The Parliamentary Under-Secretary of State, Department for Communities and Local Government & Department for Work and Pensions (Lord McKenzie of Luton): My Lords, there is a programme of regular engagement between Ministers, officials and the HCA that covers the entire remit of the HCA, including the monitoring of its contribution to this particular object. The HCA recognises that design and sustainability are not add-ons to place-making and regeneration but critical parts of a successful development process, which is why in its corporate plan it has committed to working closely with partners on design issues.
Lord Howarth of Newport: While the Government have been right to accelerate housebuilding for economic and social reasons, why have they and the Homes and Communities Agency repeated the errors of the past in subsidising substandard housing with the all too predictable results of a poor quality of life for people who have to live in these homes and high costs of maintenance and early replacement? Following their welcome announcement last May that they would set minimum design standards for all publicly funded new building, will the Government now apply this policy with clear targets and independent assessment for the Homes and Communities Agency, planning authorities and the housebuilding industry?
Lord McKenzie of Luton: My Lords, my noble friend is right to say that Kickstart has provided a much needed boost to the construction industry at a time of extremely difficult economic circumstances, but quality was not neglected. Where initial assessments gave concern, further work was done. Those schemes that the HCA could not be satisfied provided adequate value for money, including quality, did not pass due diligence. My noble friend refers to the May 2009 announcement around World Class Places, which sets out the Government's strategy for improving quality of place.
The Government have been working with the HCA to develop a new set of core design and quality standards to be applied to new homes that are funded and facilitated by the HCA. The HCA is due to publish a consultation paper shortly.
Earl Cathcart: My Lords, I am involved in the property market. We have the Commission for Architecture and the Built Environment, the HCA's design and sustainable development team, the Advisory Team for Large Applications, the National Consultancy Unit and the Urban Design Compendium-five different government organisations all promoting high-quality design, and still we get grotty designs. Surely this is a case of too many cooks spoiling the broth and wasting government money. Should they not be merged or scrapped?
Lord McKenzie of Luton: My Lords, I do not accept the description of "accepting grotty designs". As I have just explained in relation to Kickstart-an important programme to stimulate the housing market-where CABE's initial assessment indicated a lack of quality there was follow-up on that, as the CABE exercise was a desk-top exercise; if it did not have the available information it would score the project as a zero, and the follow-up was important for getting a proper assessment.
With regard to clarity on design standards going forward, the HCA inherited a range of standards from its predecessor bodies, which is why the focus is now on a consultation to ensure that we have clear standards. Stakeholders are to be involved in that consultation.
Lord Tope: My Lords, is the Minister aware that 27 of the private sector projects funded by the HCA scored five or less out of 20 on the industry's Building for Life benchmark and two of them scored just 1.5 out of 20? Does that demonstrate the HCA meeting its good design standards and, if not, what will he do about it?
Lord McKenzie of Luton: Well, my Lords, as I tried to explain, CABE undertook its assessment as a desk-top exercise, as it was asked to do, as part of the assessment for the Kickstart project. That enabled the HCA to follow up and look at the schemes in the broader context. For example, if a wider development were planned, that would impact on the judgment of whether the design was appropriate or not. That follow-up process produced further input into the evaluation of whether there was proper quality. Quality was taken into account together with value for money and deliverability, because this is about kick-starting the housing market.
Lord Best: My Lords, while it was rather miserable to have to bail out some of the builders by supporting projects that were pretty second rate, does the Minister agree that, by and large, the HCA's record on design is very good? Has he seen an article in this week's Inside Housing, the magazine of the housing sector, in which Sir Bob Kerslake, chief executive of the HCA, points out that we are building the smallest houses with the smallest rooms in Europe, and that the HCA is committed to changing that and producing better designs in the future?
Lord McKenzie of Luton: My Lords, obviously the HCA is a relatively new body, but I agree with the noble Lord that it takes very seriously the issue of
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Baroness Whitaker: My Lords, does my noble friend agree that well designed homes add enormously to human well-being and that the many are as entitled to that as the few? Will he not tie grant levels to the quality of design and ensure that there is a minimum design threshold in round 2 of Kickstart?
Lord McKenzie of Luton: My Lords, the assessment of design is very much part of what the HCA, as the funder of Kickstart and other projects, has to take into account. That is the same for phase 2 of Kickstart, as it was for phase 1.
Lord Crisp: My Lords, assuming that the Minister agrees that at a time of financial stringency good design is even more important than otherwise, because it is not just about the aesthetic but about utility and value for money, and given all the standards that are around, will he assure the House that processes will be accelerated to ensure that good design is brought in more quickly than it would otherwise happen?
Lord McKenzie of Luton: My Lords, the Government are committed to doing that as expeditiously as possible. I should stress that the HCA inherited a range of different design standards and it needs to rationalise those. That will be the subject of a consultation due to start shortly. I trust that the consultation will be followed up with the sort of clarity that the noble Lord and other noble Lords are seeking.
The Financial Services Secretary to the Treasury (Lord Myners):The Government are confident that financing remits will continue to be delivered successfully. The UK benefits from a diversified investor base. Recent meetings with market participants suggest continuing strong structural demand from the pensions and insurance sector for long and index-linked gilts; demand from investors overseas remains strong; and the Government are the benchmark borrower in their own market and currency.
Lord Hamilton of Epsom: Does the Minister accept that the traditional market for British gilts has been about £40 billion a year? That was not the case in 2009, when it was £200 billion and 90 per cent was bought by the Bank of England with newly printed money. Is the Minister really confident that the market will be able to absorb five times as many gilts as it historically has when the Bank of England is now indicating that quantitative easing is coming to an end? Does he also accept that it is not an attractive market for foreigners to come into, when we have seen devaluations of sterling against a basket of international currencies and when, traditionally, 30 per cent to 40 per cent have come from outside this country?
Lord Myners: My Lords, I am not going to comment on any decision which the Monetary Policy Committee might make on quantitative easing. During the past 12 months, the gilt market has been the world's best-performing international bond market for developed economies. We continue to be able to fund with comfort. The rate of funding currently required is in line with the quarterly rate of funding for the two quarters immediately preceding the commencement of QE-that is, just over £50 billion a quarter. There is nothing exceptional about this level of funding, particularly given that government borrowing is so far below the G7 average. We are borrowing at very attractive rates of interest. Noble Lords will no doubt be delighted that we are able to raise 10-year bonds at 3.9 per cent per annum. I checked what the rate was when the noble Lord first became a Minister: it was more than 16 per cent. I am not sure that the noble Lord is well positioned to ask questions about the cost of government funding.
Lord Bilimoria: My Lords, does the Minister think that there is a danger of rising inflation as a result of quantitative easing; and could he reassure us that this country will not be joining the so-called PIGS group of countries, particularly after the remark of Bill Gross of PIMCO that the gilts in Britain are sitting on a bed of nitro-glycerine?
Lord Myners: The Bank of England, through its conduct of monetary policy, targets an annual rate of inflation at 2 per cent. Quantitative easing is designed to ensure that we achieve that target rather than fall into deflation and recession. I have noted the comments by Mr Bill Gross of the Pacific Investment Management Company in an article in which he describes himself as an "ageing rock star". He goes on to explain clearly that he has been underinvested in sterling gilts for some time. In the City, we call this "talking your own book" and making your excuses before your clients ask why your performance has deteriorated by missing out on the world's best investment in fixed income over the last 12 months.
Lord Lawson of Blaby: My Lords, is the Minister not excelling himself in his complacency today? Is it not the case that if, as the noble Lord, Lord Bilimoria, says, the head of PIMCO was talking his own book, he would want to be proved right? His view, therefore, is to be regarded. As my noble friend Lord Hamilton said, in addition to the getting on for £200 billion of gilts that have to be sold over the next 12 months to fund the deficit, there is another £200 billion that must be sold in the unwinding of the quantitative easing, because that is the quantum there. Is it not dangerous to be so complacent? Given that the world economy is now in a strong recovery phase-admittedly, the United Kingdom is pretty anaemic-is it not important that we should cut the deficit as quickly as we can?
Lord Myners: I am not being complacent at all, although I would rather be accused of complacency than of talking down the country's economic outlook. The simple fact is that the central government net cash requirement, which is £174 billion for 2010-11, is intended to fall to £81 billion for 2014-15, as we adopt the glide path of progressively reducing the public sector borrowing requirement coming out of recession and achieve our fiscal responsibility objectives.
Lord Peston: My Lords, is it not the case that, rather than talking the country down, we ought to be talking it up in our own interests? Is it not overwhelmingly the case that of course everybody agrees that quantitative easing has to come to an end, but it is all a matter of getting the timing right? Equally, we all know that massive cuts in public expenditure have to be made, but again you have to get the timing right. The real issue is not to plunge into these things, as the official spokesmen for the opposition seem to do by more or less choosing any date that they fancy on which to act, without thinking the problem through. We must not act too rapidly, but we must act when the time is right.
Lord Myners: I, of course, agree with my noble friend in his observation. There is an appropriate time for reducing the deficit. We will do that once recovery is firmly established, but that is clearly not the case at the moment. The adjustment to quantitative easing does not necessarily require the Bank of England to sell the gilt-edged stocks that it currently holds. It can, for instance, hold them to maturity. That decision will be left to the Monetary Policy Committee.
Lord Myners: There is no current intention to re-examine the target although, as I previously advised the House, the European statistical research body is looking at how one might devise inflation measures which capture the price of housing. Should it come up with a recommendation for the EU, we would no doubt take that into consideration, but there are no current plans.
The Financial Services Secretary to the Treasury (Lord Myners): Although no money from the dormant account scheme has yet been released to any of the spending priorities, the 2009 PBR announced that the Co-operative Financial Services Group intends to submit an application to the FSA for authorisation to establish and administer the reclaim fund. If the work on this proceeds as planned, it is expected to be operational by mid-2010, which will enable funds to flow to the Big Lottery Fund and to spending priorities from that date.
Baroness Walmsley: My Lords, I suspected that the answer would be a big fat zero and I have not been disappointed. Is the Minister aware that none of the youth groups with which I have talked knows anything at all about this, and that the Big Lottery Fund, which will distribute the money eventually, has not even had its policy direction from the Government? Will the Minister ensure that when the policy direction is sent, it is as flexible as possible so that the Big Lottery Fund can respond to what young people really want rather than to what Whitehall prescribes?
Lord Myners: The direction to the Big Lottery Fund lies within the authority of the Department for Children, Schools and Families, after consultation with DCMS and HMT. That direction will be given in due course, but, first, we must follow the procedures decreed by Parliament to establish and authorise the reclaim fund. Once that has been done, the mechanisms will be set in place to address the priorities which have been very clearly delineated in the 2009 PBR.
Lord Myners: Our best estimate is that the stock of existing dormant accounts which will transfer into the reclaim fund will be in the order of £300 million to £400 million. Clearly being more precise than that is not easy because it will depend on subsequent reclaims emerging from people who come forward to say that their funds are being transferred to the reclaim fund, but £300 million to £400 million is likely to be the initial stock. Thereafter, the annual amount being transferred to the reclaim fund is likely to be in the low tens of millions of pounds per annum.
Baroness Noakes: My Lords, the Minister will know that reuniting bank accounts with their owners is at least as important as using that money for the Government's pet projects. Can he update the House on how much has been reunited with owners via the My Lost Account scheme, which was set up by banks and building societies?
Lord Shutt of Greetland: My Lords, I thank the Minister for the new information that Co-operative Financial Services has applied to take on this job. I was fearful that we were going to have an orphan looking after orphan funds. Bearing in mind that the second largest building society, Britannia, has recently merged with Co-operative Financial Services, is there not a conflict of interest?
Lord Myners: Part of the authorisation process that the FSA will be carrying out will be to ensure that conflicts of interest are appropriately managed. That would happen whichever bank, building society or financial institution had been appointed to administer the reclaim fund, which will have its own governance structure and independent oversight to ensure that it operates in an even-handed way. I am delighted, notwithstanding that the major banks chose not to support this initiative by offering to run the reclaim fund, that Co-operative Financial Services has agreed to do so. That speaks admirably of the positive attitude towards society and the community from the co-operative and credit union movement.
Lord Hamilton of Epsom: Does the Minister not feel that the Government have missed an opportunity to set up a social bank which would provide seed capital for people in very deprived areas to set up small businesses and do something about the terrible unemployment that we now have?
Lord Myners: The guidance given in the 2009 PBR included an allocation of funds to a social wholesale investment fund, which is precisely the sort of body that the noble Lord speaks to. We also want in particular to direct funds to aid and support young people. We are all aware of feral youth standing on street corners with no idea of their true values, purpose or opinions about anything; I think in particular of young people in Notting Hill. Anything that we can do to help them clarify their thoughts must be welcome.
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