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16 Jun 2008 : Column GC303

Grand Committee

Monday, 16 June 2008.

The Committee met at half-past three.

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) in the Chair.]

Housing and Regeneration Bill

(Seventh Day)

The Deputy Chairman of Committees (Baroness McIntosh of Hudnall): I remind the Committee that if there is a Division in the Chamber while we are sitting the Committee will adjourn as soon as the Division Bill is heard and will resume after 10 minutes.

Debate on Clause 88, Amendment No. 102ZD resumed.

Lord Mawson: The key point that I was attempting to make before I was interrupted by the Division Bell is that the housing association movement was begun by social entrepreneurs of their day who used their independence from the state to begin to pioneer new and innovative ways of creating social housing. The capital development programme has often been used as a mechanism for stimulating innovative approaches to social problems. This amendment seeks to encourage housing associations to continue to use their capital investment as a means of stimulating social innovation and questions the wisdom of allowing the Secretary of State any further say in what social innovation housing associations may become involved in.

Let me share with the Committee the reasons why this point is particularly important. Objective 6 of the new Tenant Services Authority’s remit is,

The regulator will begin to regulate housing associations’ non-housing activities. The power to encourage is good where associations want to develop and feel that they can skimp these responsibilities, but a weakness is that the clause does not make it very clear what the practical shape of regulation in this area will be.

While some regulation may be valuable, even inevitable given the increasing degree and scope of community investment activities, we must be alert to the costs of regulatory creep. This danger was well identified in the Cave review and reassurances have already been given at a prior stage that this should not be a cause for concern. However, it is worth looking at some of the arguments proposing limits to the size and extent of the regulatory shadow.

First, on enterprise and service innovation, many housing associations have engaged in community development work because they have believed that there is a need for a step change in the provision of all local and neighbourhood services in deprived areas. The greatest challenge is to do this so as to re-energise people and communities in ways that begin to wipe out further cycles of dependency. This is where the

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impact of social entrepreneurs within the housing associations and the local communities has been greatest. Without the impact and example of social entrepreneurs, the prospect of transforming not just neighbourhood services but the neighbourhoods themselves is diminished. Increased levels of regulation will tend to discourage and dampen enterprise and will tend to make housing associations more cautious. The entrepreneurial spirit will tend to evaporate as it has elsewhere in many parts of the public service.

Secondly, in the most deprived areas it is not just specific services—a community facility here or a training opportunity there—but the whole culture of the neighbourhood that needs to be transformed and needs to transform itself. Additional layers of regulation—it is not as if there is no regulation at all out there at present—will again send out the wrong signal to those who are seeking to change the culture of some of these new emerging places.

Thirdly, there is a need for regulation-free areas. No service area is completely regulation-free but in some areas, provided that the board control is robust, decision-making is resolute and financial viability is not impaired. It is important to preserve as much autonomy as possible. This is such an area. Real service innovation is always in short supply. There is never enough invention to keep pace with social change. All our services are straining under the pressure of ever quicker social change. However, swelling bureaucracy and regulation never seem in short supply, adding burdens and costs but never removing things significantly beyond barely satisfactory or uninspiring services. Is this a service and regulation model that we want to emulate?

Fourthly, regulation cannot promote innovation. Social invention, together with the changes and added value it brings, cannot easily be regulated. Invention is unpredictable and comes in the most unexpected of places. It often comes in places where everyone is certain that there is nothing to find. It frequently takes time to be acknowledged and have its value appreciated and understood. You cannot easily regulate for change and you cannot regulate what will change. Unless we have a system that widely promotes and encourages innovation and experiment, where will the stream of future improvements actually come from? A Highway Code is a great idea, but someone had first to invent vehicles and a highway that they could travel on. Those golden eggs and the geese that can lay them must be able to flourish.

Fifthly, many community activities are initiated precisely because of resident demand and local support from an association’s board. Things are done precisely because local conditions and people determined what the need was, and that it should be met. If these activities are now done because the regulator directs that they should be done, in ways that the regulator deems appropriate, this will tend to undermine the potentially enormous social power of local initiative. There is a world of difference between saying, “We did this because the regulator requires it”, and, “We did this because you wanted us to”. There are existing checks and balances. If an association launches into exotic activities without getting the basic services right, residents will be the first to criticise and express

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dissatisfaction. This was amply illustrated in the report Every Tenant Matters. Local energy and inventiveness, both at board and neighbourhood level, need to be nurtured. Elsewhere in the Bill the aim is clearly to strengthen governance and resident involvement.

Sixthly, community investment is frequently undertaken with non-housing money. This may be funding obtained through non-housing governmental sources, from charitable trusts or sponsorship from private enterprise. Such funding will generally come with its own conditions, requirements for outputs and audit processes, which an association must demonstrate that it meets. Is a further layer of regulatory audit really necessary? This is duplication which has a cost.

Seventhly, there is a trace of a central controlling tendency in the legislation; just a trace of that baleful tendency to treat everything as if it was ultimately no more than an arm of government. If government, either central or local, wishes to influence the work of non-governmental organisations, it already has many persuasive incentives at its disposal. Government can make funding streams available through specific programmes; can give or restrict access to partnerships; and can increase or diminish the influence and involvement of non-governmental bodies. These signals are read, and organisations and people respond rationally to them. This is the everyday life and work of government and non-governmental organisations everywhere to achieve their objectives.

What additional benefits would there be from more direct regulatory control that would not be outweighed by the damage resulting from constraining the independence of associations? Stronger partnerships emerge from independent parties than from constrained ones. The autonomy of housing associations was once thought to be an important part of their value; it would be disappointing if that insight were lost.

My eighth point is about perverse incentives. Extending regulation to this area may have several unwanted and unintended consequences. Obvious examples are that it could encourage tick-box compliance where compliant mediocrity and uniformity pass muster or might encourage a less ambitious spirit where no one feels he has to stretch once he complies. Regulation also tends to lead to a desire to reduce regulatory risks so that the safe, the limited and the dull are chosen because they cap the risk of exposure to regulatory failure. Can we afford to encourage that spirit where invention is most needed? The “business as usual” and “we meet the regulatory standard” responses often stand in the way of innovation and keep mediocrity in place precisely where making it new is most required.

Finally, the argument from monopoly supply does not apply here. The monopoly argument supporting close regulation applies to many of the services provided by housing associations, ALMOs and local authorities. If we assume that they are all going to be brought under the same regulatory umbrella within a year or two, as the Bill suggests, it is apposite for many core functions, but that argument does not apply in the same way for non-housing activities. There is considerable vigorous competition for non-housing services between

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the mainstream, the third sector and the private sector. Where competition is stronger, a case can be made for much looser regulation.

These are the nine strands of argument in favour of a loose regulatory touch on community investment activity. The arguments overlap and are linked in various ways. However, the most important strands concern the need to encourage enterprise and innovation. To make the step changes in service provision and housing supply which in large part motivate the Bill, more innovation than ever, and at a greater rate, is going to be needed. This is clear from the recent report from the Smith Institute, The Public Value of Social Housing, which was recently launched by the Housing Corporation. It states that social change and the profile of people now predominantly housed in public housing will give this contemporary housing and regeneration its hardest challenge yet.

To begin to meet this challenge it might be helpful if the Government could require the regulator, when evaluating housing associations, specifically to look for innovation activity and to comment if there is none or not much evidence of it. Social innovation will not happen by magic. It needs to be encouraged in the Bill. This amendment, plus simple little measures like this, can have considerable impact in setting the tone for future house-building programmes.

Baroness Falkner of Margravine: I shall speak briefly to Amendment No. 102ZD. My noble friend Lady Hamwee has already set out why this amendment, which essentially reorders the fundamental objectives of the regulator, is relevant. It is relevant above all because the other nine amendments are about what the regulator is intended to achieve, but this amendment is about how it operates. In Part 2 we will have many hours of useful debate on several contentious clauses which have broader powers than some of us associated with RSLs—and here I declare an interest—would wish to see.

Although we will debate the provisions later perhaps I may illustrate. We will scrutinise Clauses 191, 192 and 193, which cover standards. We will look at enforcement powers and the triggers triggered by Clause 215 and Clause 248, which deal with management transfer powers. All those things come under the broad purview of fundamental objectives and having a statement right up front on proportionality, consistency, transparency and accountability, as it would be if the amendment were to be accepted, would add much clarity to the later and slightly more contentious issues.

3.45 pm

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews): I am very grateful to the noble Lord, Lord Mawson, for so seamlessly picking up our debate where we abandoned it last week and concluding what I thought was a very good debate on a very important clause, Clause 88, which goes to the heart of what the regulator is about.

This is a large group of amendments. I shall be as clear as I can in addressing them but I also want to be as expeditious as possible as we have a challenging timetable today. I start therefore with the remarks of

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the noble Earl, Lord Cathcart, who spoke to five amendments in this group, including Amendments Nos. 102ZD and 103C, to which the noble Baroness, Lady Falkner, has just spoken, which would raise the regulator’s objective 10 above all its other objectives. The group also includes Amendment No. 103ZA, which would place a requirement on the regulator to ensure that tenants have adequate information about the standards of their housing services, and Amendments Nos. 103E and 104ZA, which seek to ensure a level playing field for all providers of social housing—all in their way excellent amendments and all ones that I cannot argue with in their intent.

Amendments Nos. 102ZD and 103C take objective 10 as it stands and prioritise it over the other nine objectives. The objectives are not random and objective 10, minimising interference, is as important as each of the others. It expresses the balance that we want to achieve between driving improvements among poor providers without increasing the regulatory burden for good providers. By making it an objective, we have not diminished the fact that minimum interference is, of course, a working principle, as it is with other regulators. That goes without saying. We have done something better in this Bill—we have made it clear that it is sufficiently important to be ranked as something that the regulator should positively aim for. That is a very powerful point.

At the same time, given the absence of market power, which we will debate in this part of the Bill, the regulator has to start by asking how he will address the weak consumer position of tenants. That is the right question. The problem with the amendment is that it changes that; it would require the regulator to start instead by asking how he minimises interference for providers. That seems misplaced and sends the wrong signal in the context of what the Bill is trying to do for the first time. I am afraid that tenant confidence would suffer, but I am also afraid that there would be practical consequences, not least because it is vital that the regulator acts early to prevent and resolve serious failures. We do not want that to be inhibited, and this amendment could make that harder. We do not think that it is in the interests of tenants or in the interests of trying to achieve genuine improvements.

Amendments Nos. 103ZA and 102B are about the importance of ensuring that tenants have access to information about the standards of their housing. Again, that is absolutely central to the effectiveness of the Bill. The Cave review made it clear, as did the National Federation of ALMOs, that this is central to giving real meaning to the power of choice. To be useful, information about management needs to be in a suitable format; for example, it should allow comparisons between local landlords, which should be broken down by local authority—and we will come on to that a little later. So we have no difficulty whatever with the principle of the amendment.

Our strong view, however, is that that crucial outcome is already provided for in the Bill. Let us turn, for example, to the second objective of the regulator, which includes ensuring that tenants and potential tenants have an appropriate degree of choice. The noble Baroness, Lady Hamwee, is absolutely right: there cannot be choice without information.

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Clause 202 imposes a statutory duty, not just an objective, on the regulator to publish information about the performance of registered providers at least once a year. The clause also requires that to include information likely to be useful to tenants and potential tenants. This is very important, because it ensures that tenants and potential tenants can get their hands on performance information in a form that is useful to them. There cannot be genuine choice without reliable and accessible information about the quality of the alternatives that are available. The clause ensures that this kind of information is regularly available.

Clause 201 will enable the regulator to collect whatever information it needs from registered providers in order to meet its statutory duty under Clause 202, but it can also use other information. It can rely on monitoring powers, including powers to commission surveys, inspections and audits, which are set out in Chapter 6. It is not confined simply to the duties in these clauses. I hope that that is reassuring and helpful.

Amendments Nos. 103E and 104ZA are the final amendments in the group of amendments tabled by the noble Earl, Lord Cathcart, and seek to ensure a level playing field for all providers of social housing. Again, that is a noble intent. The context is that there are, and will continue to be, different actual and potential registered bodies: housing associations; private non-profit bodies, which are often charitable; local authorities, should they own homes in the future; ALMOs; public bodies; and private profit-making bodies, which we are allowing to register for the first time. Those different types of organisation all have different constitutions, forms of governance, status, benefits, duties and rights. There is great strength in that diversity in the mixed economy, provided that they deliver the same best outcomes for tenants and the best use of public resources. The noble Earl can probably anticipate what I am going to say next, which is that, given the above, it is not realistic or desirable to apply the same regulatory powers to all types of provider. There is no point having controls over changes to constitutional bodies other than housing associations.

There is, however, another general point that is well served by the amendment and the Bill. To have a thriving and competitive market for the supply and management of social housing, it will be necessary to deliver the statutory objectives in Clause 88: to encourage and support the supply of well managed social housing, and to ensure that providers perform functions efficiently and effectively. Competition can be a powerful means to important ends, but it is not an end in itself and so should not be in the list of objectives. It will certainly be worked out in the way in which the objectives are implemented.

Amendments Nos. 102A and 108A were tabled by my noble friend Lady Wilkins, who unfortunately cannot be in her place today. Simply, we had a long debate on these issues in the context of the HCA. I talked about how our work on the ageing strategy and lifetime homes will help to support local authorities and housing associations to be more mindful of the rights and needs of their communities. That means building homes and communities that are inclusive and accessible.

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I said a few moments ago that the regulator’s first objective will be to encourage and support a supply of well managed social housing of an appropriate quality that is also sufficient to meet reasonable demands. That stresses the importance of inclusivity and accessibility. Good management provides housing of an appropriate quality that is sufficient to meet reasonable needs. That implies that housing needs to be suitable for existing and potential clients, some of whom will be disabled.

I also assure the noble Baroness that the second objective in Clause 88(3) states that the regulator should,

That covers her desire to see inclusive and accessible homes.

I understand the desire to add more functions to the objectives—the noble Lord, Lord Mawson, also talked about this—so that they explicitly cover specific issues. Nothing divides us on the importance of these issues, but the impact should give cause for concern. We have tried to give the regulator the clearest possible focus and clarity. We need a small number of clear high-level objectives appropriate to meet reasonable demands of providing quality housing. My fear is that if we require him to navigate a complex web of statutory duties, he will be less effective.

The standards in Clause 191(1) already permit the regulator to set out the nature, extent and quality of accommodation. It would already be possible, if the regulator considered it appropriate and necessary to do so, for him to set standards relating to the accessibility of housing after consultation with representatives of tenants and with the Secretary of State. I will make sure that my noble friend understands that point.

We have already dealt with Amendment No. 103D proposed by the noble Baroness, Lady Hamwee, in relation to the overarching nature of objective 10. I do not know whether she spoke to Amendment No. 102C. Would she prefer me to write on that?

Baroness Hamwee: I think I said that I must have fallen asleep at the end of objective 2 and not read objective 3, which covers the point. I will not speak to the amendment.

Baroness Andrews: At this stage, that is a gracious explanation. I will not reply to the amendment in that case.

I turn directly to the amendment tabled by the noble Lord, Lord Mawson, with which I have a difficulty. I agree with everything he says, because he speaks not only with authority but with genuine wisdom about how social innovation happens. What he said about the role of housing associations in that context is absolutely right. The point about the voluntary sector is that it occupies a particular space in the statutory or individual functions, which gives it an extraordinary power to change things on the ground to enable people to work differently, to relate and come together differently to make things happen. His nine points are well worth reading again, and I shall do so when I read Hansard tomorrow.

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The noble Lord will not be surprised to hear me say this. First, he addressed objective 6, which already requires the regulator to encourage social housing providers to contribute to the environmental, social and economic well-being of the areas in which they operate. I will try to put his concerns, which I know are not confined to him, to rest.

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