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Clauses 122 and 123 agreed to.

Lord Dixon-Smith moved Amendment No. 107D:

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The noble Lord said: We are back on to accountability and impairment. Here, it is the question of the accountability of housing providers, particularly to their tenants or occupants. The Bill does not satisfactorily meet the requirement for housing providers to tell their tenants how they will account to them for the housing that they provide. If the tenants are to have increased rights and obligations, and the right to intervene with management, they must have an adequate source of information. The Bill does not really describe how that is to happen. It seemed appropriate to put in a new clause at this stage to require it.

Amendment No. 110X, which appears much later in the Bill, is about the requirements of those who accredit social housing provision, so that any accreditation scheme will require the accredited person to prepare an appropriate policy statement, stating how they will account to their tenants or occupiers of their housing. It is worth introducing these amendments to the Bill so that it is explicit rather than, perhaps, implicit—the operative word there being, of course, “perhaps”. I beg to move.

Lord Bassam of Brighton: The noble Lord has kindly explained the amendments together. Amendment No. 107D would introduce a new clause requiring all registered providers to prepare a policy statement showing how they will account to residents for the performance of their functions in relation to social housing. It would oblige that to be published and a copy supplied to the regulator. Amendment No. 110X seeks to do something similar for managers who do not own homes and are selected through a management accreditation scheme.

These are highly creditable amendments which seek to focus on the key issue in social housing regulation—the relationship between landlord and tenant. The main goal of regulation is to ensure that this relationship works well and to make suppliers more accountable to consumers. In those terms, we welcome the amendments, but they must be carefully looked over. We need to know what exactly the statements would do, how they would be enforced through the regulatory system and how we would ensure that they complemented the regulator’s standards. We would also want to be sure that they did not impose too great a burden on providers.

We are happy to discuss these issues further when considering whether to amend the Bill. I would like to know what an accountability statement is, and what it might include. I can imagine statements which were very bland and unhelpful, or ones which were detailed and perhaps even unrealistic. What sort of issues would the noble Lord seek to include? I would also want to know more about the process of issuing the statement.

Those issues could be addressed in the regulatory system. Does the noble Lord intend that the regulator should set standards on the outcomes that an accountability statement should seek to achieve? Providers could play a useful role in developing such standards, so it need not be a top-down process. The regulator could also issue a code of practice on how it might work. It would be helpful to know a bit more about what is intended. We would also need to consider how that mechanism differs from what is already required

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in the Bill, except in that it is a direct statutory requirement on registered providers, which is something that we would normally try to avoid in favour of a regulatory solution.

We are setting up a regulator that can set standards on social housing management issues, including, under Clause 191, on methods for consulting and informing tenants and enabling them to influence or control the management of their accommodation or environment. In doing so, the regulator must follow the objectives, including enabling tenants to have choice, protection and the opportunity to be involved in the management of their homes. Those standards must be consulted on and may be enforced. They should be outcome-based. I cannot imagine that they will not include requirements on a minimum level of accountability to tenants. The effect of the amendment, I think, could be simply to fix in law a process by which landlords might meet those standards.

I have mainly focused on Amendment No. 107D, but there is also Amendment No. 110X, which seeks similar policy statements from managers selected by an accreditation scheme. We have not yet got to Clause 214, which seems a long way off given the speed of our progress on the Bill, so I will summarise the aim of that clause. Martin Cave identified a need for more competition for social housing management services to improve management quality. Historically, housing associations have usually managed homes in-house. Some do it well, others less well—and, in some cases, it might be better if they found a specialist manager instead.

If there is to be a change of management, whether voluntary or forced, there need to be good managers ready to take over quickly. We are allowing the regulator to run or approve schemes to accredit managers or accept schemes run by others. The regulator may require a scheme to include certain requirements, for example, that the manager must meet the standards and that there be provision for withdrawing accreditation. Many of the same issues and arguments apply to this amendment as to Amendment No. 107B. There may also be a risk of confusion if both the owner and the manager have to issue policy statements on accountability. I would prefer as far as possible to leave decisions on what is required through an accreditation scheme to the regulator.

In conclusion, we would be grateful if the noble Lord expressed some further views on this issue, not only on the principle, which we can see has positive benefits and is good, but on the pros and cons of the proposed mechanism. We are not saying yes to this, but we are not saying no either. This needs to be an iterative process. If the noble Lord wants to write to us, for a change, or set out in some sort of schema a response to what I have said, we may well find ourselves in the happy position of agreeing on an amendment or on a form of words that satisfies the points that have been properly and pleasantly made in the amendment.

Lord Dixon-Smith: I almost feel like saying, “Before the Minister sits down”, because I am very grateful for that explanation. The noble Lord began by welcoming the amendment and then he took a large bucket and

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rightly poured cold water over it. I knew that there were questions of detail that needed to be fleshed out if this was to be included in the Bill, so that came as no surprise at all. Then he indulged in some obfuscation and tried to prove that the Bill said it all already. He did not succeed. Then he invited me to write to him, which is almost unprecedented. If that is an offer of discussions before we get to Report, I welcome it, because we need to think about this. It should be explicit. I am sure that we could find a simple form of words that would make Amendment No. 107D more effective.

Amendment No. 110X, which I agree is much further on in the Bill but on the other hand is on entirely the same principle, may be less significant. If we have put it into the Bill once, we do not need to repeat it. I look forward to further discussions, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 124 to 126 agreed to.

6.15 pm

Clause 127 [Directions]:

Lord Dixon-Smith moved Amendment No. 107E:

The noble Lord said: This is another probing amendment. Clause 127 says:

The regulator is the housing services authority, and I wonder how qualified it is to give anyone advice on preparing accounts. That is the main issue. I understand the Audit Commission having the power to do that, but I never thought of the regulator having the financial expertise to give anyone advice on the preparation of their accounts. I have difficulty with this. We should look at this carefully.

The Secretary of State, on the other hand, has to require all sorts of people to produce all sorts of accounts and includes within his staff people with the expertise to give advice. It might save the regulator a great deal of trouble if he told the regulator how to produce accounts in the first place. That is the purpose of the amendment, which seeks to tease out exactly how the Government see this part of the Bill working. I want the regulator to be responsible for the regulation of housing and not necessarily for the presentation of accounts, although in part the accounts must be sufficiently clear and informative so that everyone can read them, see the real facts of what is happening and, importantly, understand. If that is left to a regulator whose job is to regulate housing rather than accountancy, we might not get it right. I beg to move.

Baroness Dean of Thornton-le-Fylde: I take almost entirely the point made by the noble Lord, but I thought immediately of a situation that started to develop in the Housing Corporation when I was there and is probably an even bigger issue now. Registered social landlords are now acting in areas where they have no social grants and are outside the regulated

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area. They want the non-regulated area to be completely separate on their balance sheet; yet that non-regulated area could be the financial risk to the regulated stock that has been funded by public funds. I hope that I am not making things too complicated.

The financial risk on the overall balance sheet could come more from the non-regulated area, although it might not. If something happened, no receiver would say, “I accept that that part of the organisation is not subject to receivership, but this part is”. The paragraph may have been aimed at this. The direct intervention of the Secretary of State should not be necessary, because the regulator should be able to give good guidelines. I have to say, without being too indiscrete, that we have had one or two difficult discussions with some housing associations that tried to tell us that it was nothing at all to do with the regulator, because the money that was raised was entirely outside the regulated part of the organisation and therefore should not be part of the overall group balance sheet. The corporation took the view that it was regulating the group, not the individual entities within the group. Whether that is still the case, I do not know.

The noble Lord’s amendment sounded eminently sensible. As he spoke to it, those kinds of thoughts came into my mind. As noble Lords can see, in the social housing sector enormous amounts of funding have been raised, and it is not a partner to the government grant. It does not have government grant in it at all, some of it.

Viscount Eccles: I speak in support of the amendment proposed by my noble friend Lord Dixon-Smith and also on my amendment to insert the words,

I shall deal with that technical matter first. In using those words, I am using predecessor legislation rather than the very technical use of the word “directions” and the fact that you must comply with directions.

The points that the noble Baroness, Lady Dean, made are of course entirely right. I suppose that they are dealt with pretty clearly in Clause 127(4), which says that a charity must distinguish in its accounts,

It is clearly necessary for there to be a distinction drawn in the accounts. My problem with the regulator doing it on his own is that it is a handover from the Housing Corporation, which was on both sides of the matter. That is an effect of the de-merger. It understood about the matters of substance relating to social housing, as well as doing the regulation, and therefore understood the matter of the accounts. The regulator will have no such need to have that understanding of accounts for the regulator’s own purpose; he is unlikely to be in any way expert in the matter of accounts and how they should be prepared. It is also the case that the social providers will go through an audit with an auditor, who will be pretty clear about how the accounts should be drawn up.

This is not a situation in which directions are appropriate. You must comply with directions, which must be drawn up very carefully and in great detail.

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On this occasion, that would not give flexibility to the auditing accountant, to the Comptroller and Auditor-General, who might have some comments to make, or to the Treasury, which might have some comments to make. Therefore it would be better to stay with the words of the previous legislation, which say,

Lord Bassam of Brighton: There have been some interesting contributions during this short discussion. The amendments are very helpful.

The clause allows the regulator to issue directions to registered providers of social housing covering the production of accounts for social housing activities. The purpose of such directions must be to ensure that accounts are prepared in a proper form and to give a true and fair view of the social housing activities undertaken and the use of funds and assets connected with those activities. The noble Viscount, Lord Eccles, has got it right: this is a carryover power or existing power of the Housing Corporation, although it has been amended in this Bill in some respects—for example, to ensure that it applies to profit-making providers as well as non-profit providers.

The regulator may use his discretion power in ad hoc situations, in relation to one provider or more—usually to issue a general direction to all registered providers. Any directions issued to a number of registered providers can be introduced only after consultation with one or more bodies appearing to represent the interests of registered providers.

Amendment No. 107E, in the name of the noble Lord, Lord Dixon-Smith, would in effect give the Secretary of State a power, not a duty, to issue guidance on the form of registered provider’s accounts. We do not agree that this would be a desirable outcome. There is no suggestion elsewhere in the Bill that the Secretary of State should issue guidance on providers’ accounts, nor is this a part of the current regulatory system. Our intention is to set up a regulator with substantial independence from central government directions and guidance. To our way of thinking, the logic of the legislation would suggest that it would be counterproductive to require central guidance on something so technical and detailed.

I agree that when setting directions the regulator may need accounting advice from professional bodies. I do not think that anyone would argue about that. But in more general terms, the regulator is best placed to decide what accounting information it needs. The Secretary of State will not have any specific knowledge or expertise on the sectors’ accounting arrangements.

Amendment No. 108, tabled by the noble Viscount, Lord Eccles, proposes a subtle change in wording in Clause 127(1), which currently states:

The amendment would change that to, “The regulator may from time to time determine requirements to registered providers about the preparation of their accounts”. Our view is that this will not change the effect of the clause. Under the revised wording, the regulator still would be able to give directions to registered providers about the preparation of their

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financial accounts. But we understand that the noble Viscount’s intention is to question whether the power in Clause 127 could be weakened slightly.

Our argument is that these directions are necessary to ensure that accounts are prepared in a proper form. Without this power to direct, the regulator cannot be sure of getting the information it needs at an early stage to identify financial problems within an organisation. In part, it takes account of the argument raised by my noble friend Lady Dean on the need to have that overall picture and to understand more about the totality of the organisation even where it is not directly, in part of its group activity, dealing with social housing. I am grateful to Members of the Committee for their amendments, which have been very helpful. I hope that that answers the points raised.

Lord Dixon-Smith: I am grateful to the Minister for his response. I am more particularly grateful to the noble Baroness, Lady Dean of Thornton-le-Fylde, and to my noble friend Lord Eccles for their contributions. They have detailed knowledge of the way in which these systems work in the field, which is very important. In fact, the noble Baroness, Lady Dean, encouraged me to the extent that she gave absolute confirmation that my concerns exist in this area of accountancy even if the amendment, perhaps, is not appropriate. I am grateful to them both and to the Minister for the discussion of this little issue. Ultimately, it is very important that the accounting is clear, correct, appropriate and understandable. I shall read the Minister’s reply with some care before I decide whether we need to pursue this subject further. But, for now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 108 not moved.]

Clause 127 agreed to.

Clauses 128 to 143 agreed to.

6.30 pm

Clause 144 [Preparatory steps: notice]:

Baroness Andrews moved Amendment No. 108ZA:

“But not the presenting of a petition by the regulator under section 165”

The noble Baroness said: These are technical amendments that address a technical anomaly between the moratorium provisions in Clause 145 and the regulator’s power to wind up a provider in Clause 165. The two powers are quite separate and are not intended to be related, but the Bill does not make this clear. The amendments ensure that it does.

The moratorium process offers an important protection for tenants and investment in the most serious of situations: when a provider is insolvent. Once the process is triggered, there is a moratorium on the disposal of a provider’s land for 28 working days. This provides an opportunity for the regulator to agree proposals with secured creditors and to put in place a rescue package. These are strong powers for the regulator, and it is an important feature of the moratorium system that they are triggered only by steps that are

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taken independently of the regulator; that is, normally by the provider or its secured creditors. It would not be appropriate for the regulator to be able to trigger these powers itself.

One of the steps in Clause 145 that triggers a moratorium is the presenting of a petition for winding up a registered provider. There are certain circumstances in which the regulator may present a petition for winding up. That power is most likely to be used when, following a statutory inquiry, the regulator has directed the registered provider to transfer all its land to another person. This allows the regulator to ensure that the provider, which no longer has any land, is closed down in an orderly manner.

These powers have distinct and separate purposes and they should not interact. If the regulator presents a petition for winding up, it should not trigger a moratorium. The amendments make this quite clear. I beg to move.

Baroness Hamwee: I have a number of amendments in the group, but I will not speak to Amendment No. 108ZBA. There have been several exchanges with the Bill Team on it, and I am grateful for its explanation.

Amendment No. 108ZBB is a probing amendment to Clause 148 and the effect of the moratorium. It seeks to understand whether a moratorium gives rise to a requirement for the regulator’s consent where there has been a binding agreement to sell land but the transaction has not been completed. We are talking about bigger items of property, but in house purchase terms we would be talking about contract and completion. That is the distinction. This is an important point, because a third party would be affected by something completely outside his control. He might suspect that a moratorium is on the way, but that is different from one being in place.

Amendment No. 108ZBC seeks to amend Clause 151, which allows the regulator to make proposals. I suggest that regard must be had to the interests of the tenants of the registered provider. That is a different way of checking whether Clause 98, which is about evidence, and Clause 88, which is about the fundamental objectives, apply. I believe that they do, but confirmation would be welcome.

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