With this it will be convenient to discuss the following amendments: No. 44, in clause 173, page 68, line 3, after ‘may’ insert
‘, in accordance with subsection (2) and subject to subsection (3),’.
No. 41, in clause 173, page 68, line 3, leave out ‘as’ and insert
‘for the purpose of protecting investment in social housing or protecting the interests of tenants and residents in social housing . These standards may refer’
No. 45, in clause 173, page 68, line 7, leave out from ‘may’ to the end of line 8 and insert ‘cover-’
Government amendment No. 229
No. 42, in clause 173, page 68, leave out lines 22 and 23.
No. 43, in clause 173, page 68, line 24, at end insert—
‘(3) In setting standards the regulator shall have regard (among other matters) to landlords’ contribution to the environmental, social and economic well-being of the areas in which their property is situated.’.
No. 47, in clause 174, page 68, line 27, at end insert—
‘(2) In setting standards, the regulator shall have regard (among other matters) to providers’ contribution to the environmental, social and economic well-being of the areas in which their property is situated.’.
We now reach a critical series of clauses that define the regulator’s powers. This is fundamental not just to ensure that we have an appropriate, effective and proportionate regulatory regime, which provides reassurance to tenants and safeguards in respect of public finance, but one that avoids unduly burdensome regulation or red tape. We also need to be absolutely confident that this regime, and specifically the chain of command that runs from the Secretary of State through the regulator to the regulated body, does not put at risk the non-public sector status of housing associations.
I referred to both those issues in my Second Reading speech of 27 November, at column 176, and they came up again on a number of occasions when we were taking evidence in the four evidence sessions on 11 and 13 December. In particular, we heard from David Orr, the chief executive of the National Housing Federation; from Mr. Julian Ashby of Tribal, and perhaps even more importantly, a major contributor to the Cave review; and Lord Best, a well known expert on housing matters—all of whom voiced concerns that the regulatory regime as defined in these clauses of the Bill might have the perverse consequence of putting at risk the non-public sector status of housing associations, so jeopardising their ability to raise finance to supplement the public finance put into social housing provision. The scale of the private finance that is currently available is enormous: between £30 billion and £35 billion has been raised to date, and without that capacity, the whole Government programme for expanding social housing in Britain will undoubtedly be unachievable. We are talking about something hugely important, and an obvious area of risk.
I have subsequently taken a delegation comprising the individuals whom I have mentioned, as well as other representatives of concerned housing associations to meet my right hon. Friend the former Minister for Housing, now the Chief Secretary to the Treasury, to expand on our fears and to suggest ways in which the Bill might be amended to address those concerns. I pay tribute to my right hon. Friend, as I do to my hon. Friend the Minister here in the Committee, for their very constructive engagement in discussing these issues, and their willingness to work through what are a number of very complex and difficult issues to ensure that we achieve the objectives that I believe that we all share of having an effective and proportionate regulatory regime that does not threaten the non-public sector status of housing associations.
I noted my hon. Friend’s clear statement this morning, when we were considering clause 118, that he did not want to see an unduly burdensome regime of regulatory diktat; I think that I got those last two words—“regulatory diktat”—right. I hope that I did not misrepresent his position. In that instance, he was opposing an Opposition amendment, and I hope that he will adopt a similar stance in responding to these amendments, which I have tabled in order to achieve the objectives that I have just outlined.
Let me run briefly through the amendments. Amendment No. 345 would leave out the word “compliance” in subsection (b) of clause 172, and substitutes the word “performance”, so rather than reading
“gives the regulator powers to monitor performance”,
the clause would read
“gives the regulator powers to monitor performance”.
I do not need to elaborate on the significance of that change. I am talking about a regulatory regime that is concerned not only with compliance with standards set, which can often produce a tick-box mentality and lead to unduly burdensome regulatory regimes, but one that aims to ensure high performance and to avoid unnecessary interference when the organisation is meeting those standards. However, it enables the regulator to take action when there is worry about the performance of an individual body subject to regulation.
The recent unhappy affairs of the Ujima housing association, whose performance was clearly lamentable in many respects, has highlighted the importance of a regulatory regime that allows effective intervention when a housing association has not been managing its affairs well. I have absolutely no hesitation in endorsing such action. Indeed, the existence of a regulatory regime that has given confidence to lenders, tenants and members of the public has been fundamental to the success of the housing association movement over the past 30 or so years. In the event of problems, they will be dealt with effectively and tenancies will not be put at risk.
The transfer of Ujima’s properties to the London and Quadrant Housing Association Trust, a large and well-run association with a strong track record of taking over other associations in difficulty and improving on their performance, gives me optimism for belief that, with Ujima, we will see something similar—and I hope that we do. I also know that London and Quadrant wishes to maintain the specific character of Ujima, which was established specifically to serve the black and ethnic minority community. I hope that that character can be maintained under the new arrangements.
I represent an area in which Ujima held about 140 properties and I was struck over the past year and a half by the increasing number of complaints from its tenants about the poor standard of service from their landlord. It contrasted with the much higher standard of service that London and Quadrant gave to tenants living in literally neighbouring properties. The two associations were both involved in a recent development, the Rubicon development at Greenwich, which I am proud to say received an award at the London Planning Awards. It is a model of high-quality development of social housing. The London and Quadrant part of it has been exemplary. I have no doubt about the importance of monitoring performance, and that is why I am proposing the amendment that substitutes “compliance” with “performance”.
Amendment No. 44 is technical, so I shall pass straight on to amendment No. 41, which would leave out “as” in line 3 on page 68 of the Bill and insert the words
“for the purposes of protecting investment in social housing or protecting the interests of tenants and residents in social housing.”
That is the nub of my objective. It sets out what regulations should be about. I want to protect public investment in social housing and the interests of tenants and residents. That is absolutely fundamental to a good regulatory regime, and that it why it is important that it should be made clear at the outset that those principles are the purpose of the regulator’s activities.
Amendments Nos. 42, 43 and 47 deal with the environmental, social and economic well-being of an area. We have touched on that already, so I will not say much more now other than that it is right for the regulator to take account of that aspect of the performance of a registered social landlord—a body registered by the new regulator—but it is difficult to operate a regulatory regime that does not fall into the trap of becoming either tokenistic, involving a tick-box mentality, or unduly burdensome. The proposal emphasises the importance of looking at the contribution that registered landlords make rather than imposing standards and monitoring how far those standards have been complied with. It has a similar objective to the earlier amendment.
The amendments would clarify the key purposes of regulation, which is about protecting tenants’ interests and public finance. That would ensure that we had a proportionate, non-burdensome and non-bureaucratic style of regulation and, above all, avoid putting at risk the non-public sector status of housing associations by creating an unbroken chain of command from the Government to the regulated body. That is the purpose of the amendments, and I hope that my hon. Friend the Minister will be able to respond sympathetically, even if he cannot accept them, as I suspect will be the case.
I would argue that this is potentially the most serious and important group of amendments that we have discussed so far, certainly in terms of the possible consequences if we get things wrong. I vividly remember Lord Best’s evidence to the Committee in December, when he said that it was simply not worth getting public sector classification wrong, and I absolutely agree. As became clear from the excellent speech made by my right hon. Friend the Member for Greenwich and Woolwich on Second Reading and from contributions by Lord Best and others in our oral evidence sessions in December, this part of the Bill is arguably the most controversial of the lot. I am, however, satisfied that the changes that we are introducing in the Bill do not affect the sector classification of RSLs and I shall come on to that in some detail when I respond to my right hon. Friend.
Before I do, however, I should tell the Committee that I spent the weekend on the internet looking—sad man that I am—at the report of the Committee stage of the Health and Social Care (Community Health and Standards) Act 2003. My right hon. Friend was an excellent member of that Committee, which discussed foundation hospitals, and I remember with great interest his comments about public sector classification. He also contributed to an Adjournment debate about public sector classification in July 2004. I have done my research quite well over the weekend and I am extremely apprehensive about discussing public sector classification with at least two fantastic experts on the issue—my right hon. Friend and the right hon. Member for North-West Hampshire. However, I will do my best.
I have just stepped in to give the Minister a break before what will probably be among the most difficult 10 minutes of his career, as he faces my right hon. Friend the Member for North-West Hampshire and the right hon. Member for Greenwich and Woolwich. In case he did not notice, however, this weekend was an FA cup weekend, and if he is saying as a representative of the alleged party of the people, that he spent his weekend on the internet checking the issues before us, instead of following the fortunes of our various teams, I am very surprised.
As my hon. Friend says from a sedentary position, Hartlepool United was not—it pains me to say this—involved in the FA cup on Saturday, although I will leave it to hon. Members to work out the reasons why.
I hope that you will not rule me of out order, Mr. Gale, but I should pay tribute before I go on to my right hon. Friend the Member for Pontefract and Castleford (Yvette Cooper), who has been promoted to Chief Secretary to the Treasury. She was an excellent Housing Minister, who pushed social housing to the very top of the political agenda. She was also a great boss and she will do a fantastic job as Chief Secretary to the Treasury. In addition, I think that the Minister for Housing, my hon. Friend the Member for Don Valley (Caroline Flint) will prove to be a fantastic successor. In paying tribute to her, however, I should point out that Hartlepool United is tonight playing Doncaster Rovers, which is her team, so I do not want her to have too good a start in her new ministerial position.
That said, let us move on to the extremely serious issue before us. I pledge to my right hon. Friend the Member for Greenwich and Woolwich that we are considering the entire structure of this part of the Bill, particularly in relation to directions and the standards system. That is largely in response to the concerns that he has raised, and I pay tribute to him for what he has done on the issue. I shall certainly consider the points that have been raised in these very thorough amendments when we table our own amendments at subsequent stages in our consideration of the Bill.
Some of the arguments relating to the powers given to the regulator in clauses 173 and 174 suggest that the regulator should not be able to set binding standards with which providers must comply. At present, the Housing Corporation issues guidance to registered social landlords, which, if approved by the Secretary of State, can be taken into account by the corporation in considering whether mismanagement or misconduct has occurred, or in exercising its powers to secure the proper management of the landlord’s affairs.
My right hon. Friend the Member for Greenwich and Woolwich and others believe that the regulator’s standards should merely be a matter to be taken into account in assessing whether there has been misconduct or mismanagement, rather than being directly enforceable. Indeed, the proposed amendment to clause 178 would achieve precisely that result.
I realise that this is not a stand part debate, but I want to go back to first principles and set out what we are trying to achieve. It is important to set out to hon. Members that the regulator will be operating in a different environment to that currently operated by the Housing Corporation. The Housing Corporation is responsible for paying significant amounts of grant—billions of pounds. While not explicitly described as an enforcement power in the Housing Act 1996, the possibility of withholding grant if the corporation has serious concerns about the management or performance of a registered social landlord is arguably the most important weapon in its enforcement armoury.
Mere guidance may have a much stronger effect on an RSL’s behaviour under the current Housing Act system, where non-compliance could have serious financial consequences. That particular unstated enforcement power will not be available to the new regulator, since, as we are all aware, the Housing Corporation’s grant and investment functions are to go to the HCA instead.
I am following my hon. Friend’s argument closely. He rightly focuses on the fact that the new regulator will not have any direct power to withhold grant, unlike the Housing Corporation, but from an earlier series of debates, when we were considering linkages and liaison between the HCA and the regulator, we established that it would be proper for those two bodies to talk to each other. I would hope that in the event that the regulator had concerns about the performance of an RSL, it would draw them to the attention of the HCA, which could then have the effect that he has described under the current regime, of leading the HCA to withhold grants. While I hear his point, I do not think that it is going to be a completely black and white issue of powers that used to exist no longer existing and the sanction of withholding grant no longer being in any way available.
I absolutely agree with my right hon. Friend’s comments. Clause 102(3), on the terms of direction that the regulator can provide to the HCA, will be important. Nevertheless, I return to the point about the splitting of the regulatory and investment functions, which are currently under the one roof of the Housing Corporation. Although I fully understand where my right hon. Friend is coming from, I would suggest that the circumstances in which the regulator will be able to prevent the agency from paying grant are possibly narrow, although there will be discussions. Arguably, that is the implicit point of the split between regulation and investment. On that basis, the regulator may need a stronger basic framework of standards with which registered providers must comply, although I am clear that the regulator must be able to enforce compliance with its standards.
I am also clear about the role of the Secretary of State. In the context of the Bill, the Secretary of State should and would only ever issue strategic directions on standards. As Martin Cave pointed out in his review, the emphasis should be on rents, on physical maintenance and conditions, and on tenant engagement and consultation. I envisage that those will be the topics where the weight of Government interest—I use that phrase carefully—would lie.
I am following the Minister intently. Yes, that is where the weight of Government interest may be. However, the Government are subject to other swathes of opinion. The problem with the clause as it is drawn is that there is no guarantee that there may not be other matters—beyond the regulator’s stated objectives—that the Government might press on the regulator in order to force direction under clause 177. That is what the right hon. Member for Greenwich and Woolwich is getting at. I am not sure if he is making a clear enough distinction between the powers that the regulator should be using and the drive that will come from the Government.
I have put on record my intention to look at the matter again. Although I am very keen to engage with my right hon. Friend the Member for Greenwich and Woolwich, with stakeholders and with others to reassure them as much as possible, a balance needs to be struck. The whole point of our proposed regulatory regime is to maintain and improve standards for tenants. Cave has suggested that that will take place in three broad areas: rents, physical maintenance of the estate and tenant consultation and engagement. That is important. I used my words very carefully, and I think that that is where the weight of Government interest will lie. Amendments will be brought forward to that effect. I do not want to pre-empt what I will do or pre-empt discussions that I am going to have with my right hon. Friend the Minister for Housing, and with stakeholders, but I think that I am hinting, as much as I can, what I intend to do.
I do not want to seek to direct very detailed standards. That is the job of the regulator. I do not wish to see or intend to use the power to secure detailed management control of registered providers on the part of the Secretary of State. We do not want to achieve that. I still maintain, regardless of all the concerns that have been raised, that it would not be possible to have any such detailed management control from the Secretary of State or the regulator.
In a previous sitting, we discussed the fundamental objectives of clause 86, which are a very important part of the Bill. Clause 86(11) states:
“Objective 10 is to regulate in a manner which—
(a) minimises interference, and
(b) is proportionate, consistent, transparent and accountable.”
That important objective should not be disregarded. The whole basis on which standards are set will be based on that 10th objective. I hope that that reassures the Committee.
Bearing in mind my commitment to look again at this whole area, I now come on to the extremely important issue of public sector classification, which gave me nightmares over the weekend. I am aware of the great concern over the private sector status of registered social landlords and Office for National Statistics classification, and I want to clarify the Government’s position. David Orr of the National Housing Federation and Lord Best mentioned their concerns in the oral evidence sessions. They do not want to see a change in the status of RSLs. Frankly, neither do the Government and we do not want to seek direct management control. What I hope to do is to liberate from the burden of regulation well-performing, viable RSLs, which have satisfied tenants.
As regards current powers and current ONS classification, let me make it very clear that ONS has already classified RSLs as being in the private sector for the purpose of national accounts. That classification was there before any changes in the Bill. It is true that the Housing Corporation already has certain strong powers. For example, it can already put directors on the boards of RSLs, it can hold an inquiry and transfer assets to another owner. It can also require consents to disposals of social homes. Such powers exist already and do not affect classification and we have no intention of changing them.
My hon. Friend is perfectly right to say that the Housing Corporation has significant powers. As I said earlier, that is appropriate and necessary, and is compatible with the non-public sector status and classification of housing associations. The important distinction is that under the existing regulatory framework, the Secretary of State does not have the powers in clause 177 to give direction to the Housing Corporation on standards to be complied with. That is the nub of my anxiety. The new legislation will create a direct chain of command: the Secretary of State can direct the regulator who can in turn impose standards on regulated bodies and require compliance with those standards. That is a new element that will—informed commentators have considered this—put at risk the non-public sector status.
I accept my right hon. Friend’s point. Under the Bill as it is currently drafted—I stress “as it is currently drafted”—the regulator’s standard-setting powers could be subject to direction from the Secretary of State. We are reconsidering that, and I pledge to keep the Committee and in particular my right hon. Friend informed on that issue.
My right hon. Friend made an important point about the Bill containing additional powers, but those powers are limited. They enable the regulator to impose fines and obtain compensation for tenants, and they require the transfer of management of poorly performing RSLs. The additional powers are much like those for normal, private sector utilities, and are modelled—to use the word of the moment—on the current, modern regulatory regime. They bring regulation into line with other regulated industries and are not, in any sense, management control.
May I press the Minister on the evidence that the former Minister for Housing, now the Chief Secretary to the Treasury, gave to the Committee? She said:
“We have had considerable discussions with the Treasury. I have asked about potential arrangements for taking advice from the ONS in advance of the Committee stage, as opposed to the normal approach in which the ONS gets asked afterwards. It would be helpful to have its advice in advance, and I have asked for it.”——[Official Report, Housing and Regeneration Public Bill Committee, 13 December 2007; c. 142, Q233.]
What has happened to it?
I vividly remember that the right hon. Gentleman responded by saying something like, “Not half.” If he will allow me, I shall come to that important point in a moment or two.
First, let me explain the general thrust of my argument. The additional powers are similar to those for private sector utilities and are part of the regulatory regime. Nothing is changing in that regard. The powers bring regulation into line with other regulated industries and are not in any sense management control. I want to stress that point.
The regulator setting standards and fining bodies for transgressing them is no different from the water regulator fining a utility, or the Health and Safety Executive imposing fines. No one is saying that the bodies that are subject to that sort of regulation are public bodies. Let me give a few examples. Ofwat has powers to fine water and sewerage companies if they breach statutory duties or licence conditions or if they do not meet required standards of performance. The areas for which they are subject to licence conditions and standards of performance and for which they have statutory duties include breaching rules on training arrangements and providing substandard services to customers by failing to meet guaranteed standards of service.
I accept entirely the Minister’s analogy. He will know from what I argued earlier that I have no difficulty with standards being set for the core functions of protecting public finance and the interests of tenants. However, I do not know of any power requiring private utilities such as those delivering water to make a contribution to the environmental, economic and social well-being of an area. If there is such a power, I would be interested to hear about it. That is the worry about the formulation in the Bill—there is scope for mission creep. That point was raised by the hon. Member for North-East Bedfordshire, but I am also concerned that because of the wide range of issues on which the regulator can specify standards, and the ability of the Secretary of State to direct the creation of standards, there is the risk of a wider chain of command that might put the classification at risk.
I fully understand and appreciate the point raised by my right hon. Friend. We have already discussed issues about environmental and social well-being. Can I give notice to the Committee that, following my point about the utilities, I will go on to address the points made by the right hon. Member for North-West Hampshire with regard to what we have done about getting clarification from the ONS. I will then come on to the specific point about environmental, social and economic well-being.
The Health and Safety Executive is another example of a regulated body. It regulates and can impose fines for breaches of the Health and Safety at Work Act 1974—for example, a failure to ensure the health, safety and welfare of employees. Again, private companies remain classified as private sector for the purposes of national accounts. Ofgem regulates the gas and electricity networks and has powers to take enforcement action including imposing financial penalties for breaches of requirements imposed under various Acts—the Gas Act 1986 for example, or issues of unfair customer practices. The private sector classification of utilities such as the gas and electricity networks are not in any doubt. I am reluctant to mention this point, as I know that the right hon. Member for North-West Hampshire has a whole range of knowledge with regard to it. However, in terms of Network Rail and the whole rail infrastructure, the Office of Rail Regulation has a range of statutory powers under the Railways Act 1993. It issues licenses with a number of conditions or provisions with which the licence holder must comply. Given those important examples, the message is clear. There can be significant obligations placed on companies with regard to their regulations, without any question of their private sector status. I hope that reassures hon. Members.
The point raised by the right hon. Member for North-West Hampshire is important in terms of dealing with the ONS and the Treasury. There has been considerable discussion with the Treasury about the matter. During his review, Martin Cave discussed his emergent thinking with Treasury officials, to understand the implications for the classification of his proposed changes to the regulatory system. My own officials have discussed the changes proposed in present legislation with the Treasury during the detailed drafting and development of the Bill. A meeting took place on 2 October 2007. After the introduction of the Bill to the House, my officials again considered the changes in the Bill with the Treasury. That took place on 21 December 2007 after the oral evidence sessions.
Earlier this month on 7 January, the Chief Secretary to the Treasury, my right hon. Friend the Member for Pontefract and Castleford,who was then Minister for Housing, and I met with departmental and Treasury officials. We asked the Treasury at that meeting about the arrangements for taking advice from the ONS—precisely as my right hon. Friend the Member for Greenwich and Woolwich said in response to the question put by the right hon. Member for North-West Hampshire. We asked the Treasury in its capacity as experts on the production of the public finances, and, for want of a better term, the owner of the Government-ONS relationship—
I am listening intently. As the Minister has indicated, this is a complex area. However, he will be aware of the recent Statistics and Registration Service Act 2007, which gives the ONS and statistics generally much greater independence from the Treasury. I wonder whether he has sought reassurance from the Treasury that his view would be reflected in the new ONS and statistics structure.
My hon. Friend has no idea how grateful I am for that intervention.