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Grand Committee

Wednesday, 18 June 2008.

The Committee met at quarter to four.

[The Deputy Chairman of Committees (Viscount Ullswater) in the Chair.]

Housing and Regeneration Bill

(Eighth Day)

The Deputy Chairman of Committees (Viscount Ullswater): If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Baroness Hamwee: It is likely that there will be a big vote today; during a large vote on the previous occasion some of us had difficulty getting back within 10 minutes. Would the Committee be a little more flexible if we cannot get through in that time?

The Deputy Chairman of Committees: I am sure that that can be easily accommodated.

Clause 191 [Provision of social housing]:

[Amendments Nos. 110A and 110B not moved.]

Clause 191 agreed to.

Clauses 192 and 193 agreed to.

Clause 194 [Consultation]:

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews) moved Amendment No. 110C:

“(ca) the Audit Commission for Local Authorities and the National Health Service in England,”

The noble Baroness said: I will speak also to Amendments Nos. 110D to 110W. The effect of the amendments is to add the Audit Commission to the list of consultees in three places. First, the regulator will be required to consult the Audit Commission when issuing or changing standards under Clause 194. Secondly, the Secretary of State would have to consult it when issuing directions under Clause 195. Thirdly and lastly, the regulator would have to consult it when issuing guidance about how it uses its powers under Chapters 6 and 7, which relate to standards, monitoring and enforcement, and to Clause 213. When we come to the bigger group in a moment, the significance of the Audit Commission will be self-evident; that will show why it needs to be added to the list of consultees.

The Audit Commission has a wide range of skill and experience, which it can add to what the regulator does. It is important that the two bodies work together to improve services. I am sure the regulator will consult it anyway. However, there are two reasons why this should be mandatory. First, Amendments Nos. 110E to 110R propose changes to the system of inspection within the Bill—I will return to that in a moment—and

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require, in particular, the Audit Commission as an inspector whenever inspection is carried out on the provision of social housing. The Audit Commission will inspect against standards as its key role, so it is only right that it is consulted when they are being developed.

Amendment No. 110W will amend Clause 213. Guidance can be issued on the regulator’s use of its inspection and enforcement powers, which will depend on evidence from an inspection. It is evident therefore that the commission should be consulted on those, too.

Given that we are proposing—we have debated the matter at some length—that the regulator’s scope be extended to local authorities and ALMOs, which are inspected by the Audit Commission for most of their services, it is particularly important that if the regulator is issuing standards and taking other action which affects this burden it has input from the commission. That covers the role of the Audit Commission as a statutory consultee.

I turn to the remaining government amendments in my name, which cover inspections of registered providers. We propose to change the current system of RSL inspections to make it fit the new regulatory regime. The amendments follow lengthy discussions with the Audit Commission and others on precisely how the system should work.

At present, inspection of RSLs is carried out by the Audit Commission, but regulation is carried out by the Housing Corporation. Regulation and inspection based on separate systems and separate standards is confusing. Since the inspection of social housing should play a key role within the regulatory system, the regulator should be assisted in investigating concerns and providing evidence to justify where needed. I therefore want to ensure that inspection is carried out on the basis of risk, as the Cave review proposes, and reflects the way that inspection is by and large now going.

Following the Cave review, we announced in June 2007 that, in future, good performance could expect minimal regulatory interference, including reduced inspections unless tenants raised concerns. That meant no more general inspections of RSLs on the current model, although I stress that there may be spot checks and good-practice checks where appropriate even on good providers. Although we want to lighten the burden on good providers, which is the balance that we are trying to achieve, it is important that it be known that good providers, too, are still within the system and can be checked. In other words, the balance of the inspection burden, which is a major cost and a burden to government and providers, will rightly fall much more on poor performers, whose tenants have concerns, than at present.

As noble Lords will know, the Audit Commission inspects the overall management performance of all large housing associations every few years, which has been very useful in raising standards, but the system is not designed to address specific problems on particular estates. We are therefore seeking to replace it with a system whereby when the regulator finds that there may be serious concerns about a provider’s performance as a result of information it collects or concerns raised

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by tenants and others, it can investigate in a number of ways, including by inspection. For example, a group of tenants might identify a serious problem with repairs on their estate and inform the regulator, which would begin an immediate inspection of repairs and closely related issues on that estate. If the inspection showed that standards were not being met, the registered provider can be required to make the improvements.

The Audit Commission has done an excellent job inspecting RSLs since it was appointed five years ago. We expect it to continue to do so under the new regime. However, we do not want to make the regulator an inspectorate in its own right as we are committed, as noble Lords will know, to limiting the number of inspectorates. Therefore, the amendments seek to make sure that the regulator must use the commission as its inspector in most cases, although we accept that it should also be able to use another organisation as inspector in certain cases such as governance and financial viability issues involving private bodies.

Amendment No. 110E defines what may be inspected, who should be the inspector and payment for services. It states that there may be inspections of a provider’s performance on two types of issue: provision of social housing, which is roughly equivalent to standards issued under Clause 191, and its financial and other affairs—that is, standards under Clause 192.

For housing provision, the regulator must use the Audit Commission as an inspector. For financial and other affairs, it may use anyone; for example, one of the big four accountancy firms. That can include the commission, but it may not do inspections itself.

Another key, but less obvious, element in this new clause is that the regulator decides when an inspection needs to be carried out. It could also decide to discontinue an inspection. This is because the purpose of most inspections is to provide evidence to back up a regulatory activity to find out what is wrong and to fix it. There is nothing to stop the regulator commissioning spot checks when there is no breach of standards. We are also making sure that the regulator has a duty to pay the commission’s cost and a power to pay other inspectors.

Let me be clear; in this system the regulator will decide who and what will be inspected. The inspections that have to be performed by the Audit Commission are limited to performance by reference to standards under Clause 191; that is, about whether the registered provider is meeting those standards.

Most of the other amendments in the group are consequential. Amendment No. 110R adds a new definition of “inspector” at the end of Clause 200, who has to be a person authorised in writing by the regulator, the commission or someone else. Amendments Nos. 110F and 110J remove subsections (1) to (5) of Clause 199, because these issues are covered elsewhere. Amendment No. 110G is consequential on the new definitions. There are three minor changes to the system: Amendments Nos. 110K and 110L add the commission to the list of bodies that the regulator must consult on the level of fees paid by providers to the regulator for an inspection; Amendment No. 110H allows the inspector and the regulator to publish an inspection report—either or both may publish. That

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will make reports easier to access; and Amendments Nos. 100N, 110P and 110Q amend Clause 200, which deals with the inspector’s powers to require the provider to provide information, and to enter premises and inspect documents. These amendments specifically extend those powers to electronic information.

The changes that we are making to the inspection regime will make it more effective and flexible. They will ensure that inspection targets what it needs to target and that it is a vital part of the regulatory system, which balances risks and requirements. These amendments are needed to clarify how the system will work. I beg to move.

Baroness Hamwee: I have one amendment in this group, Amendment No. 110FA, which is to add to Clause 199 on inspection a requirement that the persons used to carry out the inspection include tenants of social housing.

I seem to recall that the Minister said previously that this was intended, but I could not pin that down. She is nodding again, but as the National Consumer Council and the Tenant Participation Advisory Service in particular have asked for something along these lines, perhaps I should say a couple of words. Other regulators use service users to assist as lay inspectors, but there is no systematic arrangement; it is left to the regulator. The Chartered Institute of Housing has done some work on this issue and has ideas about an approach whereby tenant scrutiny can contribute to the regulator’s work and, indeed, to national benchmarking. I understand that the Public Administration Select Committee in the Commons has rightly supported user-led work of this kind. It is pretty obvious that tenants will bring a particular perspective and have opportunities to talk to other tenants and managers, and will assist in evaluating what is going on. I was glad to see the Minister nodding. No doubt she will say something in a minute.

I should also say a word about the raft of amendments to which the Minister has spoken. Others may want to say more.

I am aware that there is concern about the use of the Audit Commission on the basis that it is a monopoly service. I would find it a little difficult to argue that point, given that local authorities have to cope with this. There is, however, concern about fees. Although the Audit Commission may well provide value for money, and I am not arguing about the merits of what it does, it is not tested on fees that it charges because there is no competition; there is no tender process. That has struck me from time to time over the years as something that the local government has just shrugged its shoulders about and taken on board without much protest. Sometimes, possibly, we should say, “Hang on a moment. We’d like the Audit Commission to be involved but it could be a very expensive situation for us”. I simply wanted to put that point into the debate.

4 pm

Earl Cathcart: I shall talk to government Amendment No. 110E. It requires the regulator to employ the services of the Audit Commission as the inspecting body of housing associations. The regulator may not

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appoint any other organisation to carry out an inspection unless the Audit Commission has declined the role. While we respect the Audit Commission’s expertise, and we think it likely that it would in any case be appointed to carry out many or most inspections, we question the blanket requirement to use the Audit Commission in every case.

The noble Baroness, Lady Hamwee, has already mentioned fees; I want to mention four other issues. First, how can the regulator, the inspecting organisation or the sector as a whole be certain that there is value for money when the inspector is a monopoly provider appointed without any tender or selection process? Any of the regulated bodies would quite properly be slated for acting in such a way. Secondly, if the Audit Commission not only is a monopoly provider but also has the ability to stop any other potential provider, where is the quality control? Who can challenge poor performance and do anything about it? Thirdly, and similarly, what incentive does the Audit Commission have to organise its business in an efficient, economical way if it is a monopoly supplier of an essential service? Fourthly, the regulator will be obliged to appoint the Audit Commission even if the inspection relates to a specialised area in which the commission may have no expertise. In such a case the regulator will be able to turn to a more qualified inspector only with the Audit Commission’s consent.

Viscount Eccles: I support my noble friend Lord Cathcart. I have a slightly different point. I thought that the regulator was supposed to be strong, independent and capable of looking after his or her own affairs. You would not expect a highly competent regulator not to know how to get relevant inspections when needed. All the points that have been made go together with that. Supposing that our roles were reversed and we had put such a clause into a Bill that we were putting forward, I have a feeling that it would be called unnecessary. That is indeed what I think it is.

Baroness Falkner of Margravine: I, too, wish to speak to Amendment No. 110E. I agree wholeheartedly with the comments of my noble friend Lady Hamwee and indeed those of the noble Earl, Lord Cathcart. The fees issue is particularly pertinent. We talked on the previous day of Committee about the funding of the regulator. We are told that some £20 million will be provided by RSLs, some of which will be quite small, to pay for the regulator’s costs. Now, a monopoly provider will be providing a service that, in effect, will inspect the people who are paying in a rather circuitous way for it to be inspected.

I have had concerns in relation to other clauses—notably Clauses 192 and 193—over the use of the word “may”. I notice that in proposed new subsection (3)(a) of Amendment No. 110E, the regulator,

This is one bit of text where I should have preferred to see the words “may invite”, and the amendment should be worded so as to build in the flexibility that we all want to see. On most occasions, the Audit Commission will be the right body to carry out the inspection. That will probably be the de facto position; nevertheless, the word “may” would provide for some leeway where the Audit Commission specifically did not have the

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expertise or where a more competitive bidder was able to do the work. I hope that the Minister will reflect on that point.

Baroness Hamwee: As this is the Committee stage, perhaps I may put a question that I had intended to ask when I spoke before. I apologise for that. Clause 199 is about inspection and later we come to a number of clauses concerning inquiries. There are specific requirements relating to charities where the scope of their work could be the subject of an inquiry and notification has to be given to the Charity Commission. I imagine that the regulator would be in touch with the Charity Commission on anything other than a very routine inspection, but can the noble Baroness explain what the relationship might be with charities at the start of the regulator’s powers—that is, in the foothills of an inspection, rather than at the peaks of an inquiry?

Lord Jones: My intervention will be brief. The words “tenant”, “social housing”, “local government” and “managers” have been mentioned, not least by the noble Baroness, Lady Hamwee. I am always grateful to the Minister for her eloquent expositions. In the context of her argument, perhaps I may recommend a book that deals almost entirely with the subject of social housing—or council housing, as it used to be called. It is entitled Estates and is by a very able young woman, Lynsey Hanley. It deals in detail, first, with the origins of the right to buy and then the rise of housing associations, allied to which are requirements concerning inspections. Miss Hanley writes a memoir of her young life on a Birmingham council estate.

My noble friend may recollect that a Cabinet Minister, Sir Keith Joseph, had the habit of constructing lists of books that might be read by particular divisions in his department. The very able colleagues who advise my noble friend may wish to study in detail this book by Lynsey Hanley, which has been very well reviewed. Indeed, my noble friend may have read it and may even be able to recommend it to the Grand Committee.

Baroness Andrews: It is always good to start on a literary note. I have read Lynsey Hanley’s book but I was not convinced by the entire argument. She was very harsh on some of our present estates but community spirit flourishes even in poor and unpromising circumstances. However, it was an interesting account of what has happened and is relevant to much of what we are about in bringing to life the Homes and Communities Agency and the regulator. The HCA is there to enable us to create better places for people to live by bringing together all the agencies in a positive and quality-conscious way—thanks, not least, to my noble friend Lord Howarth—and to give tenants a better deal. If Lynsey Hanley was sitting in this Committee, I hope she would be encouraged. I am sure that my erudite colleagues behind me have read the book.

Perhaps I may start by dealing with the group of amendments relating to the lay inspectors. On Amendment No. 110FA, I am happy to reassure the noble Baroness that lay inspectors are a valuable resource and an excellent way of ensuring that inspections have active tenant involvement and investigate problems from the

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perspective of the service user. For several reasons, the amendment is not necessary because there is nothing to prevent the inspectors from being involved in inspections under either the current or the proposed systems. The current definition of “inspector” in Clause 199 does not exclude them or require them. I take the point that the amendment is to enable us to discuss this issue. As I said when I introduced it, Amendment No. 110R covers a person who is authorised in writing by the Audit Commission where it is the inspector. Any person authorised by the regulator covering social housing, where the commission is not the inspector, would include lay inspectors.

The Audit Commission has an excellent record on lay inspection. Tenant inspection advisers have been used by the commission since housing inspections in the local authority sector started in April 2000. The Housing Corporation recruited tenants to help carry out inspections of housing associations prior to the transfer of the HA inspection function to the commission in April 2003. TIAs are used on all housing management inspections, including inspections of housing associations, ALMOs and other housing services with a customer-user focus. Even some inspections of a local authority’s housing strategy service use TIAs to carry out mystery shopping. That tradition will be carried forward and is enabled by the Bill.

Turning to the lively debate we have just had on the Audit Commission, perhaps I may respond to the issues raised by noble Lords on the main amendment, Amendment No. 110E. I cannot deny that the Audit Commission is a monopoly but it brings consistency of inspection, great efficiency and expertise. We have allowed for cases where it does not have the expertise needed by giving the regulator a choice under Clause 192. On housing management issues, the Audit Commission has what is needed in this complex and large area of work and I am sure that it will be able to carry out its task superbly. However, if it feels it does not have the necessary expertise, it is a sufficiently confident enough body to say so and to require the regulator to look elsewhere.

The noble Viscount, Lord Eccles, made the point that this was unnecessary because a competent regulator should be trusted to decide. He put this argument because we are dealing in notions of trust and transparency. However, it is worth repeating that we are trying to avoid a proliferation of inspections. As I have said, inspections beyond its competence should be and can be declined. We have to have that measure in the Bill for those reasons.

On fees and costs, at the moment the cost of inspection is about £1.8 million. Because we are removing that heavy-handed routine inspection of everyone every five years, those costs will certainly go down. The fee levels will be a matter for the regulator to work out in consultation. We are requiring the regulator to pay the Audit Commission’s cost, which, as I said, will be lower, but the Audit Commission is itself accountable to the National Audit Office, so there is value for money and accountability built into the system. I hope that that will reassure the noble Earl, Lord Cathcart. Yes, it is a government body, but it is accountable to the National Audit Office.



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