APPENDIX 2: WELFARE REFORM AND WORK BILL:
FURTHER GOVERNMENT RESPONSE
Letter from Rt Hon. Lord Freud, Minister of
State for Welfare Reform at the Department for Work and Pensions,
to Baroness Fookes, Chairman to the Delegated Powers and
Regulatory Reform Committee
I am writing to follow up on my letter of 18 January
on the points raised in the Delegated Powers and Regulatory Reform
Committee's report on the Welfare Reform and Work Bill (thirteenth
report of session 2015-16) with regards to the reduction in social
housing rents.
The Government will table amendments in response
to the Committee's recommendations in order:
· To
restrict the clause 26 power to make alternative provision for
excepted cases;
· To address
the drafting inconsistency as regards 'formula rent' between paragraph 1(4)(a)
and the related power in paragraph 1(7) and to clarify how
the latter provision may be used;
· To address
the Committee's concerns regarding inappropriate sub-delegation
of the powers to define formula rent and affordable rent;
· To address
the Committee's concerns regarding delegation of enforcement of
regulations under clause 26 and of Part 1 of Schedule 2.
Where the Government believes that changes are not
required, its justification is set out below.
Clause 26 - power to impose social housing rents
control
The Committee expressed the view that clause 22,
read with clause 26, gives too wide a power to prescribe alternate
provision for excepted cases by way of negative procedure regulations.
It recommended that, even if the power is amended to include a
framework as to the type of rent control provisions and enforcement
mechanisms that can be made in regulations, the affirmative procedure
should be used. The Government notes the Committee's concerns
and has brought forward amendments which restrict the use of the
power (which may not be used to increase the annual reduction
specified on the face of the Bill nor, in a case where an exception
from Part 1 of Schedule 2 applies, to impose a maximum rent limit
that is less than the social rent rate).
The Government has also brought forward amendments
to address the Committee's concerns regarding the delegation of
power to enforce regulations under s.26, as set out below, together
with amendments which provide a greater clarity regarding how
the power may be used to apply modifications of the provisions
in excepted cases.
The Government acknowledges that the power as drafted
remains a wide one, but considers it to be necessarily so. This
will allow, as intended, the flexibility to put in place provisions
which:
· soften
the effect on providers of the rent restriction regime, where
appropriate, for example to:
· modify
the application of Schedule 2 in relation to supported housing;
· make
provision for the application of the provisions in a case where
a provider temporarily reduces a tenant's rent, to avoid requiring
a double reduction; and,
· put
in place protection for tenants where appropriate, for example
to:
· provide
for how the rent of a tenant who was, but is no longer, a high
income social tenant should be determined;
· restrict
rent increases in certain excepted cases to align with the expectations
of current policy.
With clause 22, the clause 26 power to make alternative
provision for excepted cases also enables the development of new
housing rental products during 4 years of rent restrictions. This
would be helpful as otherwise the only principles on which rent
can be set would be those in paragraphs 1-3 of Schedule 2, whereas
a new rent product, assuming for the sake of argument one might
be developed, might have a completely different way of calculating
rent. In that case the Government would look to except such cases
and put new rules in place for rent setting in affected cases.
These are important flexibilities to ensure the proportionate
application of the Welfare Reform and Work Bill provision so that
it is aligned, so far as is possible, with the rent policy that
currently applies. Using the affirmative procedure for regulations
will make implementing measures intended to assist providers more
burdensome and curtail the Government's ability to act quickly
to modify the effect of provisions were it required. Given that
these measures are broadly intended to be of assistance to providers
and tenants, that the detailed measures themselves are technocratic
in nature and that Parliament will have had the opportunity to
debate both this amendment and the measures involved during the
passage of the Bill, the Government's view is therefore that the
negative resolution procedure provides the appropriate degree
of parliamentary scrutiny for these measures.
'Formula rent' - drafting inconsistency
I am grateful to the Committee for drawing attention
to the inconsistency between the drafting of paragraph 1(4)(a)
and the power in paragraph 1(7) relating to the definition
of formula rate / rent. The Government intends to bring forward
an amendment to address the drafting inconsistency. It will further
provide that the power to define includes, in particular, the
power to prescribe that it is a rent set in accordance with a
method specified in regulations.
'Formula rent' - delegation of the power to define
The Committee further expressed the view that delegation
of the power to define 'formula rent' is inappropriate in absence
of a proper justification and includes unacceptable sub-delegation.
We regret that our previous memorandum did not sufficiently
address the justification and I am pleased to set this out more
fully here.
Formula rent is a principle that is well understood
in the social housing sector and a key element of the current
rent policy regime. The Government has been very clear that the
reference 'rate of formula rent' used as the basis of the calculation
of rate of social rent for the new rent setting purposes will
effectively mirror provision regarding the rate of formula rent
that applied via the rent standard and guidance on the reference
date. This is with the qualification that the flexibility to,
in certain circumstances, deviate from formula rent under the
previous policy will no longer be available.
Regulations will be used to set out the method for
determining formula rent for the reference date. Putting such
detailed technical provision and tables of related data in primary
legislation would be unusual and overly complicate the legislation.
The policy intention has been subject to Parliamentary scrutiny,
therefore I remain of the view that it is appropriate to set out
in secondary legislation the definition of formula rent by reference
to the method used for determining it, cross-referring, where
appropriate, to the historic guidance documents that applied at
the reference date.
The Government does not accept that cross-reference
to historic documents is inappropriate sub-delegation, but it
accepts that the drafting did not make the intentions in this
regard clear. It will therefore accept the Committee's recommendations
in part by tabling an amendment to confine cross-reference to
the relevant standard and guidance applicable on the reference
date.
Affordable Rent - delegation of power to define
The Committee also expressed the view that delegation
of the power to define 'affordable rent' in paragraph 4(5)
of Schedule 2 is inappropriate in absence of a proper justification
and that the proposed sub-delegation is unacceptable.
We regret that our previous memorandum did not sufficiently
address the justification and I am pleased to set this out more
fully here.
'Affordable rent housing' and 'affordable rent' are
principles that are well understood in the social housing sector
and a key element of the current rent policy regime to which,
as the Government has made clear, the application of paragraph(3)
is intended to be aligned. It is therefore necessary to ensure
that the definition of affordable rent is aligned with the terms
of affordable housing agreements which have not always been consistently
expressed and, in addition, have often cross-referred to historic
regulatory standards and guidance which have evolved over time.
We consider that such complexities of definition
are more suitably addressed in secondary legislation, which may
be adjusted if necessary to ensure that all intended affordable
housing agreements are captured.
There is also a need to accommodate future agreements
and definitions of affordable rent as well as existing ones and
secondary legislation provides the flexibility to do this. For
these reasons the Government considers that it is appropriate
to put the definition in secondary legislation.
However, we accept the Committee's criticism of sub-delegation
and are bringing forward amendments to address this point. Instead
of defining affordable rent by cross referring to the guidance
and standards applicable we will specify that it is rent set in
accordance to methods specified or of a description specified
in regulations.
Provisions on enforcement
On the provisions in paragraph 7 of Schedule
2 concerning the enforcement of the rent controls contained in
that schedule, the Committee expressed concern that this provision
inappropriately delegates enforcement of regulations under s.26
and the requirements of part 1 of Schedule 2. The Government accepts
the Committee's recommendation that this be addressed by an amendment
to the face of the Bill and we are accordingly bringing forward
amendments to effect this and ensure consistent treatment of enforcement
of clause 21 and of clause 26 regulations and of Part 1 of Schedule
2.
21 January 2016
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