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Housing and Regeneration Bill

That was an excellent debate. I am extremely grateful to my noble friend Lord Filkin for giving us the opportunity to go into these very important issues, which are at the heart of the Bill. He presented his case extremely eloquently, and he spoke passionately about what he wants to achieve. I am grateful that we could talk at some length about the background to this issue and how we see it. I cannot accept the amendments for many of the reasons that have been put by my noble friends and by noble Lords on the other side of the Committee, but I am persuaded that there is a good reason for taking away what we have and seeing whether we can do something else. If I say that now, perhaps the Committee will forgive me if I go into a little detail about why the Bill achieves the objectives which my noble friend rightly wants to achieve. However, that requires me to address the Bill as it will work. That will take me a little time to do, if noble Lords will allow me. There is absolutely no doubt about where we stand. The whole Bill is about tenant empowerment and putting in place for the first time things that tenants have never had before: the opportunity to have more choice in the services that they receive and to be involved in management and regulation. Indeed, we heard from my noble friend Lady Dean and the noble Lord, Lord Best, about Willow. That is the sort of thing that we want to see flourishing. This is where we all stand. The noble Baroness, Lady Falkner, talked about false choices. We must avoid this false dichotomy—the notion of two different kinds of regulation: one based on the protection of tenants, which can be parodied as being paternalistic; and one based on enabling choice. In answer to questions asked by my noble friend, the balance that we have achieved here is right because we will enable tenants to exercise choice. The regulator has an objective to enable tenant choice and to improve efficiency. If we had an overriding duty that overpowered the rest of the objectives, I do not think that it would help. The whole Bill achieves that balance of empowerment through influence, involvement and through action—working with the regulator to identify and deal with difficulties and to drive improvement. That is very important, the business of a progressive power to drive improvement. Objective 2 requires the regulator to enable tenants to have both choice and protection. I then point to objective 3, which is a true empowerment objective, which requires that it enables tenants to have the opportunity to be involved in management of their homes, and objectives 1 and 5, which in different ways offer protection to tenants as well. The noble Lord would argue that, whatever the wording of the objectives—and indeed he has more or less said it—the powers of the Bill are based around a traditional top-down view of regulation, with a dominating role for the regulator. I cannot agree with that, and I do not think that Martin Cave does. When he came to address a small group of noble Lords—I am sorry that my noble friend Lord Filkin was not able to come—he made it quite clear that he was in exactly the same place as us on this Bill and that the Bill achieved what he wanted to see with empowerment and balance. I agree that one has to know the Bill to see that, but we are not in a different place from Martin Cave, and I do not think that, in effect, we are in a different place from my noble friend. Crucially, tenants will be involved from the first in establishing standards. That is their most powerful role. If we look at Clause 194(1), we see that. Secondly, they will be involved from the first in setting the guidance that the regulator must issue—the policy framework and the use of interventions—as is set out in Clause 212. Thirdly, they will have information that will enable them to form views to provide evidence to raise concerns about how well the landlords are performing. That is provided for in Clause 99. Then there are new strong powers to bring about change in management, in Clause 191(2)(g). What do tenants get out of the proposed system? We have created a regulatory system that is designed around standards. That is absolutely right. Tenants will have direct influence in not just setting the standards but investigating them and enforcing them. One crucial point is that we are not simply talking about physical standards here—just repair and provision. They will also cover how tenants can drive improvements and continuous change. Tenants will know that there will be procedures for addressing complaints by tenants against landlords; methods for consulting and informing tenants; and methods for enabling tenants to influence or control the management of their accommodation and environment. This is not a passive set of requirements; there is nothing to stop anyone using tenant satisfaction, ambitions or aspiration as standards. These standards must be complied with and can be directly enforced by the regulator. Consistent with the independence of the regulatory system, exactly what is in the standards depends on the regulator’s decision. That is precisely why it cannot be a top-down process—because it is an essential part of the design that standards must be widely consulted on and developed by stakeholders, including representatives of tenants. That is one measure of regulation, and there will be others. Indeed, this is where the new National Tenant Voice should come in. It is not just another stakeholder representative but a partner for the regulator, which will lobby for tenants and assist in producing standards, deciding when to intervene. Far from being unrepresented, tenants will have more high-level engagement in regulation than any other group. That is absolutely right. If the level of tenant protection and choice were not sufficient, it has been reinforced; there are only three areas in which the Secretary of State has the power to direct the regulator. One is involvement by tenants in the management by registered providers of accommodation, which is a clear safeguard against any regulator who does not efficiently meet objectives 2 and 3—but again it is just a safeguard. I also want to mention two more key parts of the Bill where tenants are directly engaged and where the regulator has transparent requirements imposed on him to ensure that tenants are engaged. Clause 212 says that the regulator will set guidance on how it intends to use its powers under Chapters 6 and 7 on standards, monitoring and enforcement. There is a triple duty. It must issue guidance, it must consult stakeholders and it must have regard to its guidance. That means that the tenants will be shaping the detailed way in which the regulator operates. That is active, not passive. Secondly, we have already discussed information, but I emphasise that there is a very strong duty in Clause 202 requiring the regulator to provide performance information in a form likely to be useful to tenants to help them make choices and provide evidence. I am absolutely clear that when the regulator issues standards, those standards can require a level of engagement which is not only far beyond anything in the current system but which will enable tenants to challenge poor standards of service, give them real influence in shaping the services and enable them to influence and control the management of their homes explicitly. That certainly meets what Martin Cave wanted to happen. He outlined five areas of choice, and the noble Lord has identified them: choice over where they live; choice over how services are provided; choice over different types of service at different prices; choice over how to progress to ownership; and choice over the management organisation. All of those choices, in so far as they are within the powers of the provider and regulator, are potentially included within standards. The amendment is specifically concerned with choice of provider, by which I understand he means the manager, so I will address the issue of management choice. Martin Cave recommended that there should be more of a market in social housing management. We have introduced three new powers for the regulator to change management, in addition to the current in extremis power to change the owner. In Clause 246, the regulator may require that an owner tender the management competitively, and the selection panel must ensure representation of tenant interests. It may require the forced transfer of management of homes following an inquiry into whether there has been mismanagement or breach of standards, not just where it is concerned about a provider’s financial viability. It may appoint an individual as manager within an organisation where it is satisfied there has been mismanagement or breach of standards, but without the need for an inquiry, which is in Clause 250. The regulator can also encourage voluntary outsourcing of management, though there are barriers, and I will come to the VAT issue. It can ensure that good managers are waiting in the wings in case of management transfer through an accreditation system set up under the Clause 214 power. Many public and private organisations will be keen to manage homes. In short, we agree on so much. We both want management contestability, better management, and involvement and choice for tenants. But two issues have been raised which I need to address. One is how bad things have to get before management can be changed by force. The other is who makes the decision on forcing change; whether it is direct action by tenants or a system moderated by the regulator. Some stakeholders feel that the bar for forced management change by the regulator under the Bill at present is too high. I want to clarify that. The Bill can require a provider to tender for a change of manager without an inquiry. The power can only be used on the basis of breach of standards or mismanagement, but that covers a very wide range of circumstances and is certainly not limited to when a provider is in serious financial trouble. The regulator does not have to wait until a serious concern is brought to it by tenants. It is crucial that it can investigate proactively where it has any concerns and can take action if it finds evidence of poor management. That power can be used on any or all homes or services of a provider, and not just if the provider has a poor overall service. It can go into a single estate or the whole set of properties that are owned. It will depend on the circumstances. That will happen if there is evidence of failure severe enough to warrant the use of what is a fairly serious power, but in practice I am sure that the regulator will try to resolve the problems using lesser powers, enforcement notices, fines or compensation. Indeed, those are powers that the corporation does not have. It will be able to address poor management issues before the point where change of manager is the only answer. So I do not believe that the bar in the Bill stands too high, and neither does Martin Cave. He said several times that: "““In extreme cases, management of stock where tenants are persistently neglected or receive a persistently poor level of service could be re-tendered on a mandatory basis””." That is what we are doing. The height of the bar depends on the detail of the standards. I reassure Members of the Committee that standards could be set that certainly impact on mediocre performance, perhaps to require progressive levels of improvement. While the immediate priority, fairly enough, is dealing with the worst landlords, I hope that I have convinced the Committee that tenants will be involved in producing standards that can reflect different and rising scales of expectations and experiences. Failure to involve tenants or to meet tenants’ satisfaction can be a breach of standards; ““evidence”” includes evidence of dissatisfaction. Tenants are very much in the driving seat on that. Finally, I come to the questions powerfully addressed by the noble Lord, Lord Best, and my noble friend Lady Dean: should tenants have a direct right to sack the manager—or, as my noble friend Lady Dean put it, the owner and mortgage holder—or should the regulator make that decision? I have some problems with the amendment in this context. I am not sure whether the noble Lord thinks it is right for tenants to take direct action outside the regulatory system. However, the Bill gives the regulator three powers to achieve some of that, which the noble Lord will recognise is a huge step forward. Why do I believe that, in terms of fairness and effectiveness, forced management change has to be moderated by the regulator acting on behalf of and involving tenants? The noble Lord, Lord Best, pointed to what he described as a whole series of difficulties and problems, machinations going a long way. This is not just about tenants and landlords within a closed system. The choice of manager impacts on a wide range of issues. For example, if tenants want a superior quality service that would be costly to provide, it is not right that landlords should provide it simply to satisfy those who shout the loudest and by imposing additional costs. The noble Baroness, Lady Falkner, alluded to this: whose voices should be listened to? We all know some of the issues that that raises. A regulatory system is about a balance between providers and a balance of interests, voices and interventions with careful safeguards. It is not about responding to the loudest voices or best organised groups. That comes through strongly in the Cave report. Secondly, to pick up my noble friend’s point, the system must maintain stability. We are talking about £35 million of investment. Stability is in everyone’s best interests: tenants, providers and the general community. Uncertainty over whether managers might be spontaneously sacked leads to perverse and difficult consequences of unexpected costs and disruption—maybe even a rise in the cost of capital if lenders perceive greater risk. It is important that we consider this, and Martin Cave raised it when he met with us. Thirdly, housing associations are independent bodies, often charitable, with a strong record of innovation. Provided that the performance standard is good, they should be able to get on with their business. If they are not permitted to make decisions on how to achieve good outcomes on this basis, there could be issues over their independence. Fourthly, a direct tenant right to sack introduces a system of multiple regulation with a lot of scope for conflict. We are trying to achieve a proper consensus based on evidence and the balance of interests. On balance, the regulator is best placed to make these difficult decisions. He will be proactive and take tenants’ influence into account, in all the different ways I have described. It is therefore clear why I cannot accept Amendment No. 103D, not least because I do not know what the trigger for management change would be. I do not know who would decide what core management was and how it would be judged. On Amendment No. 104ZB, I think it unlikely that we could have specified in the Bill the structural barriers that Cave identified. The barriers he was talking about are real and their existence is a key reason for needing regulation. That is why the system of regulation gives the regulator levers to begin to address them. The objectives and the standards, and their interrelationship, will address the barriers. In objective 2 we do not specifically refer to the structural barriers, but I do not see anything in this amendment which would not be covered by objective 2. The point raised on VAT is very serious. All I would say, in the interests of brevity, is that I cannot change that rule. I am afraid that however much I would like to, I cannot hold out any hope—for reasons that the noble Lord knows full well—that the rule will be changed. I appreciate the reason for his raising it. The third amendment is essentially about standards. Clause 191(2)(g) mentions, "““methods of enabling tenants to influence or control the management of their accommodation and environment””." I hope that I have sufficiently explained the workings of standards and especially standards which influence tenants influencing management. I hope I have been clear that standards could include both the appointment of new managers and major proposals. I shall conclude with that, as I take the point raised by the amendment as a way of facilitating debate. I turn back to where I started. I hope I have clarified why I believe that the system we have means that the regulator will deliver the outcomes that the noble Lord wishes to achieve, and why we think that decisions on mandatory management change need to be under a system of regulation moderated by the regulator. I recognise that there is an underlying anxiety that the regulator might not act in a way that is conducive to the driving up of standards that we want to see. I do not think that will happen, but in order to address the concerns that have been raised, I am certainly willing to consider whether we should introduce an amendment which, while operating within a system moderated by the regulator, would put the onus on it to address directly tenants’ concerns and complaints. I am sorry to have spoken at such length, but I thought it was important to put all that on the record because it is central to the business of the Bill and to what we want to achieve. I hope the noble Lord will be satisfied.