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Let us look at the key features of a duty to address complaints. If the regulator is to be compelled to address them—bound by a specific duty instead of being trusted that it will seek evidence in an inclusive way—then there is immediate pressure for us to define what we expect it to do. What sort of complaints should it handle? We certainly all agree on one issue: a regulator can hardly handle every tenant complaint from 4 million social homes. We have always thought—a belief that I think is common around the Committee—that it should not be the regulator’s job to deal with most tenant complaints. They should be dealt with, first, by the landlord and then, if necessary, by access to the ombudsman. That is the correct route. Therefore, the regulator should be involved only where a tenant concern suggests a systematic failure to deliver. That might be on the basis of very few tenants who have identified a really serious problem, or it might be on a more general set of evidence. However, the whole issue is really about feeding evidence from tenants into the regulatory process.

On the second issue of deciding when to act, Cave was very clear that these choices were especially difficult for any regulator. He said that it was for the regulator to determine how to act. Why would we have a skilled regulator with responsibility to balance its objectives if we did not trust it to make decisions on the process of handling and using evidence? I am absolutely clear that it has to be possible to treat evidence in a transparent, inclusive and fair way, but it is difficult to define an entire complaint procedure in statute. That is partly where the problem lies because inevitably one ends up with an inflexible and bureaucratic set of structures. We have tried to do it. Officials have spent a great deal of time looking at how the necessity for that instinct can be translated into something proper and proportionate.



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I turn to the details of the amendment. It requires the regulator to consider any complaint by a “designated body” or “locally recognised representative body” suggesting mismanagement by a provider which is detrimental to tenants. I am not at all clear why the amendment is concerned about a system of designation. The only power that a designated body seems to have is the right to make a complaint, which the regulator has to consider. It shares that right with locally recognised representative bodies. It is not clear here who recognises whom. There are some issues concerning the idea of designation. I am a little concerned about the idea of the centre designating some tenant bodies as conduits for information and not others. Since I have spent a lot of time in this Committee saying that this is not a centralised and bureaucratic structure, I am concerned that this is centralised, bureaucratic and rather burdensome. I want to explore the implications of the issue of designation.

The amendment also says that the regulator should publish a response within 60 days saying what it intends to do and why, and that allowing the regulator to decide what to do requires the regulator to issue guidance to complainants on the presentation of complaints. It is not clear to me how that works, but all that will follow consultation. The amendment would also enable the Secretary of State by order to designate bodies representing the interests of tenants of social housing and would require her to publish criteria on designation. That is where the weight of the bureaucracy falls.

The proposal has many good features. It has sound principles, such as the need to issue and consult on guidance, and the attempt to limit complaints that come to the regulator by filtering them through responsible bodies. I do not want to labour the point that I think the amendment in this form will not work; Members around the Committee have made it clear that they have issues with the content and the detail, but they are in favour of the amendment in principle. We should think hard about whether we want to create something that is inflexible but that also risks confusing tenants about who is responsible for addressing their concerns and sets up an unnecessary and rather divisive system of centrally designated tenant representatives. There would be risks in that, including legal challenge.

This is where we end up. We have to be careful about the detail. We need to be concerned also about the burden on the regulator in terms of the wide range of objectives. Changing the system in any respect would require primary legislation because I do not know of any other regulators or public bodies with complaints systems that are so rigidly defined in law. I remember, when I was a Whip at the Department of Health, having agonising discussions about complaints procedures and how one could arrive at something that was successful but was also proportionate and effective.

We have been considering how we can achieve these shared desired outcomes, giving the regulator more flexibility but also making it clear to the tenants how they can complain, what they can expect and how they will be treated in that process. I am inspired by what Cave said: that the regulator, not the Government or

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Parliament, should develop the detail of how the regulator should use evidence from key complainants to build a case against poor providers and of how he can work with the tenant voice and others.

I sincerely hope that I can come back on Report with a way forward that will go some way towards meeting the concerns of the noble Lord as reflected in the amendment and ensure that, in a system moderated by the regulator, he is obliged to try hard—and to succeed, but in a flexible way—to establish a system that is generally responsive to the category of complaints that I have set out and will provide proper accountability to all stakeholders. With that commitment, I hope the noble Lord will feel confident that he can await Report stage, where we will continue the debate.

Lord Whitty: I am grateful to the Minister for that last point and I certainly look forward to her propositions for what lies behind the amendment. Somewhere in the middle there she lost me, however. Maybe I can help her, or her officials, a little on what I intend here and what I do not. This is not about individual landlord/tenant issues. It is about general mismanagement—she used the term “systemic”—by the social housing provider that needs to be drawn to the attention of the regulator.

The Minister rightly points out that Cave says that all sorts of evidence will be coming in to the regulator and he will have to make up his mind what he does and does not pursue. There will need to be systems for that and how the evidence will be presented, and that will be communicated back down the line to tenants and their organisations. However, that is a somewhat passive way to treat tenants and their organisations. I thought that the regulator and the spirit of Cave wanted to encourage the active engagement of tenants in improving the quality of social housing provision and thus to provide an ability for them to initiate action. Tenants would not simply provide evidence of which the regulator may or may not take account or that would allow it to make up its mind on whether to intervene or not in areas where they perceived bad mismanagement, but there would be a formal system whereby tenants can put the problem on the regulator’s desk. This would not constrain the regulator in what it could do about the situation, but it would have to respond one way or the other and indicate what it was going to do. There would be no constraint on the judgment of the regulator as to what is important or otherwise, or on the remedy or intervention, but it would mean that there would be an active role for tenants in their organisations.

I was trying to help the Government and the regulator in the area of designation. There are many organisations which purport to speak for tenants both locally and nationally, and just because a bit of headed notepaper arrives in the regulator’s office, it does not necessarily mean that it is from an organisation that is any sense representative. There are two criteria: national organisations with which the Government, the regulator and the new agency will engage—a relatively short list that could be regarded as a designated list—and, at the local level, housing providers themselves who recognise serious residents’ or tenants’ organisations within their estate or management block. There is a relatively easy way of doing this which does not have to be too

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formal. I do not regard it as bureaucratic or overly centralised. It is intended to limit the organisations that make use of it to those bodies which are judged to be truly representative.

I thank all noble Lords who have supported the principle of the amendment. I anticipated there would be some drafting problems but the principle has received widespread support. I agree with the noble Lord, Lord Best, that people who live on social landlord estates also ought to have rights. Earlier I moved an amendment in rather broader terms to that effect. This is an area in which, without making regulation general in a way to which the noble Baroness objected previously, we could at least enable people to raise issues of management when they live on an estate that is managed by a social provider. You would not necessarily have to give them more general rights or extend the regulator’s remit as far as my earlier amendment sought. I thank the noble Lord, Lord Best, for his suggestion and I hope that my noble friend and the department will take it on board. However, I take heart from the fact that she is going to reconsider the matter and bring something forward. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees: The suggestion is that we take a short break. With the leave of the Committee, I suggest that we reconvene at 5.57 pm.

[The Sitting was suspended from 5.47 to 5.57 pm.]

Clauses 207 to 210 agreed to.

Clause 211 [Companies: change of articles]:

Baroness Andrews moved Amendment No. 110V:

On Question, amendment agreed to.

Clause 211, as amended, agreed to.

Clause 212 agreed to.

Clause 213 [Consultation]:

Baroness Andrews moved Amendment No. 110W:

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

On Question, amendment agreed to.

Clause 213, as amended, agreed to.

Clause 214 [Accreditation]:

[Amendment No. 110X not moved.]

Clause 214 agreed to.

6 pm

Clause 215 [Exercise of enforcement powers]:

Baroness Hamwee moved Amendment No. 110XA:

The noble Baroness said: I move the amendment, but I shall not speak to it because it should have been withdrawn when Amendment No. 110XAA was tabled. It will probably be easier to speak to Amendments

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Nos. 110XAA, 110XB, 110XC and 111ZZA. The first of those amendments inserts into Clause 215, on the exercise of enforcement powers, a specific reference to objective 10 in Clause 88 regarding the proportionality objective. We may be told—I am sure we will—that that applies throughout Part 2. If that is so, why was it necessary to include paragraphs (b) and (c) in subsection (2) of Clause 215? I would have thought that proportionality would have taken into account in paragraph (b) regarding whether a failure or a problem was serious or trivial and, in paragraph (c) whether the failure or problem was an isolated incident. I hope for assurances as to how objective 10 will be applied when it comes to the making of hard decisions by the regulator.

Amendment No. 110XB to Clause 217 provides, when the regulator issues an enforcement notice, that the case relates to mismanagement of affairs regarding social housing. I thought that this matter was dealt with somewhere else in the Bill. I could not find it and it is probably simply eluding me, rather than not being there. I seek to ensure that mismanagement is what this Bill is about, rather than anything wider, if I may put it that way. Amendment No. 110XC to Clause 226 on the imposition of fines is similar.

The noble Lord, Lord Dixon-Smith, has tabled Amendment No. 110XD in this group. It relates to Clause 228, which will need amendment in any event as a result of something that happened in the Commons. Clearly, it is incorrect that that amendment relates to Clause 228(3) because it was intended to refer to subsection (2).

Finally, Amendment No. 111ZZA is an amendment to the definition of mismanagement which, as it stands, includes affairs conducted “improperly or inappropriately”. Mismanagement is a serious matter that can prompt serious actions by the regulator. I have no problem with conducting affairs “improperly”, but what is “inappropriately”? What I think is inappropriate may not be what other noble Lords think is inappropriate, or vice versa. It is too wide and subjective a term to have a place in the definition of a term whose application can have major consequences. I beg to move.

Earl Cathcart: I am going to speak on Amendment No. 110XD concerning Clause 228, which is about the £5,000 penalty. Our amendment would replace subsection (3) with the words,

That would remove the right of the Secretary of State to amend by negative order the amount specified in the Bill, £5,000, as a penalty, and instead make it subject to the affirmative procedure. The Executive should not be able to vary this already substantial amount without parliamentary scrutiny. This kind of order is too important and potentially too controversial to be passed by the negative procedure. The amendment would put in place a recommendation from the Delegated Powers and Regulatory Reform Committee on page 4 of its report. The committee points out that a similar unlimited derogation in the Communications Bill 2002

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was amended to adopt the committee’s call for those powers to be subject to the affirmative order. I hope that the Minister will follow that with this amendment.

Baroness Andrews: It might make sense if I were to start by addressing the amendment the noble Garl has just spoken to. Clause 228 ensures that the penalty fine cannot be raised above £5,000 unless the Secretary of State amends the amount by order. Noble Lords seek to ensure that the order is affirmative. That follows a recommendation made by the Delegated Powers and Regulatory Reform Committee, and I completely agree. We propose to do the same by way of Amendment No. 116C, which amends Clause 318(3), a general clause on the procedure to be applied to orders. Amendment No. 116C adds orders under Clause 228 to the list of those that must be approved by resolution in each House of Parliament. I am grateful that he, both formally and informally, and the noble Baroness, Lady Hamwee, have pointed out that there is an error in the numbering. I thank them for helping us with that.

I turn to the amendments laid by the noble Baroness, Lady Hamwee. Amendment No. 110XAA, which is on objectives—

The Deputy Chairman of Committees: There is a Division in the Chamber.

Baroness Hamwee: I cannot wait!

The Deputy Chairman of Committees: We will adjourn the Committee. I think we are all aware that there will be quite a press in the Lobbies, so I suggest that, rather than setting a specific time, we all come back as quickly as we can and start again then.

[The Sitting was suspended for a Division in the House from 6.07 to 6.17 pm.]

Baroness Andrews: I shall continue from the point where I was interrupted by that very exciting vote. Perhaps I may assure the noble Baroness that there is no need for the amendment because objective 10 already applies to this clause, as it does to every function of the regulator. However, she asked why we need these subsections in their current form. The clause imposes a very stringent test on the regulator. It is necessary to clarify what “proportionality” means in terms of enforcement, for example, as opposed to standard-setting or information, which is why the clause is there.

Taken together, this clause and objective 10 provide that the regulator must seek to regulate in a manner which minimises interference and is proportionate, and that when the regulator decides to take enforcement action, he must give particular consideration to all the issues mentioned in subsection (2) of this clause.

I turn to Amendments Nos. 110XB and 110XC, which concern mismanagement in relation to social housing—a very important issue. Perhaps I may briefly describe what “mismanagement” is. It is about how the affairs of the registered provider are conducted. In most cases, it will relate solely to the registered provider’s management of its social housing, but the mismanagement ground could apply, for example, to general financial mismanagement which is not directly linked to social

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housing. It covers standards under Clauses 191 and 192, other breaches of Part 2 and misconduct issues.

It is important that “mismanagement” is considered not just to be mismanagement of social housing—that is, breach of Clause 191 standards—otherwise, the regulator would have to sit on its hands when faced with serious financial problems in an association. We do not want that because there might be a risk of insolvency of the provider, which would not be in the interests of protecting assets or tenants. Moreover, wider governance issues could also ultimately have an impact on tenants, and that is why we want the regulator to catch such issues early. It also needs to be able to challenge mismanagement on other non-social housing issues, such as the failure to submit accounts. As it is important that the regulator tackles issues such as that quickly, probably by an enforcement notice or a penalty, it will rely on accounts to be assured that the provider remains financially stable. Failure to provide correct information may be an early sign of serious governance problems. The amendment would make that harder to challenge. I want the regulator to be able to take proportionate early action to avoid mismanagement of social housing, financial and other affairs.

Amendment No. 111ZZA seeks marginally to change the definition of mismanagement in Clause 274. That definition includes at the moment breaches of standards, breaches of any requirement set out in Part 2, and improper or inappropriate behaviour. Mismanagement and misconduct are existing crimes for action by the Housing Corporation in the Housing Act 1996. The formulation in this Bill is designed to cover the same circumstances as in that Act, but the main difference is that we have included misconduct within the overall definition of mismanagement. That is why the words “conducted improperly or inappropriately” form part of the definition. Misconduct could, for example, include tolerating serious mismanagement of staff and not keeping proper financial records.

There is an important difference between conduct that is improper and that which is inappropriate. “Improperly” means conduct contrary to law, rule, convention or propriety in relation to the conduct of the business, while “inappropriately” means in a manner that, while not necessarily improper, is not appropriate having regard to all the circumstances. An example of this might be poor judgment of risk: making risky investments or failing to carry sufficient insurance. That is behaviour inappropriate to the task in hand—what has to be done in order to safeguard the situation. We need the definition because such actions would not be covered by “improperly”. I agree that “inappropriately” is a fairly general term, but it does have an interpretation. I hope, therefore, that it is proper and appropriate to include both of these expressions.

I think that I have now responded to all the amendments in the group.

Baroness Hamwee: I thank the Minister for her response. I have to say that I am not wholly persuaded about Amendment No. 110XAA in that there is a particular need to spell out aspects of proportionality in Clause 215, but I have heard the explanations. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.



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[Amendment No. 110XAA not moved.]

Clause 215 agreed to.

Clause 216 agreed to.

Clause 217 [Grounds for giving notice]:

[Amendment No. 110XB not moved.]

Clause 217 agreed to.

Clause 218 agreed to.


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