Pre-legislative scrutiny of the draft Tenant Fees Bill Contents

5Impact Assessment

146.A regulatory impact assessment (IA) is a tool to “assess and present the likely costs and benefits (monetised as far as possible) and the associated risks of a proposal that might have an impact on the public, private or third sector” and a process “to help policy makers to fully think through the reasons for government intervention, to weigh up various options for achieving an objective and to understand the consequences of a proposed intervention”.238 As the Government says, “Good policy making should not start with the solution”, and publication of an IA “allows those with an interest in the policy area to understand:

147.Government guidance sets out when to produce an IA. Under the 2010 version, an IA was required if a regulatory proposal would: “Impose additional costs or reduce existing costs on businesses or the third sector”.240 Guidance published in 2015 indicated that an IA should normally be published at the consultation stage of policy development.241 New guidance published in February 2018 for the 2017 Parliament242 confirms (subject to irrelevant exceptions) a “full impact assessment” is needed for a measure regulating business activity where the measure has an “equivalent annual net direct cost to business” of over £5 million.243 The Ministry’s “Assessment of Impact” (see further below) suggests the average annual discounted cost to letting agents will be £85 million.

148.The Government’s Guide to Making Legislation details how departments should go about submitting draft Bills for pre-legislative scrutiny, and states that “the final impact assessment must be made available alongside bills published in draft for pre-legislative scrutiny”.244 For the avoidance of any doubt, the Guide says, “The committee [conducting pre-legislative scrutiny] is likely to wish to see a note on compatibility with the ECHR [European Convention on Human Rights], an impact assessment and a delegated powers memorandum”.245

149.The Ministry did not publish an impact assessment. Instead it produced an “Assessment of Impact” (not on the usual template),246 as an appendix to its written evidence to us.247 This was not previously published. We wrote to the Minister to encourage the Ministry to complete and publish, before we completed our scrutiny, a full IA with both monetised and non-monetised benefits, and list of assumptions in the various scenarios.248

150.If the Government had published an IA, “those with an interest in the policy area” might have been better able to understand the options considered and estimated costs and benefits.249 Dr Rugg told us there was “concern to see the impact assessment”250 and that “It is naïve to say, ‘We are going to take some money out of this and nobody is going to feel it. Nothing is going to happen and everything is going to be fine.’”251 David Cox, from ARLA, was able observe that he thought “certain parts of their mathematical calculations are woefully inadequate”.252

151.The Minister insisted:

This is a draft Bill. There is no duty on us to do what you have suggested with a draft Bill. When it gets to the point of being the Bill, we will have a duty at that point and that is exactly what we will do.253

152.We are highly concerned that the Government did not publish an Impact Assessment when publishing the draft Bill. The Government’s insistence that there is no statutory duty to produce an Impact Assessment at this stage misses the point. The Cabinet Office guidance is clear, as is the guidance (and recently revised guidance) from the Department for Business, Energy and Industrial Strategy. The Government should publish an Impact Assessment at the same time as releasing a draft Bill. Effective Parliamentary scrutiny can benefit from scrutiny of an Impact Assessment by others.

153.The Government should follow its existing guidance and publish an Impact Assessment at the same time as releasing a draft Bill. We expect to be provided with an Impact Assessment alongside any draft Bill which we are invited to scrutinise in future, and we ask that the Cabinet Office remind all Government Departments of the importance of issuing an Impact Assessment as part of the pre-legislative scrutiny.


154.The Government’s Guide to Making Legislation also reminds Departments that the public sector equality duty under the Equality Act 2010254 should be considered during the analysis of impacts.255 Northwood suggested to us that “the majority of [letting agent] staff that will be affected will be female”,256 and also expressed concern that after fees are prohibited:

Agents and landlords will favour tenants who are able to make a substantial advance rental payment prejudicing less ‘well-off’ tenants. Additionally, tenants on lower incomes or those receiving benefit will suffer further and will not be treated equally as agents will be reluctant to undertake further administration associated with referencing a guarantor.257

155.The “assessment of impact” does mention the danger of landlords opting not to risk tenants deemed more financially risky, and presents holding deposits as a mitigation of that danger.258 At the Committee’s request,259 the Minister provided us with a “Draft” Equality Analysis.260 This concludes there is no risk of different impact on men and women261 but there is potential for discrimination by landlords against prospective tenants on grounds of age (perceived greater credit risk) and race (perception of risk tenants will fail a Right to Rent check).262 It identifies possible retention of the holding deposit as mitigating these impacts.263

156.There are concerns, and little clear evidence, about the potential for this Bill to impact on equality of opportunity between those who do and do not share a range of characteristics protected by the Equalities Act 2010, including race, gender and age. Any impact may well be proportionate to the aim of the Bill. But we expect the Ministry to carry out and publish an assessment of this, including the evidence we received, before introducing the Bill.

238 Department for Business Innovation and Skills, Impact Assessment Guidance (April 2010) para 4

239 Department for Business Innovation and Skills, Impact Assessment Guidance (April 2010) para 6

240 Department for Business Innovation and Skills, Impact Assessment Guidance (April 2010) para 11

241 Department for Business, Energy & Industrial Strategy, Better Regulation Framework Manual: Practical Guidance for UK Government Officials (March 2015) para 2.5.12; in certain circumstances measures could be eligible for “fast-track”, meaning a full impact assessment would not be required but only after consultation with the Better Regulation Unit (para 1.3.5) and if the gross annual costs for businesses are less than £1m (Flow chart D).

242 I.e., after this consultation launched

243 Department for Business, Energy and Industrial Strategy, Better Regulation Framework: Interim guidance (February 2018) para 3 and p 6

244 Cabinet Office, Guide to Making Legislation (July 2017) para 14.5. See also para 22.14: “The … impact assessment should be published alongside the draft bill”. See also para 3.20.

245 Cabinet Office, Guide to Making Legislation (July 2017) para 22.29

246 Available here:

247 MHCLG, DTF0044, Annex B

248 Letter from Chair to Dominic Raab MP, 10 January 2018

249 See para 147 above.

251 Q55. See also Dermot Mckibbin, DTF0051 and Q141

254 Equality Act 2010, s 149

255 Cabinet Office, Guide to Making Legislation (July 2017) para 14.6

256 Northwood, DTF0011

257 Northwood, DTF0011

258 MHCLG, DTF0044

259 Letter from Chair to Dominic Raab MP, 10 January 2018

260 Letter from Mrs Heather Wheeler MP to our Chair, 23 January 2018

Published: 29 March 2018