§ Amendments made: No. 321, in page 169, line 10, leave out—
§ 'or is expected to incur'
§ and insert—
§ ', or when the agreement was entered into was expected to incur,'.
§ No. 322, in page 170, line 11, leave out—
§ 'a project company incurs or is expected to incur'
§ and insert—
§ 'under an agreement relating to the project a project company incurs, or when the agreement is entered into is expected to incur,'.—[Miss Melanie Johnson.]
§ Mr. Waterson
I beg to move amendment No. 13, in page 170, line 27, at end insert—
'72FA Sixth exception: Registered Social Landlords
1. Section 72A does not prevent the appointment of an administrative receiver of a company which is a registered social landlord at the time of the appointment.
2. Section 72A does not prevent the appointment of an administrative receiver of a company which, at the time of the creation of the relevant qualifying floating charge, was either:
3. In subsections (1) and (2) "registered social landlord" means a body registered as a social landlord pursuant to section 3 of the Housing Act 1985 or, as the case may be, section 57 of the Housing (Scotland) Act 2001.'.
- (a) a registered social landlord; or
- (b) a housing association registered as such in the register previously maintained pursuant to Part I of the Housing Associations Act 1985.
§ Madam Deputy Speaker
With this it will be convenient to discuss the following amendments: No. 318, in clause 249, page 173, line 25, at the end insert—'other than a society which is, or at any time has been, a registered social landlord or a housing association registered as such in the register previously maintained pursuant to Part 1 of the Housing Associations Act 1985.'.No. 319, in page 173, line 37, at the end insert—
'(2A) In sub-section (1) "registered social landlord" means a body registered as a social landlord pursuant to section 3 of the Housing Act 1996 or, as the case may be, section 57 of the Housing (Scotland) Act 2001.'.
§ Mr. Waterson
The amendments involve serious issues affecting the social housing sector. They were initially proposed by the Council of Mortgage Lenders, which has been working closely on the matter with the National Housing Federation. Let me say immediately that there is a typographical error in amendment No. 13, which should read, "Housing Act 1996", not "Housing Act 1985". If the Minister were to accept the amendment, I am sure that it would not be beyond the wit of the parliamentary draftsmen to correct that minor error.
All three amendments concern registered social landlords, 85 per cent. of which, according to the National Housing Federation, are also industrial and provident societies. Amendment No. 13 would exempt lenders to registered social landlords—RSLs—that are companies from the prohibition on appointing an administrative receiver. It would amend the clause, giving the Secretary 77 of State power by order to provide for administration to apply to industrial and provident societies. In a nutshell, it would preserve the current position.
Some £25 billion has been lent to RSLs—mainly housing associations—for new build, repair and improvement to social housing. As I said, the vast majority of RSLs are also I and Ps—I hope that this will come out all right in Hansard. There is a trend for newer RSLs to be established as companies, especially those involved in large-scale voluntary stock transfers. Unsurprisingly, the availability of competitively priced private loan finance is crucial to the Government's target of achieving the decent homes standard within 10 years. I can speak with a little authority about that, having been a shadow housing Minister in a previous incarnation. If the Minister is in favour of joined-up Government, I am sure that she will want to listen carefully to the rationale behind the amendments.
The briefing from the Council of Mortgage Lenders states:The proposals in the Enterprise Bill strike a serious blow at the social housing finance market at a time when it is already under pressure.It continues:Under the 1996 Housing Act, the Housing Corporation has the power to create a 28-day moratorium for all creditors that will allow the opportunity to rescue the RSL if possible and to protect the interests of tenants.On that basis, the impetus towards company rescue offered by administration already exists in the sector in a different form and should not be duplicated. The briefing goes on to say:The Bill as it stands creates a serious anomaly in that clause 244(1) 72B exempts the capital markets from the abolition of administrative receivership. The capital markets are significant lenders to the RSL sector and this exemption thus creates a situation where different secured lenders to the same RSL can have different rights, a situation likely to cause significant uncertainty and to make retail mortgage lenders more cautious about assisting higher risk or ailing RSLs.The CML believes that there will be three major consequences of abolishing the right to appoint an administrative receiver to an RSL that is a company—first, the cost of borrowing will go up because lenders will re-evaluate the risk and insist on more security; secondly, some projects may become unfundable because of their higher risk profile; and thirdly, retail lenders' present willingness to work with the Housing Corporation to assist RSLs in difficulties will be curtailed owing to the possibility that the capital markets will still be able to appoint an administrative receiver and thus be in a stronger position to realise their security in the event of default.
Amendment No. 318 would amend clause 249, which was added to the Bill in Committee and gives the Secretary of State power to bring in an administration regime for industrial and provident societies. At present, 85 per cent. of registered social landlords are in that category. The Council of Mortgage Lenders observes thatthis proposal potentially presents a significantly larger threat than those measures relating to companies.It also points out that variations on these proposals were suggested on no fewer than three occasions during the 1990s but were abandoned after proper consultation because of their likely effect on the social housing finance market.
78 At present, there is no power to appoint an administrative receiver in respect of an industrial and provident society, but lenders can, using their status as fixed charge holders, appoint a receiver under contract offering similar advantages. The introduction of administration to I and Ps will cut across that right. The CML says:The effects of this proposal will be similar to those for companies, though on a larger scale"—that is, more expensive borrowing, projects less fundable and a less sympathetic approach to the rescue of RSLs. It continues:An additional important consequence however will be that lenders will be forced to secure all loans via floating charges…in order to gain the right to an administrator. This will cause major and ongoing disruption and expense to RSLs and lenders alike.The National Housing Federation issued a briefing on similar terms. It represents about 1,400 not-for-profit housing organisations, which between them own or manage about 1.8 million homes in England alone. Of the change to the Bill made in Committee, it states thatthis amendment could have an immediate and extremely damaging impact on the provision of decent, affordable housing.The briefing refers to the suggestion that has been made, following consultation, that RSLs might be exempted from clause 249 provisions by order. However,there is significant concern that just the possibility of these changes to insolvency law will be enough to damage lender confidence.It asks for support for the amendments and states:The Government must not wait for secondary legislation".Yet again, it has fallen to the official Opposition to raise the genuine concerns of bodies out there in the real world. In this case, they are perhaps more significant than any, given their responsibility for a vast amount of social housing. From the point of view of the National Housing Federation, the amendments are necessary and helpful. It is difficult to understand how the Government could resist them. Indeed, it appears that we have already amended the Bill too much by including clause 249. I commend the amendments to the House.
§ Miss Melanie Johnson
Amendment No. 13 would provide a general exemption from the prohibition on the appointment of an administrative receiver over a registered social landlord. That would apply to RSLs that are companies and industrial and provident societies—the large majority—which can technically be subject to a floating charge. However, lenders do not insist on making such charges since the property is entirely land, and industrial and provident societies cannot be subject to administration.
The arguments for a special exemption seem to be based on the cost and availability of finance. Indeed, the hon. Member for Eastbourne (Mr. Waterson) emphasised that. We have listened carefully to the arguments, but we are not persuaded that there is a case for exemption for that group of lenders.
Our proposals for prohibiting administrative receivership in favour of a streamlined administration procedure will strike a fair balance between creditors and debtors. They will not affect the rights of lenders to make a floating charge, but will simply provide for its exercise through a fairer, collective framework. The new administration procedure offers flexibility, speed and adequate safeguards for the interests of floating charge 79 holders. Lenders to RSLs that are companies and already subject to administration and administrative receivership through their charges have nothing to fear from the proposals.
Let me consider amendments Nos. 318 and 319. They would remove RSLs that are industrial and provident societies from the power in clause 249 to extend administration to industrial and provident societies. I know that representatives and advisers of RSLs in that sector are worried that the power in clause 249 to extend administration to industrial and provident societies in the social housing sector could, if exercised, have an adverse impact on it. They fear that the administration moratorium may interfere with the existing arrangements under the Housing Act 1996, which already provides for a moratorium in the case of a registered social landlord in financial difficulties.
The Government would not wish to use the enabling power to extend administration to parts of the industrial and provident sector where it would be contrary to its interests to do so. Equally, we want to seek a broad range of views and do not want to rush into any decisions. Any exercise of the power will be made following full consultation, when that important issue will be examined with others that affect the whole industrial and provident sector. I assure the Opposition that we appreciate the subject's importance.
§ Mr. Thomas
I am grateful to my hon. Friend for listening so sympathetically to the anxieties that were raised with her and her officials and with me, as the mover of clause 249. Although full consultation is clearly necessary, I urge her not to draw back from using clause 249 to extend the Bill's insolvency law provisions to industrial and provident societies. In the past, such societies have had to go into liquidation because the measure's sensible powers were not available to them. The last thing we want is to deprive industrial and provident societies of that power.
§ Miss Johnson
I am grateful to my hon. Friend for his intervention, and for his continuing interest in and support for the clause that he originally tabled in Committee. I am sure that he appreciates that we do not want to take action that is contrary to the interests of any part of the industrial and provident sector. I know that his purpose in tabling the clause was to help parts of that sector in the way he mentioned. We need to maintain his objective and the overall aim of doing nothing to damage the sector; I know that he is sympathetic to that. I simply emphasise that we shall consult and examine the matter and that we will not rush into decisions. We do not want to do anything that is contrary to the sector's interests.
§ Dr. John Pugh (Southport)
If we are to take the assurance of full consultation seriously, and it happened now, interested parties would clearly say, "Accept the Opposition amendment." They have examined and 80 understood what is before them; they are reasonably good judges of their interests. If full consultation means anything, we should harken to the amendment.
§ Miss Johnson
I understand the hon. Gentleman's point, but he is not right. As a member of the Committee, he appreciates that clause 249 was included in the Bill relatively late. There has not therefore been the same opportunity for dialogue with the social housing sector and bodies that represent its interests. We believe that further consideration of the issues that the sector raises will give it an opportunity of making its views known at an appropriate time to the appropriate Department. I understand that certain matters may need to be tackled and I accept that we may need to consider that, but the amendments would not ensure that we reached the right answer by the quickest route. I know that the hon. Gentleman wants to achieve that when he urges us to accept the amendment.
In the light of my comments and assurances, I ask the hon. Member for Eastbourne to withdraw the amendment.
§ Mr. Waterson
I am grateful to the Minister for saying that she appreciates the seriousness that the social housing sector attaches to the issues that we are considering and for her comment that she wants to consult. Given that she appreciates the seriousness of the matter, I hope that we can assume that the consultation will proceed briskly and that action will ensue if the result is the one predicted by the hon. Member for Southport (Dr. Pugh). I am sure that he is right.
The subject is serious, and I do not want to divide the House on it. I simply emphasise the comments of the Council of Mortgage Lenders and the National Housing Federation, which feel strongly about the matter because it could cause them major problems.
§ Mr. Mark Field
I am sure that my hon. Friend has it in mind that the availability of competitively priced private loan finance is crucial to the sector, especially in central London. I do not say that with purely constituency interests at heart. If we run the risk, there may be further unintended consequences. The Mayor of London has already insisted on a minimum of 50 per cent. social housing in new developments. That will drive developers away from developments in much of London. In the worst-case scenario that my hon. Friend has portrayed, we run a risk of unintended consequences for a sector that will go through some difficult times in the next couple of years—
§ Mr. Waterson
I get my hon. Friend's drift. If I have not, I am sure that the Minister has. It is possible to square the circle by satisfying the social housing organisations and not undermining the amendment that the hon. Member for Harrow, West (Mr. Thomas) tabled in Committee. That has attractions for the main stream of industrial and provident societies, and he obviously speaks from knowledge. However, a serious problem clearly exists. We are happy to leave it with the Minister and hope that consultation takes place shortly.
81 I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.