---

Finance (No. 2) Bill

To clarify, Madam Deputy Speaker, I was previously talking about my hon. Friend’s analysis of AIM and I am now moving on to the regulatory regime. AIM does not stipulate minimum criteria for company size, track record or the number of shares required to be in public hands. The Government gave a parliamentary answer in response to queries about AIM’s regulatory position. In November 2003, the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) tabled a written question:"““To ask the Chancellor of the Exchequer…what discussions he has had with the (a) London Stock Exchange and (b) Financial Services Authority on the alternative investment market becoming an unregulated market…what research he has carried out on the way in which an unregulated alternative investment market would affect companies and investors””—" an important question—"““and what discussions he has had with the European Commission about the alternative investment market becoming an unregulated market.””" The response, given by the right hon. Member for Bolton, West (Ruth Kelly), said:"““The London Stock Exchange…is a Recognised Investment Exchange…under the Financial Services and Markets Act…and””—" this is the important part—"““has to operate all its markets, including the Alternative Investment Market (AIM), in compliance with the recognition requirements for REITs. The Financial Services Authority…supervises its compliance with these obligations…Because AIM is not going to become an unregulated market, the Treasury has not done any research about the impact of such a scenario on investors and issuers, nor have we discussed it with the European Commission.””—[Official Report, 4 November 2003; Vol. 412, c. 624-25W.]" 5.30 pm Let us come to the important issue, which is the housing requirements that the Chancellor, the Economic Secretary and, I assume, the Paymaster General are seeking. The Chancellor, as we have heard, said in this year’s Budget speech:"““To attract more capital into house building, we are now legislating to introduce for Britain the real estate investment trusts that are so successful in the USA.””—[Official Report, 22 March 2006; Vol. 444, c. 293.]" So, we hear two things now. We hear that the Chancellor is looking to the US as an excellent example of successful REITs, and he is looking at REITs as a way of stimulating the housing market. However, we have heard today that the main emphasis with REITs seems to be on stimulating the commercial side of the market rather than the residential side. The success of REITs in the USA is arguably because there is no listing requirement at all, which the Chancellor does not seem to have acknowledged. The important point is that without such a requirement smaller, more flexible residential property companies, would be allowed to participate. What do the Government really intend REITs to achieve? All the evidence points to the death of the original concept of stimulating investment in the residential property market. The hon. Member for Bury, South (Mr. Lewis), when he was Economic Secretary, said that"““one of the aims of introducing UK-REITs is to improve efficiency, affordability and professionalism in the private rented sector to the benefit of residential tenants.””—[Official Report, 13 February 2006; Vol. 442, c. 1556W.]" However, my right hon. Friend the Member for North-West Hampshire has said:"““When the concept was originally considered, there was concern that it should not simply be a new vehicle for existing property companies. Consideration was given to a requirement that, in order to qualify for a REIT, one would have to add to supply.””" He also said:"““Housing hardly gets a mention in the post-Budget comment on REITs.””—[Official Report, 24 April 2006; Vol. 445, c. 422-23.]" Dave Ramsden, of Her Majesty’s Treasury, said:"““We would expect that REITs in the version we have ended up with—REIT UK, if copyright allows us to call them that but that is another story—are more likely to encourage flexible investment in commercial property. That is clear from the consultation. It does not mean that we will not get some residential property, I think we will get some but it is not going to be the main focus of the REIT.””" That is the point that we continue to make: REITs are stimulating not the residential housing market, but the commercial property market. The debate over listing, however, consists of two main points. The argument for public listing—this is an important point that the Government make—is that it would subject companies to the appropriate listing authority rules regarding investor base, disclosure and market scrutiny, and would therefore help to ensure suitability for a wider retail investor base.