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I am particularly grateful to the Minister for what she has said. It seems that we have struck a chord. If she is now going to consider this field to see whether she can come back to us on it on Report, that is enormously encouraging and helpful. I draw strength from that. I hope that she will take the suggestion that when she has come to a conclusion it might make the proceedings on Report easier if she wrote to us to let us know what is going on, otherwise we might feel tempted to return to the subject unnecessarily and we have spent long enough on the Bill in Committee. In my view—wholly to the benefit of the subject with which we are dealing—when we reach the next stage we should be rather more expeditious, in large part because of the work we have done at this stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 79 had been withdrawn from the Marshalled List.]

[Amendment No. 79A not moved.]

[Amendments Nos. 80 to 86 had been withdrawn from the Marshalled List.]

Clause 34 agreed to.

Clause 35 [Recovery etc. of social housing assistance]:

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Lord Bassam of Brighton moved Amendment No. 87:

The noble Lord said: The amendment makes a technical correction to Clause 35, which gives the HCA powers to recover the financial assistance given by it to the provision of social housing. Clause 35 also gives the HCA powers to direct the social housing provider to reinvest that assistance rather than repaying it. These are powers which have been held by the Housing Corporation since at least 1988 in respect of grant to registered social landlords and are currently found in Section 27 of the Housing Act 1996.

Turning to the remainder of the government amendments in this group, Amendments Nos. 88 and 89, together with Amendments Nos. 91 to 94, which relate to Clause 36, clarify that the HCA has the powers to enter into equity-sharing agreements with providers of social housing. Again, these powers are held already by the Housing Corporation under Section 27 of the Housing Act 1996.

It is mainly through the provision of funding that the agency will drive forward its regeneration and housing delivery, facilitating work between partners and undertaking projects that make the building of homes in some areas attractive to and possible for developers. The agency will seek to build on the success of the investment programme of both English Partnerships, the Housing Corporation and, importantly, the Department for Communities and Local Government.

The ability to enter equity-sharing agreements with providers of social housing is an important part of this and a part of the HCA’s ability to use funding arrangements in creative and innovative ways. But I should be clear that this is not a power that will allow the HCA to share uplift but not downside. As currently drafted, the powers already allow the HCA to recover less than the original amount of grant. These amendments are required to make clear that it may recover more. But this is not just about the agency being able to take advantage of an uplift in value; it would be expected to share a proportion of any downturn as well.

This is not a new power. The Housing Corporation is already able to enter into equity-sharing agreements using its powers. In 2006 the National Audit Office published a report into low-cost home ownership, A Foot on the Ladder, which has already been mentioned, and which recommended that the Housing Corporation could achieve better value for money from its investment in low-cost home ownership if it made use of this power. The report recognised that housing associations do not distribute surpluses and that proceeds of sales were therefore reinvested in the affordable housing sector. However, it recommended that the amount recycled through the recycled capital grant fund, in accordance with a determination by the Housing Corporation, should be linked to the value of the property, not just the sum of the original grant. That is designed to ensure that reinvestment of the full value of taxpayers’ contribution was focused on national and regional housing priorities.

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6.15 pm

Following that recommendation, the corporation consulted with registered social landlords on establishing that link to value and it was subsequently agreed by the corporation’s board that such a link should be made. However the introduction of the link was suspended in the context of the excellent value bids for developing shared ownership homes in the 2008-11 funding round and the introduction of new equity loan products with registered social landlords and private finance partners. While these powers have not yet been used by the corporation, the concept is well established and has been discussed in detail with the RSL sector.

It is also worth bearing in mind that in future the HCA will not be dealing only with housing associations, as it will have powers to enter into funding agreements with profit-making bodies which are not under the same limits as housing associations in terms of how they can spend any surplus. This power will therefore be an important tool for the Homes and Communities Agency to ensure that it achieves value for money from its investment in social housing through profit-making providers.

Amendment No. 90A is also in this group and I should briefly describe its effect. It gives the HCA powers to reduce, suspend or require repayment or reapplication of grant in specified circumstances. These existing powers are used by the Housing Corporation and are in Section 27 of the Housing Act 1996. They will give the HCA important powers to invest flexibly, as well as ensuring that it can achieve value for money by enabling it to suspend or reduce grant payments if a provider does not deliver.

We concede that in this area the relationship between regulation and investment is complex and we propose in these amendments to make absolutely sure that the regulator and the HCA work well together. It is possible that use of the HCA powers under Clause 35(2) and (4) could cause or reflect financial difficulties for a registered provider. If a registered provider is failing to deliver on its investment programme, that could indicate some wider problems and a subsequent reduction of grant could cause further difficulties. It is important therefore that the regulator is fully aware of the HCA’s use of these powers, as it would have been when regulation and investment functions were located together in the Housing Corporation. That is why Amendment No. 90A is needed. I beg to move.

Baroness Hamwee: I wonder whether I could ask about the direction, which is the subject of the amendments and of Clauses 35 and 36. I find it a curious term, and I should like to understand whether it is intended that the HCA can give a direction retrospectively. I am not quarrelling with the concept of a deal between the HCA and a recipient which enables the HCA to share in the uplift in value and so on. However, I argue that it is improper for the HCA to come back five years later and say, “Do you know? This parcel of land is proving to be much more valuable than we thought when we did the original deal. We direct that”. I think that, as in the fully private sector, two parties should make an agreement whereby one provides finance to the other and, as part of that

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agreement, the provider of the finance says, “We will have interest. We will have a share of the capital when the property is disposed of” and so on. That is a matter for agreement between the parties when the finance is made available. It is perfectly proper that they should come to whatever agreement suits them both but, frankly, for there to be any lack of certainty about what the HCA will require at the end of a process of development seems wrong.

Lord Dixon-Smith: We also have concerns, in particular with Amendment No. 91. If the Homes and Communities Agency is planning to take part in enhanced values, presumably it is planning to pay the increased subscription if the values go down. That might be rather interesting in the present circumstances. You cannot have one without the other. If there is to be a system of grant which, as the noble Baroness, Lady Hamwee, said, is fixed and finite at the point it is agreed, that is fine, but if a grant is subsequently variable if values are enhanced in one direction, there has to be variability if the values happen to go the other way, and that is certainly not written into this provision. That situation would be very dangerous and I do not think that we should go down that road. So far as I can see, it would create a whole new architecture for grants in this field. We know that if housing associations find themselves with surpluses, those surpluses are reinvested in more housing, which is surely what one wants. If there were a threat of some of the value being creamed off and being put back into the middle again, that would destroy any incentive that associations might have to try to produce a surplus for more housing. Therefore, we cannot agree to this group of amendments and to Amendment No. 91 in particular.

Baroness Falkner of Margravine: It seems rather curious that the Bill as it stood went through the other place and then Amendment No. 91 came up. The amendment seems to have been thought of at a time when the financial situation for housing associations, and indeed for anyone who was involved with housing, was rather different from how it is now. As my noble friend Lady Hamwee said, the principle that the taxpayer should get an equitable return is perfectly fine and fair. The noble Lord, Lord Bassam, said that there had been discussions with the RSL sector, but those discussions certainly do not seem to chime with discussions that some of us have had with the same sector, in which concerns were raised.

The attitude of those in the sector is that they take a risk at a given point in certain circumstances in the financial environment that exists at the time of taking the risk. If, many years down the road, there is a change in the climate, that will not necessarily have been predictable at the time that people were deciding what risks to take. You find yourself in a situation where there is a target of 3 million homes by 2020. It is going to be a jolly difficult target to achieve in the present climate, we all know that, but the idea that we then hamper the ability of a sector that provides nearly half of that housing—social affordable housing, the housing that the Government want to put through with the Bill—and create a hurdle for it, or at least

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create greater risk adversity in their decision-making than might be in the original Bill, seems quite odd. I hope the Government will think again on this one.

Lord Bassam of Brighton: I hear what Members have to say on this issue. In its broadest terms, I can see why there might be concern. The situation has been exacerbated by the uncertainties that we are all observing in the housing market and the way in which housing finance is moving.

Baroness Falkner of Margravine: I did not wish to imply, in anything that I said, that I did not accept the principle that is being put—that you should not do this retrospectively. I wanted to correct for the record that I was not conceding that principle in any sense.

Lord Bassam of Brighton: I am grateful for the clarification. It does not affect greatly what I was going to say, but it was important for the record.

I would like to take away the Committee’s concerns, and to write to Members setting out how we see this working. The noble Baroness, Lady Hamwee, will appreciate this point: there has to be the overwhelming principle of reasonableness in the way the clauses work, and we need to set out how that would operate in this case. I am grateful for the support for the principle because it is important for the way this part of the Bill operates.

Baroness Hamwee: To save time later, I want to say that I would not accept the principle—

Lord Bassam of Brighton: Ah.

Baroness Hamwee: No, I accept the principle that I said I accepted. However, I would not accept a principle that included an element of retrospectivity and tweaked it by being reasonable when one came to it. In the commercial world—there are large amounts of money and big commercial interests here as well as everything else; they are all for community benefit, but they are big interests—you would not have an agreement that said, “A reasonable amount will be repaid at the end of the day”.

Lord Bassam of Brighton: I was trying to describe the way that the powers would work. Perhaps I was not as precise in my use of language as I should have been, and I apologise to the noble Baroness and the Committee for that. We probably need to set out our case here with more clarity, and perhaps that would assist the Committee. In the mean time, I beg to move the amendments.

Noble Lords: No!

Lord Dixon-Smith: Let me be clear: if the Government move these amendments, we shall be obliged to put amendments down on Report.

Baroness Hamwee: We cannot do that.

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Lord Dixon-Smith: No, we cannot. The Minister should withdraw.

Lord Bassam of Brighton: In that case, it would be wisest for us not to move the whole group rather than just one amendment. Then we can reintroduce them, perhaps after some further discussion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 88 and 89 not moved.]

[Amendment No. 90 had been withdrawn from the Marshalled List.]

[Amendment No. 90A not moved.]

Lord Greaves moved Amendment No. 90B:

(a) published in draft form;(b) made available for consultation for at least three months before they are determined; and(c) published at least one month before they come into effect.”

The noble Lord said: We are still on Clause 35. We are talking about funding that has been made available under Clause 22—grants, loans, guarantees and so on—and Clause 35, as the Minister has explained, is about reductions or restrictions of that assistance, suspensions, cancellations, directions and repayments.

Clause 35(1) states that the HCA may exercise its powers in such events—an interesting phrase—as it may determine and Clause 35(8) states that the HCA may determine the principles in accordance with which it must exercise its powers. The amendment seeks to establish whether there will be a process of consultation and whether the events and principles, as established, will be published and suggests a procedure under which that would happen. This is really a probing amendment to find out from the Government how the clause will work in the interests of everything being as open as possible and the right of the people who will be affected by these events and principles to have a right to have their say on how they should work before the HCA makes its decisions.

6.30 pm

Amendments Nos. 94A and 94B refer to Clause 36, which relates to the rules the HCA will make about charging interest on any payments or repayments that have to be made. Amendment No. 94B seeks to establish exactly the same principles for consultation on and publication of decisions as appearing in Amendment No. 90B in relation to Clause 35. Amendment No. 94A concerns Clause 36(7). This subsection is curious because it states that the matters referred to in a direction under the procedure for the payment of interest are to be,

so that is the general principle that will apply—

I do not understand how that would work. If you are going to have general principles which apply to working-out these matters, they should surely apply to everyone

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in all circumstances. You cannot ignore the principles and do something completely different which is thought to be appropriate in a particular case. The amendment seeks to bring subsection (7)(b) into line with subsection (7)(a) so that it should not be seen as an alternative. That seems to me to be the principle of how things should happen. I beg to move.

Lord Bassam of Brighton: I shall deal with the amendments together. As the noble Lord has explained, Amendment No. 90B would require the HCA to consult on the events which might lead it to exercise its powers in relation to the recovery or recycling of social housing assistance and to publish the outcome of that consultation at least one month prior to it taking effect. The same requirements for consultation and publicity apply to the principles under which the HCA will act in dealing with these issues. The amendment is not necessary. Consultation arrangements in relation to general determinations under this clause are set out in Clause 37.

The HCA is required to consult the regulator and other interested parties and to seek the Secretary of State’s consent. “General determinations” is defined in the clause as a determination which does not relate solely to a particular case. The noble Lord’s amendment would apply his proposed consultation procedure to all determinations, both general and those relating to a particular case. A three-month consultation period and a month-long pre-implementation publicity requirement is perhaps over the top and rather extreme in relation to a determination affecting one provider. It would be unduly bureaucratic and an inefficient use of time and resources.

The current arrangement for the Housing Corporation enables it to issue special determinations that relate solely to a particular case. However, they are rare, and are generally in response to a request from a provider, usually because it wishes to use recycled funds for a scheme that is broadly in line with the general determination but which in some way does not meet the precise requirements. In those circumstances, providers have to apply to the corporation for a special determination. Current practice is for that approval to be signed off by the corporation's board. The Bill provides for a suitable level of consultation on general determinations. The noble Lord’s amendment would be unduly burdensome as it would apply to the smallest of determinations made under this clause, which would be unreasonable.

I now turn to the other two amendments and will deal with Amendment No. 94B first because that deals with a point similar to the one made by the noble Lord. In circumstances where interest is a relevant matter relating to a determination made under Clause 35, this amendment would require the HCA to consult for three months, again, on rates of interest, payable dates and provision for suspended or reduced interest rates, publicising the outcome from such a consultation at least one month prior to it taking effect. This amendment is similar to the earlier one and it may not surprise the noble Lord to hear that we do not agree in similar terms. The consultation arrangements in relation to general determinations under this clause, like Clause 35, are set out in Clause 37. The same safeguards apply: the

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HCA is required to consult the regulator and other interested parties and to seek the Secretary of State’s consent. Again, the amendment would apply to all determinations, both general and those relating to a particular case.

It might help if I outline the type of event which currently occasions the Housing Corporation’s use of a special determination relating solely to a particular case. These are made rarely and are generally in response to a request from a provider. It will normally be because a provider wishes to use recycled funds for a scheme which is broadly in line with the general determination but has a small variation. In order to use recycled funds for such a scheme, the provider would have to apply to the corporation for a special determination. Again, current practice is for that approval to be signed off at board level. As with the previous amendment, a three-month consultation period and a month-long pre-implementation publicity requirement would be overkill in relation to the level of determination affecting an individual and particular provider. It would engender an unnecessary level of bureaucracy in relation to the issue that it seeks to deal with.

Amendment No. 94A would prevent the HCA from specifying matters in a specific determination made under Clause 36 which conflicted with principles which are applicable in the case of a general determination made under that clause. We can understand the motivation behind the amendment but we want to see the new agency acting in a consistent fashion. The amendment is perhaps an overreaction to the wording of subsection (7)(b).

Specific determinations to a provider will, by their very nature, be out of the ordinary. A specific determination is therefore likely to be required precisely because the circumstances are unusual and consequently it is possible, although unlikely, that the HCA will in these limited cases need more flexibility than would be provided for by the principles set for general determinations.

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