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The purpose of the majority of the amendments in this order is, quite simply, to update references to predecessor bodies and other references in existing Acts to ensure that these reflect the position once the HCA has been created and the predecessor bodies abolished. There is nothing pertinent to the regulator in this order. Where taxation matters are concerned, the intent is to leave the current position substantially unaltered. So the effect of these amendments, other than in the rewording of existing Acts, is extremely limited. They do not contain substantive policy issues; they are simply technical in nature. They effectively change the name of the relevant organisation to the HCA in legislation and they therefore pass the existing powers and functions from the URA, the CNT or the Housing Corporation to the HCA. The amendments are aimed, quite simply, at maintaining the status quo.

I suspect that noble Lords—especially those who were here at midnight last night—would not thank me for going into the detail of every individual amendment and so, on balance, I will not do so unless I am bound to under challenge from noble Lords. I have a line-by-line explanation but I shall forgo that. However, it provides an opportunity to briefly update the House on what has happened since the Bill left here, received Royal Assent and became an Act. I say again how much the Act was improved by the contributions of this House, for which I was very grateful.

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Following on from that, work has continued apace to ensure that the HCA and the TSA can be up and running on 1 December 2008, four months ahead of the date originally planned. This work has included developing the necessary secondary legislation: the first commencement order, which allowed, among other things, the HCA and TSA to appoint board members, was laid in September; this affirmative order and the two negative orders that Parliament is currently considering; and a second commencement order giving the HCA the bulk of its powers and responsibilities is currently being prepared and is expected to be laid before the end of this month in time for 1 December.

The HCA and TSA chairs, boards and senior management are in place. The HCA has conducted, and will continue to conduct, a series of regional stakeholder events setting out how the HCA will work and deliver. I am very impressed by the way in which Sir Bob Kerslake has involved the entire staff of the HCA in the formulation of the new body. It has been a very open and energetic process and is thoroughly to be commended.

The department’s sponsorship arrangements are being finalised and staff are being appointed. The various necessary pieces of corporate documentation for both agencies are either agreed or in the final stages of being agreed. The continuity of transferring CLG programmes has been safeguarded by 42 staff agreeing to transfer on secondment to the HCA, and those secondments vary in length between a few months and three years. HR and payroll systems are in place for both agencies and, where appropriate, have been tested. Arrangements are in place for the physical transfer of staff and data. Also with a view to a smooth transition to the new organisation, the HCA finance and IT systems have been tested successfully. The TSA financial systems are in place and are fully operational.

To achieve the benefits expected from it, therefore, the HCA will need to create a truly single agency from its component parts, which also means a single culture. That process will start immediately after 1 December with the development of a new regional structure for the agency and will include a wholesale review of the agency’s accommodation requirements and continuing work to create a distinctive culture for the HCA.

The benefits offered by the HCA are already evident in the department’s developing a response to changing market conditions. I shall take a few moments to talk about this because it is such an important part of what will be done. The HCA’s scale and the flexibility that comes from having housing and regeneration programmes delivered by the single agency are valuable additions to our policy armoury. Further benefits will flow in the next CSR period when it may be possible to redesign existing programmes to fully exploit the synergies that are available from the single agency.

The HCA is coming into being in a very different context from that in which it was conceived. To pick up the point made last night by the noble Lord, Lord Dixon-Smith, we are looking at a very different situation. There is unlikely to be any area of the HCA’s business that is unaffected by the credit crunch. House purchasers and house builders and developers are unable to access

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the funding they need, and activity is slowing markedly. The scale and speed of the downturn in the housing market have been striking. In the context of a wider economic downturn, the role of the HCA is likely to be significant. There continues to be a significant gap between supply and rising demand for new homes, and the HCA will be central to addressing that gap.

To support that, the Government are pressing ahead with the reforms that are needed to focus on the long term and condition the market and industry for growth, including repackaging surplus public sector sites and ensuring better infrastructure co-ordination. The HCA will obviously have a key role to play in that, as it will in the administration of HomeBuy Direct and the purchase of developer stock, both of which form key planks of the Government’s response to the current economic downturn.

As a means of delivering in this changed climate, the HCA has identified its key immediate priorities as having a close understanding of what is happening on the ground now and likely to happen in the near future, adopting a proactive, flexible and creative approach to ensure that as much market activity as possible can continue, and developing new approaches to broadening the base of providers and accessing new sources of finance. As a means of delivering against those priorities, the HCA is therefore developing plans to find effective ways of focusing on the delivery of social and affordable housing and housing supply; working closely with the RDAs on regeneration projects that are most at risk or in danger of stalling; making sure that money invested in regeneration and infrastructure assists in job creation; working as flexibly as possible with the housing developers by, for example, releasing smaller parcels of land, even if that is marginally less cost-effective; working with the financial sector to find new ways of funding that can help unlock the supply of homes; supporting local authorities and regions in their role in housing delivery, regeneration and development; developing, as quickly as practicable, original and innovative solutions and working flexibly to maximise the synergies across the programmes so that every penny counts; and involving local people and communities to make sure that its investment solutions are wanted and deliver what is needed. The HCA has to do all that without ever losing sight of the need for long-term sustainable development to create high quality places and housing and help combat climate change.

The implementation of these plans should enable the HCA to continue to deliver against its objectives throughout this period of economic turmoil and leave us well positioned for the world that emerges from the current economic conditions.

I have taken the liberty of explaining a bit of the context in which the HCA is now working. I hope that noble Lords will find that helpful and will approve the order.

Moved, That the draft order laid before the House on 15 October be approved. 28th Report from the Joint Committee on Statutory Instruments.—(Baroness Andrews.)

Lord Dixon-Smith: My Lords, it is a pleasure and a relief to see the Minister again on a subject so straightforward as the Housing and Regeneration Act 2008 (Consequential Provisions) Order, which consists of

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amendments to other legislation already on the statute book that are the natural consequences of the passing of that Act. To that extent, this is not particularly controversial. I am also grateful for her update on progress in the establishment of the Homes and Communities Agency and the housing regulator. It is good to know that that programme is going well, and the fact that it is likely to be completed ahead of the original schedule is a matter of satisfaction to everyone who has been involved.

The questions that derive from the information I have received relate to the Minister’s summing-up of the changing circumstances in which the whole construction industry finds itself. Behind the regulation a cost-benefit analysis was done, which we have all received. I wonder if the Government have had any opportunity to review those figures in the light of the very different economy in which we are now working and, if so, what their conclusions might be.

I am bound to say that I had some difficulty here, but that may be because I do not understand the statistical background in resolving the actual figures that the cost-benefit analysis appeared to reveal. I would be grateful if the Minister could explain to me how that work was done, if that is not too technical a question, and tell me whether any attempt has been made to update those figures in the light of the changed circumstances.

With regard to the content of the order, I have nothing to add to what the noble Baroness has said and I am grateful for her explanation.

Baroness Hamwee: My Lords, I, too, thank the Minister. I have only one question on the order and one closely related to it, which is certainly related to what both noble Lords have said.

With regard to taxation matters, I think the words that were used were, “the position is substantially unaltered”. I am sorry; it has only just occurred to me to probe that. I do not know whether that means “unaltered save for title”, or whether there is anything more. I think the phrase, “leaving everyone as far as possible in a tax-neutral position” was also used, which raises the question of what is not possible. Is that disadvantageous? I should perhaps be looking in a different direction for this question.

The Minister talked about the context of the order and referred to the rather different situation in which we now find ourselves, even though it seems only five minutes ago that we finished the Housing and Regeneration Bill. Local authorities up and down the country are working on local economic recovery plans, and I wonder whether the Minister has anything more that she can add about ways in which the HCA is working and intends to work with local authorities, because not every one will be the same. Are the Government satisfied that the model that we created in a spirit of co-operation is actually the right one?

1.30 pm

Baroness Andrews: My Lords, I will start with that question first, if I may. In terms of the way in which the HCA sees itself as responding uniquely to the

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situation, what we have in the HCA has always been a single conversation, the language we used when considering the Bill. We also have the capacity for innovation to work in different ways, whether it is with local housing companies and local authorities or the opportunities that local authorities are considering regarding funding for the purchase of stock from developers, for example. The Housing Corporation will be involved with local authorities in all the initiatives we have put in place to try to free up the housing market.

As of 2 October, of the £200 million a year marked for the purchase of stock from developers, the Housing Corporation has allocated £72 million, which will deliver 2,160 affordable homes. That obviously involves close conversations with local authorities. There will be a premium on what we can do by way of innovation and social housing, because this is where it will bite most specifically.

All the information I have received from the HCA shows that it wants to work as flexibly as possible and is open to good ideas. That means working as flexibly as possible with housing developers. I talked about releasing smaller parcels of land as well as looking at what else local authorities can do in their allocations policy and the way in which priority groups are coming forward with their housing needs. The HCA will also work closely with the regions on housing delivery. One needs to look at the sustained pressure for more homes as well as the obvious failure of developers to access the cash to do the start-ups. We are looking at clearer leadership, less fragmented funding and more effective partnership. All that will benefit relationships with the HCA.

It is our intention to maintain tax neutrality; all the provisions have been drafted on that basis.

I do not have the cost-benefit analysis in front of me, but the circumstances have changed since the impact assessment was prepared, and we are aware that the financial benefits may not be as great or realised as soon as originally envisaged. I am very happy to write and explain how the methodology will help us to understand some of the differences that we are likely to see.

On Question, Motion agreed to.

Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008

1.33 pm

Viscount Eccles rose to move, That an humble Address be presented to Her Majesty praying that the order laid before the House on 29 September be annulled (SI 2008/2546).

The noble Viscount said: My Lords, it is six weeks since this statutory instrument was laid and nine months since the enabling powers went through at the time of the Banking (Special Provisions) Act, which dealt with Northern Rock. It seems timely that there should be a debate on the Bradford & Bingley order. It has been, in the nine-month history, a matter of some concern to the Delegated Powers and Regulatory Reform

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Committee and, latterly, to the Merits Committee, on both of which I sit. The views that I express are my own and not those of the committees, except to the extent that I quote what they say.

Before going into detail, I have a comment on the commonly used phrase “business plan not working”. That is a description which applies to Bradford & Bingley; it has been freely said that its business plan did not work. What meaning can we attach to the phrase? Both the constituent parts of Bradford & Bingley were founded in 1851, and I think the meaning has probably been the same since 1851. It is risky to borrow short and to lend long. The reason why a mortgage finance company—probably a better description of Bradford & Bingley than a bank—does this is to try to achieve interest differentials which favour its profit and loss account. But the process is risky, and if the short-term market dries up, what then? Presumably, it is something along these lines that happened to Bradford & Bingley, although, as will become clear as I bring out other points, we are very short of information.

During the passage through the House in February of the Act dealing with Northern Rock, there was controversial discussion of Section 2(2)(a), on which the Treasury relies for the power to do what it has done to Bradford & Bingley. There were suggestions that the power was too wide and that it went on for too long, but there it is in the Act. It is under that section that the Treasury has taken the draconian action of confiscating the shares in Bradford & Bingley and simultaneously transferring property for £612 million to Abbey Santander. Into this story so far, the company itself, the board and the staff do not seem to have come. There has not been much in the public domain about discussions with the company, what the board thought about those discussions and what would happen to the staff. That is in sharp contrast to Northern Rock. Yet the Government have frequently said that they do not wish to manage banks. But they have sold off the continuing business and left themselves with the run-off of the existing book. That was all done on 29 September, in a great hurry.

What has been said since? There have been three Statements by the Chancellor, repeated in this House, on 6, 8 and 13 October. On 6 October, the Chancellor said:

the concept of transferring jobs and not people is interesting—

There was no debate on Bradford & Bingley following that Statement. That is not surprising, because the Statement was about the full-scale banking crisis, bringing in the G7, the IMF, Washington and whatever else. So the Bradford & Bingley was a very minor issue in the Statement on 6 October.

There was a second Statement on 8 October which merely confirmed that the part of Bradford & Bingley in public ownership was going to be run off. One is left

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with the impression that this was really housekeeping. There was not much that was urgent about it; there certainly was no hint that there was a serious threat to the financial stability of the United Kingdom. This takes one back to what was said when the Act went through and when these powers were taken.

The noble Lord, Lord Davies of Oldham, whom I am pleased to see in his place, said:

“I emphasise again that the powers that we are taking are triggered only in the most extreme circumstances”.—[Official Report, 21/2/08; col. 293.]

On the 19 February, the Chancellor had gone rather further. He said:

“There must be a serious threat to the stability of the financial system before the powers are exercised. That is a high test to be met, and the action must be proportionate. The Treasury must consider alternatives. The circumstances go way beyond simply a threat to depositors”.—[Official Report, Commons, 19/2/08; col. 175.]

That is the background.

I deal now with the concerns of the Delegated Powers Committee. The House will remember that the committee thought that an order such as this should be subject to the affirmative, and not to the negative, procedure. The chairman of the committee, the noble Lord, Lord Goodhart, made at Second Reading of the Banking (Special Provisions) Bill on 20 February, at cols. 210-11 of Hansard, a detailed and strong representation to the House that the order should be affirmative. Circumstances seem to have proved the committee to be right, because such action as has been taken with Bradford & Bingley requires explanation and debate. Indeed, if the situation on 29 September was so urgent and threatening, one could argue that Parliament should have been recalled. Given that it was not, what permitted the holding-over of the situation until 6 October? As events have shown, the procedure should have been affirmative. Perhaps there was, and still is, some mismatch between what was said in February and what happened in September. In these times, when confidence is vital, it is not good for the Government to have said one thing some months ago and then to do another later.

I turn to the Merits Committee. This is a long and complicated statutory instrument, considered on 7 October and reported on on 9 October. The committee said:

“This Order is drawn to the special attention of the House on the ground that it gives rise to issues of public policy likely to be of interest to the House”.

Otherwise, all that the committee could do was to describe what was set out in the statutory instrument, because the Explanatory Memorandum and the regulatory impact assessment were short and sketchy.

What did we learn from the two documents? We learnt basically that the Treasury considered that it had the power to do what it was doing under Section 2(2)(a) of the Banking (Special Provisions) Act and has done it. There were only three new things in the two documents. The first was the phrase in the Explanatory Memorandum, “temporary public ownership”. We knew what that meant in relation to Northern Rock, because it was to be a continuing business, eventually to be sold back into the private sector. It is not the same with Bradford & Bingley. It

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would be interesting to know what the Minister thinks the phrase “temporary public ownership” means in current circumstances.

The second new thing was the appearance of the Financial Services Authority on the scene. The regulatory impact assessment states that,

That no doubt referred to Northern Rock. There was no detail or argument as to how that was connected with the decision to take Bradford & Bingley into public ownership. I thank the Library for looking for the FSA’s determination with the best of its ability, which is greater than mine—I looked for it, too. We eventually received an answer from the FSA which stated that, for commercial reasons, its determination was not available to the public, nor to Parliament.

The third new thing was the business plan. The RIA stated:

“The government will put in place arrangements for a business plan to be developed for the remainder of Bradford & Bingley plc’s business”.

That is a pretty conditional statement. A competent administration team for a run-off of a mortgage book would probably take about seven days, possibly 10, to work out a business plan, but, six weeks later, we have heard nothing but a short announcement that Sir Philip Hampton and Mr Kingman will get round to it later with the independent board of Bradford & Bingley, about which we know nothing.

Much was missing from the Explanatory Memorandum and the RIA. There was nothing much on Part 5; there was nothing at all on Parts 6, 7 and 8. Part 6 relates to the Financial Services Compensation Scheme, which is an important part of what is being done. There was no description of the potential cost. As we saw earlier, on 6 October the Chancellor made reference to the sharing of cost, and it must have been to the relationship with the FSCS that he was referring.

The Chancellor said also that it was the Treasury’s duty to consider other options. All that the Treasury said to us about that was that the Government had considered a number of other options, including other expressions of interest from the private sector, and that it considered this to be the best solution. It gave no detail at all, not even a minimum description of what other options it had considered or a reason for its deciding that they were not suitable.

The two documents are unsigned and no Minister is named, which is completely outside all practice for the submission of statutory instruments to Parliament and through the Merits Committee. Was nobody willing to sign? The central issue is why the Treasury considered it right just to record its power under Section 2(2)(a), but saw no need to give evidence for its view. Even the Treasury can be wrong. Nor is it self-evident, given the facts, that it has the power.

Bradford & Bingley has a £42 billion book and about a 3.5 per cent share of the mortgage market. The book was surely not,

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