting with regard to registered providers.
The objectives include—I have mentioned this important point time and again—requiring the regulator to minimise interference. We do not believe that the Secretary of State could compel the regulator to act outside its objectives, even without the amendments, but it is worth while addressing these concerns and making the point explicitly the Bill. The two amendments are slightly differently worded, and in my view both would probably work, although naturally I prefer Government amendment No. 234 because it recognises implicitly that the objectives need to be balanced, and that there will be trade-offs.
I again refer Members to clause 86, subsection (13) of which states:
“The order in which the objectives are listed in this section is not significant; the regulator shall balance them as it thinks appropriate.”
Government amendments Nos. 235 and 237 deal with the potential problem of double consultation; I hope that that addresses the point that was made in connection with the earlier group of amendments. The Secretary of State will consult on the issue of direction, and the regulator will have to consult on it again, under the requirement in clause 176, before issuing it as a standard. The whole Committee will be aware that that could be very slow and duplicative process. That is why we have included clause 177(5), which makes it unnecessary for the regulator to consult when it is complying with a direction. However, I have reconsidered that subsection. In some cases, the Secretary of State could issue a detailed direction—on rent policy, for example—which the regulator could then implement without the need for further consultation because it had made no substantive additions to the direction.
In most cases, we expect that a direction will be strategic, not detailed, and that the regulator would add the detail. In such cases, the regulator should be required to consult again. We think that the Secretary of State needs more discretion here. Amendment No. 237 proposes to remove clause 177(5), and in amendment No. 235 I propose adding a replacement provision that would allow the Secretary of State, by direction, to disapply the requirement in clause 176 for the regulator to consult on matters specified in that direction. That would allow the Secretary of State to decide whether additional consultation was needed on an issue on which they had directed.
Amendment No. 236 proposes to add two lines to clause 177(4), which currently requires the Secretary of State to publish each direction. The amendment ensures that the Secretary of State will publish three things: the proposed direction on which they have been consulted, all responses to the consultation, and the final direction. That is intended to improve and enhance the quality and transparency of consultation. I hope that the amendments clarify the measure and that they show the direction of travel that we want to move in. On that basis, I hope that the Committee will accept the Government amendments and reject amendment No. 49.
Mr. Raynsford: My hon. Friend the Minister was kind enough to say that amendment No. 49 and Government amendment No. 234 were largely comparable in their intention and effect. I am delighted about that. He will be aware from the numbers that amendment No. 49 was tabled before Government amendment No.234, so I am delighted that the Government have taken stock on that and found a way to refine the wording, so that they can put their own alternative in place to achieve the same effect. I am delighted that good sense has been accepted, and I am very happy to support the Government amendment.
Alistair Burt: I have no wish to prolong the discussion, and I think that we will come back to this matter on Report. Is the Minister hoping that his proposals on consultation and the way in which the clause is drawn will be done by the time the matter is discussed on Report, or will it be done by the time we get to another place?
I take issue with the right hon. Member for Greenwich and Woolwich as regards the similarity of these two amendments. The amendments are similar, but they are not the same. I can have regard to something, but yet choose not to make a decision entirely in line with what I have had regard to. If I am acting consistently in relation to objectives, that is much more binding. I can perceive in some distant future when there is not as benevolent a Minister as the one in front of us now—
Mr. Wright: Next week.
Alistair Burt: It will be next week, given the present rate. I sincerely hope not. The Minister would say that I am making a direction under clause 177, after having had regard to the provisions under clause 173. Nevertheless, I decided to do that. A court would hold that, providing regard had been had to the powers, that was sufficient to satisfy the amendment.
5.15 pm
The bottom line is that there is concern that the power of direction is extensive. It is almost as far as that power in relation to the HCA, which is a public body. Issues have been raised, such as whether the power will have public sector borrowing requirement implications or whether we are moving the whole sector into the public sector because of the degree of direction and the like. We would just like to put on the record that we have a fear of that happening and, accordingly, when the provision is considered again, we are interested to make sure that the power of direction should not be as strong and that there should be no doubt about where the sector boundaries lie.
Mr. Raynsford: I do not want the hon. Gentleman to think that I had been light in accepting the Government’s alternative. His interpretation of the Government’s intention is slightly pessimistic. Had the Government’s amendment said that the Secretary of State shall have regard to the regulator’s fundamental objectives, and it was assumed that the Secretary of State could then ignore items that she did not agree with, the hon. Gentleman’s concerns might be justified. However, it would be difficult for the Secretary of State, when deciding whether to give a direction, to have regard to the regulator’s fundamental objectives and then to ignore them. If that were to happen, my learned friends would have little or no hesitation in seeking judicial remedies. I put that to the hon. Gentleman.
Alistair Burt: We may be dancing on the head of a pin, but many lawyers’ fortunes have been made on just that. I am merely putting the case that I do not think that such matters are exactly the same, although I concede that they are similar. I have said that, provided we have had regard to something, we would have satisfied the test of having regard. It means that we might be able to move in a different direction. However, all will be cleared up in the future to show that my pessimism was entirely unjustified and that matters will not work that way. We have discussed the implications of the provision, and I want to put it on the record that we share some of the reservations that have been expressed. We look forward to further debate on Report.
Andrew George: As someone who put his name to the amendment tabled by the right hon. Member for Greenwich and Woolwich, I support the argument of the hon. Member for North-East Bedfordshire that, as drafted, the Government’s amendment would leave the defined position of the Secretary of State in significantly more vaguely drafted terms that would clearly increase her capacity to intervene in future. Earlier, I spoke of my worry about the wording of Government amendment No. 235 on the extent to which the Secretary of State may disapply the requirement to consult in respect of “specified matters”. It would be helpful to be told what specified matters the Minister has in mind, and in which circumstances the requirement for the Secretary of State to consult can be disapplied.
I am encouraged by the Minister’s welcoming remarks. I believe that he is attaching himself to the spirit of the amendment tabled by the right hon. Member for Greenwich and Woolwich. I am keen that we pin down the extent to which the Secretary of State will have freedom to intervene or to disapply the requirement to consult in the manner that is suggested by the amendment.
Mr. Wright: We have had an interesting debate on the provisions under clauses 173 to 177. I want to move forward, but I share the view of my right hon. Friend that hon. Members have been unduly pessimistic with regards to this. I have made it clear on a number of occasions that I will look at the provisions again and bear in mind the points raised in the Cave report about raising standards according to tenant need. I do not want to be accused of misleading the Committee, so I put on the record that when I spoke today about consulting with hon. Members, stakeholders and the wider RSL sector, I did not want the Committee to think that I will be undertaking a formal consultation process with regard to directions. I will be having discussions with stakeholders, and on that basis it will be a lot quicker.
Amendment agreed to.
Amendments made: No. 235, in clause 177, page 69, line 15, at end insert—
‘( ) A direction may disapply the requirement to consult under section 176 in relation to specified matters.’.
No. 236, in clause 177, page 69, line 17, after ‘publish’ insert ‘—
( ) each proposed direction that is the subject of a consultation,
( ) each response to a consultation, and
( ) ’
No. 237, in clause 177, page 69, line 18, leave out subsection (5).—[Mr. Wright.]
Question proposed, That the clause, as amended, stand part of the Bill.
Sir George Young: May I encourage the Minister to jump a fence that he refused to jump five minutes ago? It is in relation to clause 177(2). He eloquently persuaded the Committee to add an additional consultee to clause 176—namely those who represent the interests of secured creditors of registered providers. That is eminently sensible in that the regulator should not do anything that destabilises the financing of housing associations. The question is, if it were sensible for the regulator to consult those bodies before he did anything to the standards, why are those bodies not included in clause 177(2)? It is identical in every other respect except that it excludes the interests of secured creditors. Is the Minister planning to introduce a similar amendment to clause 177 on Report?
Mr. Wright: Obviously, I have a more positive interpretation of this measure than the right hon. Gentleman. I do not think that I was sitting on the fence. I thought that I had said that I would look at the matter closely and come back on Report. I am happy to clarify the position now if that would satisfy the right hon. Gentleman.
Question put and agreed to.
Clause 177, as amended, ordered to stand part of the Bill.
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