Tenancy Deposit Scheme (Hansard, 13 February 2002)

§ The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)
My Lords, for two years the Government have supported, as a pilot, a voluntary tenancy deposit scheme. Although more time is needed to prove that it could operate as a self-financing scheme, its slow take-up makes a strong case for legislation on tenancy deposits. We propose supporting the pilot for two more years to establish, first, the basis for a self-financing national voluntary scheme and, secondly, the extent to which membership of this or similar schemes would need to be backed up by legislation.
The Government will consult on what legislation might encompass. For example, it might prevent the use of tenancy deposits where they are not safeguarded by schemes like the pilot or by regulating them in some 1091 other way. Landlords are very strongly advised to lend their support to the pilot now, so that in advance of legislation there is a proven alternative to regulating the use of tenancy deposits.

§ Lord Best
My Lords, I thank the noble and learned Lord for that very positive response which will be greatly appreciated by organisations representing not only tenants, but landlords as well. Does he agree that, in order to protect those tenants where the landlord does not wish to join a voluntary scheme and receive the benefit of having disputes resolved by the Independent Housing Ombudsman service, it is likely that a mandatory scheme will become necessary in due course?

§ Lord Falconer of Thoroton
My Lords, we should see what are the effects of the coming two years. It is extremely important to encourage as many landlords as possible to join the scheme.

§ Baroness Maddock
My Lords, I concur with the comments made by the noble Lord, Lord Best. Many people working in the world of housing will welcome what the noble and learned Lord has said today. Is the noble and learned Lord familiar with a scheme operating in East Anglia? All noble Lords will know how difficult it is for students to find adequate accommodation. At the University of East Anglia, which falls into one of the pilot areas, students have been encouraged to go to landlords who are part of the scheme. What has happened is that, of course, other landlords have then joined the scheme. Will the Minister look closely at this result? It appears that not only would such an approach help the scheme to expand quickly, it would also be a great help to our students.

§ Lord Falconer of Thoroton
My Lords, I am aware of the East Anglian scheme, which has worked well. It is precisely the kind of scheme that makes life a lot easier between landlords and tenants.

§ The Earl of Caithness
My Lords, the noble and learned Lord's reply will certainly encourage many landlords to continue to participate in the scheme and encourage new ones to join. But, just as there are bad and rogue tenants, there are often bad and rogue landlords, and until we have legislation making the scheme compulsory there will always be someone on the margins who is not benefiting. Will the noble and learned Lord seek to introduce legislation at an earlier rather than later date?

§ Lord Falconer of Thoroton
My Lords, I note what the noble Earl said. It is a view shared by many people in the housing world. Extending the pilot for two years will give us a chance to see what is the appropriate course. As I said in the second part of my Answer, we will consult now on what the legislation might encompass.

§ Baroness Hanham
My Lords, do the Government believe that a national statutory scheme could be run 1092 without a requirement for the registration of landlords and agents? Does the Minister agree that agents who handle their tenants' money should he registered with the local authority?

§ Lord Falconer of Thoroton
My Lords, as to whether or not we would need to register landlords in order to have an effective compulsory deposit scheme. I do not know the answer. That is one of the issues that the consultation will encompass.

§ The Earl of Listowel
My Lords, is the Minister aware that the income generated by the custodial option scheme is likely to be more than is necessary to fund the scheme? Is he further aware that in New South Wales, for example, the surplus income is used to subsidise schemes such as the rent guarantee scheme, which enables homeless people or people on lower incomes to gain access to housing?

§ Lord Falconer of Thoroton
My Lords, I was not aware of the Australian example given by the noble Earl. As to whether there will be enough money from the custodial scheme, one of the findings that has emerged from the pilot is that it has not yet been proved that the schemes overall are sell-financing. We need to look more at that issue before decisions are made.

§ Lord Graham of Edmonton
My Lords, I am sure that the Minister appreciates the general welcome given to the idea that people who pay deposits should, in one way or another, receive protection. Will he continue with this and be very careful about abandoning further positive action because of slow take-up? The slow take-up could well be improved over time, particularly if there is some kind of campaign to draw the scheme to the attention of landlords and tenants.

§ Lord Falconer of Thoroton
My Lords, I referred to the slow take-up, but we are continuing with the scheme for another two years. There are signs that the slow start is now leading to a process where more people are taking up the scheme. I agree that giving more publicity to this kind of scheme— including to landlords, who get a real benefit from it—will increase the take-up still further.