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First, I need to reassure the noble Lord, just as my colleague in another place sought to reassure housing associations. The power relating to the transfer of land and the other powers here could never be used on the basis of a trivial breach of standards or simply because the regulator felt that it might be a good idea. We have just discussed Clause 215, which requires the regulator, when using enforcement powers such as these, to consider not only the desirability of providers being free to run their own businessesa very important protectionbut also the materiality of any breach. That means whether it is serious, whether it is recurrent and whether it is urgent. It applies not only to whether to intervene but to which power to use and how to use it. The regulator will have to have regard to the fundamental objectives, and objective 10 requires it to minimise interference and be proportionate. There will be a materiality test and a proportionality test to satisfy before the regulator can use these serious enforcement powers. Furthermore, the regulator would have to issue, consult on and have regard to guidance on the use of its enforcement powers. It is simply not possible to use a power as extreme as that relating to the transfer of land on the basis of anything less than the most serious of breaches.
I want specifically to address the point that the regulator should not be able to use a transfer of land power or appoint new management simply on the grounds that the land or management would be improved by the change. Perhaps I may explain why it is necessary that this should remain. Again, this is not a new ground for action; it is part of the current system under the Housing Act 1996. If we removed it, it would make the transfer of land power and other powers much harder to use than at present. Perhaps we would consider removing it if the powers were currently too easy to use or were being abused. However, the reality is that in practice it is very hard to use transfer of land powers. For example, the regulator would be depriving the provider of its property and the Human Rights Act would be engaged. This simply would not permit these powers to be used on non-serious grounds, and I believe that it would be extremely unwise to limit them beyond the overarching safeguards in the Bill. It would undermine the regulators power to act in extreme cases and increase the risk of insolvency.
As I have said, the Housing Corporation rarely uses transfer of land and uses it only where all else fails. In fact, in a recent case it spent several years working with an association to improve its capacity and encourage a voluntary solution, but to no avail. This is a last resort, partly because I hardly have to say that the individual cases are time-consuming, extremely expensive and highly contentious, and there must be a watertight case before there is any legal challenge. The Secretary of State must give approval, and that is not given lightly, and it needs to find a stable organisation to transfer to, one that will accept the liabilities which transfer along with the land.
The Housing Corporation and, in future, the regulator, do not act only on the basis of mismanagement, rightly in my view. Mismanagement is retrospective, but what is important here is that the regulator must also be concerned with the future management of homes and the best interests of tenants and the public. In all of the last four transfer of land cases considered by the corporations board, it concluded that transfer was justified on both of the acceptable grounds for action: that mismanagement had taken place and that the management of the land would be improved if it were transferred.
The noble Lord made the point that an inquiry may be held only when the regulator suspects that the affairs of a provider may have been mismanaged, so why should action be taken on any other basis? Let me be clear that the test for starting an inquiry is retrospective, but that does not mean that the aims of the inquiry set by the regulator or its findings are restricted to whether there has been mismanagement. Other concerns may be uncovered during the inquiry that the regulator needs to take into account when deciding what action to take. It is possible that it might even conclude that there had been no mismanagement in relation to the matters under investigation, but nevertheless it needs to act. Each case must be decided on its individual characteristics.
The status quo works. It gives the regulator flexibility within the overall framework of checks and balances, and it is fair. Housing associations have strong protections
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I hope that I have convinced noble Lords that it would not be advisable to alter or restrict in the way proposed the grounds on which the regulators most serious powers may be used, and I hope that putting this explanation on the record will allay the concerns that have been expressed.
However, the amendments are not limited to that because they would also apply many powers that currently are used only for non-profit providers to profit makers. I shall come on to the issue of how to apply the transfer of land powers to profit makers in a moment. We have laid amendments to do this in respect of their social housing, because that is vital. We have already amended the Bill so that in the main it treats non-profit and profit-making registered providers in the same way, but there is no point in applying powers to profit makers in exactly the same way when they cannot apply or are inappropriate. What matters to tenants is that they have similar outcomes, even if the process is slightly different. We should not take unnecessary and disproportionate powers over any private sector provider. For example, there is no point in applying the powers on amalgamation to profit makers. This power applies only to industrial and provident societies and it is extremely unlikely that profit makers will have that organisational structure, and in any case it is simply not possible to merge only a profit-making providers social housing because all the providers assets would be bound to form part of a merged body. It would not be appropriate for the regulator to measure assets that are not connected to social housing.
I am also reluctant to extend the powers in Clauses 255 to 260 to profit makers. Clauses 255 to 257 prevent an association making poor financial decisions such as selling assets without the regulators consent during or immediately after an inquiry. As I have said before, we can restrict the disposal of social housing by a profit maker because consent can be refused. I think it would be excessive to go further and enable the regulator to usurp shareholders powers by suspending or sacking a profit makers directors, especially as social housing is likely to form a small proportion of their business.
We have tried to come to a fair and sensible position in relation to the grounds on which the most serious powers can be used and how they apply to profit makers. I think we have the balance right between protecting tenants and assets and being too intrusive. I have had to go into great detail, but I hope that the noble Lord will feel able to withdraw his amendment.
Lord Best: I am grateful for noble Lords support for the amendment and for the comments of the Minister, in particular those on bringing profit-making alongside non-profit-making. I understand her reasons for that not always being appropriate and was grateful for her guidance.
I turn to the substantive point incorporated in many of my amendments. The Minister addressed fully the transfer of land, to which Clause 252 relates. I have always known that the Secretary of States consent is required under Clause 253(4) before a transfer of land can be imposed, so that is not the most serious of the ways in which the regulators powers are being extended beyond cases where mismanagement is proved. I was concentrating more on Clause 248, on management transfer, and Clause 250, which gives powers to appoint the management and staff of the organisation. I was less than entirely satisfied by the Ministers response on those points. It is likely that that I will return to the matter later. In the mean time, I beg leave to withdraw the amendment.
The noble Baroness said: I shall move a group of amendments, starting with this amendment, which extend the regulated transfers of social homes to include all homes owned by a registered provider. Previously, this power was used only for non-profit-making housing associations. These amendments permit it to be used for profit-making organisations. The power to order a transfer is an existing power of the Housing Corporation, which is rarely used and is a last resort when an association has no viable future and has failed to find a workable solution on its own. The Bill provides that the exercise of a power must be preceded by an inquiry, only if the regulator is satisfied that there has been mismanagement, a breach of standards or if the transfer would improve management of the land.
As with other enforcement powers under Clause 215, the regulator must consider the materiality of any breach and the desirability of providers to manage their own affairs. The Secretary of States approval is needed. The decision of the regulator and the Secretary of State could be judicially reviewed. After consideration, we decided that applying this power to profit-making bodies was necessary to ensure that the social homes that they owned were completely secure. This power is not needed when a profit-making provider becomes insolvent, because the insolvency powers in the Bill can be used to secure the homes. However, we decided that the power was necessary if there was a serious risk that the profit-making provider would become insolvent or was running the homes so poorly that there was no other recourse than for the regulator to be able to take them away.
Most of the amendments simply remove non-profit and apply Clauses 252 and 253 to profit-makers. The key amendment is Amendment No. 110AM. It specifies, first, that only social housing and associated land held by a profit-making provider can be transferred, whereas all of a non-profit-making providers assets and liabilities can be transferred. Secondly, the amendment states that land cannot be transferred from a non-profit to a profit-making provider, although the reverse is possible.
I shall explain why we arrived at that position, which superficially may not seem fair. After all, if the regulator can transfer non-social housing assets owned by a non-profit-making provider, why not allow the same for a profit-maker? Why not level the playing field?
The reason is that there are several principles in play; it is not only a matter of having a level playing field. It is important to recognise that the Housing Corporation does not use the transfer of land power as a punishment but to preserve assets that have received some public funding and which are used for the benefit of social tenants and the community. Most housing associations own assets that may at some point in the past have been partly publicly funded but are not strictly social housing, so it is right that the regulator should be able to save these. By contrast, the profit-making sector has no historical legacy of social housing assets. The regulator has no interest in seeking
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Amendment No. 110AP is consequential on Amendment No. 110AM. If the regulator transfers non-profits land to itself temporarily, which it may have to do if no suitable transferee is available, under the amendment it cannot later transfer the homes to a profit-maker. I beg to move.
Within 6 months of the coming into force of this Act, the Secretary of State shall make regulations amending Part M of Schedule 1 to the Building Regulations 2000 (S.I. 2000/2531) (access to and use of buildings) to ensure that all new dwellings of whatever type or tenure meet enhanced minimum standards in relation to
The noble Lord said: The noble Baroness, Lady Wilkins, is unable to be present to move Amendment No. 111A. Although I have put my name to it, I shall wait until she is with us at Report stage, and I shall not move that amendment.
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