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As we wade through the mire of the shambles of this legislation, chest waders are still needed, so I have a lot of questions for the Government. Will the Minister confirm that from now on and after June, agents will still be able to offer first-day marketing? In order to allow this, may I suggest that the energy performance certificate, the EPC, which is the only new item in the pack, can be made voluntary at marketing but mandatory before the exchange of contracts? The Government have to bring this provision in; it is European legislation and it was tacked on to the Bill to make their commitment to this satisfactory. That would be one way of making the scheme work.
Another way to have first-day marketing is to provide a certificate to the trading standards inspectorate, if necessary, that a pack has been commissioned from the pack provider. After all, it is mostly legal documents. So, as an agent, if we get instructions we can ring up and ask the pack provider or the solicitor to provide the document. If they have a certificate and it is on the way, we can start marketing.
The EPC will require about 1 million extra car journeys a year because it will be necessary before marketing begins. That could be deferred by my suggestion of making the EPC mandatory. It could then be included in the valuation by the purchaser later on in the process. The EPC is valid for 10 years. It is also needed at the change of every tenancy. Which takes precedence? What happens with holiday lets? Are the Government giving us any clear instructions on that? We do not have long to go.
The dry run is another 180 degree U-turn by the Government and £4 million of taxpayers’ money will be spent on it. But some of the home information packs will be subsidised. That is not a dry run; that is not testing the market. It gives a completely false impression. This dry run is already discredited because it will be supervised by the Association of Home Information Pack Providers, which has a vested interest in the process. It is exactly the same mistake that the Government made with the Bristol trial before this legislation started. Maria Coleman had a vested interest in a home information pack business and was trying to pose as an estate agent at the same time.
Where is the industry now? The RICS has lost credibility on this. The National Association of Estate Agents started off badly but suddenly got it right and has gained in credibility. A new organisation has surprisingly sprung up. It is called SPLINTA—Sellers’ Pack Law Is Not The Alternative—ably run by Nick Salmon. It comprises 1,800 firms of surveyors, solicitors and estate agents across the whole breadth of the housing market, covering more than 3,500 offices
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8.18 pm
Viscount Eccles: My Lords, last June the Home Information Pack Regulations were reviewed by the Merits Committee, of which I am a member. What has been said already arises out of the implementation of Section 5 of the Housing Act 2004. I do not think that a case was made then, nor has one been made since, for the abandonment of self-regulation and the creation of a new class of certified inspectors.
Such a bureaucratic intervention will not improve the working of the housing market. There are no reported distortions of substance to the housing market which call for government intervention and control. The Explanatory Memorandum and the regulatory impact assessment, which accompany the regulations, do not claim that there are. The proposed public sector regime does not follow from the consultation process and the responses to them. The driver in my view has been political philosophy, a perceived need to intervene and control, and not an accurate assessment of the best interests of buyers and sellers in a market which in general works well.
I will focus now on the energy performance certificates. These are the remaining mandatory plank on which the Government rely after correctly ditching home condition reports as mandatory. I cite the Explanatory Memorandum which came with the Home Information Pack Regulations. It states:
“The Regulations refer to energy performance certificates as the certificate required by Council Directive 2002/91/EEC (Energy Performance of Buildings Directive) whose form and content complies with any enactment which implements that Directive made in accordance with article 7. Article 7 is expected to be implemented by January 2009. These Regulations do not implement the Directive, and given that they do not do so, there is no requirement to provide a Transposition Note”.
So we are left wondering what is the future of the energy performance certificate. At first reading of the directive, it does not look especially onerous or unduly technical. Its major impact will be not on family houses of different types but on larger buildings, but we have yet to see how it will be transposed and how expert the required experts will need to be. In the mean time, as the Joint Committee asks in its 34th report of July, given the 2009 implementation date, why is there not an “express temporary exception” from the obligation to include energy performance certificates or predicted ones in home information packs? Given that uncertainty, no one in their right mind would rely for regular employment on becoming a home inspector. The fees earned may turn out to be nugatory.
It is also high time for a second full round of consultation. It is approaching eight years since the unfortunately titled document The key to easier home buying and selling was issued. Much has happened since then. Much is happening now. It would be
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8.22 pm
Lord Selsdon: My Lords, I have declared my interests in the past. I begin this little monologue—dialogue, I suppose—by saying that time in reconnaissance is never wasted. However, the Government have spent an enormous amount of time in reconnaissance—very costly, very thorough. The noble Lord, Lord Rooker, provided me with a tremendous number of officials who briefed me thoroughly on everything and I am now a much wiser man.
We are all looking for a more active, positive and beneficial housing market. That starts at the bottom end with social housing and ends, at the top end, with taxing those who spend an enormous amount of money on houses in London. The problem is that the bureaucracy and costs incurred unnecessarily in this country are higher than in others. In other countries they have a simple thing: an estate agent tries to charge as much as 10 per cent. In Germany, it is the buyer who pays the agent’s fee.
Here, our agents in general take 2.5 per cent, but the added costs can be quite considerable. A £200,000 house will have costs from transfer of sale of roughly 5 per cent—£10,000; a £250,000 house will have costs of £17,500—7 per cent; a £500,000 house will have costs of £37,500—7.8 per cent. The cost is the rising amount of stamp duty; other costs that follow are delays, which are stressful.
If you seek to complete the purchase of a house, as the noble Lord, Lord Jenkin of Roding—to give him his full title, without the “s”—said, and you are dealing with leasehold, you then have the problem of having to do extra searches. For example, you may need to get the memorandum and articles of association of the company that owns that property to find out whether there is a sinking fund. Those costs go on and on. Surveys for mortgages are fairly simple: if the house is in a good area, you have a drive-by survey whereby someone just goes by and says, “Well, that house is worth enough”.
We tend to forget that it is not just about the buying and selling of the house but the importance of the house to the individual. Rather unfortunately, at least 15 per cent of people who occupy social housing should not now be there, because they can afford to buy or rent more expensive properties. When we consider all the joint schemes that are now advanced—shared schemes and others—one wonders whether those involved would have to pay the costs of the home information pack if they were transferred through.
I will not try to be negative, because a real benefit could come out of all this by sitting down and thinking significantly about the importance of property to the individual. All political parties have accepted that we seek to be a property-owning democracy. We can argue about how that should be distributed. We all believe in regeneration and social housing, whatever you call it; that may be the move towards shared ownership and freeing up the letting market so that more people have the right to let.
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The crunch point is that, in general, 80 per cent of people's assets lie in their home or property and that 80 per cent of their debt is in their property, to which you can add hire purchases and debts related to the home. Therefore, the home is far more important than just being the home. It is someone's asset, and Governments who play around by increasing the cost to the homeowner of maintaining or trading his asset, or make it more difficult for him so to do, do so at their peril.
8.26 pm
Baroness Hamwee: My Lords, the convention is that short debates of this sort are phrased in the form of a question. If I may say so to the noble Baroness, this is a very good Question. The “I told you so”s may be irresistible to some Members of your Lordships' House, but what really matters is: where now and how do we get there? On how we get there, there are both legal and practical aspects. The noble Lord, Lord Rooker, once paid me the compliment of saying that I was not a real lawyer—I think that he meant that I was not a barrister and did not wear a striped suit—but I think that it is the lawyer in me that has been unable to understand in technical terms how the Government are dealing with this. Are we to get new regulations? Will the Secretary of State use his power to suspend part of the Act, or what? I asked someone to phone the Department for Communities and Local Government to inquire about that. Understandably, the first contact did not know, but was going to phone back, but has not. If the department does not know, I do not know how the public can.
Perhaps a more important point is what the Government will do now to boost confidence in home information packs. I must say that those who have been in sympathy for a long time with what the Government have been trying to do—if not all the detail and mechanisms—are finding that position hard to sustain. It has been a long time. The noble Lord, Lord Graham, said so. When I saw the publications in the Printed Paper Office with the DETR logo on them, I felt quite nostalgic.
According to the Observer in July, the personal financial industry is believed to have spent £225 million on HIPs to date. The article stated:
“While you may not be too bothered about lenders, lawyers and estate agents losing money, I’m sure you are under no illusion about the fact that it will be the consumer who ends up paying”.
My noble friend Lord Addington spoke vividly about the trainees who have paid. I hope that the Minister can be clear about how they will be treated in future. She has been asked about the trials, the dry runs, which are being undertaken and planned. I am sure that the House will be especially interested to hear what are the criteria for judging their success. In June, I read a comment from HBOS that said that lenders had been insufficiently involved in the dry run, that key elements would be tested too late and not tested at volume. That has been touched on.
Home information packs are not the biggest issue in housing. To me, the issue is the supply. If a local authority got into such a pickle, the district auditor
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In conclusion, all those in property—there are several in the Chamber tonight—know the dangers of misrepresentation. With that thought, I urge the Government to be entirely clear about their intentions from now on. They represented in a technical fashion to potential trainees that these schemes were going ahead to a timetable, and those trainees need to be compensated. The Government cannot afford another stumble; they need to be clear in order to recover confidence.
8.30 pm
Lord Hunt of Wirral: My Lords, I declare my interest as a partner in Beachcroft LLP and the other entries on the Register. I warmly congratulate my noble friend on securing the debate and on her lucid and penetrating speech. To summarise what has been said in the debate, the Government have a disastrous policy that is now in a terrible mess. I therefore want to give the Minister as long as possible to explain. We do not have to finish until eight minutes to nine, so she will have a long time to do so, and we are avid to listen.
It is never endearing to say, “I told you so”—I agree with the noble Baroness, Lady Hamwee, that there is little profit in saying that—but many of us on this side of the House, as we have heard, warned Ministers from the outset that their policy on home information packs was ill-thought-out, intrusive, and expensive nonsense. Much more important is the fact that many of us warned that the policy was likely to unravel, and I echo what my noble friend said about the whole pack of cards coming tumbling down. The fundamental point is surely that moving home is already one of the most stressful, debilitating and, above all, costly undertakings. It was generally felt that HIPs could serve only to add to the general nuisance and woe. My noble friends Lady Hanham and Lord Jenkin of Roding are right to talk about that stress. We must bear that in mind. My noble friend Lord Selsdon, too, is quite right that 80 per cent of the assets—80 per cent of the debt—is in a person’s home. We must therefore handle this policy very carefully.
In their original form, HIPs would have cost as much as a survey. Indeed, in many ways they were going to replicate a buyer’s survey but would in no way obviate the need for one. Numerous headlines in July said that the Government had seen sense and had backtracked on all this nonsense, but the truth is not quite so simple or so gratifying. The statement given on 30 July informs us that the only aspect of the Government’s policy that has changed will now be an authorised rather than a mandatory aspect ofthe HIP during the dry run. I recall exchanges with the noble Lord, Lord Rooker, about the dry run and the trials. The ominous note in the statement is an implied threat that mandatory HCRs will remain on the table if the industry fails to make a success of its rollout.
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HCRs are supposedly so attractive that they will take flight majestically entirely voluntarily, but just in case they do not, the market must now operate under the shadow of the Government’s power to impose them as and when Ministers dictate. So the leopard’s spots have not changed that much after all, although I hope that the Minister will clarify all this for us. We have already heard from my noble friend Lord Eccles that the Joint Committee found some defective drafting; no doubt the Minister will explain all that and speak in her defence. We have also heard that the EPCs are a very good aspect, and I agree with my noble friend Lord Jenkin that there is a good case for them; my noble friend Lord Eccles said the same.
There are so many questions; the noble Earl, my good friend Lord Caithness, posed a whole set of them. I would like the Minister to respond to the point about compensation made by the noble Lord, Lord Addington, who, with the noble Earl, has instanced the number of people who took the training and have spent a great deal of money, only for the Government to move the goalposts. We need as quickly as possible an explanation of exactly where the Government are at the moment. That, of course, is my noble friend’s question.
8.36 pm
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews): My Lords, the noble Baroness, Lady Hanham, has done the House a service by converting her Question into a debate. I share noble Lords’ frustration that it is a short debate, and I shall try to answer as many questions as possible. I will certainly write to noble Lords if I cannot answer all of them in the time available.
It has been a very thoughtful debate, and I know that I face many veterans of this policy on the opposition Benches. I shall concentrate on where we go now in order to answer the noble Baroness’s Question, but I must say a little about where we have come from. I thank my noble friend Lord Graham for his support. I had another supporter, but he became sick. It is a pleasure to share the Bench with my noble friend Lord Rooker.
I start by making it clear that we are fully committed to making home information packs work in the interests of consumers and the industry as a whole. We have agreed on two things tonight: there is nothing more stressful than buying a home; and the home is our greatest, most valuable and most emotive asset. We are right to respect people’s passionate feelings about that, so the need to make the process of buying and selling homes more predictable, less stressful and less wasteful is as urgent and as inescapable as ever. I was delighted to hear the noble Earl, Lord Caithness, say that we should think about the future, because to accept the status quo is an indefensible position. We still have the slowest system in Europe, slower than it was in 1998, and it is horrendously complicated. I very much respect the positive experience that the noble Lord, Lord Jenkin, had with his estate agent, but not all such experiences are so positive. I will return to the point. I do not think that either party opposite would want to put
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The noble Lord, Lord Selsdon, made a very good case for home information packs. It was a very thoughtful and helpful speech in many respects. Noble Lords have asked about the point of having a home information pack without including the home condition report. On the evidence that we have collected, and the evidence from places such as Denmark and New South Wales, we still rightly believe that a single legal document up-front that brings together vital information—sometimes elusive information such as leaseholds that may be scattered in solicitors’ officers or banks or buried in filing cabinets from where it has to be dug out—can make the system simpler and more transparent, particularly for the first-time buyer. I do not want to introduce a personal note into the debate but I am currently in the process of collecting such documentation. I think that this system can remove obstacles in terms of speed and complexity in what is a very uncertain process.
There are costs in the system but they will be transferred from the buyer to the seller, and most sellers are also buyers. What a boon it is for first-time buyers to be able to look at a house and to know that they will be given the information they need up-front by the seller. If they do not buy one house they can find another one and they will not have to pay for a second set of papers.
On balance, noble Lords have welcomed the energy performance certificate, which is the other mandatory aspect of the HIP. I am glad about that. However, I say to noble Lords who questioned why the EPC was brought forward now—as though it were intended to mask the mandatory nature of the packs—that we have to tackle climate change in this country. Our homes emit huge amounts of carbon. We have no time to waste. We are bringing the EPC forward now because it will contribute to achieving a target of a 20 per cent reduction in carbon emissions by 2010. It will do so by informing people how to save on energy costs, how to improve insulation and how to reduce their bills. This is a win-win situation. We did not have to wait until 2009 and we chose not to because the situation is urgent. It is something that we could do something about. The regulations that we will introduce, to which I shall refer later, will be amended to make stand-alone energy performance certificates a mandatory component of home information packs. Finally, I confirm that home information packs will come into effect, as we have already announced, in June 2007. That is one element of the answer to the Question raised by the noble Baroness.
I turn now to the burden of the debate—which is why we made the change and the implications for the industry and people in training. The change announced in July does not in any way imply a loss of faith in the value of home condition reports—far from it. Why should it be easier to get an MoT on a car than it is to get a comprehensive account of the state of one’s prospective home, especially since only 30 per cent of people get a mid-range survey? Our
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The first element was the timing, which was dictated by the fact that when we did the dry run collecting evidence, no matter how expansive the reconnaissance, the real-world impact of home condition reports proved to be very difficult. There were 15,000 voluntary packs in operation, only 250 of which had a home condition element. None of them had a home condition report and we could not test or trial them because the home inspectors were not in place. It became clear that we had to test them in a real world environment. At the same time, we thought that a mandatory test—and we were well advised on this—would be deeply unpopular and flawed not least because people who moved from one area to another would end up by paying twice. In June, we therefore took the decision that we had to have proper, independently evaluated trials which would be conducted by home inspectors.
The second element, which was made clear to us, was that despite its best efforts, the lending industry did not have its automated valuation systems in place to the extent that the information generated by the HCR could be used to make mortgage evaluations a simpler desktop process—which is where the lending industry wants to go in many respects.
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