§ 3.51 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Mackay of Ardbrecknish.)
§ Lord Williams of Elvel
My Lords, before the House resolves itself into a Committee, I must declare an interest and I apologise to the House for not declaring it before Second Reading. I ruled myself out of discussion on Part III on leasehold reform on the grounds that I was a leaseholder who could be affected by the provisions of the Bill.
On studying the Bill further, I found that there could be an interest which I should have declared to your Lordships. It is that my wife is a member of the council of Stonham Housing Association. She is unpaid and performs that service on a voluntary basis. Indeed, at the risk of betraying marital secrets, she does not want to be paid, somewhat to my displeasure, but I leave that aside. I took advice from the Table as to whether that was an interest I should properly declare and the advice I received was that in view of the resolution which your Lordships passed last November about Peers being cautious about interests which may affect them, I should declare an interest. I do so very willingly. My wife has offered to resign from the membership of the council of management of Stonham Housing Association but I do not believe that your Lordships would consider that to be an appropriate measure. I certainly would not.
I mention the matter because this is the first point of—if I may so express it—case law under the resolution which your Lordships passed last November. I am sure that noble Lords will have been listening extremely carefully to what I said and will have noted the advice I received from the Table. I wonder whether, in some respects, we are not going too far. Therefore, I declare that interest.
On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The CHAIRMAN OF COMMITTEES in the Chair.]
§ Clause 1 [The register of social landlords]:
Lord Williams of Elvel moved Amendment No. 1:
Page 1, line 11, after ("office") insert ("and regional offices").
§ The noble Lord said: In moving Amendment No. 1, I shall speak also to Amendment No. 3. The whole matter of registration and how it is to be publicised was considered at length in another place. If the noble Baroness, Lady Hamwee, will permit it, it may save the time of the Committee if I ask the Minister to intervene at an early stage because I am advised that Mr. Curry, the Minister responsible for the Bill in another place, wrote to my honourable friend Mr. Raynsford with, 1368 among other things, a note from the Housing Corporation about how it proposes to handle the statutory register of social landlords and how it proposes to make available the relevant information. Members of the Committee may have been to the Library to read a copy of that letter but just in case that is not so, it may be useful if the Minister were to give a summary of its contents before we move on with the amendment. I beg to move.
Yes, I hope that I can give the noble Lord, Lord Williams, the summary he requests. It is proposed that the new statutory register of social landlords will comprise the registered number, name, address and relevant board minute of registration in hard copy. In the light of the requirement in Schedule 2 regarding the independent ombudsman scheme, the register may also include the name and number of the approved scheme that each social landlord registers.
In addition, there will be maintained a new public information file which will contain for each registered social landlord a copy of the rules and governing instrument with all amendments and consents to amendments since registration, formal registration documents, the completed application form for registration, the latest annual return, which will provide details of board membership, the number of members of the board, the principal solicitor's name, and such items as that, one set of audited accounts for the registered social landlord's last three financial years, complete with transfers of engagements where relevant, and, for larger associations, key policy documents on tenant selection and allocations of policy.
On a regional basis, it is proposed to develop a system whereby an abstract of key information from the PIF for each landlord is made available at each corporation regional office, probably through the computer network. The sort of information available will be key information on the annual return and a summary of the income and expenditure accounts and balance sheet. That would be accessible on a screen from a network channel or provided as a print-out. Members of the public requiring hard copies could obtain them by giving three days' notice of a request at the regional office. Those will then be provided by the head office. I believe that that is as much information as I can give as to what will be on the register.
§ Lord Williams of Elvel
I am grateful to the Minister for putting that on the record. I am sure that Members of the Committee, having heard what he said, will wish to look at the full proposals from the Housing Corporation, available, I understand, in the Library. As far as I can see, they meet the anxieties we had when proposing Amendment No. 1 and, indeed, Amendment No. 3.
There is only one point I wish to raise. Will the Housing Corporation consider the need for devolution of its responsibilities, particularly in relation to the information from the board, which is a central board? Such a devolution would not only increase the ability of the corporation to give information as and when required at a suitable place and in a reasonable time, but could also involve some form of democratic 1369 representation on regional boards which would provide a greater level of accountability than is the case at present in the Housing Corporation centrally.
The matter was debated at length in another place. The Minister has outlined what the Housing Corporation has in mind and has endorsed that on behalf of the Government. I am grateful to the noble Lord for that fact. I see that the noble Baroness wishes to comment. I give way.
§ Baroness Hamwee
I am much obliged. I am also grateful to the Minister for putting the information on the record. As this is the first amendment that the Committee is considering, perhaps I may explain why I, too, felt that that was important. The Housing Corporation is a quango, and we will no doubt have many debates during the Committee stage on questions of accountability. I shall certainly support requests for as much as possible to be placed on the record as regards the way in which the Bill will operate. I believe that that will be our best opportunity and the best record for us to refer to in the future when asking the Government how matters are progressing. It is important that the Government should set the context for what the Housing Corporation is doing, as we will not have the opportunity to question the corporation directly.
§ 4 p.m.
I appreciate the remarks made by the noble Lord, Lord Williams, and the noble Baroness, Lady Hamwee, about accountability. Doubtless we will have to deal with that issue again at a later stage. Such points as whether there should be local representation on local boards for the Housing Corporation fall outside the scope of the amendment now before us, but we may have an opportunity to return to the matter later.
I turn now to the main question raised by the noble Lord, Lord Williams; namely, whether the information function should be delegated. We feel it is important that the register and the associated files, which are important documents, should be kept well, up to date and properly. We also feel that they should exist in a single place so that one can be sure that such functions are indeed carried out properly. To the extent that information then needs to be disseminated from that correct, confirmed register to other offices, we will certainly look at ways in which that might be improved. However, we believe that there needs to be one proper register upon which people can rely and which is maintained as a responsibility by one organisation rather than that responsibility being disseminated and, therefore, possibly not so easy to enforce.
§ Lord Williams of Elvel
I am grateful to the Minister for his response. I did not necessarily mean to suggest that different registers should be kept in different places for different regions. I accept that there has to be a central register. Nevertheless, with modern technology, it is not impossible for that central register to be disaggregated among whatever region and in whatever manner might be appropriate.
As I am sure the Minster realises, we are discussing an important matter. Anyone who is a tenant, or going to be a tenant, of a social landlord will wish to know—
1370 and, indeed, should wish to know—first: whether that landlord is on the register; secondly, what the condition of that social landlord is; and, thirdly, who the people are who will actually run the property of which he or she is, or may become, a tenant. In our view it is vitally important that that information should be available as soon as possible at any reasonable time.
I believe that the Minister and I are at one on the matter and that it is a question of technology. However, I very much hope that it will not be a matter of the Housing Corporation centrally simply saying, "That is the register and it is available on the Internet", or whatever it may be. I hope that there will be proper facilities for those who are, or who will become, tenants of social landlords to enable them to have access to such information at a suitable place and at a reasonable time. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas moved Amendment No. 2:
Page 1, line 13, leave Out ("Part") and insert ("section").
§ The noble Lord said: In moving the above amendment, I shall speak also to Amendments Nos. 61, 106, 107 and 110. Amendment No. 2 allows Clause 1 to come into force on a date to be specified by order. That is necessary to enable the corporation's register of social landlords to be introduced in the correct sequence of events. It is consistent with the commencement provision for the Bill as a whole (in Clause 204), which provides for the provisions at Part I of the Bill to be brought into effect at different times.
§ The other amendments in the group provide for the commencement of various other clauses to come into force on a date to be specified by order. Amendment No. 61 concerns the commencement of provisions relating to the right of tenants to acquire dwellings. Amendments Nos. 106, 107 and 110 all concern the commencement of provisions relating to grants under Sections 50 to 55 of the Housing Act 1988. I beg to move.
§ Lord Williams of Elvel
In themselves, the amendments seem to be unexceptionable. However, can the Minister say why the provisions were not included in the Bill in the first place?
I think it would be honest to say that they were neglected.
On Question, amendment agreed to.
§ [Amendment No. 3 not moved.]
Baroness Hamwee moved Amendment No. 4:
Page 1, line 16, after ("it") insert ("satisfies the conditions in subsection (2) and").
The noble Baroness said: In moving the above amendment I shall, for the convenience of the Committee, speak also to Amendments Nos. 5 and 6 which are grouped with it. Indeed, it would make no sense if I were not to do so. We are now dealing with a simpler point than might at first appear to be the case from the drafting of the amendments. Clause 2(1) describes bodies which are eligible for registration as social landlords and sets out three groups:
(a) a registered charity,
(b) a society registered under the Industrial and Provident Societies Act 1965 which satisfies the conditions in subsection (2), Or
(c) a company registered under the Companies Act 1985 which satisfies those conditions".
§ In the case of the second and third bodies, they are required to satisfy the conditions in subsection (2) of the clause. My amendment is designed merely as a means to ask the Minister to explain why those conditions do not have to be met by a charity. One of those conditions is that the body should be "non-profit-making". Of course, I can understand why it is not necessary to spell that out in the case of a charity. However, the "objects" of the non-profit-making body are dealt with later in the clause.
§ I wonder whether any charity which does not deal with housing matters—perhaps a medical charity, a dogs home; indeed, the list is almost endless—might be eligible to register. I suppose it is a rather picky point and I apologise to Members of the Committee for using prime time to raise it. Nevertheless, the issue arises at the start of the Bill and, therefore, I have raised it in its place. I beg to move.
The noble Baroness, Lady Hamwee, is right to say that it is a rather picky point. We are most concerned that charities should come forward where they feel able to play a part in the provision of social housing. However, looking at the amendments put forward by the noble Baroness, we feel that, picky though they are, they are probably right. Nonetheless, we would like time to look at the wording to see whether we agree with it absolutely or wish to propose something better. With those words of comfort, I hope that the noble Baroness will feel able to withdraw the amendment.
§ Baroness Hamwee
I shall not be quite as grudging as the Minister. I thank him for noting the point and for having regard to it. I have no particular proprietorial interest in my drafting; it is simply important to get the Bill to say what we want it to say. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ [Amendments Nos. 5 and 6 not moved.]
§ On Question, Whether Clause 1, as amended, shall stand part of the Bill?
§ Lord Williams of Elvel
Before we leave Clause 1 there is a matter of which I hope I have given substantial notice to the Government; namely, the whole question of what is a social landlord and what should be on the register. In Clause 2, which we shall come to, there is a provision for companies registered under the Companies Act 1985.
The problem with social landlords who may be registered under one Act or another is that the governing Act of a social landlord is the Act under which he will be registered. In the case of, for instance, local housing companies—the principle of which we support—which may be registered under the Companies Act 1985, there 1372 seem to me to be some problems which the Government should consider. We have no particular difficulty with housing associations registered under the Housing Associations Act 1985. That is referred to in Clause 1. However, we have some problems with the Government's approach as regards other social landlords who may be registered under the Bill as it is at present drafted.
I give the Committee some examples. There may well be a company registered under the Companies Act 1985 which is governed by that Act as amended by later companies legislation. The duties of directors under the Companies Acts are quite different to the duties of members of a council of housing associations registered under the Housing Associations Act 1985. As your Lordships will be aware, the Companies Act is a rather complex and difficult measure. It imposes a variety of obligations on directors and on shareholders and contains a variety of measures about who can call general meetings and what those general meetings can decide and many measures as regards mergers, acquisitions and various other matters of that nature. I do not wish to go through the whole of the companies legislation before the Committee this afternoon.
It therefore seems to me that before we move on the Government would be wise to spell out in a certain amount of detail how they see local housing companies—as opposed to those housing associations which are registered under the Housing Associations Act 1985 mentioned in Clause 1—and companies registered under the Companies Act 1985 conforming with the provisions which we shall discuss later in the Bill. This is a general point which I wish to raise at the outset.
The whole matter of companies legislation is one thing but it appears from what I have heard that local housing companies will be encouraging widespread ownership, perhaps ownership by tenants of the properties of the local housing company. I can envisage that the local authority may be a shareholder in such a company. I can envisage that private interests—pension funds and others—may be shareholders. Under those circumstances, if that is what the Government's thinking is, the placement of those shares would come under the Financial Services Act. That raises all sorts of rather more complicated questions about the nature of due diligence and of the criminal penalties for those who offer shareholdings in companies without due diligence. The maximum penalty for recklessness under the Financial Services Act is seven years' imprisonment.
It therefore seems to me that the Government have to—and I hope at this stage will—make a general statement which we may well come back to in the course of our discussions. I hope the Government will wish to make a general statement about how they see social landlords who are not registered as such under the Housing Associations Act 1985. There may be similar questions in Clause 2 about those registered under the Industrial and Provident Societies Act 1965. However, I shall come to that later. As the noble Lord, Lord Lucas, will be aware, I have raised this question before. I repeat that I hope that he will be able to make a general statement to which we may well come back in the 1373 course of amendments which we move. It is to us rather a serious problem to find out exactly what the Government's intentions are.
§ 4.15 p.m.
Yes, indeed, the noble Lord made known his concerns to the Government some little while ago. If I may say so, they are entirely reasonable. It is important that these two powerful pieces of legislation should work together, particularly when they are governing the same company. I hope I may be allowed to take up some small amount of the Committee's time to go through the basic principles which we see underlying how these two Acts will work together when applied to the same housing association.
The present situation is that the Housing Corporation may register as a housing association, a registered charity or a society registered under the Industrial and Provident Societies Act 1965 which meets certain conditions. These conditions are in outline that the society does not trade for profit and is established chiefly for the purpose of providing housing for letting. It is for a body which wishes to become a social landlord to decide which form of incorporation best suits its purpose. A registered charity will be subject to the supervision of the Charity Commissioners. A registered charity which is a Companies Act company must comply with the requirements of the Companies Act. An industrial and provident society will be subject to the supervision of the Registrar of Friendly Societies. If such a body succeeds in achieving registration as a housing association, it will be subject to the monitoring and regulation of the Housing Corporation using the powers conferred on it by the Housing Associations Act 1985, as amended.
We have a situation therefore in which a registered housing association will be subject to two or three sets of requirements emanating from different sources and governed by different legislation but each reflecting legitimate interests of regulatory and supervisory bodies. This Bill extends eligibility for registration to those companies registered under the Companies Act 1985 which satisfy certain conditions. These are in brief that they are non-profit-making and are established chiefly for the purpose of providing housing for letting. This will permit non-charitable Companies Act companies to register which they have hitherto been unable to do. In large measure the Bill re-enacts with minor changes the powers conferred on the Housing Corporation by the Housing Associations Act 1985 as variously amended.
The most significant new provisions are those relating to the right to acquire and to cases of insolvency. Thus non-charitable Companies Act companies will be subject to the regulatory requirements of the Housing Corporation, as charitable companies have thus far been, and will be subject to the new provisions like all other registered social landlords.
The Bill does not seek generally to replace, override or amend the Companies Acts. The duties, functions and other prohibitions placed upon directors, shareholders and others by those Acts remain unchanged. The powers in the Housing Bill supplement and overlay the 1374 Companies Acts with additional requirements designed to allow the Housing Corporation to fulfil its remit of protecting public funds and protecting tenants. The corporation needs separate, often parallel, powers because it will have different legitimate interests from those of directors, shareholders and others. It may wish or need to act when they do not. We need to ensure that it has the powers it requires to do its job.
Any Companies Act company considering bidding for social housing grant or taking over transferred council housing stock, or anyone thinking of setting up such a company for these purposes, will be able to see in the Bill and in the published criteria guidance and so forth from the Housing Corporation of what will be required of them. It will be for the company or the individual to judge whether this is acceptable to it.
It may be helpful to the Committee if I illustrate how the basic principle of separate but overlapping legislative provisions might work. The corporation has certain powers which parallel those of the shareholders of a company—for example, to remove a director in certain circumstances, Schedule 1, paragraph 4, and to appoint a new director in certain circumstances, Schedule 1, paragraph 7. This does not remove the shareholder's power to do the same thing. The corporation needs the power independently in order to be able to take action when the company is failing to manage its affairs so as to deliver adequate housing to its tenants. It must be able to act in the public interest whether or not any or all of the shareholders agree or are concerned. It is still the case that shareholders may dismiss directors and could, therefore, dismiss directors appointed by the corporation. They may seek to reappoint directors whom the corporation has dismissed. That kind of battle can develop now between rival factions of shareholders.
However, if in doing that shareholders put at risk the proper management of the company as a social landlord, with all that that implies for tenants, the corporation has further powers to bring into play. It may direct an inquiry into the affairs of the company. If the corporation embarks on this course it has various associated powers, in effect, to take control of the company's finances and staff. Again, therefore, in pursuit of the protection of public funds, the corporation can act without the agreement or against the wishes of shareholders but cannot remove their rights.
A director appointed to the board of a company by the corporation may call an extraordinary general meeting at 21 days' notice. Shareholders may also require an EGM to be held. Typically an EGM will be called to dismiss or appoint directors. These powers operate in parallel. This could lead to a succession of EGMs in the same way as the actions of different groups of shareholders could cause a series of EGMs to be held in an ordinary Companies Act company. It is unlikely that that would be an efficient way of resolving disagreements but company law permits it and the Bill does not change that.
The noble Lord, Lord Williams, asked about the issue of shareholdings in local housing companies to tenants and local authorities. It is likely that local authorities 1375 and tenants will wish to be shareholders in local housing companies. But those companies will not be publicly quoted companies. Shares will not be offered freely to members of the public. Therefore I believe that the noble Lord's concern about the full weight of the Financial Services Act being brought to bear may not arise. However, this is clearly an area of great importance and I do not wish to be drawn too far into what is a difficult and complicated area with a large number of teeth in its jaws. If the noble Lord will allow me, I shall write to him and to others who speak in Committee between now and Report stage to give a detailed picture of how we see this procedure operating under the Financial Services Act.
There are obviously other illustrations I could give of how the Companies Act will work with this Bill. For instance, perhaps I may draw the noble Lord's attention to paragraph 16(1) of Schedule 1 where the corporation determines the form of a company's accounts. The noble Lord, Lord Williams, asked whether that will lead to companies producing two sets of accounts, as people are rumoured to do in Italy. Yes.
§ Lord Hylton
It is well known that large institutions such as pension funds, insurance companies and provident and friendly societies control a very considerable amount of money. In recent years they have not used those funds for providing housing. In many ways it would be extremely desirable if they used at least a proportion of the funds perhaps to provide housing for their own beneficiaries, or—going further afield—for the general public at, if not the lowest level of housing association rents, somewhat below full open market value.
I shall be interested to hear from the Minister whether that possibility is in the Government's mind, and, if so, how they believe it should be achieved. Would they like to see such institutions registering housing subsidiary companies in their own right and therefore qualifying under this Bill? Alternatively, would they prefer to see such institutions providing funds to existing housing associations perhaps by way of a loan so that they could then be blended with other funds coming from the Housing Corporation and possibly involving housing association grant?
§ Lord Williams of Elvel
The noble Lord, Lord Hylton, has put his finger on yet another point to which the noble Lord, Lord Lucas, did not reply. I refer to the acquisition of local housing companies, if there are to be local housing companies. It is the duty of any director to respond to the interests of the shareholders. It is also the duty under the Companies Act—frequently neglected—to respond to the interests of employees. It has not been tested in the courts. I leave the point with the noble Lord.
The shareholders of a local housing company may be a pension fund. That is very desirable. There may be tenants. It may be a minority local authority. Someone comes along—I do not say who that someone will be—and says, "That's fine. It is an interesting company. It owns a lot of land. At the moment it is a social landlord but"—we discussed Ministry of Defence housing for 1376 families recently—"we think that this could be rather an interesting property company. We should like to deregister as a social landlord, take this over as we are entitled to do under the Companies Act, and make it into a formal property company." Is there any provision which would prohibit that other than the Housing Corporation making bleating noises?
The noble Lord is not right to say that private companies are excluded from the operation of the Financial Services Act. I am glad to hear that he will write to me on the matter. I make a perhaps rather niggling point. We have so far reached the end of Clause 1. On the Minister's advice, the Committee agreed to one amendment put forward by the Government on the ground that it had been neglected, the Bill having been through full debate in another place. In another case, on Clause stand part, I am informed by the Minister that the Government will write to me with a full response to the issues I have raised, the Bill having been debated at length in another place. I am full of the virtues of this House and this Committee. However, I feel that these issues might have been addressed by the Government before they reached another place, let alone this House.
I know that the noble Lord is as much a fan of this House as I am. I am sure he realises that it is the function of this House to act as a revising Chamber. It is a function which it performs extremely well. In the previous housing Bill this Session, the noble Lord demonstrated just how well this Chamber can perform its function. We are having the opportunity to do so again. The fact that the talents of the noble Lord, Lord Williams, are clearly required in the scrutiny of this Bill merely demonstrates what a good job this House does, how necessary it is, and what an important part of our British constitution it is. I am glad to have the support of the noble Lord on that, even though he did not state it explicitly.
I should like to read in Hansard what the noble Lord, Lord Hylton, said, before replying to him to ensure that I do not miss anything. However, the basic principle is that institutions lend to housing associations and increasingly they supplement government grant. We expect to see that continue. We also expect to see institutions investing in housing investment trusts for private rented housing. It is a direction we are clearly interested in supporting. However, I wish to read again exactly what the noble Lord said.
As regards the transfer of shareholdings and the consequences it might have, I agree with the noble Lord, Lord Williams, that there is nothing in the Bill which would prevent those evils. It is intended that such problems should be prevented by the requirements which the Housing Corporation makes on companies which wish to become social landlords as regards their articles, restriction on the transfer of shares, and restrictions on the ways in which they can change any item in their articles of association without the permission of the Housing Corporation.
The noble Lord, Lord Williams, will realise that one can set up the articles of association of a company to be pretty restrictive on the way in which shares are 1377 transferred. I agree with him that the point should be set out in full in writing to the noble Lord. I undertake to do that, if not immediately during this Committee stage then before Report.
§ 4.30 p.m.
§ Baroness Fisher of Rednal
Before the Minister sits down, will he give me an assurance that we shall not fall into the trap of the Rachman period? I do not know that we would call him a social landlord; we prefer to call him a grasping something else. Will the legislation make allowances for a man or an organisation being prevented from sabotaging what should be a good set of regulations?
It is clearly of prime importance to prevent a social landlord falling into the hands of Mr. Rachman, Mr. Maxwell or, indeed, anyone of similar inclinations and, shall we say, lack of general morality. As I said to the noble Lord, Lord Williams we shall address the point in the requirements that the Housing Corporation sets out for companies which apply to become social landlords. However, the matter needs to be set out in detail and I shall send the noble Baroness a copy of what I write to the noble Lord, Lord Williams.
§ Lord Swinfen
The Housing Corporation's rules for management of social property will probably prevent a Rachman-like situation. However, like the noble Lord, Lord Williams, what concerns me is that social landlords would be at the low-value end of the market because such organisations would be non-profit-making organisations operating at low rents. It could well be that a carnivore company would come along, intent on buying up a company, changing the way in which it operates, increasing the rents considerably and possibly selling off part of the land bank that it was waiting to develop. There could be extremely attractive morsels to carnivore companies.
The Housing Corporation may well set limits on how a social landlord may dispose of its own assets and what it does with the proceeds of the disposals, but we ought to ensure that such companies are not available to be swallowed up by carnivores, with the whole tenet of that social landlord being changed.
§ Lord Beaumont of Whitley
I wish to pick up the point made by the noble Lord, Lord Williams, with which I feel that the Minister did not deal properly. Concerning the state in which the Bill reaches your Lordships' House, is the suggestion being made that, because your Lordships' House is a noble and competent organisation, there is no duty on the Government to produce Bills in the right state when they come here? This House is a good revising Chamber, but surely it should not have to revise often or very much. It is the Government's duty to produce Bills in the right state. I hope that the Minister will not at any future time produce as an excuse the suggestion that it gives us an opportunity to do our duty. It is rather like the theological suggestion that there should be more and more sin in order that grace should abound. It is faulty and I hope that the Minister will give it up.
Dealing with the last suggestion first, it is plainly ridiculous. If civil servants were perfect, we would not need Ministers; if Ministers were perfect, we would not need another place; and if all three together were perfect, we would not need this place. It is clear that we need this place and I glory in that fact.
§ Lord Williams of Elvel
Perhaps I may end the debate on a positive note. I offer a suggestion to the Government. It seems to me that the only way in which the Government can or we can protect local housing companies is for the Housing Corporation to have what is known as a "golden share" in each local housing company. That is a well tried and well established mechanism for ensuring that carnivores, as the noble Lord, Lord Swinfen, said, cannot take over companies and realise a great deal of profit. I recommend the golden share solution to the Government.
I clearly recognise that the House will wish to consider and discuss this matter in detail. I am committed to providing the House with the information which it will need in order to do so at Report.
Clause 1, as amended, agreed to.
§ Clause 2 [Eligibility for registration]:
Baroness Hamwee moved Amendment No. 7:
Page 2, line 34, at end insert—
("(g) engaging in other activities for the promotion of the social and economic well-being of residents, provided that these shall be incidental to its purposes under subsection (2).").
§ The noble Baroness said: This amendment stands in my name and that of the noble Lord, Lord Williams. Clause 2 provides for what I may call the main objects of the registered social landlords and permissible additional objects and purposes. I seek to place on the face of the Bill, through this amendment, a permissible additional purpose. I readily concede that subsection (7) allows the Secretary of State to add to the list by way of an order. However, the objectives contained in the amendment are important enough to be on the face of the Bill.
The amendment's purpose is to extend the criteria to include wider urban regeneration, to ensure that the potential of a local housing company can be maximised. I appreciate that the terminology,
the promotion of the social and economic well-being of residents",
is wide. However, it is intentionally wide. Members of the Committee have frequently discussed the connections between housing, health, education, employment and so on. Many noble Lords have considerable expertise on the issues raised by care in the community. It is perhaps one of the faults of our administrative system that it is not always easy to cross disciplines. I hope that in the overarching view that the Committee is able to take of legislation, it is appropriate to suggest that an overarching provision should be included at this point.
§ Care in the community raises matters not just of housing in the sense of a roof over the head of the tenant but of the way in which that person's overall care is organised to enable him or her to live as fulfilled and 1379 independent a life as possible. That is wider than the simple provision of accommodation in its narrowest sense.
§ The matter was raised in another place and at that time the Minister said that, although he was willing to consider the point, he thought it was rather loose and wide. I am grateful to the Government for agreeing to consider it. I had hoped that since the stages of the Bill through another place, there would have been an opportunity to give further consideration to the issues raised. I think it important enough for the point to be on the face of the Bill. If that is not possible, then I should be interested in hearing the Minister's assurances about the issues. I beg to move.
§ Lord Williams of Elvel
I support the noble Baroness, Lady Hamwee, in proposing this amendment, which is important. It was discussed at some length in another place. It has the purpose of widening the role of local housing companies, particularly in urban regeneration. It also has the effect of allowing local housing companies to act for the benefit and social well-being of their tenants outside the main purposes for which they were set up by a sponsor. Other objectives might be to encourage local employment, improve health and all sorts of other things which in our view local housing companies should do.
The Minister in another place thought that such an amendment was slightly woolly and should not be on the face of the Bill. My view is that it should be. It would determine what local housing companies are meant to do. It goes beyond the rather narrow definitions that the Government had in mind. For that reason, the Government ought to pay very great attention to the remarks of the noble Baroness, and I certainly support her.
§ Lord Monkswell
One of the matters that we need to appreciate is the effect of size and scale. To take the Committee back to the 1930s, when the estate of Wythenshawe—which is rather like a new town—was being built on the outskirts of Manchester, it was built by the city council on land that it had bought. It included not only housing, which was the main purpose of the estate—namely, to rehouse people who lived in slums in the inner-city—but also factories, schools, hospitals and even churches and public-houses. They were either wholly owned by the local authority or let to the organisations, with ownership of the land and property being retained by the local authority. It was a very large development to house some 50,000 or 60,000 souls.
I think we all appreciate that in a development of that size there is a need to include schools, hospitals, factories, shops and leisure and religious facilities. While we may not envisage the building of a new town for 50,000 or 60,000 people happening very often in modern Britain, looking at the other end of the scale we see that if the local housing company is building one or two houses, there is very little requirement for it to consider any of the other social and economic amenities that may be required. As the operation becomes larger, the scale of the activities becomes more enveloping; the number of people involved and the geographical area 1380 become larger. There will then be a need for housing associations to take on board the social and economic needs of the people that they will house. If they are not to be involved in that directive themselves, they need to have some regard for it in the developments they propose. It is very important that we include a measure such as this. I strongly support the amendment.
§ 4.45 p.m.
Registered housing associations have traditionally had a range of additional permissible purposes beyond the specific provision of housing for rent. These allow them to use their expertise more widely for the benefit of tenants. The Bill contains a list of such purposes or objects.
We recognise that there is scope to go beyond the present provisions, but the limitations placed on these activities are an important part of regulation. The primary purpose of registered social landlords is to provide housing for rent. We do not want registered landlords undertaking activities which extend beyond the expertise and competence of the management committee. This could threaten the commercial viability of a landlord and put at risk tenants and public funding.
We have a lot of sympathy with the ideas behind the amendment and behind the remarks of the noble Lord, Lord Monkswell. It is obviously clearly important that we build not just houses, but communities, and that they should have in them all that is necessary to make for a full life for the people who live there. However, the experience and finance available to an individual housing association are limited.
Therefore, the noble Lord will see the provision in Clause 2(4)(a) that housing associations or social landlords may work,either exclusively or together with other persons".That is specifically to envisage the possibility that where what is required is more than plain and simple housing, and where, for instance, cinemas and shopping centres are required, the development should be done in conjunction with people who take the risk of those commercial activities and who are expert in providing and managing them. I believe Clause 2(4)(a) also covers the concerns expressed by the noble Baroness, Lady Hamwee, about care in the community.
Clause 2 covers the list of objects and purposes as enshrined in the Housing Associations Act 1985. It allows additional purposes to be added if new activities are identified that would be appropriate. A commitment has already been given during earlier stages of the Bill to consider possible additional purposes for inclusion in the order that the Government propose to bring forward at commencement to cover the additional purposes that have been added since 1985 by secondary legislation—principally, that is a particular long and complicated scheme for Wales.
Such additional purposes might, for instance, include the provision of community alarm systems, not just for the tenants of housing associations, but more widely. We can see merit in activities like these. However, the wording of this amendment is very wide and could 1381 encompass a range of activities which, while providing benefits for tenants, could nevertheless expose landlords to considerable financial risk.
In earlier considerations of the Bill in another place an offer was made to consider any clearly defined proposals for inclusion in the order that will need to be brought forward at commencement. We feel that that is the way to proceed. We would be happy to consider whether a more clearly defined proposal could be made which we could take forward. If the noble Baroness is able to devise such a proposal, we shall be happy to discuss it with her or on Report. For now, I should be grateful if she would withdraw the amendment.
§ Lord Williams of Elvel
I am grateful to the Minister for indicating that there might be some sympathy within the Government for the noble Baroness's amendment. Is it really right that the noble Lord expresses sympathy and then asks the noble Baroness to produce an amendment with which the Government have sympathy? Would it not be proper for the Government to take the matter away and say, "Yes, we understand what the noble Baroness and the Committee say and we will bring back an amendment on Report"? Is that not the correct procedure?
If this were an initiative of the Government on which we had ideas that we wished to bring forward, then we would. From previous experience we are aware that the noble Baroness, Lady Hamwee, is quite capable of having ideas that appeal to us. We hope that that might be the case this time.
§ Baroness Hamwee
We know that the Government are bereft of ideas but I had not expected to hear it in quite such blunt terms. I wish to pursue one or two matters further. The Minister said that the activities which will be allowed under this additional object might expose a landlord to risk. First, this is a subsidiary activity. I am not suggesting that it should be the main activity. Does the Minister accept that house building is a very risky business indeed and that it is perhaps a little paternalistic to be reacting against, if I may use the shorthand, the social responsibilities encompassed in this quite wide-ranging but nevertheless subsidiary matter.
Secondly, perhaps I may ask about his comment on care in the community activities coming within subsection (4)(a). He mentioned an alarm system—a community alarm system. Alarm systems are very valuable. I quite take his point that it is desirable to use the technology that is installed to make such systems available perhaps beyond just a small group of houses and flats. The example was used by his honourable friend in another place. That example surely fits within subsection (4)(a), so I fail to understand why it is used as an example of what might be dealt with specifically under something like my new clause. Can he confirm that subsection (4) is about permissible additional purposes and objects and not mandatory ones? His opening comments seemed to suggest that we were seeking to impose this on landlords. I assure the Committee that that is not the case.
1382 Finally, I think in opening—I may have misheard the noble Lord—he referred to regulations which the Secretary of State might make under Clause 2(7) containing a condition or limiting criteria. If I understood that correctly, it worries me somewhat because it suggests that the regulation-making power might be rather wider than the words on the face of the Bill suggest. Can the Minister respond to any or all of those points?
§ Lord Monkswell
Can the Minister advise us a little further? He suggested that subsection (4)(a) would allow the activity that might be beneficial. Yes, it would allow some activities, but let us think of the most significant problems faced by landlords generally and social landlords probably more particularly. One problem is what one might describe as bad neighbours—neighbour nuisance problems—and the other is marital breakdown. Surely it would be in the interests of the housing association to take steps to prevent, mitigate or reduce the incidence of bad neighbourliness and also the incidence of marital breakdown. That is not normally recognised as the activity of a landlord. However, the amendment would enable activities such as those to be carried out by the social landlord which would contribute significantly to the beneficial organisation and operation of his activities. However, as I read the Bill, a social landlord would be prohibited at the moment from undertaking such activities.
The noble Lord, Lord Monkswell, illustrates the problems with the amendment very neatly in terms of the ways one could extend the housing association's or social landlord's activities. The landlord might think that in a large development it was appropriate for him to run a betting shop and take all the risks himself. That might well be something that would fit in the terms of this amendment as it is.
Housing is a risky business but it is a business which most housing associations—indeed, all good housing associations and social landlords—understand and specialise in. It is important that in terms of the management of any organisation the management time and effort, which with a social landlord is likely because of the largely amateur nature of its board to be restricted, is directed at the main purposes of that operation and does not deviate to all kinds of subsidiary activities which then let it take its eye off the ball and which may in themselves go wrong and cause a lot of problems and whose existence may cause problems to occur in the main activity which would otherwise have been dealt with. So we think it is important to restrict what a social landlord can do.
However, I can give the noble Baroness the comfort that she asked for. These are permissive powers. We are not looking for housing associations and social landlords to take these on if they do not want to. The powers that may be added under subsection (7) are also permissive. They can extend the powers. They cannot impose restrictions on them. An alarm system just for the housing association's residents would come under Clause 2(4)(a), but something which extended to other premises would not. It is the extension to other premises which would come in the order under subsection (7).
§ Lord Williams of Elvel
Before the noble Baroness decides what to do with her amendment, perhaps I may ask the noble Lord to clarify exactly where we are in Committee. As I understand it, the noble Baroness has moved an amendment. We have debated it. The Minister has said that the Government have some sympathy with the aims of the noble Baroness. He then went on to say, as I understood him—I am open to correction—that if the noble Baroness produces on Report something similar the Government will consider it sympathetically. Am I right so far?
I do not think I used the word "similar". What I was trying to get across was that if the noble Baroness came forward with a more clearly defined proposal, one which did not carry the dangers of extension into all kinds of undesirable activities—we are currently proposing that such extensions should be made through orders under subsection (7)—we would look at it with an open mind. We are all headed in the same direction. It is merely a question of how we achieve it.
§ Lord Williams of Elvel
As I understand the words "clearly defined", they mean properly drafted by parliamentary counsel. Would the Government therefore be prepared to lend the noble Baroness the services of parliamentary counsel in order to devise a more clearly defined amendment at which the Government might look sympathetically?
If the noble Baroness cares to come to talk to me about it, I shall be very happy to discuss it with her as a preliminary to doing that. However, I do not think the noble Lord should confuse the concepts of parliamentary draftsmanship with "clearly defined". The two are not always the same.
§ Lord Williams of Elvel
I certainly do not confuse parliamentary draftsmanship with a clear definition. As I understand it, the Government are not prepared to draft their own amendment in response to the noble Baroness. Therefore, it seems only right that if the noble Baroness is to be invited to produce something on Report the Government should give her some assistance.
§ Baroness Hamwee
I was going to ask the Minister if I might discuss this matter with him in any event for a reason which has occurred to me as we have been debating the matter. I am becoming less clear about the relationship of the permissible additional objects and provisions such as one sees in the memorandum of association of a company which provide a range of ancillary powers and objects which support the main object. Quite frequently they refer to dealing with ancillary matters—an activity which supports the company's main object.
For instance, to take the example of an alarm system a little further, it may well be that it is not economically practicable to install an alarm system for a limited number of properties, but it would become very practicable to install it for a larger number of properties. It is the relationship of the powers under the landlord's constitution, however constitutionally it is organised, and the permissible purposes and objects under this clause, where I would welcome some clarification. 1384 Perhaps, having bowled that further matter at the Minister, he might want to say another word now—or perhaps not. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ 5 p.m.
Lord Lucas moved Amendment No. 8:
Page 2, line 44, leave out ("by the landlord to the tenants") and insert ("of the houses by the body").
§ The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 9, 10, 12, 13 and 14. These amendments to Clause 2 have the purpose of clarifying the provisions. Amendment No. 8 amends subsection (5)(c) of the clause to enable the registered social landlord to be able to repair and improve houses sold or leased, possibly on a shared ownership basis, to prospective tenants as well as to existing tenants.
§ Amendment No. 9 reinstates the definition of "disposed on shared ownership terms" from the Housing Associations Act 1985. Amendment No. 10 extends the definition of "resident" to include a person occupying a house managed by the registered social landlord. The amendment reinstates the definition of "resident" from Section 4 of the Housing Associations Act 1985.
Amendment No. 12 seeks to provide that, where an order is made to add further additional permissible purposes, it may contain such provision as the Secretary of State thinks fit regarding,
the priority of mortgages entered into in pursuance of any additional purposes, objects or powers".
Amendment No. 13 is a minor drafting improvement. Amendment No. 14 removes a duplication with Clause 51. I beg to move.
§ Lord Williams of Elvel
I am grateful to the noble Lord for proposing the amendments. I have a certain amount of difficulty with Amendment No. 9, which mentions:a premium calculated by reference to a percentage of the value of the house or of the cost of providing it".In paragraph (b) reference is again made to the "value of the house".
Can the noble Lord tell me how the value of the house is to be calculated and how the cost of providing it is, in turn, to be calculated? Unless one knows that with absolute certainty, it is rather difficult to determine the premium calculated by reference to a percentage. While I am on that point, will the noble Lord be good enough to say what kind of percentage of the putative value of the house or the putative cost of providing it is appropriate?
Yes. In order to keep my mind clear, perhaps that is best. As I understand the matter, this is a definition for the purposes of the rest of the Bill of what is meant by "disposed on shared ownership terms". It is a definition that has been in wide use since the 1985 Act and is, I believe, well understood. But if there is any difficulty or confusion with it, I shall certainly write 1385 to the noble Lord. I understand that the procedure is that the house is valued—we are not laying down in the Bill how it should be valued, merely defining that there shall be such a process—and then the amount that the person indulging in share ownership pays obtains a share of the property with the rest on lease. The amount that the person buys is commonly 40 per cent. but will rise over time, perhaps to full ownership, if the circumstances of the tenant improve. It depends on the particular terms envisaged by the social landlord.
I am not sure that there is any fixed arrangement on how the house should be valued or any fixed arrangement on what percentage of the house should be in the ownership of the social landlord and what percentage in the ownership of the tenant. I am not sure that we intend that there should be any fixation in those matters.
§ Lord Williams of Elvel
The noble Lord will surely be aware that in raising the question of the value of the house, we start again on the enormous hornets' nest which was the subject of endless debate regarding council tax: who values the house at what, and whether it is simply some estate agent who goes round and says, "That is valued at this, and that is valued at that." We have to go beyond that and ask how and who—how the house will be valued and who will value it for these purposes. It is more than a technical point. With the greatest respect, the 1985 Act had nothing to do with that matter. That Act appeared before the council tax was introduced.
§ Baroness Hamwee
I hope that the Minister can come back with something which will not have too much scope for argument in the future. The noble Lord, Lord Williams, in his capacity as a Member of the revising Chamber, has done the Chamber and, if I may say so, the Government, a service by asking those questions.
My points concern Amendments Nos. 12 and 14. With regard to Amendment No. 14, the reference to transitional provisions seems to have been lost. It is not contained in the provision that this clause replicates. It may be that the Minister will say that there is no need for transitional provisions. Perhaps he could clarify that point.
As I read Amendment No. 12, it allows the Secretary of State to impose a new order of priority of mortgages. That seems a very strange and rather worrying concept. Mortgages take priority in the world generally according to the order in which they are granted, subject to agreement between the various parties concerned. Frankly, I find it a little worrying to allow the Secretary of State to alter that arrangement.
I turn to the noble Baroness's second point. This is already a matter of fact in the existing order, which, as I said earlier, deals with a particular Welsh scheme under the 1985 Act. The concept of loans provided for different purposes having different levels of priority in a repayment and their rank vis-a-vis other repayments to different people is one which has been created for that purpose. We need, therefore, to recreate it to continue that scheme, and it may come into play in 1386 the future. I shall be happy to ask my colleagues in the Welsh Office to write to the noble Baroness to explain the necessity for this scheme. But since it is in place, and they wish it to continue, we are now merely wishing to ensure that they have the necessary powers to provide for its continuation.
So far as the transitional provisions are concerned, I believe that Clause 51(3) will provide the comfort that the noble Baroness requires.
§ Baroness Hamwee
I shall be grateful for an explanation of the point raised in Amendment No. 12. But I shall also be glad to have whatever assurances the Minister can give that the power will not be used any more widely than it is used at present. It appears to give quite considerable scope. I look forward to receiving letters on the subject.
I shall certainly do as I said. I shall also consider the points raised by the noble Lord, Lord Williams. My understanding of the purpose of this particular definition is merely to explain what that term means when we define the powers that a social landlord may have in its constitution. Therefore, I am not becoming involved in the mechanism of how that happens. I understand that in practice the landlord must employ a recognised valuer in order to arrive at the price, and the share is a matter of agreement between the landlord and the tenant. It is commonly 30 per cent. or 40 per cent., but that is very much a matter of agreement and flexibility.
I do not feel that in a definition for the purpose of this particular clause we need put our hand into the hornets' nest. But I shall look at the question and hope to make sure that we do not have to do so.
§ Lord Williams of Elvel
I am grateful to the noble Lord for that explanation. The amendment moved by the Government states:the value of the house or of the cost of providing it".We are uncertain whether that is the value of the house on the market, whatever it might be, valued by somebody or the cost of providing it. The two things may be quite different and may be totally removed. Who is to choose whether it is the value of the house or the cost of providing it? Do the Government intend that it should all be done by negotiation?
As I understand it, we are merely trying to provide a wide definition of what shared ownership means and what is involved rather than trying to say that any particular type of scheme would be advisable, acceptable or permissible. I do not believe that they are questions which enter into the definition, which is just for the purpose of making sure that the social landlord has the power to enter into this kind of scheme. Then one can either say that a particular house is worth £50,000 and therefore a 40 per cent. share is £20,000; or it may be said that the house cost £50,000 to build and, therefore, whatever its value may be, a 40 per cent. share will cost £20,000. That is the way I read the 1387 clause; but, as I said, I do not see that the problem that the noble Lord raises, which is real enough, has an impact on this particular clause.
§ Baroness Hamwee
Can the Minister tell the Committee whether a shared ownership lease is defined elsewhere in legislation? The Minister need not necessarily tell the Committee at this moment.
The definition is taken from the Housing Associations Act 1985. As I understand it, the amendment makes sure that it reappears in this Bill exactly as it appears in the earlier Act.
§ Lord Williams of Elvel
That is precisely why, because the 1985 Act came before the council tax legislation, we might get into problems of the valuation of property and the cost of replacing it. This definition of shared ownership may well be out of date in the light of the debates which took place about the council tax and banding. I ask the Government to look at it again to see whether they can do something better.
On Question, amendment agreed to.
Lord Lucas moved Amendments Nos. 9 and 10:
Page 3, line 1, leave out ("shared ownership lease") and insert ("lease—
Page 3, line 5, after ("provided") insert ("or managed").
§ On Question, amendments agreed to.
§ 5.15 p.m.
Deputy Chairman of Committees (Lord Murton of Lindisfarne)
If Amendment No. 11 is agreed to, I am unable to call Amendments Nos. 12 to 14 inclusive owing to pre-emption.
Lord Williams of Elvel moved Amendment No. 11:
Page 3, line 8, leave out subsections (7) and (8).
§ The noble Lord said: This amendment concerns the powers of the Secretary of State to change primary legislation, which is proposed in Clause 2(7) and (8). I am a little surprised that the Delegated Powers Scrutiny Committee of your Lordships' House did not focus on this matter rather more clearly than it did. I very much hope that it will wish to consider the matter. It is a general principle that amendments to primary legislation, if the recommendations of the Delegated Powers Scrutiny Committee are followed as they have been in the past, are normally achieved by the affirmative procedure rather than the negative process.
§ The Government should try to get their legislation right when it comes before your Lordships, and there should not be amendments saying, "We may have left something out and the Secretary of State can put something in as and when circumstances require or when they develop". Subsections (7) and (8) should not be there. They were only put in by the Government 1388 because they believe that they may have left something out. I am surprised that the Delegated Powers Scrutiny Committee has not focused on this point. It is wise for this Committee at least to have a discussion on the matter. I beg to move.
These two subsections are not here because we believe that we may have left something out, but because we know that we have left something out. The subsections are put in here quite deliberately. They are here because, as we discussed the amendment of the noble Baroness, Lady Hamwee, and the power suggested in that amendment—which in many ways is desirable—we felt that it ran too wide and offered many opportunities for social landlords to become involved in things in which they should not become involved. Nonetheless, we recognise that opportunities and ideas will occur from time to time, such as extending alarm systems into properties not owned by the social landlord, but which it will be appropriate for social landlords to deal with. These matters will need tight definition. They are concepts which will develop as the market develops. We need a way of including them in legislation because we have set our face, at least for the moment, against having any general permissory power as suggested in the noble Baroness's amendment.
I have explained at length why we do not agree with the noble Baroness's amendment and why we are uncomfortable with it. But we must have some way of bringing in these further minor permissory powers. The way we have chosen to do it is by individual scrutiny of the powers by the Secretary of State. In recognising that we need to make these additions from time to time, we must have the power for the Secretary of State to approve each individual extension. That is what we have. One way or the other, we need something within the Bill which allows it not to fossilise.
§ Lord Williams of Elvel
As always, I am grateful to the noble Lord for his response. He began by saying that it is not that the Government thought that they may have left something out, but because they knew they had done so. Perhaps the noble Lord can explain what the Government know they have left out and then we can begin discussing the Bill before us in the light of the Government's knowledge of what they have left out.
Having said that, would it not be appropriate in an amendment produced by the Secretary of State affecting primary legislation, and in accordance with the normal procedures of this House, for it to be put forward through the affirmative resolution procedure rather than the negative procedure?
We believe that in this particular case the negative resolution procedure is appropriate and the Delegated Powers Scrutiny Committee agrees with us. It is open to the noble Lord to disagree with us, but we hold to our view that for this particular power the negative resolution procedure is appropriate.
§ Lord Monkswell
I rise to support my noble friend Lord Williams of Elvel on this matter. I believe that he has got it right. It is curious that we have a long clause with detailed provisions, which the Government have 1389 seen fit to place before Parliament to have written into the Bill, and therefore to give the strength of legislative imprimatur to the matter. Yet they see fit to say that if they want to change these matters which they thought were so important to be in the Bill, that change will not be very important. Therefore, the provisions will not be worthy of the higher degree of scrutiny of the affirmative procedure. The Government cannot have it both ways. The matter is either of significance, and, therefore, changing the provision is a significant act and worthy of closer parliamentary scrutiny, or it is not. It is something which is worthy of what one might describe as "Executive diktat" rather than legislative authority. If the Government want to retain the powers of subsections (7) and (8), we must have the affirmative procedure rather than the negative procedure.
All that I can say is that I do not agree with the noble Lord. I said that we know that we have left something out because while the Bill was in another place we committed ourselves to re-enacting the Housing Associations Permissible Additional Purposes (England and Wales) Order 1994, which principally concerns a scheme which is in force in Wales and which is of a detailed nature which we did not consider belonged in the substance of the Bill.
As the noble Baroness, Lady Hamwee, mentioned, we have said that we should like to consider the question of alarm systems. It is possible that we can do that along with the re-enactment of that 1994 order, together with any similar proposals which are brought forward and meet with our approval. I do not regard these as major factors; they are additions rather than alterations to what is in the Bill. The power is restricted to adding rather than changing or deleting. Given that we intend to restrict the provisions to measures such as community alarm systems, I do not think that this should cause the Committee any alarm.
§ Baroness Hamwee
It is perhaps wrong to say that I am torn on this matter. However, not only are our obligations as a revising Chamber sometimes extremely onerous, but I have much sympathy with the notion that any order from the Secretary of State should be made under the affirmative resolution procedure. After all, as our debate on my earlier amendment showed, such matters are not necessarily straightforward. It is essential that the appropriate and widest suitable powers are given to landlords. It is because I believe that it is appropriate to ensure that their powers are as wide as is reasonable and appropriate that I do not feel that I can go along entirely with the noble Lord, Lord Williams.
However, I hope that the Government will take seriously our expressions of concern about the work that still requires to be done on this clause in order to ensure that we have clear and workable provisions which have received the proper amount of parliamentary scrutiny. The noble Lord is right that it is not appropriate for the Government to say, "We know that we have not been as imaginative as we 1390 might have been, so we shall give ourselves the opportunity to be more imaginative, but shall do so more or less in private".
§ Lord Williams of Elvel
The noble Lord, Lord Lucas, said that it was up to me to agree or disagree with what the Delegated Powers Scrutiny Committee said. Indeed, I disagree with what the Scrutiny Committee said and I very much hope that that committee will take the views of these Benches into consideration.
I am perfectly content that there should be some provision which would allow the update or adjustment of these clauses. Nevertheless, it is true that under past Bills amendments to primary legislation have been made by affirmative orders, not by negative orders. I very much hope that on Report the Government will take another look at this and perhaps change the procedure. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas moved Amendments Nos. 12 to 14:
Page 3, line 9, at end insert—
("The order may (without prejudice to the inclusion of other incidental or supplementary provisions) contain such provision as the Secretary of State thinks fit with respect to the priority of mortgages entered into in pursuance of any additional purposes, objects or powers.").
Page 3, line 10, leave out ("Any such order") and insert ("An order under subsection (7)").
Page 3, leave out lines 11 and 12.
§ The noble Lord said: I spoke to these amendments with Amendment No. 8. I beg to move them en bloc.
§ On Question, amendments agreed to.
Lord Williams of Elvel moved Amendment No. 15:
Page 3, line 15, at end insert—
("(9) In relation to bodies to which local authorities have transferred properties under section 135 of the Leasehold Reform, Housing and Urban Development Act 1993, they shall not be ineligible for registration as a social landlord solely by virtue of the number of properties so transferred.").
§ The noble Lord said: The purpose of the amendment which stands in my name and that of the noble Baroness, Lady Hamwee, is to ensure that there is no arbitrary limit on the number of properties that a registered social landlord should possess or have transferred to it from a local authority. The proposed limit of 8,000 homes on transfers to any one landlord is, in our view, an arbitrary maximum. A more flexible system which avoids the creation of a monopoly landlord would be to set the limit at 8,000 homes or one-third of the local authority's housing stock, whichever is the higher. We believe that it is essential to allow local authorities to package estates to secure private finance, as well as to benefit from economies of scale and to avoid setting up several separate companies which in the present circumstances would incur substantial and unnecessary establishment costs. A number of urban local authorities have indicated that the proposed limit will inhibit 1391 transfers. Therefore, I very much hope that the Government will reconsider their position on this. I beg to move.
§ Baroness Hamwee
The amendment stands in my name also and is grouped with Amendment No. 105, which has my name and that of the noble Lord, Lord Williams, boxed and coxed rather than coxed and boxed, but it relates to a similar point. One of my concerns about the Bill and some of the Government's responses so far to the criticisms that have been made of it is its restrictive and constrained nature. It is important to allow as much flexibility as possible.
We have reached nearly 5.30 p.m. without even one sentence being said about the need for the supply of affordable housing. I appreciate that in Committee it is not appropriate to make Second Reading speeches, but I think that it is appropriate simply to say that I hope that the Government will keep in mind the fact that underlying practically every amendment is the concern of many noble Lords, of very many of those who work in the housing sector outside this place and of their customers, as well as of those who fail to be customers because of the lack of supply, that we must use the Bill to assist that supply as far as possible, not restrict it.
§ Lord Hylton
It is only in recent years that it has become possible for local authorities to transfer part or all of their housing stock to housing associations. It would be helpful if the Government could give their view of how that process has worked in practice because there were some criticisms of it when it started. The question of accountability has rightly been raised. Anything that the Government can say on how the process has worked would be helpful.
§ 5.30 p.m.
We have heard a clear explanation of what the two amendments seek to do. I do not agree that we should allow an unlimited number of properties to be transferred from a local authority registered landlord. My understanding is that the noble Lord, Lord Williams, does not believe that either. We are talking merely about a matter of degree. I shall explain why we end up where we are. Transfer brings a number of benefits to both the local authority and tenants. One of these is greater investment in the stock. But it also provides an opportunity to improve efficiency in the management of the stock, and the responsiveness of managers to the wishes of the tenants. Splitting large amounts of stock into smaller more manageable units helps this process. While there may be certain diseconomies of scale caused by splitting a stock of, say, 12,000 dwellings into three units of 4,000, there are also significant opportunities for greater efficiency and responsiveness.
Having a size limit is also important for trying to get more diversity and choice in the social rented sector. I accept that this may not always be the case in some shire districts where we have allowed all their stock to be transferred to a single new housing association. But in urban areas where an authority has a large amount of stock there are clearly opportunities to increase choice 1392 and competition between landlords. The ceiling of 5,000 is one that we want to keep. But we want to be pragmatic. There are cases where it would be appropriate for a transfer to exceed this limit. Where a larger urban authority progressively transferred its stock, an average of 5,000 properties would seem to be right: for example, where an authority with between 30,000 and 50,000 dwellings considered transferring part or all of its stock. In those circumstances it will naturally do it in a number of tranches and it is sensible to provide some flexibility to enable area or location-based transfers over the 5,000 limit. It is true, however, that in the case of many partial transfers in urban areas, which will often be estate based, the size of the transfer will be below the current limit.
We are also willing to make exceptions in rural areas where splitting the stock can occasionally be arbitrary and affect viability because of geography and the way the stock is managed. Where it is not practical to split the stock we will allow transfers over the 5,000 limit. We have said that even where an authority is working to an average of 5,000, the maximum size of any one transfer will be 8,000 dwellings. We feel that at this level there is no argument about economies of scale. Housing organisations do not need to be any bigger to be viable and provide a good level of service to their tenants.
I hope that this explanation of our policies and the flexibility that already exists make it clear to the Committee that subsection (3) of the new clause in Amendment No. 105 would be an unhelpful constraint on the Secretary of State's discretion. Amendment No. 15 and subsection (2) of the new clause in Amendment No. 105 have no material effect on their own, since at the point of registration newly established transfer landlords have no stock, the transfer taking place usually shortly thereafter. More importantly, there is no practical purpose in preventing the corporation establishing a size criterion for registration when it is the Secretary of State's policy and the exercise of his discretion which establishes whether there is to be a maximum size limit.
I turn to the comments of the noble Lord, Lord Hylton. Last year's White Paper expressed the Government's continuing support for housing transfers. Some 50 authorities have done this, all with the support of the tenants who have to vote for it. It is my understanding that the process is proving a success.
I do not have any particular expectation that the noble Lord, Lord Williams, will have been convinced by my arguments. I have a feeling that there is a basic difference of policy, perhaps with politics underlying it, but I hope that my explanation has at least given him a clearer idea of why we take this position.
§ Lord Williams of Elvel
The noble Lord is quite right. We have basic political differences on this matter. I said that a number of urban local authorities had indicated that the limit would inhibit transfers. The noble Lord has adduced no evidence to support the particular limit that has been chosen. I am sure that the Committee accept that there is here a basic political difference. The only way to resolve such a difference is to test the opinion of the Committee. I beg to move.
§ 5.34 p.m.
§ On Question, Whether the said amendment (No. 15) shall be agreed to?
§ Their Lordships divided: Contents, 53; Not-Contents, 105.1394
|Division No. 1|
|Addington, L.||Hylton, L.|
|Archer of Sandwell, L.||Jenkins of Putney, L.|
|Ashley of Stoke, L.||Kennet, L.|
|Avebury, L.||Kilbracken, L.|
|Beaumont of Whitley, L.||McNair, L.|
|Berkeley, L.||McNally, L.|
|Blackstone, B.||Mar and Kellie, E.|
|Bristol, Bp.||Monkswell, L.|
|Broadbridge, L.||Morris of Castle Morris, L.|
|Bruce of Donington, L.||Nicol, B.|
|Carter, L.||Oxford, Bp.|
|Clinton-Davis, L.||Rea, L.|
|Cocks of Hartcliffe, L.||Redesdale, L.|
|David, B||Richard, L.|
|Donaldson of Kingsbridge, L.||Sandwich, E.|
|Dormand of Easington, L.||Shaughnessy, L.|
|Dubs, L.||Simon, V.|
|Foot,L.||Simon of Glaisdale, L.|
|Freyberg, L.||Stoddart of Swindon, L.|
|Gladwin of Clee, L. [Teller]||Strabolgi, L.|
|Graham of Edmonton, L. [Teller]||Taverne, L.|
|Halsbury, E.||Taylor of Gryfe, L.|
|Hamwee, B.||Thomas of Walliswood, B.|
|Harris of Greenwich, L.||Wallace of Coslany.L.|
|Hayman, B.||White, B.|
|Hollis of Heigham, B.||Williams of Elvel,L.|
|Aberdare, L.||Feldman, L.|
|Addison, V.||Forbes, L.|
|Alexander of Tunis, E.||Gainsborough, E.|
|Allenby of Megiddo, V.||Gardner of Parkes, B.|
|Ashbourne, L.||Gisborough, L.|
|Astor of Hever, L.||Goschen, V.|
|Balfour, E.||Gowrie, E.|
|Berners, B.||Gridley, L.|
|Bethell, L.||Hamilton of Dalzell, L.|
|Birdwood, L.||Harding of Petherton, L.|
|Blaker, L.||Hayhoe, L.|
|Blatch, B.||Hemphill, L.|
|Boardman, L.||Henley, L.|
|Boyd-Carpenter, L.||HolmPatrick, L.|
|Brabazon of Tara, L.||Hooper, B.|
|Campbell of Alloway, L.||Hylton-Foster, B.|
|Campbell of Croy, L.||Ilchester, E.|
|Carnegy of Lour, B.||Inglewood, L.|
|Carnock, L.||Ironside, L.|
|Chalker of Wallasey, B.||Kinnoull, E.|
|Chelmsford, V.||Lane of Horsell, L.|
|Chesham, L. [Teller.]||Lauderdale, E.|
|Clanwilliam, E.||Lindsay, E.|
|Coleraine, L.||Liverpool, E.|
|Colwyn, L.||Long, V.|
|Courtown, E.||Lucas, L.|
|Cranborne, V. [Lord Privy Seal.]||Lyell, L.|
|Denham, L.||Mackay of Ardbrecknish, L.|
|Denton of Wakefield, B.||Mackay of clashfern, L. [Lord Chancellor.]|
|Dixon-Smith, L.||Marlesford, L.|
|Downshire, M.||Massereene and Ferrard, V.|
|Ellenborough, L.||Mersey, V.|
|Elton, L.||Miller of Hendon, B.|
|Milverton, L.||Renton, L.|
|Monk Bretton, L.||Romney, E.|
|Monteagle of Brandon, L.||Saint Albans, D.|
|Mottistone, L.||Seccombe, B.|
|Mountevans, L.||Shuttleworth, L.|
|Mountgarret, V.||Soulsby of Swaffham Prior, L.|
|Munster, E.||Strathcarron, L.|
|Murton of Lindisfame, L.||Strathclyde, L. [Teller.]|
|Nelson, E.||Strathmore and Kinghorne, E.|
|Newall, L.||Sudeley, L.|
|Norrie, L.||Swansea, L.|
|Northesk, E.||Swinfen, L.|
|Orkney, E.||Swinton, E.|
|Orr-Ewing, L.||Teviot, L.|
|Oxfuird, V.||Trumpington, B.|
|Pilkington of Oxenford, L.||Ullswater, V.|
|Rawlings, B.||Vivian, L.|
|Rees,L.||Wyatt of Weeford, L.|
|Rennell, L.||Wynford, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 5.42 p.m.
§ Clause 2, as amended, agreed to.
§ Clause 3 [Registration]:
Baroness Hamwee moved Amendment No. 16:
Page 3, line 16, leave out ("may") and insert ("shall").
§ The noble Baroness said: I shall speak also to Amendments Nos. 17 and 19 in my name. Amendment No. 18, tabled by the noble Lord, Lord Williams, is grouped with these amendments. The list of groupings attaches Amendment No. 25 to this group, but it might be more convenient to debate it with the next group of amendments to which it more appropriately belongs.
§ My amendments are probing amendments, and the questions that I shall ask, are, I hope, straightforward. Clause 3 deals with registration of social landlords and provides that the Housing Corporation may register social landlords which are eligible. My first amendment to change the word "may" to "shall" is to enable me to ask the Government what scope for discretion they feel the Housing Corporation should appropriately have.
§ My second amendment provides that a social landlord which is eligible is registered if it applies for registration; in other words, the matter is not automatic.
§ Clause 3(2) refers to an application but the first part of the clause does not seem to require it. My third amendment (Amendment No. 19) is to ask the Minister to explain the reason for what is a dual set of registrations. Clause 3(3) provides for notice of registration as a social landlord to be given to the various registers upon which the particular social landlords are registered as a result of their own constitution as a company, charity, and so on. Is that to provide the investigator with a clue—a track—as between the different registers? I ask the question having partly in mind the scope for confusion that may arise if the bodies are required to register in different places, and there are different requirements for registration for each of them. Perhaps the Minister will explain why it is necessary to make that cross reference. I beg to move.1395
§ 5.45 p.m.
§ Lord Williams of Elvel
Apart from the amendments to which the noble Baroness has spoken, there is also Amendment No. 18 in the group standing in my name. I shall be interested to hear the Government's response to the questions which she has put. The question I put—again mine is a probing amendment—is on what basis and how shall the corporation determine a fee for registration?
I understand that there is a general duty on the corporation to be reasonable, but social landlords may wish to have some indication as to what they may be charged for registration. The words "if any" imply that, as the Bill is drafted, the corporation may not wish to charge a fee. Is that the case? If it is not the case, under what circumstances might the corporation determine to charge a fee? In that case, what sort of fee and on what sort of scale will the corporation so determine? Will that be publicised in a manner which will allow those who wish to be registered to be properly cognisant of what they have to pay in order to get on the register?
I shall deal first with Amendment No. 16. The noble Baroness asks, quite reasonably, what sort of discretion are we giving to the corporation here. The answer is we are giving it a wide and unspecified discretion in order that it shall be able to refuse to register, effectively, landlords which it does not consider viable or suitable. Of course it has to exercise those powers reasonably. That is the control on it. There can be all manner of reasons why a company might not be suitable for registration.
Registration opens up a number of privileges, including the receipt of large quantities of taxpayers' money. It is right that the corporation can take action to keep companies which are in a dodgy financial position, or are in other ways deemed unsuitable, off the register. I do not believe that I can be much more specific than that in telling the noble Baroness how it will be exercised, except of course to re-emphasise that it will be exercised reasonably.
Amendment No. 17 adds the words "and which applies for registration" to that same sentence. I had, I am afraid, read that in conjunction with Amendment No. 16, and thought that the two just went together. The noble Baroness has described it separately. As she described it separately, it seemed to me to have some sense, but I should like to take it away to consider whether it should be included; otherwise, as the noble Baroness suggests, it will open the way for the Housing Corporation to register all sorts of people who did not wish to be registered. They might find that inconvenient.
Amendment No. 19 would remove the requirement for notification. That is required principally because in various parts of Schedule 1 we require the registrars not to take particular action unless permission has been received from the Housing Corporation, such as registering an amendment to the articles of association. Unless there is a mechanism for informing the registrar that those are companies or charities where those rules apply, which is what the subsection provides, the registrars could not carry out the duties we place upon them later in the Bill.
1396 Amendment No. 18 in the name of the noble Lord, Lord Williams of Elvel, deals with the introduction of a charge for registration with the corporation. The basic reason for this is to give the corporation protection which it does not need at the moment but may eventually need against frivolous applications. This is a question which the noble Lord raised on the housing grants Bill, when he proposed to purchase the mansion of my noble friend Lord Ferrers. He wished to protect local authorities against such frivolous applications.
§ Lord Williams of Elvel
I did not propose in that Bill to purchase the mansion of the noble Earl, Lord Ferrers. I was using that as a hypothetical possibility which the noble Earl indeed ruled out.
The noble Lord was indeed making a frivolous proposal, which was exactly the sort of thing he wished to protect local authorities against. I hope that we were able to convince him that local authorities had sufficient powers to enable them not to incur expense if such frivolous applications were made.
This is not the case with the Housing Corporation. It has to take applications seriously and investigate them properly. Therefore, if it were to occur that a significant number of frivolous applications were being made, this ability to charge a fee would be useful. But there are two key points to be made. Any charging proposals would have to be included in the new determination on the manner of applications. The corporation is required to consult on that determination. It could not introduce a charging system without warning and it would have to take representations into account.
Secondly, the corporation is required to follow the principles set out in government accounting. Any fee would have to be related to the costs involved. For example, it would be reasonable for it to charge a relatively nominal fee for standard applications, with additional charges for organisations with complex business plans. With those safeguards in place it is reasonable to allow the corporation to charge fees in the future if it deems such a procedure to be necessary.
§ Lord Hylton
The noble Lord the Minister has said in relation to Amendment No. 16 that he believes it to be desirable that the Housing Corporation should have a wide discretion. Let us suppose that it exercises that discretion to refuse an application; will there be any right of appeal against the decision? Also, would it not be most desirable that the criteria for non-registration should be published so that they can be known in advance?
I do not immediately have an answer to the very reasonable questions asked by the noble Lord. I shall write to him before Report stage.
§ Baroness Hamwee
At the risk of sounding a little impertinent, may I say in response to the Minister's comments that it is perhaps appropriate to wait and see what the Committee does with Clauses 4, 5 and 6, which deal with the criteria and appeals against decisions, 1397 because the points I have raised are probably better taken in context with the clauses that we end up with there. The Minister wishes to intervene.
Having received sudden inspiration, I am now able to confirm to the noble Lord, Lord Hylton, that a right of appeal is indeed contained in Clause 5 and the criteria will be published.
§ Baroness Hamwee
I was trying gently to say the same thing. I shall withdraw this amendment but, before I do so, perhaps I may say that the Minister said, quite sensibly, that the Housing Corporation needs to alert, to take one example, the registrar of companies to the fact that a company has particular conditions which will attach to it. Has it not come to a very cumbersome pass that such a straightforward matter as that, entirely ancillary to the general powers of the Housing Corporation, needs to be spelt out? That takes one-third of a page of legislation. We need then to be sure that those words are precisely right and give no scope for confusion. That also raises questions about whether other ancillary matters which are not spelt out are then within the powers of the Housing Corporation.
I believe that we sometimes need to stand back and consider rather more laterally the implications of the way in which we approach some of these matters. However, having got that off my chest, I withdraw the amendment.
Amendment, by leave, withdrawn.
§ [Amendments Nos. 16 to 19 not moved.]
§ Clause 3 agreed to.
§ Clause 4 [Removal from the register]:
§ The Deputy Chairman of Committees (Viscount Allenby of Megiddo)
Before calling Amendment No. 20, I should inform the Committee that if this amendment is agreed to, I cannot call Amendment No. 21.
Baroness Hamwee moved Amendment No. 20:
Page 3, line 39, leave out from ("shall") to end of line 40 and insert ("give the body at least 14 days notice that it intends to remove the body from the register.
( ) Where the Corporation receive a response to that notice they shall consider it and notify the body of their decision.
( ) Where the corporation decide to remove the body from the register they shall not do so until after the time for an appeal to the High Court under section 6 below (appeal against decision on removal) has expired.").
§ The noble Baroness said: I rise to speak to Amendment No. 20, grouped with Amendment No. 21 in the name of the noble Lord, Lord Williams of Elvel, and Amendment No. 22 in my name. It may be convenient if I refer here to Amendment No. 25, which is to take out a clause of the Bill that my other amendments seek to replace. I hope that this is a fairly straightforward matter, proposing an alteration of the process of removing a registered social landlord from the register. It makes it clear that the Housing Corporation is to notify the landlord of its intention, then make a decision and allow time for appeal before implementing the decision. The Housing Corporation notifies the companies registrar and other registrars only 1398 when it removes the landlord from the register. The structure under the Bill is perhaps a little unclear. Is it intended—this is the point of the amendment—that the registrar should be notified before removal, pending appeal? I beg to move.
§ Lord Williams of Elvel
I would like to speak to Amendment No. 21 standing in my name. It seems to me that 14 days, which would be, I imagine, calendar days rather than working days, is rather short notice when a social landlord is to be removed from the register. There may be holidays, there may be bank holidays, there may be all sorts of intervening matters. This is purely a probing amendment, and I would question whether 14 days is sufficient notice to allow proper consideration by the social landlord of what is being done.
Presumably, the social landlord would be in a position, having been given the notice, to correct the deficiencies which have led to the notice in the first place. That is what I understand, and I hope the noble Lord will correct me if I am wrong. If that is the case, I should have thought that 14 days is not long enough, having received the notice, for the social landlord to act in the manner in which it should act in order to remain on the register. It is really to try to help social landlords that I suggest 14 days might be insufficient.
§ The Earl of Kinnoull
I have not perhaps fully understood the matter further on in the Bill, and I wonder whether my noble friend could say what the financial consequences would be if a social landlord were to be removed from the register.
§ 6 p.m.
Clause 4 of the Bill establishes the conditions to be satisfied before a social landlord can be removed from the register and the procedures that the corporation has to follow. It may be worthwhile to rehearse what they are. They are that the landlord is a body no longer eligible for such registration or has ceased to exist or does not operate.
Amendment No. 20 would require the corporation to notify a landlord of its intention to remove it from the register. Should it make representations to the corporation, it would, if it decided to proceed, be required to wait until completion of the period for an appeal to the High Court before effecting the removal.
In Amendment No. 21 the noble Lord, Lord Williams, proposes that the corporation be required to give at least 28 rather than 14 days' notice to a body before removing it from the register. The changes proposed here are unnecessary. The corporation can only remove a body from the register where it is no longer eligible, or has ceased to exist or does not operate. The corporation is required to give at least 14 days' notice, and is able to use its expertise and judgment in these matters to apply a period of notice in excess of 14 days where it is sensible to do so. Any active social landlord who is to be de-registered, will have had plenty of warning of what is afoot. This will not come as a surprise and he will be ready to appeal if he feels that is justified. The corporation must be able to take decisive action.
1399 The noble Baroness, Lady Hamwee, has further proposed that before taking a decision to remove a body from the register, the corporation should consult with a relevant local authority in whose area the landlord has assets. In practice the corporation will have consulted long before reaching such decisions. It would want to alert a local authority which has plans to work with a questionable landlord before de-registration became an issue.
I believe these amendments to be unnecessary and invite the noble Baroness to withdraw Amendment No. 20.
§ [Amendments Nos. 21 and 22 not moved.]
Lord Williams of Elvel moved Amendment No. 23:
Page 4, line 6, after ("body") insert ("owns assets or").
§ The noble Lord said: I am rather concerned about the word "operates" as it appears in the Bill as drafted. Social landlords of varying descriptions "operate" in the sense of "manage" and "operate" in the sense of "owning assets". The two do not necessarily go together. I should have thought that an amendment along the lines which I propose, which would clarify exactly which local authorities are to be consulted before a social landlord should be removed from the register, is appropriate because a social landlord may own assets in a local authority area and not manage them. Conversely, a social landlord may operate assets in a local authority area but not own them.
§ Therefore, the Bill will be drafted properly if it encompassed both owning assets and operating. They are two quite different functions and I believe that the Bill would be better drafted if my amendment were accepted. I beg to move.
I am informed that "operating" subsumes "owning" assets. If a social landlord owns assets in an area, then he is operating in that area. However, I appreciate the noble Lord's concern. I shall check this matter again with lawyers and come back on Report if there is any need to remove doubt.
§ Lord Williams of Elvel
I am grateful to the noble Lord. On the face of it, it seems a matter of plain English. However, the noble Lord says that "operates" may mean something else and I understand that lawyers sometimes think differently from the rest of us.
I am grateful to the Minister for saying that he will look again at this matter to make sure that although we all understand the intention in this regard, it is properly expressed in the Bill. Even if the noble Lord decides, on advice, that the expression in the Bill covers that at which I am aiming, I should still wish to have confirmation from him in the form of a statement clearly on the record that that is the case so that if ever there is a dispute about this matter, the courts can refer to a ministerial statement saying that "operates" means "owning assets". However, the noble Lord has said that 1400 he will seek advice on that matter and we shall see what happens at the next stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Clause 4 agreed to.
§ Clause 5 agreed to.
Lord Williams of Elvel moved Amendment No. 24:
Before Clause 6, insert the following new clause—
DELEGATION OF CORPORATION FUNCTIONS
(". The Corporation shall have the power to delegate any part of its monitoring functions under this Chapter in respect of a registered social landlord to a relevant local authority after full consultation with them.").
§ The noble Lord said: The purpose of this amendment is quite simple. It is to enable the corporation to delegate any part of its monitoring functions, under the chapter which we are discussing, in respect of a registered social landlord to a relevant local authority, after consultation. By "relevant local authority", I mean an authority which is concerned in the area in which the social landlord operates or owns assets or, if the two are the same, simply operates.
§ The purpose of the amendment is to allow local authorities to take on regulatory responsibilities, particularly for local housing companies in which local authorities may well be shareholders. We must remember that that is a distinct possibility. In my view, the Government should allow the delegation of the corporation's functions to such local authorities in order that they may be in a position to be at least involved and control the companies within their relevant area which are part of their own business as a local authority in providing housing.
§ I understand that this was an amendment which was tabled in another place but was not selected for debate. Therefore, it is important for this Chamber to debate in Committee amendments which were not selected for debate in another place.
§ This runs along the lines which the noble Baroness, Lady Hamwee, and I have been working along throughout our debates in this Session. We have been trying to get local authorities more involved and more responsible and we have been trying to give more delegated powers to local authorities rather than having everything centralised. At the moment, the corporation seems to be centralised, whether it is for England or Wales. In our view, it seems to be a good idea that some of these activities, particularly where they concern local housing companies, should be delegated to the relevant local authority. I beg to move.
§ Lord Hylton
I am very much in favour of increasing, where possible, the powers of local authorities. However, if a local authority happens to be a shareholder in the registered company, it occurs to me that a conflict of interest may arise. Therefore, in those cases it may not be desirable to achieve such delegation.
We have considered the ideas put forward in this amendment but we remain of the view 1401 that the monitoring functions of the Housing Corporation belong with the corporation and that that responsibility should not be dissipated.
I agree with the noble Lord, Lord Williams of Elvel, that registered social landlords must work with local authorities to meet local housing needs.
Local authorities need to be reassured that the registered social landlords operating within their boundaries are providing good and effective services. They have an interest in all registered social landlords assisting them to meet their housing needs, regardless of size. I recognise that they will take a closer interest in a landlord that has taken over stock and tenants from the local authority; be it few houses by a small local housing association or a large-scale transfer to a local housing company established for the purpose.
The statutory responsibility for regulating registered social landlords rests with the corporation. It is accountable to Parliament to whom it must report, through the Secretary of State, annually. It is also subject to the oversight of the various committees established by the other place.
The corporation has a duty to ensure that the public funding invested in registered social landlords is protected. It also has a duty to ensure that the interests of tenants are protected and acceptable service levels provided. To enable it to fulfil its statutory function the corporation has been given a wide range of powers. These enable it to act quickly and effectively to redress any identified failings.
Only the corporation can exercise its functions. It can enlist the support and assistance of other bodies and organisations to help it to collect and interpret relevant information. Where it needs to buy in specialist expertise, it will approach private sector bodies or use existing public bodies; for example, the proposed involvement of the Audit Commission which is being provided for within the Bill. It can seek assistance from a local authority, and we have provided in the Bill, in Clause 32, for the exchange of information in support of any of the corporation's functions.
Registered social landlords operate across the whole of England and Wales. Some are small, locally-based organisations; others are very large landlords with properties and tenants in many local authority areas. The corporation, when exercising its regulatory function, must treat all registered social landlords equally. It must act consistently. Should it fail to do so, it would be open to judicial review.
If regulation is to be imposed consistently, the corporation must be in control of all decisions. Delegation of its monitoring for any individual registered social landlord would open up the possibility of a variation in standards. A local authority will have its own views based on local circumstances; it will not be able to judge performance across the whole sector.
The noble Lord, Lord Williams, suggested that the provision for consultation would enable the corporation to offer the relevant guidance to a local authority. It would, though, still allow a local authority some freedom and so leave open the possibility for varying standards being set.
1402 There is nothing to prevent the corporation keeping in contact with local authorities; indeed, that is to be encouraged. If there is to be consistency in the regulatory function, we consider that the decision-taking needs to rest with a single body. For that reason, we would not go along with the thought behind the amendment that there is scope for delegating some of that particular function of the corporation.
§ Lord Williams of Elvel
Of course, under the Bill the regulatory function of social landlords will not rest with a single body. It will rest with the Housing Corporation which is the regulator for England and with Housing for Wales which is the regulator for Wales. They are two different bodies. They may work to the same principles, but my general experience in how things apply in practice in Wales versus England means that there may be differences in the application of those general rules between both bodies. Therefore, having split the regulatory function in two—and I do not want to talk about Scotland at this stage, because it is not referred to in the Bill—and, presumably, having another regulatory power for Scotland and, indeed, one for Northern Ireland, it is no case to say that there is one regulator for all registered social landlords in the United Kingdom.
Having decided that that is not the Government's case, I have a suggestion to make for what, I agree, is a relatively small number of registered social landlords and, perhaps, for the small local housing associations of which there are many. Why not take advantage of the powers and knowledge of local authorities, subject to agreed standards which would have to be agreed between, for example, Housing for Wales and the Powys district council, or between the Housing Corporation and an English local council? Why not disaggregate the arrangement even further? Once you split it into two, three or four—as the case may be in the United Kingdom—why not introduce an effective regulatory power for the smaller operations using the local knowledge of the authorities whose properties many of the social landlords will take over? I am not entirely convinced by the Minister's argument. Perhaps he would like to respond to that point because it is particularly relevant to Wales.
§ 6.15 p.m.
§ Baroness Hamwee
Before the Minister responds, I should like to express my strong support for the amendment for the many reasons outlined by the noble Lord, Lord Williams of Elvel. Perhaps the Minister can share with Members of the Committee the suggestions that the Government may make to the Housing Corporation as to how it should work with local authorities. It is important that such arrangements work smoothly. I understand the point made about delegation, but I am not clear how far the noble Lord thinks it would be a good thing for the Housing Corporation to take seriously the recommendations that are made. If it does 1403 not delegate, it could at any rate use the expertise of local authorities as much as possible without actually going as far as delegating.
§ Lord Berkeley
I rise to express my support for the amendment moved by my noble friend Lord Williams. For many years I have heard the principle espoused by this Government that subsidiarity is a good thing. It is particularly good when it relates to Brussels and Westminster. But, suddenly—as, indeed, we have just found in the Minister's response—it becomes the worst thing ever when it goes below Westminster, so to speak, to local authorities. Surely they have the local knowledge to deal with local matters.
Of course there must be common standards across the country, but they must take into account local variations and local knowledge. I detect a slight paranoia here about giving local authorities any involvement in what I see as being a pretty vital function. Again, subsidiarity bites the dust because no one seems to be prepared to let go. Surely it is possible within the overall control of the corporation to delegate or subcontract—or whatever the right word may be—work to local authorities in the areas with which they are familiar and in which they were elected to operate.
I appreciate the remarks made by the noble Lord, Lord Williams, that there are two housing corporations, both being separate, individually, empowered statutory bodies. To overcome the objections that I raised in my reply to the amendment, one would have to consider having an individual statutory body for each local authority. But, in that case, one would not have a satisfactory body to deal with the many housing associations which are spread widely between local authority boundaries.
I believe that Members of the Committee are trying to address the question of whether there is some mechanism for looking after the small local housing association or similar body which could reasonably be delegated to local authorities, where such authorities could be involved to the benefit of everyone concerned. Given the objections that I outlined earlier, I believe that that is likely to be more of a working arrangement than a statutory transfer of responsibility.
However, I shall certainly consider enlarging upon my description on how local authorities might work together with the Housing Corporation to deal with those small local operations. If the noble Baroness will allow me to do so, I should like to write to her on the matter before the Report stage.
§ Lord Williams of Elvel
Perhaps as this is also my amendment the noble Lord will write to me too before Report stage.
§ Lord Williams of Elvel
I do not insist. I am grateful to the noble Lord for his comments. However, I think there is a serious problem here and that the noble Lord now sees the point. I hope I may yet again mention the case of Wales. I have no particular experience of the 1404 Housing Corporation in England, but Housing for Wales needs the support of local authorities in monitoring the activities of local housing companies particularly. There are, of course, housing associations which spread across local authority boundaries, and indeed the Housing Corporation and Housing for Wales will have that authority. But it is the smaller bodies—particularly the local housing companies, if we are going in for that—where the local authority could easily do what Housing for Wales is perhaps not able to do at the moment. We do not want a big bureaucracy in Housing for Wales, do we? I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Clause 6 [Appeal against decision on removal]:
§ [Amendment No. 25 not moved.]
§ Clause 6 agreed to.
Baroness Hamwee moved Amendment No. 26:
Before Clause 7, insert the following new clause—
INDUSTRIAL AND PROVIDENT SOCIETIES: REGISTRATION
(".—(1) In this section an exempt society is a society—
(2) In respect of the exercise by an exempt society of its functions as a social landlord—
§ The noble Baroness said: I apologise that the drafting which has been used to encompass the matter of concern is inevitably complicated. To say that it is opaque would probably not be putting it too strongly. I hope that I shall be able to make clear the point that underlies it. Increasingly over the past 20 years or so, it has been seen as right and appropriate that tenants of a housing association should be involved in the association as, if you like, its consumers.
§ Provision, for instance, has been made for direct election by tenants—as well as tenant shareholders elected as shareholders—to management committees. In one instance of which I know that was done on the basis that the tenants should not be in a majority. Rules such as that have received the consent of the Housing Corporation and have been registered by the Registrar of Industrial and Provident Societies. As I say, many associations are taking steps such as this to alter their rules. I have been advised of one association which, having done this with Housing Corporation consent, has found that the registrar recently appears to have altered his position on tenant involvement in a housing association. That registrar is insisting that, whenever an 1405 association seeks a change in its rules, its rules limit the shareholding by tenants; limit membership of an association's committee by tenants—in both cases to one-quarter—and make provision as regards quorums.
§ By and large, housing associations incorporated under the Industrial and Provident Societies Act have rules which are based on model rules drawn up by the National Federation of Housing Associations. This conflict, as it appears, between the registrar's views, those of the NFHA and those of associations which are seeking rule changes and which are pursuing progressive programmes in the involvement of their tenants is causing no little confusion and difficulty.
§ My amendment seeks to ensure that the registrar's concerns do not have such a wide effect as to inhibit a social landlord being registered as a social landlord and fulfilling the necessary conditions. I appreciate that, on the face of it, this is perhaps an obscure point, but it is right to raise it within the context of this Bill. I shall be grateful for any help that the Minister can give now or following today's debate. I beg to move.
I do not know whether the noble Baroness believes in reincarnation, but if so perhaps in another life she was a parliamentary draftsman. Certainly, as she said, this is a clause of great opacity, but I think we know what she is after. We recognise that tenants have an important part to play in the management of their homes. This is something the Government have supported and taken forward for many years now. It is right that tenants should not only be able to make their views known; they should also be able to ensure these views are reflected in the management decisions affecting their properties. Registered social landlords have generally welcomed these initiatives. Many have welcomed tenants onto their management committees where they have an opportunity positively to influence management decisions.
The noble and learned Lord, Lord Nolan, in his report on local spending bodies, which included housing associations, called for tenants to have a greater say and for them to have more opportunities to become members of their associations. Consideration is being given to this and the other recommendations in the report, and the Government will be responding formally at a later date. We understand the concerns of registered social landlords expressed by the noble Baroness, Lady Hamwee, regarding the recent announcement by the Registrar of Friendly Societies that where an industrial and provident society seeks to amend its rules then he would expect these to limit the percentage of tenants that can be members to no more than 25 per cent. of the total membership. He has also indicated that members should not comprise more than 25 per cent. of the places on the management committee of an association.
Our policy is clearly that tenants should not be in the majority. If I might put things diplomatically, I believe that discussions have been held between the corporation and the registrar on this matter and that these are to continue. The registrar has a duty to regulate all industrial and provident societies, not just those that are 1406 registered social landlords. This dual regulation can on occasions create some minor difficulties, but with good will on all sides they can generally be overcome.
The proposal in this amendment would effectively involve an amendment to another Act which has not been considered in any detail in the passage of this Bill. There needs to be further discussions to see whether the apparent difficulties can be overcome. We doubt that amendments to primary legislation are necessary but we shall certainly bear that possibility in mind. With that comfort, I hope that the noble Baroness will feel able to withdraw her amendment.
§ Baroness Hamwee
I am grateful for those comments. The Minister has indeed been extremely diplomatic and careful in what he said. I, too, must be careful not to be so seduced by those words as to let the matter go at a later stage in this Bill if it appears that those discussions—I think that was the term the Minister used—are not proving as productive as the Government might hope. Can the Minister give any indication of the likely timetable as it relates to the timetable of this Bill? If he cannot, can he give an assurance before the next stage that the matter can be handled outside the scope of primary legislation as without some such comfort I would feel the need to return to the matter? In other words, I need to know that I am not letting pass a good opportunity to deal with something which is clearly of widespread concern.
If I have not been able to satisfy the noble Baroness by the time we reach this matter on Report, I would expect to see another amendment from her to the Bill. I am quite clear therefore that I shall have to answer her one way or another.
§ Baroness Hamwee
I thank the Minister. On that basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Clause 7 agreed to.
§ 6.30 p.m.
§ Schedule 1 [Registered social landlords: regulation]:
Lord Williams of Elvel moved Amendment No. 27:
Page 116, line 7, after ("gift") insert ("or make a loan").
§ The noble Lord said: In moving Amendment No. 27, it may be for the convenience of the Committee if I speak also to Amendment No. 28 in the name of the noble Baroness, Lady Hamwee, Amendment No. 30 in our joint names, and Amendment No. 31 which stands in my name.
§ Amendment No. 27 concerns the remuneration of members of the council of the housing associations, and of the board of directors (if that is the case) of other social landlords. The Committee will he aware that before the House went into Committee I declared an interest in that my wife was a member of the council of Stonham Housing Association. Therefore, I enter particularly sensitive territory. Despite that, and on advice, I believe that I am able to speak on the matter.1407
Paragraph 1 of this schedule begins with the rubric,
Payments by way of gift, dividend or bonus".
§ It does not mention making a loan. There are certain restrictions in companies' legislation on making loans. I imagine that Companies Acts would apply where a social landlord who is registered is a Companies Act company. I also imagine that such restrictions would apply to other organisations which may be registered as social landlords which are not Companies Act companies. In other words, there should be parity treatment between the different types of legal organisations.
§ I shall leave the noble Baroness to speak to her Amendment No. 28. Amendment No. 30 in our joint names refers to the remuneration of members of the council or board of directors, or whatever it might be, of a registered social landlord. As the Minister said in another place, the Government do not seek to change the ethos of the housing association movement. I am glad to hear that because I believe that the housing association movement has persisted for many years on the basis of voluntary service. It is only right that it should do so. Nevertheless, there is the nagging question not just of refunding the expenses of those involved in housing associations but also as regards loss of earnings. Again, I speak from a certain amount of marital experience. Being involved as a member of the council of the housing association involves an enormous amount of time, effort, reading papers and making decisions. Loss of earnings can be a major problem if a housing association wishes to have on its council people who are not supported either by private income or other means. It seems to me that some formula along the lines of jury service could be right.
§ It is an important matter. So far as I am aware—I am open to correction—it is the first time that it has been proposed that housing associations should cease being organisations run on a purely voluntary basis by people who give time and effort to them and become possibly professional organisations with directors or members of the council who are professionals in the sense that they are paid for that specific job. It is an important principle that I believe the Committee would wish to discuss.
§ Amendment No. 31 is simply a probing amendment which seeks to encourage the Government to explain why the corporation has the power to specify maximum amounts even in the case where shareholders of a company registered under the Companies Act decide that the managing director may qualify for substantial bonuses if the company, although non-profit-making, may have done particularly well. I question whether the corporation is not cutting across some of the provisions of the Companies Act in that respect. It is purely a probing amendment. I beg to move Amendment No. 27.
§ Baroness Hamwee
I do not need to add to the comments of the noble Lord in support of Amendment No. 30 which also stands in my name. Amendment No. 28 is entirely straightforward. It enables the 1408 Government to confirm that a gift does not include a benefit as set out in paragraph 2, to which the amendment refers.
As the noble Lord, Lord Williams, records, the housing association movement is supported by the commitment of voluntary committee members of registered social landlords. There are in England and Wales more than 25,000 such people freely giving of their time serving on the committees of housing associations. Many more contribute to the running of the registered social landlords as members of local, area and tenant committees. We are considering part of the Bill which proposes the possibility that they may receive some compensation for loss of earnings or for the time that they give in such service. Perhaps I may take time to set out the Government's position in this area.
First, let me explain the present controls over the granting of payments and benefits to board members of registered social landlords and members of their families. Paragraphs 1 to 3 of Schedule 1 of the Bill broadly re-enact the provisions of Section 15 of the Housing Associations Act 1985. Payments to board members are limited to the refund of expenses directly incurred. The provision provides for the corporation to be able to specify the maximum amount which may be paid.
Last year the National Federation of Housing Associations conducted a review under the chairmanship of Sir David Hancock, of the governance of housing associations. In their report the review team recommended that consideration be given to the introduction of a loss of earnings regime. In taking forward the provisions from the 1985 Act we have taken the opportunity to clarify the provision to enable loss of earnings regime to be introduced, subject to the corporation using its powers to specify the maximum amounts that might be paid.
I turn to the Nolan review. During his review of local spending bodies, including housing associations, the noble and learned Lord, Lord Nolan, was asked to consider the question of payment to board members. He concluded that at the present time there was no case for departing from the voluntary principle. Many long-standing members apparently suggested that they would be offended if offered money. Perhaps that applies to the wife of the noble Lord, Lord Williams.
The noble and learned Lord, Lord Nolan, also considered whether compensation for loss of earnings should be forthcoming. His committee concluded that at present it could not be justified. Nor was it necessary to attract new people.
Our position is that we are not advocating the introduction of payment to board members. But there is a continuing demand for new people to come forward. Should the position change, then we need to ensure that there are no unnecessary restrictions in place.
The noble and learned Lord, Lord Nolan, in his report suggested that where there was flexibility over the timing of meetings, this was another consideration against loss of earnings compensation. We have to recognise that employment practices are changing 1409 radically. For many there is no standard working day; some work flexible hours, others fixed shifts involving both early and late hours. If we are to recruit people from a wide cross-section of backgrounds, we may find that some form of compensation will be necessary.
Amendment No. 30 proposes that any payments to board members be limited to the amounts payable under the Juries Act 1974 for loss of earnings. I recognise there are benefits to be gained from using an existing scheme and I am sure the corporation will consider it before specifying maximum limits in accordance with its powers in paragraph 3 of Schedule 1. I shall return to that later.
The corporation's initial intention is to consider the possibility of a small token payment. However, it is possible that in some instances there may well be justification for some modest payment for such groups as the self-employed, the low paid or the unemployed. The jury service analogy, while helpful, may not be exactly what is required.
The corporation's good record was recognised by the noble and learned Lord, Lord Nolan. He considered that decisions on possible exemption should be the sole responsibility of the corporation and should not require the approval of the Secretary of State. We consider there are good grounds for also leaving decisions on the maximum level of payments to it and do not see any need to impose any separate limit. The corporation will consult on any proposals.
In Amendment No. 27, the noble Lord, Lord Williams, has proposed that the limit on gifts or payments granted by a registered social landlord to members should extend to loans. I am grateful to the noble Lord for his explanation of the purpose of his amendment. I share his concern that members should not be granted any unlimited benefits by registered social landlords. I recognise that at present loans are not explicitly mentioned. I do not believe that any amendment is necessary, but we shall check the position with our legal advisers and inform the noble Lord of the results.
In Amendment No. 28, the noble Baroness, Lady Hamwee, has proposed that to avoid any doubt an amendment be made to the effect that a gift does not include a benefit within the meaning of paragraph 2. I believe the paragraph already adequately covers gifts and do not think further clarification is necessary. I hope that that assurance will satisfy the noble Baroness.
I understand that the final amendment in this group is a probing amendment. The noble Lord, Lord Williams, would like some background on how this power is to be used. The first point is that it will be subject to public discussion. The corporation's board has given preliminary thought to these issues. Leading on from my points earlier, it has agreed two general matters of principle: first, if anything other than token payments are allowed, they should be modest and based on a loss of earnings concept; secondly, any system which is put in place should derive from an established regime, such as jury service or magistrates' allowance.
1410 The noble Lord, Lord Williams, also asked whether the power to set the maximum payment cuts across the Companies Act. The simple answer is yes. This is an extra limitation and the power allows the corporation to set maximum limits on certain payments. The shareholders of a Companies Act company are free to decide what to pay the managing director, but subject to the limit set by the corporation, which is an additional restriction, together with those in the Companies Act.
I hope that what I have said reassures the noble Lord. If the paragraph were to be removed, it would significantly weaken the corporation's powers, and we feel that it has its place in the Bill.
§ 6.45 p.m.
§ Lord Swinfen
Before my noble friend sits down, perhaps he could help me. I have been looking through paragraph 2 of the schedule and wonder whether a social landlord will be able to make a loan to an employee or officer who moves from an area where housing is at a reasonable cost to an area of expensive housing. The loan would allow him to find somewhere for himself and his family to live and therefore to take up the employment with the social landlord. It may be to the benefit of the social landlord that that person should be employed because of his skills and knowledge, but he might not be able to take the job if he were not able to obtain a loan to buy property in that way.
Under paragraph 2(1)(a) a contract of employment which offered such benefits would allow them to be paid. I do not believe that there should be any difficulty if they are regularly offered to employees.
§ Lord Swinfen
What is the position if the point is not dealt with in the contract of employment? It does not have to be, because it could be separate from the contract of employment.
I see no other way in which the offer could be made under the schedule, but I shall write to the noble Lord if there is one.
§ Lord Monkswell
The employee could be issued with a new contract of employment which included those terms. Perhaps I may press the Minister about the power that the Housing Corporation will have to allow payment to members of a housing association. From what the Minister said, we currently have a voluntary system where people are not remunerated or paid or even given expenses. Apparently there is no demand for it according to what the Minister said. Yet the Government say that it may be necessary to recruit people. What is the responsibility of the Government to recruit people into, for example, a voluntary organisation?
1411 Previous changes that we have seen in what we might describe as public service—whether it be local authority members or magistrates—have required Acts of Parliament to determine their levels of remuneration or the level of expense claims that they may make. Surely it is not just that the power to determine the possible payments for a public service should be vested in the Housing Corporation rather than in parliamentary determination. There seems to be no mechanism whereby Parliament can be involved either by primary legislation or secondary legislation. There is no mechanism for Parliament to be involved in determining what levels of remuneration or expenses might be allowable or whether there should be any. It appears that the power is given totally to the Housing Corporation to determine the matter.
I suggest that it is a big departure from custom and practice in the way that public service has been considered that the power should be vested in the Housing Corporation rather than there being recourse to parliamentary determination. Can the Government respond to that point?
It is a matter of judgment. Earlier I quoted the noble and learned Lord, Lord Nolan, in support of the attitude that the Government take that the matter could reasonably be delegated to the corporation. I appreciate that the noble Lord, Lord Monkswell, and other Members of the Committee may believe that the noble and learned Lord does not get it right all the time. On this occasion, we agree with him and are comforted by his agreement with us. It is open to the noble Lord, Lord Monkswell, to take the opposite view but we take our view based on the same evidence before us.
§ Lord Williams of Elvel
I thank the Minister for his response to the amendments. I understand that he will consider Amendment No. 27 on the making of a loan and let me and other Members of the Committee know what the Government's legal view is. I wish to emphasise to the Minister that the housing association movement is absolutely committed to the principle of voluntarism. There is no question of it wishing to go professional, but housing associations recognise that a basic level of remuneration may be necessary in order to attract certain people to serve as members of the council.
The Minister adduced the report of the Committee on Standards in Public Life in aid of his view. Again there may be disagreement, but our view is that the amendment on the limitation to jury service meets precisely the terms of the Nolan Committee's second report. It reflects the spirit of the recommendations of the Nolan Inquiry. I find difficulty in understanding why the Government seem to leave matters rather in the air. I should have thought that some provision on 1412 the face of the Bill, perhaps better drafted than the amendment I have proposed, would be right. Perhaps the Minister would care to comment on that point.
It is certainly a matter that we shall think about. But there is no possibility of my even hinting to the noble Lord that we might actually agree with him.
§ [Amendment No. 28 not moved.]
Lord Lucas moved Amendment No. 29:
Page 117, line 6, leave out from ("Corporation") to end of line.
§ The noble Lord said: This amendment concerns the powers which the corporation has to determine what payments or benefits a registered social landlord which is an industrial and provident society or a company registered under the Companies Act 1985 may make. These powers are not new. Under Section 15 of the Housing Associations Act 1985 the corporation currently has the same powers in respect of industrial and provident societies. They are sometimes known as "Section 15 exemptions" since, in effect, they exempt associations from the strict rules of that section designed to avoid conflicts of interest. Section 15 is re-enacted, with amendment, by paragraph 2 of this schedule.
§ In his second report the noble and learned Lord, Lord Nolan, supports the retention of these powers, but recommends that they should be fully devolved to the corporation to simplify the procedures.
§ We are still considering the main recommendations made by the noble and learned Lord in that report. But this is a relatively minor matter, and one on which we can agree that the corporation, as regulator, is better placed than we are to determine what exemptions from the general rules as to payments and benefits should be allowed. This amendment therefore removes the requirement for the Secretary of State to approve any such determination. I beg to move.
§ On Question, amendment agreed to.
§ [Amendments Nos. 30 and 31 not moved.]
Lord Williams of Elvel moved Amendment No. 32:
Page 119, line 36, leave out from ("receive") to end of line 39.
The Bill as drafted allows the corporation to appoint someone to be a director of a registered social landlord and goes on to allow that person,
to require an extraordinary general meeting of the company to be convened within 21 days of a request to that effect made in writing to the directors of the company".
§ It is almost unprecedented that one director, as opposed to a group of shareholders, should be appointed by a regulator and then be allowed to call an extraordinary general meeting of a company. Certainly that is not the case, so far as I know, unless the noble Lord corrects me, with any of the regulators of the utilities. It seems a very extraordinary power to include. I hope very much that the Minister will be able to justify it. I beg to move.
Paragraph 7 of Schedule 1 provides the corporation with power to appoint a new director to a registered social landlord which is a registered company under the Companies Act 1985. Paragraph 8 of Schedule 1 provides the corporation with similar power to appoint a new committee member to a registered social landlord which is an industrial and provident society.
The purpose of this provision is to allow the corporation to exercise its judgment on when additional expertise or guidance is necessary and to enable the new director to help influence the existing directors to ensure that a registered social landlord is managed in an effective and proper manner.
Amendment No. 32 would prevent a director appointed by the corporation from calling an extraordinary general meeting. This power conferred on a director appointed by the corporation runs parallel to the powers under the Companies Act for shareholders and directors to call an extraordinary general meeting. It does not remove those powers. Rather this specially appointed director can act independently to call an extraordinary general meeting where he believes this would help to achieve the purpose for which he has been appointed—the proper management of the company's affairs. This director is acting in the public interest, which may quite legitimately differ from the interests of individual shareholders.
Extraordinary general meetings will typically be called to discuss the dismissal and appointment of directors. The corporation-appointed director will be concerned to restructure the Board to overcome management problems. Others could try to frustrate him. We cannot prevent this without removing their rights, which we have not sought to do.
What we have done is give the corporation further powers which we shall come to in later parts of this schedule to take more decisive action, if their appointed director or directors cannot get things under control.
I hope that explains to the noble Lord our logic in wishing the director to have these particular powers. I agree with him that it is unusual, though I can think of many instances in corporate practice where a particular investing organisation has been given particular powers through the board of directors or through its shareholding to call an EGM which would not run with the ordinary concept of majority control. This is a device which we feel fulfils the requirements we have in this particular case. We do not believe that it creates any problems under the Companies Act. However, I wait to hear the noble Lord's remarks.
§ Lord Williams of Elvel
I am grateful to the Minister. I am sure that it does not create problems 1414 under the Companies Act; it is just wholly unprecedented. It runs in parallel with the normal provisions of the Companies Act. The Minister mentioned groups of shareholders. Certainly 10 per cent. of shareholders can summon an EGM. That applies to any company under the terms of the Companies Act. I cannot think of any regulator—Ofgas, Oftel, Ofwat, off anything else—which has the power to summon an EGM of a Companies Act company. That is the power that the Government are giving to the corporation.
The noble Lord made the point that this would be to summon an EGM which would usually be used to sack the director. An EGM is also required for increasing capital. It may well be that the corporation will wish to increase the capital of a company. Presumably, the corporation will be allowed to make that suggestion and put propositions to an EGM. It is not stated anywhere that the corporation or the director can move a motion at an EGM; it simply says he can call an EGM. He cannot even necessarily speak at the meeting except as a director. It all seems very confused. The Government should examine this matter to see what would happen at an extraordinary general meeting, if convened by a director appointed by the corporation. Would that director then be allowed to move any resolutions at the EGM? It has to be assumed that he cannot unless he has the approval of the board under the Companies Act. I should be grateful if the Minister would look into the matter. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Dubs moved Amendment No. 33:
Page 123, line 25, after ("Corporation") insert ("together with the Accounting Standards Board").
§ The noble Lord said: In moving this amendment standing in the name of my noble friend Lord Williams of Elvel, I shall also speak to Amendments Nos. 34 and 35.
§ I was a little surprised when in an earlier debate, I believe on Clause 1 stand part, the Minister, in reference to paragraph 16(1) of this particular schedule, said that there would be two sets of accounts for those registered social landlords that came both under the Companies Act and under the Housing Corporation. I was rather puzzled by that, and I have tried to think my way through the significance of this particular provision. The Government risk causing some confusion.
§ As I understand it, some registered social landlords are also incorporated companies and therefore have to conform to Companies Act requirements. That means that the way in which they present their accounts would have to be in accordance with the Accounting Standards Board. Other registered social landlords may not be registered companies. Therefore, they would simply come under the requirements of the Housing Corporation. But, in addition, those which come under the Companies Act would also have to come under the Housing Corporation. It is difficult for me to take comfort from an outcome which means that the corporation may set different requirements for the whole 1415 range of social landlords, some of whom will also have to conform to the standards of the Accounting Standards Board.
§ In a nutshell, it seems to me that that is excessively complicated and will cause confusion. I trust that I am right in having quoted the Minister as saying that there would be two sets of accounts. If not, if the Minister will indicate, perhaps we can clarify that. But, as I heard him fairly clearly, no doubt he goes along with that. The Minister also used the expression "separate but overlapping".
The result is likely to be that for some registered social landlords there will be two sets of accounts; or certainly some social landlords will prepare accounts in one way and others will be obliged to prepare accounts in another way. I do not see how that will help clarify the financial position of those bodies. Moreover, I should have thought that the Accounting Standards Board would require the accounts to be prepared, as it says in the schedule:
in a proper form and … give a true and fair view of … the state of affairs of the landlord … and … the disposition of funds and assets".
I cannot understand why there should be those different conflicting and confusing requirements. It seems to me that Amendment No. 33 helps clarify matters. The amendment simply requires that the Corporation:
together with the Accounting Standards Board may from time to time determine accounting requirements".
That seems to me a very simple change which will add clarity and consistency to the way in which those bodies prepare their accounts.
§ Turning to the other two amendments which concern the requirements for audit, I have looked hard at that part of the schedule which refers to this matter. The expression "a qualified auditor" comes up more than once. My understanding is that when companies come under the Companies Act, they have to appoint auditors who are members of the Institute of Chartered Accountants (I think it is that), which means that they must conform to certain specific requirements. But some social landlords may not come under the Companies Act, as has already been made clear. Therefore, I assume that the reason for this provision is that they need to have qualified auditors because they are not obliged to provide auditors with particular qualifications under the Companies Act.
§ I ask who such a qualified auditor would be and to what would he have to conform if they were not the same requirements as those that come under the Companies Act. It seems to me that it would be much simpler if all social landlords had to have their accounts audited by people who conform to the same standards. That is the purpose of Amendments Nos. 34 and 35. I beg to move.
§ 7 p.m.
These amendments raise two questions: first, whether there will be two sets of accounts, as I said earlier. It is quite clear that for a company incorporated under the Companies Act 1985 and for a 1416 registered social landlord under this Bill, which is also such a company, there are two sets of requirements to produce accounts. There is the requirement in the Companies Act and the requirement in this Bill. The two exist not in opposition but parallel. So, in principle, there is a requirement to produce two sets of accounts.
But the Housing Corporation confirms that there are no substantial differences between its requirements and those of the Companies Act. But the corporation requires more detailed information in some areas in order to fulfil its regulatory function. It says that in practice there may not be a need for completely separate sets of accounts; all that may be required is to supply the supplementary information alongside the Companies Act accounts. Ordinary commercial companies encounter that difference when producing accounts according to the English standard and the American standard. The accounts look different and are different but they apply to the same company and the same affairs. But one is looking at a different set of regulatory regimes and a different set of purposes.
We do not feel that Amendment No. 33 is appropriate. Page 123, line 25 of the Bill applies to the accounts required by the Housing Corporation. The Accounting Standards Board is interested in the Companies Act accounts. So we do not believe that the Accounting Standards Board has any function to fulfil in that set of accounts. The two are conceptually separate. But probably in practice one set of accounts, with an additional set of notes, will satisfy the housing corporation.
With regard to Amendments Nos. 34 and 35, I agree with the noble Lord, Lord Dubs. I find the phraseology on page 124 of the Bill—paragraph 18(4)—a little confusing. What it amounts to is that an auditor has to be a Companies Act auditor. In other words, any social landlord has to be audited by an auditor who is qualified to audit a company under the Companies Act. For the noble Lord's enlightenment, that consists of the Institute of Chartered Accountants in England and Wales, Scotland and Ireland, the Chartered Association of Certified Accountants and the Association of Authorised Public Accountants. They can all audit Companies Act companies and those people will be required to audit any social landlord.
Therefore, I do not believe that there is any case for a restriction to the Institute of Chartered Accountants in England and Wales because those people are already quite happily qualified to audit any company. We do not need to look for more than that. I understand that these amendments were put forward in the fear, which I agree could easily be gathered from the wording here, that there might be some possibility of a relaxation, allowing in people who would not be qualified to audit a company to audit a social landlord.
§ Lord Monkswell
The Minister has satisfied me to a certain extent with regard to the arrangements for the auditing of the accounts. But I must say that he has not satisfied me with regard to the preparation of the accounts and the accounting requirements.
1417 I am a comparative layman when it comes to accounts. I must admit that in the past I have had some difficulty in determining what the accounts of different organisations and companies mean. Quite often they are arranged in different ways and it is difficult to work out what they signify. When it comes to housing associations or arrangements under the Housing Corporation, we must recognise that there is a need for some transparency and visibility over what is going on. We are also dealing with a large body of volunteers who almost by definition will not be qualified in accountancy. It is useful to recognise that. We must ensure, as best we can, that the accounts that may be determined by the Housing Corporation are not significantly different from accounts that may be required for companies.
I was interested in the Minister's remarks that the requirements of the Housing Corporation were supplementary and additional to enable it to perform its regulatory functions. We can all recognise that and it is probably very useful to have extra information in accounts to make them more understandable and more transparent to the regulatory authorities, members of the Housing Corporation and others involved in this area of activity. It would be useful if, when the Housing Corporation is determining its requirements, it could be involved with the Accounting Standards Board to ensure that the accounts required by the Housing Corporation are supplementary and additional rather than in a different form, which could quite easily happen.
I hope that the Government will think about this problem. Although they may not accept this amendment, I hope that they will think of other ways of ensuring that two sets of accounts are not produced but that all the information that is needed can be enshrined in one set of accounts. The Minister's remarks about supplementary or additional information would be the way to do it. It is rather disturbing to hear that we are likely to see two sets of accounts. Unless this problem is resolved, we shall only add to the confusion of people trying to determine what is going on.
§ Lord Dubs
Perhaps I may briefly make a further comment. I thank the Minister for clarifying the position regarding the auditors. He has confirmed that the Bill as drafted means what the amendment is intending to achieve, so I am happy to have that assurance. However, I am less happy about the Minister's comments in relation to the question of how the accounts should be kept.
The Minister said that the Housing Corporation would not require accounts to be presented in a different form from those normally required by the Accounting Standards Board but that the corporation might in some respects want more detailed information to supplement the normal Accounting Standards Board requirements. That is fairly clear. If the amendment to which I was speaking is accepted, the Bill would say:The Corporation together with the Accounting Standards Board may from time to time determine accounting requirements".1418 I should have thought that those words would actually meet what the Minister said and clarify the position beyond doubt so that we would not run the risk of having accounts presented in two different ways by the same social landlord. It would have the other advantage that all social landlords, whether or not they come under the Companies Act, would present their accounts in a similar way and conform to similar standards. I should have thought that the Minister's argument leads to the outcome which the amendment would achieve. I wonder whether he would think again about the merits of the suggestion in Amendment No. 33.
What paragraph 16 of the schedule achieves is that all social landlords will produce their accounts in the same format. It also says that the format will be determined by the Housing Corporation alone. We think that is right. It has its own requirements and it should be able to insist on accounts which show what it wants in the way that it wants.
I am sure that the Housing Corporation is made up of sensible people. It certainly is at present and it probably will be in the future. It will wish to work as far as possible with the grain; and that will mean, as far as possible, with accounting standards recognised for companies and in general for other bodies. That is why the Housing Corporation at the moment says that in practice all it would expect to be needed is a certain amount of supplementary information presented with the accounts and reported on by the auditors. We think that the powers should be there to enable the Housing Corporation to get what it wants in the way that it wants without being forced to comply with the wishes of some other body which has a different set of interests.
§ Lord Dubs
I see that the Government are not to be persuaded. I still regret that that is the Minister's position. We may well find that those social landlords who come under the Companies Act, if they wish to avoid producing two sets of accounts, may, in conforming to the Housing Corporation requirements, be departing from the requirements of the Accounting Standards Board. The Minister said that the Housing Corporation will be sensible and that—I am paraphrasing what he said—it will take account of the standards of the Accounting Standards Board in order to achieve a satisfactory outcome. In other words, the Minister is saying that he will not put it in the Bill but the Housing Corporation had better do what the amendment says. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ [Amendment Nos. 34 and 35 not moved.]
Lord Lucas moved Amendment No. 36:
Page 125, line 40, after ("with") insert ("the").
§ The noble Lord said: This amendment corrects a drafting error. It inserts the word "the" between the words "with" and "consent" in paragraph 19(4) of 1419 Schedule 1. While "with consent" may make sense in certain circumstances, in this one it does not. I beg to move.
§ On Question, amendment agreed to.
Lord Lucas moved Amendment No. 37:
Page 126, line 7, at end insert ("or persons").
§ The noble Lord said: In moving this amendment, I wish to speak at the same time to Amendments Nos. 38 to 45. These amendments are necessary because the current wording of paragraph 20(7), which deals with the conduct of an inquiry by more than one person, is ambiguous and unclear. Paragraph 20(7) was introduced as an amendment at Commons Report, consequent on another amendment providing that more than one person can be appointed by the corporation to conduct an inquiry. These amendments therefore represent a certain amount of polishing that is required. I beg to move.
§ On Question, amendment agreed to.
Lord Lucas moved Amendments Nos. 38 to 45:
Page 126, line 8, leave out ("considers") and insert ("consider").
Page 126, line 11, after ("person") insert ("or persons").
Page 126, line 11, leave out ("he thinks") and insert ("they think").
Page 126, line 12, leave out ("him") and insert ("them").
Page 126, line 14, after ("person") insert ("or persons").
Page 126, line 15, leave out ("and in such form").
Page 126, line 15, at end insert—
("( ) An interim or final report shall be in such form as the Corporation may specify.").
Page 126, leave out lines 16 to 20.
§ The noble Lord said: I have just spoken to these amendments. I beg to move.
§ On Question, amendments agreed to.
§ Lord Mackay of Ardbrecknish
I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage begins again not before 8.15 p.m.
Moved accordingly, and, on Question, Motion agreed to.