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Housing Corporation (Delegation) etc. Bill

My Lords, I beg to move that this Bill be now read a second time. This short Bill of two clauses comes from the other place unamended. It has the support of Her Majesty’s Opposition who commended the Bill to the House, stating that they wish to help secure the Bill’s speedy passage. It also has the support of the Liberal Democrats, who observed that they look forward to the Housing Corporation being able to continue to carry out its functions efficiently. It is not the longest Bill that has ever come before this House, but it has significance beyond its length in safeguarding social housing. That takes us to the heart of the Bill. Its purpose is simple. It gives the Housing Corporation a power of delegation from its board to below board level to any of its members, committees or employees in the future. It also deems the corporation always to have had such a power since it was founded in 1964. We need primary legislation because it is the only way in which we can be absolutely certain that the full range of past decisions of the corporation are valid and can provide a power of delegation going forward. I will give noble Lords a bit of history on why we are in this position. My speaking note is rather long, but I shall try to cover some of the issues that were raised in another place. Until the end of last year it was believed that the Housing Corporation board had an implied power of delegation. It was not just the corporation that thought it had such a power. Everyone else with an interest—my department, the lending community, housing associations and the 2 million people who live in housing association homes—thought that it had. I know that noble Lords are aware of what the Housing Corporation does and its importance to the provision and maintenance of high quality social housing in this country. However, perhaps I may explain what the Bill needs to achieve and put that into some context. The Housing Corporation was established under the Housing Act 1964 to oversee the housing association sector. Its position was later consolidated in subsequent legislation and its role and functions are now principally set out in the Housing Act 1996. Today, the corporation plays a crucial role in regulating nearly 1,800 housing associations—registered social landlords, or RSLs—which own or manage more than 2 million units of social housing and provide a range of other services to the broader community. The activities of the Housing Corporation have a direct impact on the lives of several million people in our society, many of whom are among the most vulnerable. In carrying out its duties as regulator, the corporation drives improvements in housing association performance and efficiency to ensure that tenants have high quality homes to live in. It also has a strong focus on ensuring that housing associations are financially viable in order to protect the public investment in social housing and to ensure that associations continue to attract private finance at competitive rates to build and improve affordable homes. Equally important, the corporation is also the delivery agent for the provision of new social housing in England. It helps to develop and implement regional and national housing strategies, using public subsidy to procure affordable housing, being responsible for the national affordable housing programme. As noble Lords opposite know, after many years of experience, it has a very far-reaching role. It is obviously important therefore to facilitate the smooth passage of this Bill in order to safeguard the valuable work that it has done since 1964. The powers of the Housing Corporation need explanation. When it was created in 1964, it was very much a creature of its time. It was common for public bodies and non-departmental public bodies not to be given an explicit power of delegation. One reason for this is that at the time many bodies took fewer statutory decisions. It was therefore plausible for all such decisions to be carried out by the board. However, the primary reason that such explicit powers of delegation were not included in the legislative provisions establishing bodies such as the corporation is that at that time powers of delegation were more readily taken to be implied. Since then, the majority of bodies set up without explicit powers have been wound up or have had their legislation modernised to confer such powers. However, that did not happen in the case of the Housing Corporation. It appears that the reason for the failure to modernise the legislation was administrative oversight. We are not aware of any other NDPB being in the same predicament as the Housing Corporation. With hindsight, it is clear that the corporation’s powers should have been reviewed at the time of the passing of the Housing Associations Act 1985, which this Bill amends. An explicit power of delegation should have been included in that Act. Unfortunately, no such action was taken. Subsequently, the passage of further Housing Acts in 1996 and 2004 would have provided another opportunity to give the corporation such a power, but it was again overlooked. It is very regrettable that that did not happen because we now have to spend separate parliamentary time on this issue. I should like to emphasise again that the board of the corporation believed that it had an implied power of delegation and has been acting in good faith on that basis since its inception in 1964. We know that because the corporation’s board minutes record numerous instances of delegation of decisions taking place. Nowhere is there any suggestion that the corporation thought that it was acting unlawfully in doing so. The problem was uncovered during preparations for an internal training course on delegations at the end of last year. The corporation discovered that an express power to delegate did not exist, and that it was unlikely that such a power could be implied. Legal advice to my officials confirmed that this was the case, and we promptly set about addressing the problem. It became clear that legislation was the only way to rectify the problem. The Bill merely seeks to give the corporation a power which analogous bodies already have. Similar bodies, including the Audit Commission, English Partnerships, English Heritage and the Commission for Social Care Inspection, already enjoy such a power. The Bill seeks to give the Housing Corporation a power of delegation which everyone concerned thought that it already had, and therefore to return to the position that we thought we were in before the problem was discovered. I should like to explain two things. First, I shall outline the specific detail of the Bill and its provisions for the record. Secondly, I want to look at some of the key issues raised in debate in the other place in order to reassure noble Lords and to demonstrate why the Opposition and Liberal Democrats supported the Bill and urged its speedy passage through Parliament. The Bill has two clauses. Clause 1(1) gives the corporation an express power going forward to delegate the exercise of its functions to individual members of its board, its committees, sub-committees and employees, which it does by putting a new paragraph in Schedule 6 to the Housing Associations Act 1985. This subsection brings the powers of the corporation into line with the vast majority of other bodies and allows for administrative efficiency. Given the thousands of statutory decisions which must be taken by the corporation on a day-to-day basis, it is simply not practical for all such decisions to be taken by the board itself. Subsection (2) gives the corporation and Housing for Wales a retrospective power of delegation to any of its members, committees, sub-committees or employees to ensure that statutory decisions are not invalid by reason of being delegated by the board on the presumption that it had an implied power to do so. This is to remove any doubt about the validity of such decisions on the grounds that they were not taken by the board itself and essentially restores what was assumed to be the status quo. Subsection (3) operates to validate past decisions taken or evidenced by a document duly executed under the seal of the corporation or Housing for Wales. As I have explained, the corporation believed that it had the power from its inception to delegate and, acting on that assumption, set up delegation procedures. Although the board’s delegation procedures are often well documented, in many cases it would be impossible at this stage to provide evidence to demonstrate beyond doubt that a decision which may have been taken 40 years ago was valid. To do so, it would be necessary to show that the decision in question was made by a committee of the corporation or by someone who was a member or employee at the relevant time, and to whom it was intended that the power to take the decision would be delegated. This subsection has been included to relieve the burden on third parties and the corporation to provide evidence to establish those facts. Without such a provision, uncertainty about the validity of large numbers of past decisions would remain. It is also intended that the clause should be broad enough to cover all eventualities: every decision where the parties have acted in good faith. So the legislation provides the certainty we require. For example, it covers instances where informal instructions were given to a member of the board to take decisions, so no formal decision to delegate was even documented. In practice we believe that this happened very rarely, if at all, but without this provision it is possible that third parties acting in good faith would be disadvantaged. To provide certainty without making provision here, either we would have to go back and look at each decision, informal or formal, to see whether it had been delegated informally or formally. Given the corporation’s history, in most cases it would not be possible because records may no longer exist. Subsection (4) provides that where the fixing of the seal has been witnessed by any member or employee of the corporation or Housing for Wales during the period prior to this Bill, it has been properly witnessed. The previous legislation enacted in 1996 provided that the fixing of the corporation seal may be authenticated by the signature of the chairman or any other person authorised for the purpose, but it would be difficult and in some cases impossible to establish years after the event that the individual authenticating the fixing of the seal was an employee or a member at the relevant time and had in fact been authorised to take that action. To reiterate, the intention of these two subsections is to give complete certainty about the validity of the corporation’s decisions and to draw a firm line under past decisions made by the corporation which have been duly executed under seal and authenticated by a member, employee, the corporation or Housing for Wales. It removes any doubt about their validity. Essentially, third parties can assume that any decision properly executed by the corporation under seal is valid. Obviously, I must stress that these subsections will not be used to validate fraudulent decisions. We are not suggesting that any such decisions have ever been made, but under Clause 1(3) decisions of the corporation must have been duly executed to have validity. Clearly decisions which were fraudulent would not have been duly executed. Moving on to Clause 2, this sets out the Title of the Bill and the fact that it will extend to England, Wales and Scotland in the following ways. The legislation will have effect in Wales in respect of decisions of the corporation relating to housing associations in Wales before the establishment of Housing for Wales and during the later period when the corporation’s former functions were carried out by Housing for Wales. Since 1999 these functions have been carried out by the National Assembly for Wales and there is no question about the validity of such decisions. The Bill will have effect in Scotland in respect of decisions of the corporation relating to housing associations in Scotland made prior to the commencement of the Housing (Scotland) Act 1988. That Act established Scottish Homes, which took over the responsibilities of the Housing Corporation in relation to housing associations in Scotland. Those responsibilities were subsequently transferred to Communities Scotland, an agency of the Scottish Executive. On 10 May the Scottish Parliament formally approved a legislative consent motion in respect of this Bill, which allows it to apply to Scotland in the way described. The Housing Corporation has never operated in Northern Ireland and therefore the Bill does not extend there. Before I close, perhaps I may go over one or two of the key issues raised in the other place to provide noble Lords with reassurances and to stress that the swift progression of this Bill is the only way to rectify the situation the Housing Corporation finds itself in today. Honourable Members of opposition parties expressed worries about the retrospective nature of the legislation in the sense that it might legitimise past decisions delegated by the corporation board. I should stress that the usual concerns about legislative retrospection do not apply here. We are well aware of the potential dangers attached to retrospection and we are careful about it, in particular where the legislation imposes a penalty on individuals. But the other reason for scrutinising retrospective legislation carefully is that it is often inconsistent with the need for legal certainty and could operate against the interest of individuals in an unfair or arbitrary manner. However, this Bill does not seek to alter the rights of individuals to the benefit of some and the disadvantage of others. It does not seek to unravel transactions with unforeseeable consequences. In fact, as I have pointed out several times, the reverse is true: the Bill will establish what was thought to be the status quo and will put parties in the position they all considered they were in before the problem was discovered. It gives the Housing Corporation and stakeholders a power everyone had previously thought applied and therefore self-evidently there are no issues or additional costs arising in respect of implementation. The Bill simply ensures that those who have acted in good faith in reliance on Housing Corporation decisions are not disadvantaged. I turn now to the detail. Honourable Members also rightly expressed an interest in the kinds of delegated decisions of concern here. There are several types of decision. The major concern relates to Section 9 of the Housing Act 1996 which requires the consent of the corporation to be obtained by a registered social landlord for any disposal of land or housing stock under Section 8 of that Act. In most cases where a valid consent has not been obtained, the disposal would be void. A disposal includes the placing of charges on property by lenders as security against a loan. It is obviously very important to have certainty about these consents because they are significant and have important implications for the future of social housing, new build and the levels at which housing associations can borrow. Legal advice has assured us that in fact the effect of land registration is likely to protect purchasers and owners with an interest in land. Under the system of land registration, the fact of registration itself is the source of title, so charges registered are valid and binding unless the registrar or the court can be persuaded to rectify; namely, to amend the register following a challenge. Legal advice is that in these circumstances it is unlikely that rectification would be granted. Nevertheless, that qualified reassurance has not been sufficient to provide the sector with the certainty it requires. There remains uncertainty among those who consider that they had a valid and enforceable interest in land. The situation raised questions about decisions that could have had an important and long-term impact on the future of social housing such as, for example, the interest rate at which housing associations could borrow against assets. This could be raised to reflect the increased risk to lenders; the draw-down of loans in general terms; or the confidence that lenders might have in individual housing associations or broadly in social housing. All these things might be affected in the long term. I have no doubt that the noble Baronesses will agree that maintaining the confidence of the social housing sector in these long-term decisions is a very serious matter. It is essential that lenders feel that they can continue to invest; that housing associations continue to function as normal; and that tenants who depend on social housing continue to feel assured of the financial viability of their organisations. Because of the close involvement we have had with lender organisations and their representatives since the problem was discovered and because we have taken prompt action in addressing it, lenders have thus far been persuaded to take no action. They have, however, agreed to this on the condition that we legislate as soon as possible. I should also stress that we have closely involved not only the Housing Corporation but representatives of RSLs and the Financial Services Authority in the preparation of the legislation and they support its speedy passage. There are a few other areas of concern about which we need to have complete certainty. One of these is the status of other regulatory decisions taken by the corporation, such as statutory appointments to the board of an RSL which has experienced problems and is under supervision. We would not want those sorts of decisions challenged opportunistically by interested parties, particularly where an RSL is already under supervision and needs to be regulated further in the public interest. There are also potential concerns about housing association registration and rule changes. The corporation is responsible for registering social landlords. Registration brings them within the scope of regulation, which establishes the basis on which the social housing grant is paid to them, and the corporation must give its consent to any changes in the rules or objects of an association. For example, it might be to extend the range of activities undertaken by an association or the client groups that the association was established to serve. A failure to obtain a valid consent may call into question subsequent constitutional amendments since the initial incorporation of the RSL and the actions that had been taken were on the assumption that the rule changes were valid. A number of RSLs have adopted changes to include express powers in relation, for example, to lending matters, to borrowing limits, to swap powers and to powers to create floating charges. If those powers are not in place it is very difficult to be certain that loans, guarantees and hedging agreements would be valid. Finally, decisions made under Schedule 1 to the Housing Act 1996 to grant special determinations to the RSLs permitting them to make specific payments to staff and board members would also have a degree of uncertainty cast upon them. That, again, would leave the way open to challenge in the future. As I have said, in some areas of concern we can take some comfort from other legislation. I have mentioned the Land Registration Act 2002, which should provide comfort about the enforceability of transactions; and the Companies Act 1985 and the Industrial and Provident Societies Act 1965 might give some comfort in regard to rule changes. But having looked into this in some detail, it is clear that those provisions offer insufficient certainty and comfort whether we are talking about the associations, lenders, residents or the Housing Corporation. I want to be clear that we are not saying that the decisions taken by the corporation or the subsequent actions of RSLs are invalid, rather that we cannot be 100 per cent that a court would find them valid if challenged. That goes to the heart of the matter. One further issue that was raised in the other place concerned the review of housing and regeneration. As noble Lords will know, my department is carrying out at the moment a review of the roles of the Housing Corporation and English Partnerships. It was suggested in the other place that the Bill might be delayed until the outcome of that review was known. We have not yet made a decision about the relationship between the Housing Corporation and English Partnerships. If the two organisations were to merge, obviously we would need primary legislation. It would take time to draw that up and to take decisions about the functions that any new body would have. So we could not delay the measures without being irresponsible and having to face uncertainties about the legislation being introduced and the timing available to us. There is a wide-ranging consensus among all stakeholders as well as support from all parties in the other place that this Bill is the only way to solve the problem that we find ourselves in. It restores what we all believed until the end of last year to be the status quo. I am sorry to have spoken at such length but I hope that the degree of detail will reassure the noble Baronesses that the Bill does exactly what it is intended to do. I wholeheartedly commend it to the House. Moved, That the Bill be now read a second time.—(Baroness Andrews.)