Report (2nd Day) (Continued)

Part of Welfare Reform and Work Bill – in the House of Lords at 10:15 pm on 27th January 2016.

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Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Lord in Waiting (HM Household) (Whip) 10:15 pm, 27th January 2016

My Lords, the amendments in this group are mainly technical in nature. The majority of them respond to points raised by the Delegated Powers and Regulatory Reform Committee and we hope that they will be welcomed. Others stem from issues which we have identified might have been of concern to social housing providers, or they might be helpful to them in accommodating the rent reduction measure.

I start by addressing some of the points raised by the committee. In its report it expressed concern both that the power in Clause 26 to make provision for excepted cases through regulations was drafted too widely, which could provide latitude to make different provision for rent control or enforcement, and that negative procedures apply here. The powers under Clause 28 provide important flexibility to put in place, by means of regulations, alternative provision for how maximum rents should be determined in special cases. Our broad intention is to use these powers either to relax the requirements for social housing providers or to protect tenants.

However, we recognise some of the committee’s concerns and, in response, have brought forward Amendment 77, which restricts the use of the power so that it may not be used to increase the annual 1% reduction specified in the Bill or to impose a maximum rent below the social rent rate in a case where an exception from Part 1 of Schedule 2 applies. The amendment also provides clarity regarding how the power may be used to apply modifications of the provisions.

The power remains a wide one, and necessarily so, because it will allow the flexibility to put in place provisions which soften the effect on providers of the rent restriction measure. It will also put in place protection for tenants and, if necessary, make provision for new rent products launched during the life of this measure. These are important flexibilities to ensure the proportionate application of the Bill’s provisions so that they are aligned, as far as possible, with the current rent policy, and they will enable us to respond to developments in the sector. It is not our intention to use them to put in place significantly different or more onerous provision for large swathes of social housing. That is why we have not accepted the committee’s recommendation that regulations under this power should be affirmative. That would make implementing measures intended to assist providers or help tenants more burdensome and it would curtail the Government’s ability to act quickly to modify the effect of provisions where required.

Amendment 80 is consequential on Amendment 77, and Amendment 65 is, in turn, consequential on Amendment 80.

The committee also expressed concerns about the different approach to enforcement of Part 1 of Schedule 2 and of regulations under Clause 26—both, as originally drafted, powers to provide for enforcement—as well as enforcement of Clause 21, which is on the face of the Bill. We accept that there should be consistency of approach, so Amendments 54 to 58, 74 and 78 align enforcement of Schedule 2 and Clause 26 with that of Clause 21 so that all enforcement will be provided for on the face of the Bill through Clause 24. Amendment 60 is consequential on Amendment 74. Amendment 59 is a consequential amendment which transposes Clause 24 to after Clause 28.

We are grateful to the committee for identifying an inconsistency in drafting relating to the definition of formula rent and have brought forward Amendment 64 to address this. We have also taken the opportunity to clarify that the power to define formula rent includes the power to provide that it is a rent set in accordance with a method specified in regulations. The committee also expressed the view that delegation of the power to define “formula rent” is inappropriate in the absence of a proper justification and includes unacceptable sub-delegation. I hope that I will be able to reassure the House on both points.

As many of your Lordships will know, formula rent is a principle that is well understood in the social housing sector and a key element of the current rent policy regime. We have been clear that the definition of formula rent in the Bill will be aligned to the definition under the rent standard and government guidance on the reference date, albeit with the qualification that the flexibility to deviate from formula in exceptional circumstances will no longer be available. That policy intention has been subject to parliamentary scrutiny and, given that the method for determining formula rent is complex and involves reference to numerous tables of supporting data, we remain of the view that it is appropriate to set the definition out in secondary legislation and to refer to the rent standard and guidance from which that definition is derived. We do not accept that cross-reference to these historic documents is inappropriate, but do accept that the drafting did not make the intentions in this regard clear. Amendment 64, therefore, restricts such references to the rent standard and guidance documents applicable on the reference date.

Finally, the committee expressed similar reservations about the power to define affordable rent. Having reflected on them, we have tabled Amendment 70 to address the criticism of sub-delegation. We agree that cross-referring from the regulations to the content of the rent standard and guidance documents is not necessary. Instead, the regulations may provide that it is a rent set in accordance with a method specified or described in regulations. However, again, the Government’s clear view remains that the complexities of the definition are such that they are more appropriately dealt with in secondary legislation, which can, if necessary, be adjusted to reflect the terms of new affordable rent agreements.

I now turn to Amendments 66 to 68. These are important amendments to address a drafting oversight and to allow the continuation of the present policy that affordable rent housing may be let at the social rent rate when this is higher than the affordable rent, as may be the case in some low market-value areas.

Amendments 71 and 82 will enable continuation of the present policy that affordable rents are inclusive of service charge when determined on the percentage of market rent principle, but exclusive of service charge when determined on the social rent model.

Amendment 79 is a consequential amendment and removes the definition of “affordable rent housing” and “affordable rent” from the interpretation section, as these terms are no longer used other than in Schedule 2. Amendment 69 adds an example to the list in paragraph 4(4) of types of arrangements and agreements to which the definition of “affordable rent housing” may refer.

I now turn briefly to Amendments 72 and 73. I know that my noble friend Lady Williams had a helpful meeting with some of your Lordships to explain the purpose of these amendments. They amend Schedule 2, paragraphs 6(2) and (8), and would enable the regulator of social housing or the Secretary of State to issue an exemption allowing a provider to set initial rents at a specified percentage above the social rent rate if the statutory conditions for granting such an exemption are met.

Amendment 81 is a small clarification that, for the purpose of calculating rent reductions, the day on which a tenancy begins or ends should be treated as a full day. The purpose of this is to simplify calculations for providers.

Amendment 62 modifies the principles for determining the assumed rent in order to avoid disadvantaging providers who implement their annual rent increases later in the year than 8 July. An “assumed rent” is a rent set by reference to the rent of a previous tenant, and this amendment corrects a drafting anomaly which could have meant that, in certain circumstances, the assumed rent would be determined by reference to the provider’s 2014-15 rate, not the 2015-16 rate as intended. Again, the Government’s intention here is that this amendment should prove helpful to providers.

Amendments 75 and 76 are consequential amendments.

I apologise to noble Lords, but I misspoke earlier: I was supposed to have said Clause 26 and not Clause 28. Due to the technical nature of these explanations, if it would be helpful, I am happy to write to noble Lords to clarify exactly what I meant and to correct what I said. Because it is late and these are technical amendments, I am very happy to pick up other points in correspondence if, having read what I said, noble Lords would like any further clarification. I am sorry about the length of time that that took. I beg to move.