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We want the non-housing activities to flourish. We recognise how much they have grown and developed in an innovative way in recent years, and we want to see that happening. There is absolutely no intention that the regulator should set detailed standards on RSL voluntary activities, not least because we think that there are enough protections. For example, the Bill prohibits the regulator from setting standards on issues that are unconnected to social housing. The Bill requires the regulator to consult, to act proportionately with minimal interference and to comply with a better regulation code, which says that standards should be outcome-based wherever possible. We have amended the Bill in the other place to ensure that the regulator must have regard to the desirability of housing associations being free to choose how to conduct their business. On the one hand, we positively want to encourage them to do that, and on the other we have put protections in to enable them to do that.

The reason why it is where it is in the Bill is not least because, as the local government Bill went through the other place last year, we were talking about how to strengthen duties of partnership and how we need to keep standards on local well-being so that RSLs can co-operate with local authorities in a reasonable and proportionate way and one that is in keeping with their non-public status. We would like to see that happening within the framework of new partnership agreements and so on, so that they can play a maximum role in society and in their community.

Secondly, I have made the point about having a small number of high-level objects, but the amendment pushes too far in terms of the legitimate interests of the regulator. It widens its scope. The noble Lord talked about regulation creep. I think that this would be a case of objective creep, if it were included. The regulator must act proportionately. I do not believe that adding social innovation to the objectives would help, and in fact I would question whether it would not inhibit or at least make it more difficult for the regulator to deliver balanced and proportionate regulation. There is a real danger that an active role for the regulator would stifle and not support innovation. There is a genuine issue, given the way in which the noble Lord described the dynamics of the best that could happen on the ground. I do not think that would help.

I hope my comments have been helpful to the Committee. I am grateful for that debate and hope that the noble Earl will be able to withdraw his amendment.

4 pm

Earl Cathcart: This has been an interesting and far-reaching debate. The noble Baroness talked about objective 10 but did not agree that it is in the wrong place. I cannot understand her arguments for that. It seems to sit awkwardly where it is. The whole business

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of proportionality, as the noble Baroness, Lady Hamwee, said, entails an overarching approach to how things are done, not what is to be done. That point was echoed also by the noble Baroness, Lady Falkner. Putting this objective as number 10 in the list is just not the right place for it. Our amendment places it at the top followed by the nine objectives dealing with what has to be done. We feel that that is a natural progression of events. I cannot understand the noble Baroness’s reasoning. I shall have to reread carefully what she said.

The noble Baroness also did not like our next amendment, on information. I think she said that it should come in somewhere else, in Clause 201 or 203. I shall have to look again at what she said and at those two clauses. However, our amendment follows the Cave recommendation which says that empowerment requires information. That is why we felt it was important to put it in here, in the objectives for the regulator, rather than tucking it away somewhere at the back of the Bill. We thought that was quite important.

Our next amendment, Amendment No. 103E, deals with the level playing field. If we do not have a level playing field then some providers will be at a great advantage to others. Those that have to be regulated will not have a level playing field as they will have constantly to spend time and resources getting the right boxes ticked by the regulator while others are able to get ahead with the project. It is not a level playing field and there should be one. I understand that there are issues about VAT as well. Some have VAT and some do not. That seems cack-handed. If we are trying to get providers to provide social housing they all ought to be on the same footing.

On the amendment tabled by the noble Baroness, Lady Wilkins, to include the word inclusive, we agree with her that although it is just another word, it does sum up an awful lot that needs to be done. That point was debated in another place, where Sir George Young talked about empowering disabled people. The aim of the noble Baroness’s amendment would undoubtedly improve the Bill and ensure that houses are built to lifetime home standards. We quite liked her amendment.

The amendment of the noble Lord, Lord Mawson, is very interesting. He obviously has great experience in his field. He talked about the large sums that the Government will spend on housing and how that should trigger social innovation. It is not just about the building of bricks and mortar but about all the other things that it should encompass. He mentioned regulatory creep and how increased regulation will discourage and dampen enterprise and add to the burden of costs and delays to the projects. The Government need to encourage enterprise and innovation and not stifle it with overregulation. I shall read with interest what the Minister says, but at this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 102A to 103A not moved.]

Lord Filkin moved Amendment No. 103B:

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The noble Lord said: I shall speak also to two other amendments in this group standing in my name. I want to express my thanks to the noble Earl, Lord Cathcart, for his vigilance and for helping me to get all three in the same group. All three amendments focus on the Government’s and the Bill’s objectives to empower tenants, and therefore a legitimate question for the Committee is whether the duties, the roles and the form of the regulation are appropriate to realise this end. Before advancing into more detail, I would like to express my thanks to staff at the Chartered Institute of Housing, the Tenant Participation Advisory Service, the National Consumer Council, the National Federation of ALMOs and others. Many of them would agree with much of what I have said but I doubt whether any of them would agree with everything I have said. We are broadly in the same territory on these concerns and issues. I am also grateful to the Minister and her officials for the time and the courtesy that they have advanced on these matters.

I want to take some of the Committee’s time to go back to Cave to see why he saw tenant empowerment as so important. On page 48, Cave quoted, first, that,

and, secondly, that,

Both those quotations are from the National Consumer Council, which Cave is quoting with clear support. A third quote comes from the Chartered Institute of Housing, which said,

Those of us who for more years than they care to remember have worked to manage, or mismanage, or who seek to improve and empower tenants, well know how true those statements are. They are therefore central to what I hope the Government are trying to achieve.

It is legitimate for the Committee to ask the Government specifically how tenants will be empowered as a consequence of the Bill and through what mechanism. As ever, Governments sometimes know more than they have revealed. Through this process we may therefore be better sighted on what exactly is intended and how this is to be worked out. I very much hope so.

Some of our concerns are perhaps reinforced by the fact that the Government’s consultation on Cave's recommendations was partial, and I could not see what seemed to some of us to be Cave’s critical recommendations in the consultation document issued. I shall illustrate that very briefly although I may return to it. First, Cave clearly saw that we should have a system of co-regulation; in other words, it was not just a top-down central state model but a model of consumer protection and consumer empowerment. Secondly, Cave saw addressing the structural impediments to choice referred to in the third amendment in the group as fundamental. Finally, Cave saw it as essential that there was an expansion of the availability of

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choice, in practical ways, to tenants; otherwise any amount of information has little meaning in practice because you cannot do anything with it. So Cave saw all those issues as absolutely central to the regulatory model he was proposing. Perhaps I am slow, but I felt that the clarity with which that has come through in the Bill is slightly lacking.

I hope that through this process we will find out where the Government stand on these issues and what their policy is on it. It is particularly important because, as my noble friend Lady Andrews indicated, the Bill says that the regulator has, as one of his or her fundamental objectives, to ensure that tenants have an appropriate degree of choice. That clearly begs the question: “Appropriate to whom?”, in the judgment of the regulator, who may be progressive or may be deeply conservative. I do not use that word in a political sense; I use it in a different sense. Secondly, is it a tenant’s view of what is appropriate, or what have you? It also has the flavour of being a slightly passive view of the world; it is asking whether tenants can choose what they want within the world as it is, as we know it and are used to it. Cave was in a different space; he saw clearly that there had to be mechanisms to promote choice in a great variety of ways, otherwise you would not get tenant empowerment.

As I have signalled, consumer empowerment is to many of us an end in itself, but Cave saw it as central to the regulatory model that he proposed. He said that consumer empowerment had the greatest potential to address the underlying problems of market failure. Of course, he would say that because that has been almost a leitmotif of most regulators of monopolistic services over the past 20 years—the attempt over time to try to change the nature of the market so that the regulator’s detailed involvement is less necessary, because there is more effective market choice operated by consumers. I do not think that we will disagree on that; the debate is about whether, effectively, these clauses and the mechanisms that the Government propose are likely to do that.

As I said, choice is central to consumer empowerment. Cave identified perhaps five areas of choice—although maybe it was four: a choice over the range of services; a choice over the manager; a choice over maintenance; and choice over additional services. I think that there were probably others. In other words, Cave saw that tenants having choice over those areas was fundamental if empowerment was to mean anything.

I shall bore the Committee with one further quotation. Cave quotes with approval what the National Consumer Council, the Audit Commission and the Housing Corporation all said, which was:

I shall weary the Committee no longer but start to focus this down on to the specifics. The first amendment in my name, which is supported by many of these whom I have quoted, seeks to address what tenants

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can do in practice if they are dissatisfied with the cost or quality of the housing management services that their landlord is providing in a locality—or they may think that another is better. What we have understood from helpful discussions with my noble friend and officials is that effectively the model proposed for this is that the regulator will set standards and, if tenants are unhappy, they will apply to the regulator and say, “Our housing manager is not meeting those standards—please, regulator, intervene”.

There are three things wrong with that. First, most tenants are dissatisfied at some point with their landlord; it is the nature of life. Often it is for good reasons, but not always. But with the multimillion tenancies that will be subject to the regulator and have a single domain, when we have all had our way, whether sooner or later, it is impossible to conceive of tenants, every time they are dissatisfied with their housing manager and want something done about it, having to go to the nanny central state and ask it to intervene. So it is flawed in terms of process. But it is, secondly, flawed in that it does nothing to empower tenants but empowers only the regulator to sort out the problem. It is clear that you need both those things, but you have to try to get the regulator to work towards empowering tenants at locality, so they can get things sorted out themselves with their landlord rather than going up to the central state.

The amendment specifically says that the regulator should devise, in consultation with social landlords and tenants organisations, a mechanism that would put in place just such choice opportunities for tenants in a locality if either they thought that their landlord was not very good or, equally, if they thought that another landlord nearby was likely to give them a better service. This is not Utopianism. This is exactly what I can do as a common freeholder—I think that is the term—of a block of flats in Pimlico. To put it simply, if we, as a group of tenants, are dissatisfied with the managing agent, we can vote on the matter at an AGM. The landlord’s agent then goes to the market and gives us a choice of alternative providers. We did that two years or so ago. It is perfectly possible, and is part of a normal form of collective choice. The regulator should be able to devise such a system—I will not weary the Committee by going into excessive detail, although I spent at least 10 minutes in the garden on Sunday thinking about it so I shall give a little detail. In effect, there is a mechanism for making this work at a local level. If we believe in empowerment, we want this to happen.

4.15 pm

I remind the Committee that I am talking about one of Cave’s key recommendations in paragraph 2.85; these are not the ramblings of a Member of your Lordships’ House with nothing better to do. I therefore have two questions for the Minister. First, does she think that it is desirable in principle for tenants to have such a choice in their locality without having to go to the central regulator? Secondly, if she does believe that that is appropriate—I hope that she does and that she says so as a political statement; it is hardly one for officials—does she believe that the Bill puts a duty, not a power, on the regulator to promote such choices?

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The second of my amendments relates to structural impediments; I have said previously why these are fundamental. Cave gave a specific section of his report to the importance of addressing the structural obstacles to consumer empowerment and choice. This is on page 55, for those who wish to address the issue. He says that,

In other words, it is the central job of the regulator. My concern is that there is no mention in the Bill of the responsibility for what you would have thought was a central issue. No doubt the Minister will say that the regulator has the power to address these issues, but I am saying that there should be a duty to do so.

Cave gives, I think, five illustrations of this; no doubt he could have given more. First, he talks about separating the housing development role from the ownership and management role, so that achieving economies of scale in procurement and financing are not left to ever larger monopolistic housing providers at a local level. Many of us feel that that may have been the story with RSLs for a few years. Secondly, he talks about overcoming the present VAT disincentive to outsource housing management so that tenants can have a choice of housing manager without suffering a taxation penalty. Thirdly, he talks about the contestability of housing services at the instigation of consumers collectively, which we have just talked about. Fourthly, he talks about the rationalisation of management services on estates in multiple ownership. Lastly, he talks about the local management of dispersed housing stock. There may have been another topic.

In essence, Cave, as a good specialist on how to regulate a system, identifies present structural failures. His argument, and mine, is that unless there is a duty on the regulator to work to promote the removal of those impediments, we will still have the same disempowered tenants suffering under the same paternalism of which we are all guilty to a large extent. Does the Minister agree with Cave that it is necessary to work towards removing structural impediments? Clearly it would be naive to think that the regulator can get rid of VAT by himself; we are talking about taking five or 10 years. If she does agree with Cave, why is this not in the Bill?

I will not weary the Committee by talking in detail on Amendment No. 104ZB, because it is another variant of what we talked about before. Given that we are in Grand Committee, these are no more than probing amendments, but I look forward to hearing what the Minister says, and perhaps to having further discussions with her or with her officials, if she wishes, and to reflecting on the position of a number of us who are working on this to see whether we should table an amendment that is sharper and less probing at the next stage of the Bill. I beg to move.

Lord Best: I am partially but not entirely supportive of the amendment. I very much look forward to hearing how the Minister will respond to it.

First, empowerment of residents is a fundamental part of what the regulator should be about, and it is tremendously important in how social housing is run

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in the future. I have had the privilege of being a judge in the gold awards that are given out each year by the Housing Corporation, for the entire time that the corporation has been organising the awards. Last year, the gold award went to those housing associations best at empowering residents. That meant rather than always thinking about the failures and the problems for regulators that housing associations may bring forward, we see the best and we see really good examples of what can be achieved. We saw absolutely wonderful effects, where organisations genuinely and fulsomely engaged their residents in the management of their estates and their affairs. It was a tremendously uplifting experience. The gold award winner that I remember best was Willow Park Housing Trust in Manchester, where the residents were doing brilliant things. What a way of unlocking the potential of citizens to do great things for each other and for the community of which they are a part. Empowerment of residents is a hugely important prize and The regulator, can serve to enhance resident empowerment, that is a crucial objective in the Bill.

I do not know whether one should say, as in the wording of the amendment tabled by the noble Lord, Lord Filkin, that tenants should have the power,

or whether that is exactly the way that this is best expressed and followed through. It is putting the onus on the tenants to change provider in the event of poor management. That brings with it a whole series of difficulties and problems that would mostly be avoided if the onus is on the regulator to ensure that there is a change of provider in the event of poor management.

The regulator has wider duties than simply to promote the best interests of the consumer. The regulator has to think about the viability of the businesses that are being regulated and the cost to the taxpayer of any decisions that are taken exclusively by consumers. Ofcom, Ofgem, Ofwat, —or even the Tenant Services Authority—will need to balance the views of a group of possibly many aggrieved residents against the disadvantages of changing their managers at any one time. There would be a lot of small print about who would vote, how the decisions would be taken and whether leaseholders living on the same estate would also be engaged. This refers only to the tenants, but we are increasingly thinking in terms of mixed communities, with shared owners and owners, and whether the whole community would be part of changing the provider of the facilities.

How often would residents be able to change their provider and at what cost? There are cost implications of a change of this kind, not least the costs of VAT, as the noble Earl, Lord Cathcart, said. It may be a ridiculous measure, but VAT exists and even if one managed to achieve a 5 per cent saving on one’s management costs through choosing a different, more efficient, leaner and meaner landlord to do the work, there is a 17.5 per cent charge that rather wipes out the 5 per cent gain because of the VAT rules. It is extremely difficult to change VAT rules, even if one has the high moral ground on the issue.

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There is the question of making the existing staff redundant and whether they are TUPE’d into the new arrangements. The machinations go quite a long way. In essence, putting an onus on the regulator to intervene where residents made it clear to the regulator that management was poor, and where taking an objective and balanced view the regulator came to the conclusion that poor management required a change of provider, is the best approach.

It is worth remembering also that the housing ombudsman exists and is highly effective. I have been well impressed by the ombudsman’s work in picking up some of the pieces where residents are aggrieved. I think that we would need to play in the role of the ombudsman both in advising the regulator and possibly in acting first before one goes to the full measures that removing that provider and substituting a new provider would imply. So I am entirely supportive of greater empowerment of residents, very much including tenants, but I am not absolutely certain whether the best route is through tenants having the direct opportunity to change providers themselves rather than the regulator having powers and duties to perform in that way.

Baroness Hamwee: I am extremely glad that the noble Lord, Lord Best, went first, because I have been wondering how to express my support and my concerns without sounding paternalistic. He has been able to do so. One wants, of course, to empower tenants, and all the language I was wrestling with to try to express my concerns about how to do it was coming out wrong. So I should like to ally myself with his comments. I shall not repeat what he said; perhaps I can just put my star to his wagon.

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