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There are, however, some small points on the amendments as opposed to the objectives—objectives in every sense—of the amendments tabled by the noble Lord, Lord Filkin. I am not convinced that a particular mechanism should be an objective of the regulator. The aim and the outcome rather than the way of doing it is what needs to be expressed in Clause 88. I look forward to the Minister telling us how far Clause 191, especially Clause 191(2)(g), covers points that have been made. This provision covers the standard whereby the registered provider must,

I had a little difficulty, too, with the term “structural impediment”. These amendments are about the tenants’ point of view, but the impediments are impediments to the providers. So it took me a little while to understand what that amendment was about. They are not impediments directly to the tenants though they do have an indirect effect.

I am sorry that that is going to read more as opposition to the proposals than I meant. I suppose that it is a concern about the specific amendments rather than the direction in which the noble Lord is seeking to take the thinking, which I very much support.

Lord Dixon-Smith: There is a sort of parallel to this situation; it is not precise in any way at all but I think that it is none the less apposite. Shareholders of plcs

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have every right to get involved with the management responsible for the company and, if need be, change it. That seems to me the ideal that the noble Lord, Lord Filkin, would like to aim for. I am bound to say that even that, although it may refer to plcs, is a fairly well regulated and understood procedure. Certainly every company has very clear and definite articles to regulate exactly how that would work.

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With his great experience of this subject, the noble Lord, Lord Best, is right to raise a cautionary note. The principle is easy to enunciate. The devil is always in the detail and it is the detailed mechanism that one would really have to worry about. Although I am happy to support the noble Lord, Lord Filkin, in the principle of what he would like to aim at—we can all be clear that that is the ultimate objective if we can achieve it—the words of the noble Lord, Lord Best, and the noble Baroness, Lady Hamwee, about supporting with caution are probably the wisest way to go. I shall not add to everything that has already been said because it would waste time and energy. I look forward to what the Minister has to say. I suspect that she will be somewhere in agreement with everything that has been said. But she has the authority and the awful responsibility of having to produce a solution. Perhaps her doing it today is more than we should expect, but we will read her reply with interest.

Viscount Eccles: I support the noble Lord, Lord Filkin, although by the time I finish I am not sure he will think that my support is exactly the sort that he would like. But I shall do my best. My noble friend Lord Dixon-Smith gave the example of shareholders, who have an arm’s-length relationship. In particular, if you are small shareholder, you only have to phone whoever and sell the shares. You do not have to say a word to the company with which you are dissatisfied. In my view, that is not really the same sort of relationship.

Do we really want to aspire to wherever the noble Lord, Lord Filkin, would like us to go? Do we want to do it? If all tenants were fully empowered there would be no need for a regulator. Like the noble Lord, I live as a tenant. For the time being, rather worryingly, I am also the chairman of the tenants. Some of them are very vocal and insist on things being said to the manager, and sometimes they are not so easy to say. The noble Lord is privileged, but the long-term question is whether we intend to make everyone similarly privileged. There can be two schools of thought that do not think that that can be aspired to, and one of them is the practical school of thought. The noble Lord, Lord Best, is not supported, I think, by the noble Lord, Lord Mawson, who would like to have social innovation, which would go very well with the thrust of the amendment proposed by the noble Lord, Lord Filkin.

It is right that there are huge practical problems. What do we do? We start by talking about market failure. We move on to choice and empowerment. Does everyone want to see the end of market failure? There are an awful lot of people with an interest in market failure and in the lack of choice and dependency. This is a two-way street because the dependency can come, as I think the noble Lord, Lord Filkin, indicated,

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from the top down. But it can also come from the bottom up in the sense of people saying, “If that’s the way they want it, then I’m going to stay dependent”. This is a long-term political issue about our society and it has been extremely valuable for the noble Lord, Lord Filkin, to raise it today. My belief is that we should try to get there. We should never give up on the basis that it is too difficult.

Baroness Dean of Thornton-le-Fylde: My noble friend Lord Filkin said that anyone who believes in tenant empowerment will support this amendment. I believe in tenant empowerment; I tried to practise it when I was chair of the Housing Corporation. The noble Lord, Lord Best, talked about the Willow Park Housing Trust in Wythenshawe. I remember it well. I remember it being very badly managed by the local authority. It wanted to have a governance structure that was different from the structure the Housing Corporation normally went for. With the support of the tenants, that is what we went for, and we have seen the outcome in good tenant involvement.

The noble Lord, Lord Best, said that the devil is not in the detail, but these amendments present real practical difficulties. We all want to ensure that tenants have real involvement in their homes but, frankly, most of them are more concerned with getting the jobs done—for example, getting the windows replaced—than with knowing who is the chief executive of the housing association.

It is a complex issue. A matter which has not been mentioned so far is the £35 billion of private sector funding that goes directly into housing associations. It does not go to the regulator or the Government but to individual associations. There are real practical difficulties in these three amendments. I shall not deal with the words, as I accept that these are probing amendments, and the noble Lord probably accepts that these words are inappropriate for the Bill. However, what does he mean by “tenants”? Does he mean the tenants’ association, the majority of tenants or a handful of tenants? Then there is the issue of bypassing the regulator, which the regulations permit, in order to change the management of the housing stock. That brings other issues with it. It is the responsibility of the regulator, not of individual tenants who could not guarantee delivering the combined view of the tenants.

There are a number of other issues. One of the reasons why there is £35 billion of private sector funding in this sector is the stability that the regulator has created. I have seen it operate. I have seen failing housing associations being merged into other housing associations without anyone losing his home, and if we are talking about financial failure, that is what we could be talking about. We do not need examples; we can see it in the market at the moment.

My noble friend referred to changing the manager of a block of flats. There is not just the manager but the mortgage holder as well. With all due respect, I suggest to my noble friend that he probably has a mortgage and his next-door neighbour has a mortgage with someone else. In a block of flats, the manager is just the manager. In housing associations, the manager is also the owner of the property and is responsible for funding the mortgage.

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I have difficulty with the term “poor management”. If you asked 100 tenants, 99.9 per cent of them would say, “My management is poor”, because there are always areas where housing management can fall down. Mismanagement is another matter. I have difficulty with these three amendments and would like to hear what the Minister has to say.

Baroness Falkner of Margravine: I shall speak briefly because the noble Lord, Lord Best, and the noble Baroness, Lady Dean, have covered the issues I wanted to cover. I shall make one fundamental point to the noble Lord, Lord Filkin, which was made at Second Reading. It is that we emphasise voice and choice in the Bill, but voice is at the heart of what we need to do. All the amendments are to do with information and knowing what tenants want, and one amendment touches on constraints such as the structural impediments. That is absolutely right, because until we have that information, the providers of housing cannot do anything about it. As someone who is associated with one, I know how difficult it is sometimes to ascertain what the tenants want. It is sometimes very difficult even to get tenants on to your boards in tenant management committees because of vocal people with certain agendas that may not necessarily reflect the agendas of others. However, that is not so pertinent to the issue.

Choice is also key; I would not want to give the Committee the impression that it was not. However, the point ultimately is that there is only so much choice because of the very nature of social and affordable housing. It is not the kind of choice that would be available out there in the market. The noble Lord, Lord Filkin, said at one point that he wanted market choice that was operated by consumers, but you cannot have market choice that is operated by consumers in this sector. It is not possible.

I am also involved in Hyde Plus, the Hyde Group’s think tank—we have actually bothered to set up a think tank—which looks at broader community issues. It looks not only at the people who live in our houses but at the people who live in that entire community, their economic prospects and whether transport is an impediment and crime an issue. We produce reports, which I know are well regarded, which we discuss in the broader G15. Leading-edge housing associations are cognisant of the importance not only of giving people somewhere to live but of helping them to make something of where they live and to contribute to their lives. This set of amendments would not achieve that. We should concentrate less on false choices and more on empowerment, because that is sorely needed in this sector.

Baroness Andrews: That was an excellent debate. I am extremely grateful to my noble friend Lord Filkin for giving us the opportunity to go into these very important issues, which are at the heart of the Bill. He presented his case extremely eloquently, and he spoke passionately about what he wants to achieve. I am grateful that we could talk at some length about the background to this issue and how we see it.

I cannot accept the amendments for many of the reasons that have been put by my noble friends and by noble Lords on the other side of the Committee, but I

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am persuaded that there is a good reason for taking away what we have and seeing whether we can do something else. If I say that now, perhaps the Committee will forgive me if I go into a little detail about why the Bill achieves the objectives which my noble friend rightly wants to achieve. However, that requires me to address the Bill as it will work. That will take me a little time to do, if noble Lords will allow me.

There is absolutely no doubt about where we stand. The whole Bill is about tenant empowerment and putting in place for the first time things that tenants have never had before: the opportunity to have more choice in the services that they receive and to be involved in management and regulation. Indeed, we heard from my noble friend Lady Dean and the noble Lord, Lord Best, about Willow. That is the sort of thing that we want to see flourishing. This is where we all stand. The noble Baroness, Lady Falkner, talked about false choices. We must avoid this false dichotomy—the notion of two different kinds of regulation: one based on the protection of tenants, which can be parodied as being paternalistic; and one based on enabling choice. In answer to questions asked by my noble friend, the balance that we have achieved here is right because we will enable tenants to exercise choice. The regulator has an objective to enable tenant choice and to improve efficiency. If we had an overriding duty that overpowered the rest of the objectives, I do not think that it would help. The whole Bill achieves that balance of empowerment through influence, involvement and through action—working with the regulator to identify and deal with difficulties and to drive improvement. That is very important, the business of a progressive power to drive improvement.

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Objective 2 requires the regulator to enable tenants to have both choice and protection. I then point to objective 3, which is a true empowerment objective, which requires that it enables tenants to have the opportunity to be involved in management of their homes, and objectives 1 and 5, which in different ways offer protection to tenants as well. The noble Lord would argue that, whatever the wording of the objectives—and indeed he has more or less said it—the powers of the Bill are based around a traditional top-down view of regulation, with a dominating role for the regulator. I cannot agree with that, and I do not think that Martin Cave does. When he came to address a small group of noble Lords—I am sorry that my noble friend Lord Filkin was not able to come—he made it quite clear that he was in exactly the same place as us on this Bill and that the Bill achieved what he wanted to see with empowerment and balance. I agree that one has to know the Bill to see that, but we are not in a different place from Martin Cave, and I do not think that, in effect, we are in a different place from my noble friend.

Crucially, tenants will be involved from the first in establishing standards. That is their most powerful role. If we look at Clause 194(1), we see that. Secondly, they will be involved from the first in setting the guidance that the regulator must issue—the policy framework and the use of interventions—as is set out

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in Clause 212. Thirdly, they will have information that will enable them to form views to provide evidence to raise concerns about how well the landlords are performing. That is provided for in Clause 99. Then there are new strong powers to bring about change in management, in Clause 191(2)(g).

What do tenants get out of the proposed system? We have created a regulatory system that is designed around standards. That is absolutely right. Tenants will have direct influence in not just setting the standards but investigating them and enforcing them. One crucial point is that we are not simply talking about physical standards here—just repair and provision. They will also cover how tenants can drive improvements and continuous change. Tenants will know that there will be procedures for addressing complaints by tenants against landlords; methods for consulting and informing tenants; and methods for enabling tenants to influence or control the management of their accommodation and environment. This is not a passive set of requirements; there is nothing to stop anyone using tenant satisfaction, ambitions or aspiration as standards. These standards must be complied with and can be directly enforced by the regulator.

Consistent with the independence of the regulatory system, exactly what is in the standards depends on the regulator’s decision. That is precisely why it cannot be a top-down process—because it is an essential part of the design that standards must be widely consulted on and developed by stakeholders, including representatives of tenants. That is one measure of regulation, and there will be others. Indeed, this is where the new National Tenant Voice should come in. It is not just another stakeholder representative but a partner for the regulator, which will lobby for tenants and assist in producing standards, deciding when to intervene. Far from being unrepresented, tenants will have more high-level engagement in regulation than any other group. That is absolutely right.

If the level of tenant protection and choice were not sufficient, it has been reinforced; there are only three areas in which the Secretary of State has the power to direct the regulator. One is involvement by tenants in the management by registered providers of accommodation, which is a clear safeguard against any regulator who does not efficiently meet objectives 2 and 3—but again it is just a safeguard.

I also want to mention two more key parts of the Bill where tenants are directly engaged and where the regulator has transparent requirements imposed on him to ensure that tenants are engaged. Clause 212 says that the regulator will set guidance on how it intends to use its powers under Chapters 6 and 7 on standards, monitoring and enforcement. There is a triple duty. It must issue guidance, it must consult stakeholders and it must have regard to its guidance. That means that the tenants will be shaping the detailed way in which the regulator operates. That is active, not passive. Secondly, we have already discussed information, but I emphasise that there is a very strong duty in Clause 202 requiring the regulator to provide performance information in a form likely to be useful to tenants to help them make choices and provide evidence.

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I am absolutely clear that when the regulator issues standards, those standards can require a level of engagement which is not only far beyond anything in the current system but which will enable tenants to challenge poor standards of service, give them real influence in shaping the services and enable them to influence and control the management of their homes explicitly.

That certainly meets what Martin Cave wanted to happen. He outlined five areas of choice, and the noble Lord has identified them: choice over where they live; choice over how services are provided; choice over different types of service at different prices; choice over how to progress to ownership; and choice over the management organisation. All of those choices, in so far as they are within the powers of the provider and regulator, are potentially included within standards. The amendment is specifically concerned with choice of provider, by which I understand he means the manager, so I will address the issue of management choice.

Martin Cave recommended that there should be more of a market in social housing management. We have introduced three new powers for the regulator to change management, in addition to the current in extremis power to change the owner. In Clause 246, the regulator may require that an owner tender the management competitively, and the selection panel must ensure representation of tenant interests. It may require the forced transfer of management of homes following an inquiry into whether there has been mismanagement or breach of standards, not just where it is concerned about a provider’s financial viability. It may appoint an individual as manager within an organisation where it is satisfied there has been mismanagement or breach of standards, but without the need for an inquiry, which is in Clause 250.

The regulator can also encourage voluntary outsourcing of management, though there are barriers, and I will come to the VAT issue. It can ensure that good managers are waiting in the wings in case of management transfer through an accreditation system set up under the Clause 214 power. Many public and private organisations will be keen to manage homes.

In short, we agree on so much. We both want management contestability, better management, and involvement and choice for tenants. But two issues have been raised which I need to address. One is how bad things have to get before management can be changed by force. The other is who makes the decision on forcing change; whether it is direct action by tenants or a system moderated by the regulator.

Some stakeholders feel that the bar for forced management change by the regulator under the Bill at present is too high. I want to clarify that. The Bill can require a provider to tender for a change of manager without an inquiry. The power can only be used on the basis of breach of standards or mismanagement, but that covers a very wide range of circumstances and is certainly not limited to when a provider is in serious financial trouble.

The regulator does not have to wait until a serious concern is brought to it by tenants. It is crucial that it can investigate proactively where it has any concerns

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and can take action if it finds evidence of poor management. That power can be used on any or all homes or services of a provider, and not just if the provider has a poor overall service. It can go into a single estate or the whole set of properties that are owned. It will depend on the circumstances. That will happen if there is evidence of failure severe enough to warrant the use of what is a fairly serious power, but in practice I am sure that the regulator will try to resolve the problems using lesser powers, enforcement notices, fines or compensation. Indeed, those are powers that the corporation does not have. It will be able to address poor management issues before the point where change of manager is the only answer. So I do not believe that the bar in the Bill stands too high, and neither does Martin Cave. He said several times that:

That is what we are doing.

The height of the bar depends on the detail of the standards. I reassure Members of the Committee that standards could be set that certainly impact on mediocre performance, perhaps to require progressive levels of improvement. While the immediate priority, fairly enough, is dealing with the worst landlords, I hope that I have convinced the Committee that tenants will be involved in producing standards that can reflect different and rising scales of expectations and experiences. Failure to involve tenants or to meet tenants’ satisfaction can be a breach of standards; “evidence” includes evidence of dissatisfaction. Tenants are very much in the driving seat on that.

Finally, I come to the questions powerfully addressed by the noble Lord, Lord Best, and my noble friend Lady Dean: should tenants have a direct right to sack the manager—or, as my noble friend Lady Dean put it, the owner and mortgage holder—or should the regulator make that decision? I have some problems with the amendment in this context. I am not sure whether the noble Lord thinks it is right for tenants to take direct action outside the regulatory system. However, the Bill gives the regulator three powers to achieve some of that, which the noble Lord will recognise is a huge step forward.

Why do I believe that, in terms of fairness and effectiveness, forced management change has to be moderated by the regulator acting on behalf of and involving tenants? The noble Lord, Lord Best, pointed to what he described as a whole series of difficulties and problems, machinations going a long way. This is not just about tenants and landlords within a closed system. The choice of manager impacts on a wide range of issues. For example, if tenants want a superior quality service that would be costly to provide, it is not right that landlords should provide it simply to satisfy those who shout the loudest and by imposing additional costs. The noble Baroness, Lady Falkner, alluded to this: whose voices should be listened to? We all know some of the issues that that raises. A regulatory system is about a balance between providers and a balance of interests, voices and interventions with careful safeguards. It is not about responding to the loudest voices or best organised groups. That comes through strongly in the Cave report.

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