Westminster Hall

Thursday 13th December 2018 Westminster Hall

Thursday 13 December 2018

[Joan Ryan in the Chair]

Backbench Business

Thursday 13th December 2018 Westminster Hall

Withdrawal Agreement: Economic Analyses

Thursday 13th December 2018 Westminster Hall

Treasury Committee

Select Committee statement

11:19

[Joan Ryan (in the Chair)]

We begin with the Select Committee statement. Nicky Morgan will speak on the publication of the 25th report of the Treasury Committee, “The UK’s economic relationship with the European Union: The Government’s and Bank of England’s Withdrawal Agreement analyses”, HC 1819, for up to 10 minutes, during which no interventions may be taken. At the conclusion of the statement, I will call Members to put questions on the subject of the statement and call Nicky Morgan to respond to those in turn. Members can expect to be called only once, and questions should be brief. I call the Chair of the Treasury Committee.

[Nicky Morgan (Loughborough) (Con)]

It is a pleasure to speak under your chairmanship, Ms Ryan. I thank the Backbench Business Committee for the opportunity to make a statement to the Chamber on the 25th report of the Treasury Committee on the economic impact of the withdrawal agreement and political declaration, and on the Bank of England’s analysis. I place on record my thanks to the Treasury Committee’s staff, my fellow members of the Committee, the witnesses who appeared before us, and all those who submitted written evidence—all of whom played a vital part in producing the report with great speed.

Over the summer, I wrote to the Chancellor, the Governor of the Bank of England and the Financial Conduct Authority on behalf of the Treasury Committee and asked them to produce and publish analysis of the economic impact of the Brexit withdrawal agreement and of the future framework, once it had been negotiated by the Government with the EU. The purpose of securing those analyses was to ensure that Parliament’s meaningful vote on the withdrawal agreement, whenever that may be, is properly informed. Like many other Select Committees, the Treasury Committee has spent the last few weeks poring over the details to ensure that all right hon. and hon. Members walk through the voting Lobbies with the best possible evidence.

When the analysis we requested was published a couple of weeks ago, there were accusations of “Project Fear Mark 2”. Some ramped up the rhetoric even further, with cries of “Project Hysteria”. Let me clear: the analysis of the withdrawal agreement published by the Treasury, the Bank of England and the FCA was requested by the Treasury Committee for Parliament. The timing of the publication was driven by us to ensure that there was enough time for evidence sessions on the analysis ahead of the vote as we then expected it. Any personal criticism of the Chancellor, the Governor of the Bank of England, our regulators or witnesses, all of whom were responding to parliamentary requests, is wholly unfair and does not aid constructive discussion of the issues—and they are important issues. The analysis that the Treasury Committee received helped it greatly in producing its report on the Brexit deal, which was published and sent to all Members of Parliament on Tuesday morning.

Although Committees can be divided along ideological, party and, more recently, Brexit lines, consensus is always sought. There are 11 Members of Parliament on the Treasury Committee, and I am sure that there are at least 12 different views on Brexit, but this report, like the other 24 reports that we have published since I became Chair 17 months ago, was unanimously agreed. That shows that while the House, and indeed the country, appears more divided than ever, compromise can be achieved. As I have told the House before, all hon. Members will have to compromise if we are to find a way through Brexit.

The firm aim of the report was not to recommend how Members of Parliament should vote, but to ensure that they are as informed as possible and as aware as possible of all the relevant evidence when it comes to choosing a Division Lobby. Unfortunately, the Government made this difficult to achieve. They provided economic analysis of the UK leaving the EU under five different scenarios. The White Paper scenario, which is akin to the Chequers proposal, represents the most optimistic reading of the political declaration, rather than a more realistic scenario. It does not represent the central or most likely outcome under the political declaration, and therefore cannot inform Parliament’s meaningful vote.

In the report, the Treasury Committee expresses its disappointment that the evidence provided by the Treasury does not analyse the backstop. The Treasury also failed to include any short-term analysis, including on public finances and on regional and sectoral job losses or gains. Members of Parliament, as representatives of their constituencies, will understand how important that regional analysis is now and in the future.

Specifically on the Government’s decision not to model the backstop, the Committee concluded that that was a mistake. The Governor of the Bank of England told us

“on average for a trade deal from start to finish, it is something in the order of four years”,

but we know that previous EU negotiations have taken longer—for example, the trade agreement between the EU and Canada took eight years. Even if the implementation period is extended for one or two years beyond December 2020, it is feasible that the UK could enter the backstop, which, as we know, is politically contentious, given what we have already heard in the withdrawal agreement debate. Despite it being neither the UK’s nor the EU’s preferred position, the Government should have modelled the backstop.

We as the Treasury Committee would not be doing our duty to the House of Commons if we did not look at the effects of the withdrawal agreement on the financial services sector. In each of the five modelled scenarios, the sector will contribute less to the UK economy, but we know that it is a critical taxpayer, as well as being part of presenting a face of global Britain on the world stage. The Financial Conduct Authority expressed its concern that the UK would be a rule taker during an implementation period. In assessing the financial services sector’s ability to withstand a no-deal Brexit, the Governor provided reassurance that the Bank of England is

“sleeping soundly at night, because the core of the financial sector is in the position that it needs to be in for the tough scenario.”

While the Governor’s sleeping patterns may provide some succour to MPs, it is clear that a vacuum of information exists. There is a dearth of analysis that shows how the economy will transition to a new trading relationship. There is also a lack of modelling on the future framework between the UK and the EU.

However, Parliament may wish to draw from the range of scenarios that have been modelled, in order to assess the economic impact of the draft withdrawal agreement and political declaration. The scenarios range from 0.6% less GDP under the Chequers plan than would otherwise have been the case, to 7.7% less GDP in a no-deal scenario.

Select Committees play an increasingly important role in the life of this Parliament, particularly given its make-up and the nature of the Brexit issue that it faces. I was very clear, and I would like to thank the Committee’s members again for their support, in saying that we wanted to make sure that analysis and evidence were put before MPs. As I said, we wanted to do that not to tell them how to vote—we are all grown-ups and should be able to make decisions on behalf of our constituents as their representatives—but to make sure that the information was out there.

We know what happened earlier this week, which is that the meaningful vote was suspended and postponed. It will come back before the House at some point—maybe not until the new year. I suggest to the Minister here today—the Exchequer Secretary to the Treasury—that that gives time for some of the issues that are identified in our report to be potentially remedied, or for more evidence to be given to the Committee, which we will report to the House, as we have done before.

In conclusion, whenever this vote comes back to the House, I hope, on behalf of the Treasury Committee, that all Members of Parliament will find time amid the turkey, crackers and festive wrappings to read our report before that Division bell rings.

[Lyn Brown (West Ham) (Lab)]

I am delighted to serve under your chairmanship, Ms Ryan. The Treasury Committee’s report is a damning read for those who had dared to hope that the Government’s withdrawal agreement analysis would enlighten the debate. We already knew that this Government’s Brexit was going to damage our economy; every piece of credible independent analysis has shown that, and the Government’s own analysis has shown it, too. As we see from the Committee’s report, the Government failed to provide all the evidence the Committee requested and

“modelled scenarios…yet did not model scenarios that are considered probable and have the potential to be persistent over the medium to long term”.

What is worse, none of the Government’s economic analysis even attempts to give Members or our constituents accurate information about the things that matter most, which are jobs, incomes and prices over the next year. Put simply, the Committee has confirmed that the Government have failed to show leadership at this time of immense uncertainty and fear in our country.

I have just a couple of questions for the right hon. Member for Loughborough (Nicky Morgan), the Chair of the Treasury Committee. First, is it not true that none of the Government’s proposed options will be good for the economy, to the tune of at least a 4.9% hit? The Chancellor described that hit as being “slightly smaller”, but I must admit that a hit of more than 4% does not feel small to me. I would like the right hon. Lady’s view on that issue.

Secondly, as there is no analysis of what happens if we remain with the backstop, we can only conclude that the Government either do not know what the effects of that option are or that they do not want us to know what the effects are. Can the right hon. Lady enlighten us and say which of those she thinks is true?

Finally, given that the Bank of England considers that a no-deal scenario could be worse than the 2008 financial crisis, and given that the Government think that a no-deal scenario would cut as much as 11% from our economy, does the right hon. Lady agree that it is utterly irresponsible to threaten something that no responsible Government would ever consider allowing in their own country?

[Nicky Morgan]

I thank the hon. Lady for her questions, and it is good to have this debate—I am sure we would have had it on the Floor of the main Chamber if it had continued, but now we have time to reflect on all of this.

The hon. Lady is right to say that the first thing the Chancellor admitted—I think both publicly, when the analysis was first published, and before the Committee as well—was that none of the scenarios shows that there will not be a negative impact on the UK economy. A 4% hit is substantial, if we think about that figure in the context of the financial crisis, and we as MPs all know that many of our constituents still feel the effects of that financial crisis 10 years on. Wages are now growing, but it has taken some time for them to do so.

Another of the hon. Lady’s questions was in relation to no deal. I know the Minister will not answer now, but he will be more than capable of answering for himself at some point in the future. However, I have been a Treasury Minister myself, and to be fair to the Government, they have dropped the “No deal is better than a bad deal” language. Parliament has already made it very clear that we are not going to sign off on any kind of no-deal arrangement, although we all have to debate among ourselves how we will head that proposal off at the right time. It is very clear that the Government do not want there to be a no-deal scenario, and I am glad that the analysis has shown why a no-deal scenario would be so very damaging and why it is of such concern to businesses, importers, exporters and those employing our constituents.

The hon. Lady also asked about the backstop modelling. Members will see in the report and in the transcripts of our sittings that we asked all our witnesses and the economists who gave evidence whether it was possible to model a backstop. With any modelling, it is all about the underlying assumptions. Some assumptions would have to be made about the way the backstop would operate and how long it would last. The Government told our Committee that, because they do not want to be in the backstop and because the backstop is not the preferred Government policy, it did not have to be modelled.

I think we all hope that that is the case and that the backstop is an insurance policy not to be called upon. Undoubtedly, however, on the basis of how long it takes to negotiate free trade agreements, there is a possibility that the backstop will be needed. That would then have an impact on those relying on importing to and exporting from this country. There is time now, and it might well be that this is something the Government Economic Service might want to consider, although its staff also deserve a Christmas. They might want to consider how they might give some more evidence to the House on this issue before we get to the meaningful vote.

[Ian Murray (Edinburgh South) (Lab)]

I congratulate the right hon. Lady and her Committee for producing this report, which could be summed up in one sentence: Brexit makes the country and every one of our constituents poorer. We see that when we get to the conclusions.

However, my question is about financial services. I have tens of thousands of financial services jobs in my constituency, and under all the models examined in the Treasury Committee’s report, the financial services industry shrinks, by anything between 9% and slightly less than 1%. That would have a disproportionate impact on Edinburgh, because of the way its financial services sector is set up. Was any modelling done on how many jobs would be lost and on what the Government need to do between now and 29 March next year to put in place a system, mechanism or part of a deal that would mean that the financial services industry would not shrink but, indeed, grow?

[Nicky Morgan]

I thank the hon. Gentleman very much for his question. I am pleased that he has mentioned financial services, because the view among those in the financial services industry is that they have not really had quite as much attention devoted to them as they should have, given that they are such a significant taxpayer and employer. I am also glad he mentioned Edinburgh, because we tend to think sometimes just about the City of London. He is of course absolutely right to say that there are many financial services jobs in his constituency and in other constituencies around the country.

Before I get on to his point that all scenarios will make us poorer, one interesting thing about the economic modelling for the Treasury is that it is done purely on the trading impact. It is fair to say—it is both a negative and a positive—that there is no domestic policy assumption made at all. Of course, it is possible for any future Government to consider how they might respond to the scenarios as they unfold.

There was not specific modelling of jobs. There have been estimates, and again we asked the chief executive of the Financial Conduct Authority for some, as we have asked other financial services witnesses. The initial estimates of jobs moving overseas have not come to pass, but we are still looking at between 5,000 and 10,000 people being impacted.

The financial services sector now talks about “day one” and “day two” impacts. As for day one, we know that a lot of financial services firms are already putting in place contingency arrangements and that they are trying to keep job moves to a minimum. Depending on the deal that is eventually arrived at—this relates to the hon. Gentleman’s question about what deal could be put in place to help this process—the impacts of “day two” and beyond on jobs being lost or moved could be very significant for the financial services sector. Obviously, we could be talking about thousands of jobs. These are often well-paying jobs, and they are not something that any of us here today want to see disappearing from our constituencies.

Let me answer the hon. Gentleman’s question, though, which is actually about the deal on the table at the moment. The political declaration refers to a system of equivalence, but a lot of work needs to be done to work out the equivalence regime. Andrew Bailey, the chief executive of the Financial Conduct Authority, went through with our Committee how he thought the equivalence regime needs to be enhanced, and I think he is right on that issue.

I do not think it is any great secret for Members of this House that I am in favour of a Norway-plus type of option, whereby we would retain access to the single market. I know that there are other objections to that proposal, but for financial services it would keep the passporting regime in place, which would be of significant benefit to financial services firms, and therefore in terms of the numbers of people they can employ going forward.

[Sir Peter Bottomley (Worthing West) (Con)]

I join in thanking my right hon. Friend and her Committee for the work they have done, together with their advisers and the witnesses. In conclusion 6, there is a reference to the backstop, which leads to paragraphs 35 to 40 in the report. There, Professor Nickell says that it is possible to model the backstop, and then says that the backstop might be in place for 15 years. I do not think that is a very serious kind of modelling to do, because we do not know what change there would be. Am I right in saying that, unlike most trade agreements, the ones we will need to make with the EU27 are based on equivalence now, rather than trying to bring people together?

[Nicky Morgan]

I thank my hon. Friend for his question. Of course, one of the issues is that it is not known how long the backstop might be needed for. One would hope that 15 years is probably a wild overestimate, but it is true that the Canadian-European trade agreement took eight years; however, as my hon. Friend says, they were starting from a very different position from the UK and the EU, given the trading relationship that we have at the moment and very much want to maintain.

My understanding, which I think comes from evidence that the Secretary of State for International Trade gave to the relevant Select Committee and to the Exiting the European Union Committee, is that significant progress has been made in rolling over existing trade agreements. It is not just the new trade agreement with the EU that has to be negotiated; the UK then needs to separate out, and become a party to, the trade agreements the EU has with other countries. Progress has been made on that.

However, my hon. Friend is right: the point about modelling the backstop is not that it is impossible, but that it is possible, with very clear explanations of how it has been done. Generally, the comment on all of this—we saw this with some of the reporting around the Bank of England scenarios—is that it is easy to overestimate or overinflate the damage. The Bank of England was very clear that these were scenarios, not forecasts. Again, that could be done with the backstop: we could set out some scenarios that can be modelled, while making it very clear that they are not predictions of what is going to happen in the future.

Protection for Homebuyers

Thursday 13th December 2018 Westminster Hall

13:51

[Kate Green (Stretford and Urmston) (Lab)]

I beg to move,

That this House has considered protection for homebuyers.

It is a pleasure to see you in the Chair, Ms Ryan. I start by expressing my thanks to the Backbench Business Committee for allocating time for this debate; to Paula Higgins from the HomeOwners Alliance, and Emma Thomas and Steve Turner from the Home Builders Federation, who took the time to brief me; to the House of Commons digital team, which facilitated a digital debate on the subject earlier this week, in which hundreds of members of the public participated; and especially to the many individuals up and down the country who have been in touch with me to share their experience of buying a new home, particularly my constituents Lisa, Mike, Denise and Deepak. I also thank the Exchequer Secretary to the Treasury—for listening to the introduction of this debate, at least. I hope he will find our discussion to be of interest.

I am sorry to say that the experiences that homebuyers have related to me are not happy ones. I regret that I cannot mention every individual case that has been conveyed to me, but I will do my best to reflect the wide range of issues raised, in relation to both the defects that homebuyers too frequently encounter when they move into a new-build home and the poor customer service that follows when they try to have those defects rectified. Of course, everyone expects to find snags in a new house, but I was pretty shocked that Shelter reported that more than half those surveyed in a YouGov survey in 2017 said that they had experienced some, or a lot of, major problems with their new home, and some of those problems were frankly dangerous.

In Woodsend in my constituency, residents moving into new Persimmon homes experienced a toilet that was flushing boiling water; a toilet that did not flush; dripping from the loft; holes in the walls; skirting boards that needed replacing; problems with light fittings; a front door that could not be closed; and a whole host of other problems. From across the country, I have heard reports of waste water from a lavatory not being connected to flow into the sewerage system, and gathering underneath the house; uneven floors; exposed nails; unfinished electrics; waterlogged gardens; issues with insulation; and problems with sinks, walls and fixtures.

[Ian Murray (Edinburgh South) (Lab)]

I am grateful to my hon. Friend for bringing this welcome debate before the House. Bellway Homes built homes in my constituency in 1988, and there is a suspicion that the gas installation did not meet the 1988 gas regulations. Residents have been fighting Bellway since, and the matter has now come to a head: the company has put its lawyers on to the question of whether it should comply with those regulations, despite the gas safety advisors saying that the homes do not meet the regulations.

Should we be highlighting these issues more often, and saying to people who are purchasing these homes that they require a much greater level of protection, either from Government or from insurance, to make sure they are covered for not just a few years but for decades into the future?

[Kate Green]

I am grateful to my hon. Friend for making that point. The issues of protections through statute and of information to purchasers will be among the many points that I hope to draw to the Minister’s attention during the remainder of my speech.

A couple of weeks ago, the BBC’s “5 live Investigates” reported on the shocking experience of a couple who had moved into a new Bovis home in Worcestershire. During that programme, homebuyer Craig read out a list of a staggering 354 defects in their new house. Last week, the “Victoria Derbyshire” programme reported on homebuyers who found that the mortar in the walls of their new Barratt and Taylor Wimpey homes was crumbling. Buyers report that once they have decided to buy a house, they are placed under considerable pressure to complete the purchase speedily, so that the developer is paid and managers meet their sales targets. Quality is clearly being compromised as a result of those pressures.

[Justin Madders (Ellesmere Port and Neston) (Lab)]

The pressure that buyers are put under to conclude purchases quickly is something I hope to talk about later on. Is my hon. Friend aware of issues with developers insisting that particular solicitors complete the transactions?

[Kate Green]

Indeed I am, and that too is a point to which I hope to return in the course of my remarks.

[Sir Peter Bottomley (Worthing West) (Con)]

I apologise for not being able to stay for at least the middle part of the debate, because of another parliamentary duty. Does the hon. Lady agree that one of the consequences of this debate and those BBC programmes is that publicity attaches to the builders? It would be a good idea for there to be some forum that other media could look at, so that the names of the builders that manage to build homes without defects or correct them quickly get praised, and those that do not get damned.

[Kate Green]

The hon. Gentleman has raised an important point about the impact on the reputation of the whole industry. Although some of the builders involved are household names, it is important to recognise that, as I have heard, some smaller local builders are implicated in delivering poor-quality build, whereas others meet a very high standard of both build and customer service. However, too often, it is the large developers—whose reputation people will be familiar with, and in which buyers might reasonably feel they could place some trust—that are letting their customers down so badly.

I will put on the record a few of the other major household names that I have heard mentioned, as although I will be talking about my constituents’ experience with Persimmon Homes, Persimmon is far from being the only offender. I have also heard about problems with Bellway Homes, which my hon. Friend the Member for Edinburgh South (Ian Murray) mentioned; Harron Homes; Charles Church, which is an arm of Persimmon; Linden Homes; David Wilson Homes; and Keepmoat Homes. It is entirely possible that colleagues will add to that list in the course of our discussion.

The problems of defects are compounded by the appalling customer service, and sometimes outright bullying, that homebuyers experience when they attempt to have defects remedied. My constituents in Woodsend began complaining about their new homes many months ago. Lisa tells me that she waited a year and a half before Persimmon even gave her a named customer service contact, although the company did find time in that period to pay its then chief executive a £75 million bonus. I wrote to the company on Lisa and her neighbours’ behalf earlier this year and was staggered to be told that it was not Persimmon’s policy to deal with MPs. However, it was not dealing with or responding to the homebuyers either. I think the House will agree that that is truly shoddy and reflects systemic problems that are incumbent on Government to sort out.

Buying a house is the biggest, most important purchase most of us will ever make. People work hard and save up for their dream home, but too often instead they are suffering huge cost, stress and inconvenience.

[Danielle Rowley (Midlothian) (Lab)]

I thank my hon. Friend for bringing such an important debate to the House. I want to add something about the frustration that her constituents feel, especially with Persimmon Homes. A constituent of mine said:

“Unfortunately, we have had nothing but continuous issues since we moved in. What should have been one of the happiest times for us has been plagued by bad workmanship and appalling communication and customer service.”

They expressed to me that it had had such an impact on their life at what should be a happy time. Does she agree that it is a life-changing moment and that bad house builders are causing such distress to constituents?

[Kate Green]

I absolutely agree. In fact, my hon. Friend’s constituents have been posting on Facebook about some of their experiences with Persimmon, which echo those of my constituents. She makes an important point about the impact these things have on people’s emotional wellbeing. Some of the homebuyers who have contacted me in recent weeks have talked about being forced to take time off work because of mental health problems created by the stress they are experiencing.

As my hon. Friend said, buying a new house is a life-changing moment for many people. In and of itself, it is a big, emotional, stressful experience and is often accompanied by other big life changes, such as leaving the family home for the first time or an enlargement to the family. It is important to acknowledge that that stress is significant, often lasts for a protracted period of time and is exacerbated by the reluctance of developers to engage with people’s problems.

Despite all that, house purchase is one of the areas of consumer law that is least protected in consumer legislation. Property is exempt from the Sale and Supply of Goods Act 1994, meaning that if it fails to live up to expectations, there is no right to reject it and demand a refund. The role of building control inspectors is to ensure that technical standards are met. They are not responsible for monitoring build quality.

What is more, the person carrying out the work—in other words, the developer—has the choice of which building control body to use to carry out the inspection. A confusing landscape of codes of practice, warranty schemes and even, as was reported on the “Victoria Derbyshire” programme, attempts to gag buyers from going public leave people at the mercy of the developers and warranty companies. All in all, as the HomeOwners Alliance says, people get less protection when buying a house than they do when buying a toaster.

What needs to change? The all-party parliamentary group for excellence in the built environment made a series of recommendations—I know the Minister will be familiar with them—in an extremely well researched and comprehensive report in 2016. Earlier this year, the Government undertook a much-needed public consultation on strengthening rights and protections for homebuyers. I welcome those initiatives, and I am glad the Government have indicated their support for the introduction of a new homes ombudsman, but there is no detail as yet or timescale for implementing that.

In the meantime, the multiplicity of codes, warranties and complaints systems makes things very complicated for homebuyers. The Home Builders Federation told me that it is working on a series of industry-wide reforms, including preparing for the introduction of an ombudsman scheme, a standard sales contract, a single code of practice and a minimum set of warranty standards. It hopes to work with mortgage providers so that compliance would be required for a purchaser to obtain a mortgage. That is all well and good, but I just do not think people will be reassured simply by a voluntary, industry-led approach. The Government need to be much more precise and prescriptive.

The HomeOwners Alliance and the all-party group have called for a number of measures that would significantly help to improve the situation for homebuyers. In her response, I hope the Minister will specifically address them. First, they propose a 2.5% snagging retention so that new-build homebuyers retain 2.5% of the cost of the house, which would be held back for six months, until the end of the defects period, where it would be paid over only if the defects have been corrected. That would create a powerful incentive for builders to sort out problems.

The HomeOwners Alliance and the all-party group propose a right for homebuyers to inspect their new home before moving in, without prejudice and with the right to bring their own surveyor or snagger. Builders selling their properties off plan will often refuse to let buyers inspect the property before they take the keys. That practice is unacceptable and should be ended.

Standardised contracts should include the full plan and specification as standard, rather than them being hidden away in an office. The contracts must include standardised terms and have more detailed specification so that builders cannot swap for cheaper materials. Consumer groups should be involved in the development of those contracts, otherwise the fear is that they will continue to be stacked in favour of the developer.

A focus on quality is much needed across the sector through the adoption of International Organisation for Standardisation standards. A review of the inspection and warranty regimes is required to give consumers reassurance that buildings meet standards set by Government and greater clarity about what is covered. Buyers believe their warranties will protect them for up to 10 years, but after the first two years, warranties typically cover only serious structural defects. Again and again in preparing for this debate, I heard reports of warranty companies refusing to take responsibility for sorting problems.

We also need minimum standards for compliance inspections. A single homebuyers code should replace the many different codes, which are so confusing for homeowners. The new ombudsman, funded by the industry—I think that is the Government’s intention—should be the guardian of the code. It should cover after-sales service as well as the quality of the building work.

Developers should not be able to recommend individual solicitors. That point was raised a few moments ago by my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders). Solicitors should be working for the homebuyer, but if they get most of their business via the developer, that naturally creates a conflict of interest.

[Helen Goodman (Bishop Auckland) (Lab)]

I am pleased that my hon. Friend has secured this debate. Does she not think that it might be an idea for the Law Society to look into the behaviour of solicitors who put themselves in the position of having that serious conflict of interest, which is so detrimental to our constituents?

[Kate Green]

I absolutely agree, and I hope the Law Society will take note of that suggestion.

The final suggestion for improvement and reform is for prospective homebuyers to have more up-front information about the property they are purchasing, including whether properties are leasehold or freehold and the implications of buying leasehold property. We have all heard reports of rip-off service charges and ground rents that rise every year affecting leaseholders in our constituencies. The Government need to act to address that scandal. There should be a standardised key facts document, as there is in financial services, such as for mortgages. Also, better information needs to be handed to the consumer once the property has been completed. I hope that the Minister will respond in detail to those suggestions.

Before I conclude, I should say that no debate in this House right now would be complete without a reference to Brexit. Fundamentally, the problems I have described come down to corporate greed, but they have been exacerbated by pressure to build the new homes needed to meet Government targets, which the construction industry is struggling to cope with. Poor quality workmanship has been attributed in part to being forced to rely on inexperienced, unqualified labour.

The Construction Industry Training Board tells me that, in response to the shortage of skilled workers, many developers are relying on EU workers to fill gaps in their sector, including electricians, carpenters and bricklayers. Those are skilled trades, and investment in upskilling the domestic workforce to meet demand is imperative. However, were we simply to turn off the tap on EU labour, the pressures that the industry faces would only increase.

We are still waiting for the Government’s immigration White Paper, although I was pleased to hear the Leader of the House promise in business questions this morning that we would see it next week. There are particular worries in this sector, not least because of the reliance on self-employed labour, yet there is a real lack of information about how the Government’s post-Brexit immigration system will work for self-employed workers. Will there, for example, be the possibility of third-party sponsorship schemes to enable such skilled tradespeople to continue to come in and provide labour in our construction sector? I urge the Minister to press her Home Office colleagues to ensure that the immigration policy that it introduces meets the needs of this crucial sector.

This House cannot sit by while so many of our constituents face such great cost, stress and disappointment when making such a significant investment. The industry needs to get its house in order, and the Government have a responsibility to ensure that it does so. The Minister must tell us exactly what steps she will take to protect our constituents from seeing their dream home become a nightmare. I look forward to her response.

14:09

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

It is a pleasure to see you in the Chair this afternoon, Ms Ryan, presiding over the debate. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) both on securing this important debate and on her excellent opening speech, which covered so much ground. I am grateful to the House of Commons Library and to the Leasehold Knowledge Partnership for their briefings. I will focus on two points: leaseholder tenure, which my hon. Friend mentioned, and, briefly, fire sprinklers.

I co-chair the all-party parliamentary group on leasehold and commonhold reform with the hon. Member for Worthing West (Sir Peter Bottomley) and the right hon. Member for Kingston and Surbiton (Sir Edward Davey). It is good to see our inestimable vice-chair, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), in the Chamber.

Governments of both persuasions have recognised that homebuyers are vulnerable to purchasing a property that does not meet their expectations. The Tories legislated in this area in 1986 and 1993, and Labour did more in 2002. Despite incremental increases in protection, the Government recognise that more needs to be done. As a result, the Prime Minister, and successive Secretaries of State and Housing Ministers, have been making promises on ground rents, the conduct of property management companies, the right to manage, dispute resolution and commonhold. We have had various statements—written and oral—a White Paper, calls for evidence and consultations. The Law Commission has been tasked with a major review of the law and is on the case.

The first anomaly comes with the purchase of the property. I say “purchase”, but as the Library briefing makes clear:

“Owners of long leasehold properties do not necessarily appreciate that, although they are owner-occupiers, they are in a landlord and tenant relationship with the freeholder.”

It might not be clearly pointed out by the solicitor acting for the purchaser. As my hon. Friend the Member for Stretford and Urmston mentioned, that is perhaps no surprise when those solicitors are recommended by the selling developer and, it can be reasonably suggested, manage to juggle a conflict of interest that would be beyond most of us.

My constituency of Poplar and Limehouse has the second highest number of leasehold properties in the country, and had the highest number of leasehold sales in 2015. Whereas the Home Builders Federation says that more than 90% of new homebuyers say that they would buy a new-build home again—somewhat contradicted by the nightmare stories articulated by my hon. Friend—a national survey in 2016 conducted by the Leasehold Advisory Service, the Government-funded advisory body known as LEASE, found that 57% of leaseholders regretted buying a leasehold property. That is quite a contrast.

LEASE has come in for quite a bit of criticism for not doing enough for leaseholders. When Mr Gavin Barwell was Housing Minister, he stated that LEASE should be the leaseholders’ champion, but LEASE still has a remit for freeholders and developers. That looks like a conflict of interest, and I would be grateful if the Minister would give her view of where LEASE sits within the legislative framework.

There is no doubt that some leaseholders are perfectly happy with their homes. However, many are not. The duration of leases can be anything from 99 years, 125 years, 250 years or 999 years. That is quite a range. The Library briefing lists a range of potential problems, some of which were mentioned by my hon. Friend. They include high service charges and a lack of transparency over what people are being charged for; freeholders blocking attempts by leaseholders to exercise their right to manage; excessive costs for building insurance; administration charges; applications to extend lease agreements; and event fees.

I was contacted by a group of leaseholders in my constituency only last night, on the Aberfeldy village estate, complaining that their property management company, Rendall and Rittner, had raised service charges in 2016-17 by 12%, and this year by 6% in a new estate. Residents are also complaining about the poor service for the significant charges that they are paying—nearly £3,000 per year. The Leasehold Knowledge Partnership, the campaigning charity in this area, and the all-party parliamentary group secretariat, run by Martin Boyd and Sebastian O’Kelly, ably assisted by Ms Katherine O’Riordan, have been lobbying the Government on those matters for years.

One of their notable successes early on was getting the Department for Communities and Local Government—now the Ministry of Housing, Communities and Local Government—to revise the figures for leasehold properties. The Department was working on the basis of 2.3 million properties for a number of years. LKP persuaded it eventually that there were many more, and the Ministry now uses the figure of 4.3 million. However, LKP calculates that there are more than 6 million such properties, and the all-party parliamentary group knows which figures we think are likely to be more accurate.

The Select Committee on Housing, Communities and Local Government is in the middle of an inquiry, the conclusions and recommendations of which are keenly anticipated by the sector. There is strong pressure to regulate the sector in respect of property management companies. Some are trying to do a professional job and are observing their own voluntary standards in the meantime—many are members of the Association of Residential Managing Agents. However, many others need regulation that requires them to perform to professional standards. Lord Best has been leading a working group developing a regulatory regime, which the Government have committed to introduce.

[Helen Goodman]

Does my hon. Friend not agree that it sounds as though there has been some serious mis-selling, and the Minister ought to refer it to the Financial Conduct Authority?

[Jim Fitzpatrick]

There are certainly anomalies in the whole system. I think that there are more problems with the actual tenure of leaseholds, which makes buyers vulnerable to a range of things. Developers and freeholders then abuse the power and privilege that they have. Whether that is a matter for the FCA or not is another matter. The Minister might want to comment on that when responding.

My last point about leasehold relates to cladding. After the tragedy of the Grenfell fire, and following a major review of high-rise properties across the country, many blocks were found to be at risk. It is welcome that the Government set aside £400 million for councils and housing associations in the public sector to remove and replace defective cladding in homes and carry out remedial work. However, in the private sector the Government have restricted themselves to encouraging and exhorting freeholders and developers to do the honourable thing and accept the costs. Sadly, that has not worked in all cases. More troublingly, where it is not working, in blocks such as New Providence Wharf in my constituency, companies such as Ballymore are passing the costs on to leaseholders simply because they legally can.

In some buildings, the National House Building Council 10-year warranty has provided protection, as it has in New Festival Quarter in my constituency. Along with the positive decision by Bellway that has already been referred to, that stands in stark contrast to Ballymore. These costs run into millions; most of the residents of these flats are young professionals who are mortgaged up to the hilt, with no capacity for additional borrowing even if they wanted that option.

On 29 November, the Secretary of State published a written statement on the matter, in which he stated:

“I am…writing to local authorities with buildings where the owner refuses to remediate unsafe ACM cladding, to offer them our full support to take enforcement action. This will include financial support where this is necessary for the local authority to carry out emergency remedial work.

Where financial support is provided, local authorities will recover the costs from the building owner.

I am determined that building owners will not evade their responsibilities and that local authorities will have all the support they need to ensure that all high-rise buildings with unsafe ACM cladding are made permanently safe for the people who live in them.”—[Official Report, 29 November 2018; Vol. 650, c. 18WS.]

Further to that statement, I submitted a written question asking

“what legal powers local authorities have to recover costs.”

The Minister for Housing answered:

“The Housing Act 2004 allows local authorities to take enforcement action…If local authorities need to take emergency remedial action but are unable to fund this work up front, we will consider requests for funding which would be repaid once the local authorities recover the costs from the building owner.”

I would be grateful if the present Minister confirmed, first, whether the 2004 Act is the relevant legislation, secondly which section of the Act can applied—perhaps her officials could highlight it for us—and thirdly how much money is being set aside for such contingencies.

Most of what I have to say about tenure relates to points that I have raised before, but I make no apology for raising them again because they still need to be pressed. The Government’s work programme is very welcome, but we want to see it reach a conclusion.

My final point, which is somewhat connected, is about fire protection and the use of fire sprinklers. The Scottish Government are legislating for fire sprinklers in houses in multiple occupation, following a private Member’s Bill, the proposed Social Housing (Automatic Fire Suppression Systems) (Scotland) Bill. The Welsh Assembly has passed building regulations to require an automatic fire suppression to be introduced into new and converted homes, which is due principally to my former Fire Brigades Union colleague, Ann Jones AM. Wales was the first country in the world to pass such legislation: the Building Regulations &c. (Amendment No. 3) and Domestic Fire Safety (Wales) Regulations 2013, which came into effect on 1 January 2016.

In its ninth report of 2017-19, published on 18 July 2018, the Housing, Communities and Local Government Committee recommended:

“Where structurally feasible, sprinklers should be retro-fitted to existing high-rise residential buildings to provide an extra layer of safety for residents. The Government should make funding available to fit sprinklers into council and housing association-owned residential buildings above 18 metres, and issue guidance to that effect to building owners in the private sector.

We heard strong evidence recommending the Government require sprinkler systems be installed in a wider range of buildings, including student accommodation, hospitals and large commercial warehouses. The Government should undertake a consultation into whether it would be appropriate to require the installation of sprinkler systems in these buildings too.”

I would be grateful if the Minister updated us on where the Government stand on the installation of fire sprinklers in homes for vulnerable people, HMOs, buildings above 18 metres and high-rises above 30 metres, and gave us the latest news on sprinkler retrofitting.

There is much more fire protection work that can be done to protect people. The Government are moving towards better protection for people who have leasehold tenure, but that protection cannot come quickly enough. I look forward to the speeches of the Front-Bench spokespersons, especially that of my fellow West Ham United supporter, the Minister.

14:25

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) on securing this important debate. I would like to follow my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) in speaking about leasehold issues that relate to the protection of homebuyers.

An estimated 12.4% of homes sold in Washington and Sunderland West were sold as leasehold in 2016. I realise that my constituency does not have the largest number of leasehold homes—certainly not as many as the constituencies of some of my hon. Friends—but the issue is still important to my constituents. That is why I recently began a consultation on leasehold homes in which I asked constituents to get in touch with me about their experiences. I only launched the campaign three weeks ago, but 30 constituents have already written to me with their concerns, in some cases in detail. I do not have time to go into the details of each, but I would like to share the themes that have become apparent from their emails.

Most homebuyers were not aware what a leasehold was when they purchased their home. There is a serious lack of knowledge about what leasehold and freehold are; I feel that developers have a duty to inform prospective buyers about the difference between the two and what it means for them. As we have heard, solicitors also have a part to play. It makes a person wonder who they act on behalf of—the buyer or the developer—especially when the developer includes free conveyancing as part of the sale. Solicitors should always act in the best interest of their client, who in this case should be the buyer, not the developer. I have to agree with my hon. Friend the Member for Bishop Auckland (Helen Goodman), who is not in her place at the moment, that this abuse should be referred to the Law Society. I hope that the Minister will make that recommendation; I am sure it is in her power to refer dodgy solicitors to the Law Society.

Does the Minister agree that if we are to protect homebuyers, we should educate them to know the difference between leasehold and freehold so that they can make the best decision for themselves and their families? That should certainly be the case for first-time buyers, and financial education lessons in schools have an important part to play in achieving that.

Notwithstanding the issue of educating the population as a whole, there should be complete transparency from very early on in the sale about whether the property is leasehold and what that means. Two of my constituents have told me that they were not informed that their property was leasehold until the very day of signing the contract. Another has told me that they were not aware that their property was leasehold until nearly 15 years after the original purchase—probably when they tried to make alterations or build an extension. Because of the lack of knowledge about leaseholds and the lack of information available to homebuyers, there is a lot of confusion and variation when it comes to buying the freehold.

Many leaseholders were told that they could purchase the freehold at a later date, perhaps when they had saved enough money. However, when some constituents inquired about purchasing the freehold, they found that the goalposts had moved and the price was much further out of reach than they had expected. Some have even been informed that the freehold is now not for sale—in some cases because it has been sold to a third-party company without the leaseholder’s knowledge.

Not only is the cost of buying the freehold out of reach for some of my constituents; so is the cost of ground rent, which can increase year on year. Then there are the admin fees that homeowners have to pay when asking the freeholder’s permission to make changes to their own property. One of my constituents was charged £400 by the freeholder to build a conservatory on their own property. Another constituent expressed great frustration that they are charged £100 for a yes or no decision on basic things, such as replacing a kitchen, bathroom or even a window. It can sometimes take more than eight weeks to hear back on whether that is a yes or a no.

I know that some leaseholders out there listening will now be horrified and will be deterred from making queries to the freeholder, for fear of being charged some of these exorbitant fees. Too many leaseholders are locked into a state of being regularly over charged by freeholders, being unable to afford their ever-increasing ground rent, or never being able to afford to buy their freehold due it to being linked to some sort of escalator that was hidden in the small print of the contract, which their solicitor never pointed out to them. I share the concerns of my constituents who feel like they have been ripped off by leasehold contracts and I call on the Government to launch an inquiry into the scandal as soon as possible.

14:30

[Justin Madders (Ellesmere Port and Neston) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) on securing this extremely important debate and on the way she managed to cover a whole range of issues. There are many aspects to this issue. As my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) said, I am vice-chairman of the all-party parliamentary group on leasehold and commonhold reform. I pay tribute to him and the hon. Member for Worthing West (Sir Peter Bottomley) for the work they have done, ably aided by the Leasehold Knowledge Partnership, in raising the many issues in many debates here.

The title of the debate is “Protection for Homebuyers”. The truth, as we have heard, is that there is little protection, if any. We have a system based on the historic principle of caveat emptor—buyer beware—which is a principle I often hear quoted back at me when I raise concerns about some of the more insidious practices developers have adopted over recent years. Buyers should beware, because caveat emptor relies on a buyer and a seller having equal bargaining power, and that is simply not the reality in 2018. We have a huge shortage of housing, there are significant barriers for buyers in getting on the housing ladder and there are a handful of huge companies responsible for the vast majority of housing delivery.

The situation has been exacerbated by the Help to Buy equity loan scheme, which offered support to first-time buyers for new-build homes only. That led to an effective monopoly being held by some developers. If someone wanted to purchase their first home in the area where they grew up, the only choice would have been to visit the sales office of an individual supplier.

[Kate Green]

Does my hon. Friend agree that it is not just individual homebuyers who are being ripped off by some developers, but the taxpayer, because it is public money, through the Government’s Help to Buy scheme, that is helping to boost their profits?

[Justin Madders]

I absolutely agree. The reliance on this small group of developers has been a very poor deal for the taxpayer, and it is against that backdrop that the leasehold scandal has emerged. Once-trusted household names such as Bellway, Persimmon, Redrow, Taylor Wimpey and Countrywide acted in, I believe, a deliberate way to exploit the circumstances and rip off thousands of people around the country—and the taxpayer, in the process.

For no other reason than profiteering, houses in many areas gradually began to be sold on a leasehold rather than a freehold basis. Punitive permission fees—where a leaseholder is forced to pay a significant sum for everything from putting up a shed to changing a carpet—were hidden in the small print of the leases. Service or maintenance charges were then added, charging leaseholders for the same services that they are already paying council tax for. If that was not enough, the developers then added onerous clauses, causing the ground rent in many cases to periodically double, taking them from an initial modest sum to thousands of pounds after a few decades, rendering the properties unmortgageable and unsellable in the future. The ground rent is, of course, being levied for absolutely nothing in return.

When purchasers query the leases on the properties, they are offered a range of scripted reassurances, being told that the properties are “virtually freehold” and that they would have first refusal to buy out the lease. In almost every case, the lease is then sold without the knowledge of the person actually living in the home, to become an income stream for a network of opaque investment companies. People are then told they can purchase the freehold of their own home only if they are prepared to offer tens of thousands of pounds.

As we have heard, purchases of these properties take place in an extremely tight and completely artificial timescale, imposed by the developer through a hard-sell approach. To compound the unequal relationship between the parties to the transaction, a variety of pressure and incentives are used by developers to encourage the use of a solicitor on their own panel. While the solicitor of course has a duty to act in the interests of the purchaser, the reality is that when hundreds of cases are being provided by the developer, that independence is inevitably put under some strain.

My constituent, Katie Kendrick, has helped to lead an incredible campaign on behalf of leaseholders around the country against this scandal, and I pay tribute to her for everything she has done to bring it to the attention of the public. Her own case is a textbook example of the kind of issues we have talked about. In July 2014, with her husband, she bought what transpired to be only the lease to her home from Bellway, a company with a revenue of more than £2.5 billion last year. It was bought through the Help to Buy scheme, and they had only 28 days to complete the purchase following payment of the £500 deposit to reserve the plot. Because of this developer-imposed and completely arbitrary timeframe, Katie and her husband were pressured into using the Bellway-recommended solicitors.

They were informed during the process that, after two years, they would have the right to buy their freehold without any problems and that it would cost in the region of £2,000 to £4,000. Less than two years later, in February 2016, they received notification that the freehold to their home had been unilaterally sold to Adriatic Land 4 (GR1) Ltd. When they inquired whether they could purchase the freehold, they were quoted an amount of £13,350.

I have concluded that Katie’s experience was deliberately manufactured, because it is simply not feasible for the exact same actions to have become standard practice across a range of developers throughout the country. If this situation, as I believe, was deliberately manufactured to exploit thousands of people up and down the country, what is the Minister going to do about it?

If the situation is so serious and inequitable that it should be banned from ever occurring in the future, as is the Government’s apparent policy, how can she justify taking no action to help those people who have already been affected? What examination has been undertaken of the Government’s role in the leasehold scandal? Does she accept that Help to Buy—a scheme created with good intentions—not only helped to create a monopoly position that was exploited, but has also subsidised the perpetrators? What is going to be done about that?

The Housing, Communities and Local Government Committee investigation into these issues is extremely welcome, and I would urge anyone who has not yet done so to look at the evidence provided to date. Some of the responses from developers are completely incredible, in the literal sense. All the developers were unanimous in their support for ending the leasehold scheme that they have already inflicted on thousands of people around the country. Taylor Wimpey told the Committee that when the doubling ground rent issue

“came to our attention...we made a very quick decision to convert the homes that we sell to freehold.”

That implies that until that point they were unaware of the basis on which they were selling their homes.

When Bellway was asked why it sold the freehold off to a third party rather than to the people actually living in the property, their chief executive, Jason Honeyman, replied:

“It is how we have always operated as a business. I am sure that is not the answer you want.”

A member of the Committee pressed him further on this point:

“I am asking why your customers do not get the chance to exercise the opportunity to buy their freehold. You are selling the freehold out from under them without their knowledge.”

His response was simply:

“Yes, we are.”

We know from many Bellway customers that they were specifically told by the sales staff they would be able to buy the freehold, yet here is the chief executive admitting that they have always sold them on to third parties. That, more than anything, shows that when I first called this scandal the payment protection insurance of the housebuilding industry, I was right to do so.

Although the initial response to this emerging scandal from the Government was the right one and was positively received by leaseholders, there is a huge amount of frustration at what are perceived as broken promises. Leasehold houses are no longer to be completely banned, as was promised by the Government. Ground rents will not be reduced to a peppercorn, but to £10, which creates an asset and again amounts to a broken promise by the Government. Will the Minister explain why there has been this backtracking from removing ground rents altogether to having a minimum cost? For all those people already trapped in leasehold properties more than two years on from the scandal coming to public attention, we have little more than warm words from the Government, and no action.

One of the reasons for people’s anger is that, although obscene bonuses have been awarded to Persimmon executives, the bulk of the profits have come from the taxpayer through the Help to Buy scheme. The Government need to accept that they are not simply a bystander, but a financer of the scandal. They cannot simply watch from the sidelines as our constituents continue to be ripped off while a handful of predators generate profits. It cannot be right that the companies that are guilty of this industrial-scale rip-off are the very same ones that we will end up relying on to get us out of the country’s very real, very damaging housing crisis. There seems to be an over-reliance on the market to deliver the new homes that we desperately need. I have seen very little evidence to suggest that developers will act responsibly.

As the leasehold scandal shows, developers have become ever more adept at squeezing cash out of homeowners. Another way of doing that is through the provision of grounds maintenance and other communal services. It seems that the idea of the developer paying the local authority a commuted sum to cut the grass and maintain common paths has had its day. I am not clear whether the blame for that lies with local authorities for asking for too much or with developers that are not prepared to cough up enough funds in advance. I am sure they will always blame each other. The net effect is that more and more homeowners now have, in effect, to pay twice for the maintenance of open spaces—once through the management fee and once through their council tax.

Of course, council tax pays for lots of things, but something as visible and obvious as grounds maintenance leads people to ask why they face a double-whammy. My suspicion is that developers will always be tempted to save themselves the expense of an up-front payment to the local authority by letting their customers pay further down the line long after they have fled the scene. It is not only a double payment; it is also inefficient and lacks accountability. If the grass is not cut on the verges in most parts of my constituency, either I or a local councillor will hear about it and respond. It is not that easy to get a response from a management company.

I want to say a few words about the difficulty in getting developers to comply with their legal obligations once they have completed the bulk of the work. Yet again, the name Bellway crops up. Although it finished building the properties on an estate several years ago, the roads have yet to be adopted by the local authority, because they are not yet up to highway standards. Years of wrangling and paperwork followed the work. We all know about the significant cuts in funding that local authorities have experienced, and yet they have to waste their precious resources chasing developers that are reluctant to face up to their responsibilities.

Another example of that in my constituency is in the Mostyn House development in Parkgate. Originally, it was a boarding school in a listed building. Once the school shut, the site was an attractive one for developers. It is now an impressive mix of new builds and apartments woven into the fabric of the old school, but it suffers from one major disadvantage: although some people have lived there for five years, it still does not have planning permission. The reason for that is that the revised plans were submitted halfway through the redevelopment. Despite the best efforts of the local authority enforcement officers, the developer, PJ Livesey, continually dragged its heels, and as a result there is still an outstanding long list of works.

Our Front-Bench spokesman, the hon. Member for Great Grimsby (Melanie Onn), is not someone who goes around fishing for compliments, but she and the shadow housing team are very engaged on these issues. I hope they continue to develop a full suite of important policies that will tackle many of the injustices we have heard about.

The net effect of all this is that there is no protection for homeowners. Once the developers have left town, they show little interest in keeping to their legal responsibilities. Worse, they continue to market their properties as a revenue stream for third parties.

As my hon. Friend the Member for Stretford and Urmston said earlier, why can we not have a retention scheme for snagging? Part of the purchase price could be held by an independent third party, only to be released when everyone was satisfied that things had been resolved. We do that with deposits for tenancies, and we are talking about something much more significant—sometimes a once-in-a-lifetime investment. People deserve more protection than they currently get. The cowboys in the developer sector need to be consigned to the history books.

14:43

[Diana Johnson (Kingston upon Hull North) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) on securing this debate and on the eloquent way in which she set out her case. She and other hon. Members showed that there is a major problem, and I hope the Minister will address it in her remarks.

When my hon. Friend said that she was seeking a debate on this issue, I immediately said, “I would love to be part of that debate,” because for the past eight or nine years I have been having problems with house builders in my constituency. I have been most struck by the fact that, of all the casework I deal with, they are the most difficult group to get a response from.

My hon. Friend said that Persimmon has a policy of not dealing with Members of Parliament, and that is certainly my experience. Despite numerous letters and telephone calls, it was only when I sent it a message saying that I was about to stand up in Parliament and make very derogatory remarks about its failure to respond that I even got the courtesy of a letter. It then took many months to get a meeting—I got one after, I think, five years of trying. That part of the house building community really needs to sort itself out.

We have heard a lot about the leasehold scandal. We have heard about snagging with new properties, and homeowners’ problems in getting that sorted out. I want to talk about two issues that have been a problem for me in my constituency. As a background, I should say that Hull is one of the most successful Help to Buy areas of the country. Lots of my constituents have scrimped and saved to get together the money to buy their home, and they are really proud that they have been able to do that. They are then faced with developers who, once the house has been sold, seemingly wash their hands and think they have no responsibility for sorting out the problems they have left behind. My constituents are left high and dry.

I want to give two examples. The first involves Harron Homes and Persimmon Homes, which developed a housing estate around Whisperwood Way in my constituency. The estate was completed in about 2007, but it took me and the residents four years of campaigning to get the road surfaced by the developers and adopted by the local authority. Of course, that should have been done before the residents moved in. It was unsafe, it damaged people’s cars and it was dangerous to children and the elderly. There were also problems with Yorkshire Water completing the sewerage works. Harron Homes dragged its feet to get the road surfaced.

It is clear that developers, utilities and, in some cases, local authorities, should have stronger responsibilities placed on them to ensure that issues such as that do not drag on for four years. The residents have to pay their council tax, their water rate bills and everything else, but there is seemingly no mechanism to ensure that the problems they face are dealt with.

While all that was happening, I was approached by some more residents from Whisperwood Way. They came to me because they had moved into properties in Leadhills Way that were built right up to the edge of the Sutton Cross drain. Those families told me that their homes had been built by Persimmon in 2006, and they were having two problems. The first was that the homes were built too close to the drain, which caused their gardens to sink and their fences to collapse into it. The second was that the pathways on the estate were not surfaced to a council standard. A local resident said:

“My children are extremely eager to play on their garden toys but I am reluctant to let them do so because of the fear that the fence and land near to it will simply fall/slip down into the drain if they so much as go near it. Our garden (and I’m sure several of our neighbours’ gardens) are extremely fragile due to erosion caused by the ‘drain’ and the tractors who ‘dredge’ the sides by simply pulling the ground away. I feel like myself and my children are living like prisoners. I appreciate that this sounds extremely dramatic, but this is how this issue is making us feel. It’s especially hard during the school holidays when both of my children are off.”

The key issue in that case is that there was no way for the council to take any enforcement action against Persimmon to compel it to sort out the problem that had developed on the land very close to the drain that it had built houses on.

If residents had someone—an ombudsman, for example—to turn to, backed by real powers to compel developers to put right problems, such matters could be sorted out, without adding to the years of stress and misery, which my constituents are still going through. Although finally, after five years, we got Persimmon to a meeting where we agreed that it would carry out a report into what was happening, proper resolution of the problem at the back of those houses is still lacking.

[Danielle Rowley]

My constituency of Midlothian is the fastest growing in all Scotland, and every town and village has a huge new development. That is the same for a lot of areas throughout the UK, which is why it is such a big issue. With huge new developments, although there are also good developers, a lot of problems come to the fore. Such issues need to be tackled now as we are building on a scale we have not seen in a long time. I hope that the Minister will take note of all the fantastic contributions today, because this is an urgent issue that needs to be dealt with.

[Diana Johnson]

We also want to see more house building, so we need to get this sorted out and to get it right.

My constituents have asked me to say that they feel that the way in which a company such as Persimmon has behaved—with disregard for their problem for so many years—is an utter disgrace. Persimmon should be facing massive fines for its behaviour, not giving out the massive bonuses to which many hon. Members have referred.

As I started by saying, in Hull we have one of the most successful Help to Buy schemes. Persimmon has benefited, as did the former chief executive Jeff Fairburn with much of that £75 million in pay, shares and bonus that he pocketed. He has gone, obviously, but his successor at Persimmon, David Jenkinson, is getting about £40 million from the bonus scheme. That is not acceptable, and I hope that the Minister will comment.

In conclusion, my constituents’ issue has gone on for far too many years. It needs to be resolved. I hope that we see progress on an ombudsman with some real powers on the side of residents who have done their best—they are aspirational and want to buy their own homes—but find themselves in a nightmare scenario in which companies can simply ignore them and their problems.



[Mr Virendra Sharma in the Chair]

14:52

[Liz Twist (Blaydon) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma.

I thank my hon. Friend the Member for Stretford and Urmston (Kate Green) for securing this important debate. It is not before time that the House has had the opportunity to turn to the issues faced by homebuyers, in particular the buyers of new-build homes. At a time when we all recognise the need for substantial home building, we perhaps give too little thought to what happens after the homes are built, bought and sold, and to what happens to the buyers.

My hon. Friend has already spoken about the problems faced when defects are found after purchase and the difficulty of getting a response, let alone a solution, from the house builders. I can certainly echo her concern from experience in my constituency, but I want to look at a couple of other issues that also affect my constituents. The first is that of the completion and adoption of new housing estates. It has very much been a preoccupation for me, not just as an MP but as a local councillor in the years before that.

A new Barratt/David Wilson Homes and Persimmon Homes development was started more than 10 years ago. I will not name it because the residents have mixed views on whether that would be a good thing. Some householders were already living on the site when development stalled in about 2011, because many would-be buyers were unable to find mortgages after the banking crisis. It picked up again, however, and the last house was sold nearly two years ago—most of them long before that.

Families moved in with the promise of play areas for their children, but it took years for them to appear and, as many of those who bought early said, their children were now grown up and not interested in play areas—although, thankfully, the many younger children on the estate are. Buses that were promised to take people from the estate to the local bus interchange, avoiding the need to use a level crossing, did not materialise. The council proposed a price to adopt play areas and public open spaces, but the developers thought the price too high and opted to go with a private management company. Even now, however—one of the companies, Barratt’s David Wilson Homes, has been updating me—they are still arguing about the cost and arrangements of that contract, meaning that residents are concerned about maintenance and safety into the future, and of course about the appearance of their estate.

A spine road runs through the estate, in a loop from one entrance to the other, but it was not until this year that work started on completing the surfacing of the road and installing kerbs for drainage. Checking that latest update I received, I find that the date for completion of the work has been pushed back to January ’19. Residents are very concerned about that, with lots of young children on the estate and cars flying about on a very uneven surface. They are worried about damage to the cars but they are much more worried about damage to the children, who until recently had nowhere else to play. Furthermore, no fees have yet been paid to the council for the adoption of the roads, despite its best efforts, and street lighting is not finally sorted out. I could go on—but we get the picture.

We—residents, local councillors and me—have not sat back and let that happen. We have met with the developers, looked at enforcement action and complained like hell. We even had a liaison committee with the two developers, to work through all the issues, but, sadly, despite hours of talk, everything seems to come down to money and the developers not wanting to spend the money on the estate to complete it.

[Mrs Hodgson]

My hon. Friend is making some valuable points that have not been mentioned so far. The issue of unadopted roads came up on a new-build development in my constituency, especially with regard to an area where shops, the takeaway, restaurants, pubs and things have been built. The roads are unadopted, so people can just park wherever they like, creating huge issues with knock-on effects, such as on safety, which she has mentioned. I raised this in an Adjournment debate on the Floor of the main Chamber, and it would be great if something came out of this debate regarding unadopted roads on new-build estates.

[Liz Twist]

My hon. Friend reminds me of something else that I should have mentioned: at the time of buying the properties, my homebuyers were told that there would be a shop, a pub and a bus, but none of those things has come to pass. Even while we were telling residents that that was not going to happen, new buyers towards the end were still being told that there was going to be a pub on site—all the residents already knew that that was not going to happen. That is an important point, and she made another one about safety. As we all know, parking on new developments is a huge issue, with residents feeling it is insufficient and with the dangers that that can present.

[Mrs Hodgson]

On that very point, I am grateful that my hon. Friend has given way, because I do not think that I made myself clear—though she probably knew what I meant. Because the roads are unadopted, there are no yellow lines. On the roundabouts, articulated lorries can pull over to park, and no one can move them on because there are no yellow lines or anything—the roads are all still unadopted. That is a major problem in the whole area. Some measure should provide for temporary adoption of the roads for safety reasons, even while the estate is still being built.

[Liz Twist]

Thankfully, we do not have articulated lorries—we do not have a shop on the estate either—but there is a real problem of people parking wherever they want to because there are no lines. That is one of the issues we have talked about over the years.

It cannot be right that developers can start estates, build homes and sell them all, and then lost interest and leave them. We need measures in place to allow us to tell developers, “You must complete this work by this timescale and to an adoptable standard.” I know many residents on the estate; they are hugely frustrated by the process.

The second issue I wish to raise, which has been raised already, is future adoptions and maintenance of new developments. With local authorities seriously cash strapped, many are looking at policies that increasingly involve private management companies taking on maintenance of grounds and roads for a service charge. It is vital that there are clear and transparent ways in which those management companies are accessible and responsive to residents, and that residents have a voice in the condition of their estate. It is not good enough just to pass over a lump of money for someone to maintain part of an estate in perpetuity, with no way of redress thereafter.

That brings me on to the third issue I wanted to mention: leasehold. Service charges have some common features with leasehold. My hon. Friends the Members for Poplar and Limehouse (Jim Fitzpatrick), for Washington and Sunderland West (Mrs Hodgson) and for Ellesmere Port and Neston (Justin Madders) have talked quite a bit about leasehold issues so I will not go over them all again, but I want to raise two points: service charges and the use of developers’ solicitors, either through encouragement or referral fees.

My hon. Friend the Member for Ellesmere Port and Neston referred to the inquiry of the Housing, Communities and Local Government Committee. As a member of that Committee, I heard from some leaseholders and other witnesses. Service charges are particularly important to leaseholders because of shared areas, but they affect new homebuyers, too, under the new arrangements where management companies may be involved in maintaining estates. It is important that people are clear about what their rights are and that they have redress when things go wrong. The problem of developers encouraging people to use their nominated solicitors affects both freeholders and leaseholders.

The residents on the anonymous estate that I mentioned and the leaseholders who gave evidence to the Select Committee said that they were not informed of important issues about their properties or their estate, whether they were planning issues, were about the leasehold or were about increasing ground rents. For leaseholders, that can have particularly long-reaching effects. Not being told about ground rents and service charges or the way they increase means that some buyers of first homes are trapped in what was their dream first home, because they have a growing family and need to move. The Select Committee heard evidence that a number of people are trapped by increasing ground rent and the wariness of mortgage lenders to lend on those properties. Those people are especially affected, having been told they can buy the freehold in future, when they find out it has been sold on to developers at extortionate costs. That cannot be right.

It cannot be right that referrals fees, arm twisting or inducements such as new carpets or garden landscaping can be used by the seller to encourage the purchaser into using their preferred solicitor. There are codes of practice that solicitors are bound by, which should protect buyers, but the number of people who told us that they were not aware of conditions shows that something is going wrong. The system has to be seen to fair and right. I hope the Minister will address that issue.

Homebuyers deserve protection and better ways of effectively addressing their concerns, whether they are freeholders or leaseholders. The proposed changes that my hon. Friend the Member for Stretford and Urmston told us about would be helpful. However, as she said, voluntary codes are useful, but much more rigorous action needs to be taken to protect homebuyers. I hope the Minister will assure us that homebuyers will get the protection that they so need.

14:59

[Sir Peter Bottomley (Worthing West) (Con)]

I will not speak for all that long. I thank the hon. Member for Stretford and Urmston (Kate Green) for introducing the debate and those who have already spoken on leasehold and other issues.

In West Durrington, where 700 homes are being built, Chamonix Estates, working for Taylor Woodrow and for Persimmon, have some questions to answer from the residents. Although it is probably better not to use today to put those on the record in detail, if it does not solve the problems, I will.

What we are talking about has happened in the social sector, too. When I first became a Member of Parliament, I represented part of the Ferrier estate in Kidbrooke, where the Greater London Council had managed to build 5,000 homes, but where there was no pub, post office, church or chapel, and the sewerage system worked the wrong way rather than the right way. It was demolished within 20 or 30 years. Things were almost unbelievable until we heard the cases of some residents represented by Members of Parliament here in the debate.

I have a question for the Minister; I am sorry to put it to her without notice, so perhaps an answer by letter to Members would work. If she or her officials listened to “Money Box” on BBC Radio 4, they would have heard that if landlords charge leaseholders directly, there is no VAT, but if they charge them through a managing agent, there is VAT. Even taking the inputs into account, there is still a charge of between 15% and 13% extra. That needs to be sorted out before or after we leave the European Union. Apparently, it is a European Union requirement—I do not know whether that is true. It seems vital that we should take the opportunity, rather than having artificial arrangements, to make it plain that if the leaseholder pays the service charge there is no VAT, whether they pay it through a managing agent or directly to the landlord.

We understand that officials in the Department have to work on leasehold issues with greater width and depth than they did 10 years ago because, then, they did not know how many residential leasehold properties there were and it was not anticipated that so many more would be built. If the majority of homes are leasehold, we have to put the majority of our effort into ensuring that new leaseholders of flats, old leaseholders of houses and flats, and everyone else, get a fair deal. The Prime Minister talks about justice for all—justice for those leaseholders should be a big part of that.

15:07

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Sharma. I congratulate the hon. Member for Stretford and Urmston (Kate Green) on bringing not only a very important but a highly interesting debate to listen to, which has included various Members around the Chamber. It is very challenging to sum up the debate because there have been so many powerful points made by so many hon. Members, but I will do my best to pick out some of the key points as I saw them.

The hon. Member for Stretford and Urmston talked about the unhappy homebuyer experience and the impact that has on people when they have made a huge investment in their future. She also mentioned the number of problems that occur, particularly with new homes. Giving due praise to good home builders is important, because there are many. I am very fortunate: in the highlands, due to the scale—it is probably not the same scale as in other urban areas—the home builders are very good in general. They are not without problems—there are still issues, which I will talk about later. The hon. Lady was right to pick out those large developers who are getting away with some of the things she described.

The hon. Lady said that buying a home was one of the big, significant life changes, but that buyers were having to buy their houses more or less without having seen the final build. She also talked about the introduction of the new homes ombudsman. Like her, I would like to know more about what that will entail. It would be useful if the Minister covered some of those points, albeit she may want to do so briefly. The hon. Lady was right also to highlight the dangers of a voluntary approach when there is clearly such a widespread problem in house building.

The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) mentioned issues for leaseholders as opposed to freeholders, and went on to address issues with ground rents and service charge hikes. I will talk later about property factoring charges. Those are important issues for people. Importantly, he also mentioned fire safety and sprinkler legislation, and pointed out the moves to tackle those issues in both Wales and Scotland.

The hon. Member for Ellesmere Port and Neston (Justin Madders) mentioned shocking additional charges that homebuyers uncover after purchase. That is clearly wrong. No one should be put in a position where they buy blind and suddenly find additional costs coming out of the woodwork—literally, in this case.

It is important to highlight the serious issue of solicitors’ conflict of interest, which a number of Members raised. It makes no real sense for the system to exist in that way. Clearly, there has to be segregation so people have confidence in the legal process when they buy a new home. The hon. Gentleman talked about people being pressured to use a solicitor from a panel due to purchase time pressures. Consumers should not be put under pressure when making a purchase of such magnitude in their lives. He challenged the Minister on those issues. He also raised the issue of paying maintenance charges twice, which I will come to, and suggested that the Minister might want to look at a retention scheme.

The hon. Member for Kingston upon Hull North (Diana Johnson) told us, shockingly, that she had waited five years for a meeting. That is disgraceful, and she rightly named and shamed Persimmon for doing that. She mentioned the issue of sinking gardens, which sounds horrendous, and one householder’s fear that her fence and land would slip into the drain, which the council could not take enforcement action on. Since Persimmon was mentioned a number of times, it is important to touch on the obscene bonuses paid to its chief executives. Surely, such grandiose remuneration is unacceptable.

Other hon. Members talked about completion and adoption, promises that are made about facilities and the scary arguments that come later with developers about costs. It is common for problems to occur a couple of years after the purchase price is paid and people move in, and for the developer either to be nowhere to be found or to argue. That is simply not good enough.

We do not know what consumer protection measures will be proposed—as was highlighted, they have yet to be published—but they are unlikely directly to affect Scotland because of the devolved nature of housing. However, that does not mean they will have no effect, so I am keen to see what comes from them. For a number of years, homeowners have had issues with property factors. The UK Government recently consulted on the issue as part of its implementation of reforms to the leasehold system, which is very different.

The Scottish Government brought forward the Property Factors (Scotland) Act 2011, which means that since 2012, registration has been compulsory for property factors operating in Scotland and they have had to follow a code of conduct outlining minimum standards. There is also a new dispute resolution system. The homeowner housing panel, and now the housing and property chamber of the first-tier tribunal for Scotland, have allowed homeowners to challenge property factors in Scotland.

[Jim Fitzpatrick]

Property factors being property management agents in Scottish speak, yes?

[Drew Hendry]

I am grateful for that translation from the Scots.

A test case was brought by Mr Michael Marriott, a householder in Clackmannanshire, against Greenbelt Group in 2015. He took his case to the Lands Tribunal for Scotland and won, because it was found that the deeds were not compliant with the legislation. Perhaps that is a learning opportunity for the UK Government. Where there is a clear breach, homeowners can pursue a course to get factoring clauses taken out of their deeds altogether.

That has made a big difference, but it would be foolish to say it has cured all the problems. There is much more work to be done in Scotland, including on issues with shared factor arrangements on private housing estates. There is one such estate in Milton of Leys in my constituency. One of my constituents was advised that his factoring bill had risen from £100 in 2005-06 to £173 in 2017-18, with no explanation—it was just applied to the costs.

[Kate Green]

The hon. Gentleman is making a really interesting point. I know from personal family experience that one of the difficulties with factors is that those homeowners are often older people who live in specialist or sheltered estates. Does he agree that it is particularly important that any regulation and legislation attends to the needs of more vulnerable homebuyers?

[Drew Hendry]

I am very grateful for that intervention. That is an important point. Lots of people are in a vulnerable situation. They tend to be elderly people and people with disabilities, but it is important to recognise that there are other vulnerable groups, such as the young and inexperienced, who may not be able to think about entering into a contract in the same way as other people. Some people have found it difficult to get recourse when work is not done to the standard they expect, and others have found that maintenance of communal landscaped areas is ignored completely.

As well as introducing measures to protect homeowners, the Scottish Government are working to ensure that those who aspire to home ownership are able to achieve it. I will mention a specific programme that the Minister may find it useful to hear about. Ensuring that everyone has a safe, warm and affordable home is central to the Scottish Government’s drive for a fairer and more prosperous Scotland. Since 2007, they have delivered more than 80,000 new homes—as a proportion of the population, that is a third more than in England and three quarters more than in Wales. More than 28,000 households have been supported through the Scottish Government’s low-cost initiative for first time buyers scheme and the Help to Buy programme. Nearly 20,000 houses have been built for affordable home ownership.

The Scottish Government have also introduced a new land and buildings transaction tax relief for first-time buyers, which will raise the zero-rate threshold for that group to £175,000, benefiting all first-time buyers in Scotland by up to £600. That reform means that more than 85% of those who have bought a property worth £40,000 or more since April 2015 have either paid less tax compared with stamp duty land tax, or no tax at all.

Affordable housing to buy is very important for my constituents and across Scotland. A recent survey found that increasing numbers of young people want to live and work in the highlands and islands. In 2015, when the survey was previously carried out, many young people cited poor connectivity and a lack of housing as barriers to wanting to stay.

Working together is delivering results. Mid-market rent projects are delivered through the city deal investment in a partnership between the Highland Council, the Scottish Government and house builders. Through partnerships with Highland Housing Alliance and others, young people who cannot yet afford a mortgage are given the opportunity to rent a home at a mid-market rate to allow them to save for a deposit and buy the property after a number of years.

I want to quote my constituents, Sally and Ruaridh, who have just moved into their new home this week through the Highland Housing Alliance mid-market rent initiative. They will be able to buy the property in five years, after paying a mid-market rent that allows them to save. Sally said:

“This move has been transformational for me and my partner. We are now in a secure home where we hope to start a family one day, and we’re able to save hundreds more each month to help us towards a deposit for a mortgage.”

The Raining’s Stairs development in my constituency in Inverness, which includes mid-market rent properties, won the award for the best residential development of under 70 homes at the Inside Housing development awards in London last month, so it is appropriate to mention it in this debate. Some 55% of Help To Buy recipients were aged 30 years or under. The Scottish Government recently announced a further £100 million to extend the scheme by two years to March 2021, to help even more people into home ownership.

The debate has been interesting. I wanted to touch on points specific to Scotland, but I will underline that some of the voices we have heard talking this afternoon about the costs incurred by constituents and homebuyers and about the activities of house builders have been eye-opening. I hope that the Minister has had her ears open and is willing to proactively address the many deep concerns that people have. I look forward to hearing her response.

15:21

[Melanie Onn (Great Grimsby) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I thank my hon. Friend the Member for Stretford and Urmston (Kate Green) for securing this important debate. I commend the exceptional and knowledgeable contribution that she made in opening the debate, which has taken us far beyond the debate’s title. The contributions have been wide and varied, but they all fall within the subject of justice and fairness for people buying their own homes.

If we are to end the housing crisis, we need to build hundreds of thousands of new homes every year, but what is sometimes lost in a number-focused, target-based approach to house building is the issue of quality. The desire or requirement to complete at speed overshadows the checks and details that people buying brand-new homes expect to have within the system of sign-off before properties are exchanged. Unfortunately, far too many new homes fail to live up to the standards that homebuyers should be able to take for granted.

A YouGov survey commissioned by Shelter found that almost all homeowners of recent new builds experienced some problems when moving in, with more than half of new homes having major faults. As a consequence, there is a crisis of confidence in the quality of new homes, with only two in 10 people thinking that new homes were built to a higher standard than old ones, and only three in 10 preferring to live in a new home rather than an old one.

My hon. Friend the Member for Stretford and Urmston made some alarming statements in her contribution. There was a higher level of danger in some new homes because of poorly installed heating or electrics; a lack of security when front doors did not close; and a public health risk when drainage from bathroom facilities was not properly fitted. We surely cannot consider that acceptable in this day and age, so there is a clear quality problem within some new homes. The worst of it is that homeowners experiencing difficulties suddenly find that they have limited protections and guarantees regarding their new home’s standard.

All political parties accept the need to significantly increase house building output in this country, and that brings with it an urgent need for a more accountable system to check on new builds and restore confidence that buying a new home does not come with a Pandora’s box of problems and headaches for owners. That includes the issue of leasehold, which my hon. Friends the Members for Poplar and Limehouse (Jim Fitzpatrick), for Washington and Sunderland West (Mrs Hodgson) and for Ellesmere Port and Neston (Justin Madders) dealt with in great detail. My hon. Friend the Member for Poplar and Limehouse said that the Government recognise that there are gaps and failings in legislation relating to leaseholders, but no concrete action has yet been taken. I am sure he feels the Government owe it to his constituents to get it sorted.

My hon. Friend the Member for Washington and Sunderland West talked about the lack of information about leaseholds. There is a real lack of knowledge and understanding, so perhaps the Minister will set out what she is doing to make sure that people are aware of their situation when they buy a home. Clear, concise information is needed. When people buy a new home, the amount of information they are sent is enormous, so how can we make sure that leasehold information is at the top of their list of concerns and is addressed and explained properly? My hon. Friend also highlighted the purchase of freeholds. The price is often set far out of the reach of individuals, or the freehold is sold to third parties.

There is also the issue of rip-off fees charged by freeholders. The Minister has overseen changes to rip-off fees in the rental sector to some extent. She took on board many of my comments in the Tenant Fees Bill Committee, and I thank her for that, but when will she take further action? If rip-off fees are not acceptable in the rental sector, we cannot say that they are acceptable in the home ownership sector.

My hon. Friend the Member for Ellesmere Port and Neston talked about the rip-offs around ground rents rising to extortionate levels, making homes unmortgageable and unsellable. He described the valiant efforts of his constituent, Katie, who led a campaign on behalf of leaseholders around the country to highlight that scandal in all our minds. There is an opportunity to take retrospective action, but the Government have been reluctant to talk about it. I have no doubt there are complications, but, as my hon. Friend said, this matter is the PPI of the homebuying and leasehold sector. If we can take action on PPI contracts, why can we not take action on those leasehold contracts?

The creation of a new homes ombudsman is welcome news for consumers, but when can we expect to see that ombudsman in action? Precisely what powers will they have? The Government must press ahead with greater enthusiasm to give homebuyers the sense of security they need when buying a new-build home. Despite a home being the most expensive and important purchase that most of us will ever make, homebuyers too often do not enjoy the same protections that we enjoy when we buy even the most basic everyday goods and services. If somebody bought a book with missing pages, a box of chocolates with their fillings missing or a TV that did not produce a picture, they would be able simply to return the product for a refund or a replacement. But when it comes to a new house, consumers are left to navigate a complex and inadequate warranty system, the whims of developers and the small print of warranty providers. When problems arise, new homebuyers have to go through toil and stress simply to get what they paid for and what they should rightfully be entitled to as consumers.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson)—a democratically elected Member of this House who is of some civic standing—said it took her five years to get a meeting with a developer. Developers must understand the potential for embarrassment when being held to account publicly in this place. It should not take a Member of Parliament to have to address this matter. It should be simple and straightforward for an individual to get action from developers, and it certainly should not take my hon. Friend five years to get an audience with these incredibly important people in the developer sector.

[Helen Goodman]

My hon. Friend on the Front Bench is making a strong speech. Does she not agree that the large number of cases presented today and previously shows that the situation is not accidental? We are talking not about one or two mistakes, but about a deliberate strategy by the developers to set things up so that they have all the cards and the homeowner has no rights.

[Melanie Onn]

My hon. Friend is right. Some of the dismissive responses from some developers have been mentioned in the debate: “Have you been doing this?” “Well, yes.” “Has it previously been to the disadvantage of leaseholders?” “Well, yes.” “Have you been able to do anything about it?” “Perhaps, but it is only now that we are prepared to do it.” It just goes to show that highlighting such things and putting pressure on the companies can have a swift effect, not least if they want to save their reputational skins.

It is not acceptable that people have to put up with major problems with their home or delay moving in, or even that they have to move out during belated repairs to bring the house up to scratch. The Government should bring forward a full suite of consumer rights for homebuyers when they introduce the measure on the new homes ombudsman. However, when more than half of new homes are built with major problems, it is clear that problems in providing protection and standards to homebuyers run deeper than consumer rights. There are clear failings across the house building sector, allowing homes to be built systematically in a way that quite clearly falls below the standard that anyone should expect.

That was highlighted well by my hon. Friend the Member for Blaydon (Liz Twist), when she talked about unfinished estates and issues of completion, adoption and delays. She mentioned people living for too long on building sites when there are delays in completing properties, as well as lack of transport and infrastructure, and the failure to provide basic amenities such as shops, play areas and community centres—the things that build a community. Instead, estates are left full of Lego houses, with no centre or heart.

We have a planning permission bidding system with too much flexibility on both affordable housing and standards of building, and bidders can see the building of a home to a high standard as a costly extra. Too often, they fail to recognise that they are not simply building houses; they are building communities, which confers on them a corporate ethical responsibility. They should take pride in the work they do, the homes they provide, and the communities they are building around the country. It sticks in the craw when large companies exploit the system and fail to live up to their moral duty to deliver affordable housing of an acceptable standard, but still pay uncomfortably high bonuses—despite benefiting from the Government Help to Buy system.

We have already heard about Persimmon’s horrendous customer service. My hon. Friend the Member for Kingston upon Hull North may be surprised to learn that it gets three out of five stars for customer satisfaction. Perhaps she would think that that rates it rather too highly. It will no doubt be disappointed that it is not getting five stars in the HBF customer satisfaction ratings, but rather than concentrating on improving building standards or communication with customers, it insists on paying out £75 million in bonuses to its executives. That is alarming.

Last year, I met the new bosses of Bovis Homes, another company that was struggling to meet acceptable standards, because of a combination of over-expansion, too much subcontracting and being too distant from customers. For a long time it had a five-star building rating, of which it was incredibly proud, but it lost it. It was heartening for me—and it did not take me five years to get a meeting—to hear that Bovis bosses were determined to turn things around. They were quite crestfallen that the company’s reputation had been hit so hard. They had been known as a high-quality, trusted home building brand. Customers were pleased at the change of heart, but there were those who had hoped to move into their dream-forever home for whom the game change was too little, too late.

The need to build hundreds of thousands of homes a year should not lead to reduced standards in house building or allow companies to exploit the housing crisis by making a fortune from an under-regulated housing system. The Government should consider the call from the Federation of Master Builders for a licence to practise, to root out cowboy builders who forgo the rules during construction.

My hon. Friend the Member for Stretford and Urmston talked about a single homebuyers code, developers not being able to insist on particular solicitors to be used by homebuyers—who would have a free choice—and an information pack post-sale. She also highlighted the issue of training for subcontracted staff, and looked forward to high-quality apprenticeships in the building sector. Those are issues that it is well worth considering.

My hon. Friend the Member for Poplar and Limehouse talked about safety and retrofitting sprinklers, and that should not be forgotten. The issue is not just about houses; it is also about flats, of course. When we think about high-rises, the Grenfell tragedy and its effects should not soon be forgotten if we want citizens to be safe.

I hope that the Government will take seriously what has been said in the debate, which was a good and helpful one. I hope they will seek to tighten regulation of planning standards and materials quality, and ensure that the homes we build are safe and up to scratch. Like the HomeOwners Alliance, the Government should want better new build, and should take much stronger action, including retrospective action for leaseholders.

15:29

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)]

It is a pleasure to serve under your chairmanship, Mr Sharma, as it was to serve under Ms Ryan’s.

I thank the hon. Member for Stretford and Urmston (Kate Green) for securing the debate and providing an opportunity to debate all the issues. I understand that she and many of us present today want better protection for purchasers of new-build homes. The Government are committed to making the housing market work. We aim to increase house building to an average of 300,000 net new homes a year by the mid-2020s. As we move towards achieving that target, we will not sacrifice higher quality and standards. They must go hand in hand. It is vital that as housing supply increases the quality of new-build homes continues to improve. In our housing White Paper we set out our ambition for a housing market that works for everyone. We expect all housing developers to deliver good quality housing, to do it on time, and to treat house buyers fairly.

I, like other hon. Members, was shocked to hear about the terrible experiences of the poor families featured on “5 live Investigates”, including the home with 354 faults. For families who worked hard to save and buy their new home it should have been an exciting time, as so many hon. Members have said. The programme highlighted the plight of Mr Wakeman and his partner Tracey Bickford. It was heartbreaking to hear Mr Wakeman read the list of issues with their home, and describe the disgraceful disruption to their lives, including having to move out of their home. Although theirs is an extreme example, such cases happen far too often. We all hear of them happening. I have heard it from many constituents who write to me through their Members of Parliament, and also in my own constituency correspondence.

Equally familiar are stories of houses not completed on time and purchasers who are not kept informed, which the hon. Member for Blaydon (Liz Twist) discussed. Families and households save for years to afford a new home. Those of us who are fortunate enough to have bought a home can remember the feeling of excitement and joy at getting the keys. Everyone deserves to be able to enjoy their home and start a new happy chapter in their lives.

We know that mistakes will happen. Building new homes is a complex undertaking, involving many different skills and trades, which necessarily means that there is a higher risk of something going wrong. The critical thing, however, is that when things do go wrong, house builders and warranty providers fulfil their obligations to put things right. The Government have been absolutely clear on that point. In too many cases problems with build and finish quality are not resolved quickly enough. The after-sale service that developers provide must improve. We shall therefore be keeping the pressure up on industry, not only to put things right but to prevent them from going wrong in the first place.

The Government are committed to reforming the process for purchasers of new-build homes to obtain redress. I acknowledge that the current process is complicated, and that the proliferation of schemes and warranties has resulted in varying levels of service and protection. That is why we are taking action.

In October—only two months ago—we announced our intention to bring forward legislation to require all developers to belong to a new homes ombudsman, because it is absolutely right that consumers should have fair, quick and easy ways to get things put right when they have a problem. Earlier this year we consulted on how we could improve redress, not just in relation to new-build homes, but for residents across all housing sectors. I will return to this later, but let me say now that we will be publishing our response to that consultation soon. At the same time as exploring more substantive reforms, we are challenging industry to simplify redress now and to provide proper support for consumers in the early years of a house purchase, when most problems occur, until we have the ombudsman in place.

In November—one month ago—I met the executive chairman of the Home Builders Federation, which is taking forward proposals to implement a better redress system, based on the recommendations in the reports by the all-party parliamentary group for excellence in the built environment published in 2016 and this year. I believe this work is a positive step in the right direction.

The hon. Member for Stretford and Urmston was very agitated, as were many other hon. Members, about the potential conflict of interest with solicitors. It is not acceptable that there is a conflict of interest. The Secretary of State has written to the Law Society on the issue and has also written to the Solicitors Regulation Authority, in the context of leasehold reform and conflicts of interest between developers and conveyancers. I expect those two authorities to take note and come back to us on the matter.

A number of hon. Members mentioned that we often hear that new-build homes are not completed to the standards required under building regulations. These regulations set the standards for the design and construction of new homes. The primary responsibility for compliance rests with the people carrying out the work. Work on new homes is subject to building control either by the local authority or a private approved inspector. However, it is the responsibility of the building control body to take all reasonable steps to assess compliance. It is a spot check process carried out at certain points during the building work. A building regulations compliance certificate issued by a building control body is not a guarantee of the highest standards and the responsibility is not removed from the builder or developer. If a consumer feels that the building control body did not carry out its functions properly, they may complain to the local government and social care ombudsman in respect of a local authority. A complaint about an approved inspector can be made to CICAIR, the Construction Industry Council Approved Inspectors Register, which is the body that approves inspectors.

The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) asked about sections in the Housing Act 2004 and about local authority powers to make developers undertake remediation for unsafe cladding. I will write to him about that and also about retrospective fire sprinklers.

[Melanie Onn]

I recently visited London Fire Brigade to talk about building regulations and the checks that are undertaken. The issue with spot checks is a real concern for safety. The failure to put an insulation sock underneath a window caused a new-build block of flats to be engulfed by fire just weeks after people had moved in. Can the Minister think of anything more that can be done to strengthen the system, to make sure it goes further than spot checks, so that key factors that support people’s safety in their homes are not missed?

[Mrs Wheeler]

I thank the hon. Lady for that very useful intervention. My team will take that back and we will write to her with an answer.

We know more needs to be done and expect more to be done. That is why the Government announced measures to champion the rights of buyers of new-build homes, including a new homes ombudsman. That will provide one obvious place for consumers to go, and will have the powers such a body needs and the interests of consumers at its heart. It will ensure that when people buy a new-build home and do not find the standard of build they expect, they are treated fairly and their concerns are dealt with quickly. We will work with consumers and the industry to develop our proposals, which will be published in more detail soon and will set out the scope and powers of the ombudsman.

In the meantime, we have been challenging industry to improve redress in the shorter term. The work being done by the Home Builders Federation could lead to a voluntary new homes ombudsman and better redress for consumers in the short term, while Government works towards legislation. In our response to our redress consultation we will set out the standard we expect these voluntary arrangements to meet. We also expect that any new redress scheme for buyers of new-build homes should be free to the consumer, as in other sectors.

We believe there should be a clear and quick escalation route for issues of building safety and are exploring a number of options. Again, we call on the industry to implement actions and processes so that the examples we heard on BBC “5 live Investigates” do not happen in the first place. We want to see a marked improvement in the standards of new homes and will ensure that home buyers get those standards, not only for new-build homes but across the market.

Further to building regulations and standards of new-build finish, the leasehold system needs to be fair and transparent to the consumer, so that their home truly feels like their own. Unfair practices in the leasehold market have no place in the modern housing market, nor do excessive ground rents, which exploit consumers who get nothing in return. In July, the Government announced that no Government-funded scheme would be used to support the unjustified use of leasehold for new houses.

[Sir Peter Bottomley]

We are all grateful for what the Government have said in the past and what the Minister is saying now. One of the problems with ground rent is the question of what it is there for at all. The commonhold gets rid of ground rents. We do not know whether the help to buy scheme is used to commonhold. Can the Minister make an announcement about how that problem will be solved, so that commonhold homes can be accepted for help to buy?

[Mrs Wheeler]

There are discussions going on about commonhold. I will be happy to talk to my hon. Friend about this offline.

Our technical consultation on how to improve the leasehold market and make it fairer for consumers has now closed, and we are analysing the responses. We want to see developers support everyone who has onerous ground rents, including second-hand buyers, and for customers to be proactively contacted. We are helping existing leaseholders by making it easier and quicker for leaseholders to form residents’ and tenants’ associations. We are proposing a single, mandatory and legally enforceable code of practice covering letting and managing agents, giving people a clearer and simpler route to redress. We are publishing a how-to-lease guide for consumers and looking carefully at how we currently give support and advice to leaseholders.

The hon. Member for Washington and Sunderland West (Mrs Hodgson) was very interested in educating leaseholders. We are publishing the how-to-lease guide, which will educate leaseholders. We have also held workshops with the industry to develop the how-to-buy and how-to-sell guides, which will be published in 2019.

The hon. Member for Poplar and Limehouse asked about leasehold reforms. LEASE, the group that we use to help give information, is unambiguously on the side of leaseholders. LEASE no longer pursues any commercial interests and it does not advise leasehold professionals. [Hon. Members: “Good.”] Yay—I just had a good. Get that in Hansard—sorry, I shouldn’t say that.

The hon. Member for Washington and Sunderland West asked about permission fees. Lord Best has a working group that is considering permission fees and whether they are reasonable or they should be banned in total.

The hon. Member for Ellesmere Port and Neston (Justin Madders) mentioned the £10 ground rent. For a peppercorn to exist there must be a consideration of exchange of money. We are concerned that peppercorn could be open to abuse and therefore we have considered that an amount should be specified in statute. We have chosen £10 because that is the annual amount used for right to buys.[Official Report, 21 January 2019, Vol. 653, c. 1MC.]

[Justin Madders]

It is helpful to have that explanation, because I have been mystified about what led to that situation. Obviously, peppercorns have been around for centuries; I do not know whether there is some legal advice that the Minister may be able to share, even confidentially, about why we still have to have a financial figure rather than a peppercorn.

[Mrs Wheeler]

Given the previous week’s history of sharing legal advice, I might skip over that one, if the hon. Gentleman does not mind. Perhaps he and I could have a cup of tea. The £10 peppercorn ground rent was part of our recent leasehold consultation and we will be considering our approach in light of the responses to the consultation.

[Sir Peter Bottomley]

How about 10 lbs weight of peppercorns?

[Mrs Wheeler]

Black pepper or white pepper?

[Melanie Onn]

Or pink?

[Mrs Wheeler]

Or pink—yes, please—or green; we could have green pepper as well. This poor Hansard writer, dearie me.

I recognise that many freeholders have to pay charges toward the maintenance and upkeep of communal areas on an estate. That is especially prevalent on new estates, exactly as the hon. Member for Blaydon mentioned. Freeholders who are unhappy about the transparency of those charges are becoming an increasingly frequent part of my ministerial postbag, and I understand why they are unhappy. Leaseholders have a whole suite of protections and rights that enable them to hold management companies to account, but freeholders have no such equivalent, even though they may be paying for the same or similar services.

The Government agree that the current situation is unfair to freeholders, and we are committed to legislating to plug that gap. We have set out our proposed approach to implementing those measures in part 4 of the recent leasehold reform consultation, which closed on 26 November. We intend to create a new statutory regime for freeholders, based on the rights enjoyed by leaseholders, which will ensure that maintenance charges must be reasonably incurred and services provided of an acceptable standard, and include a right to challenge the reasonableness of charges at the property tribunal.

[Helen Goodman]

The Minister is being generous in giving way. I do not know whether she noticed my ten-minute rule Bill on that precise point, but when she brings forward the legislation or proposals on freeholders, would she consider capping the charges and making it possible for the freeholders to buy and self-manage the common areas, which, as she knows, are being sold on and on and on to a series of exploitative management agents?

[Mrs Wheeler]

The hon. Lady poses a number of questions, all of which are very interesting. I will reread Hansard after the debate and take on board what I can.

The Government agree that the situation is unfair, so we intend to introduce a new statutory regime and are considering whether freeholders should have a right to change the provider of maintenance services by applying to the tribunal for appointment of a new manager, which may be useful if a freeholder is dissatisfied with the service they are receiving. As it happens, my officials are now analysing the responses and the Government intend to bring forward legislation to implement changes as soon as parliamentary time allows.

We move on to another area in this vast debate, home buying and selling. Around 1 million homes are bought and sold in England each year, but another 25% to 33% of planned sales fall through, costing consumers around £270 million and creating stress for far too many people. The Government published our response to the home buying and selling call for evidence in April 2018, setting out an ambitious programme of action to make the buying and selling process in England cheaper, faster and less stressful, in line with our manifesto commitment. There is no silver bullet that can change everything at a stroke and fix the process. Instead, we will need to make a number of practical changes, some big, some small, which taken together will make the experience much better. To put hon. Members’ minds at rest, we as a Government are here to tackle those issues.

We have already started work. We have created a new working group focusing on the regulation of property agents, chaired by Lord Best. We have begun working with industry and the National Trading Standards estate agency team to develop guidance on making referral fees more transparent and to look at the case for banning them. We have also doubled the funding available to that team. We have written to all local authorities reminding them of the Government’s ambition to have a property search request completed within 10 working days. We have consulted in implementing reforms to the leasehold system, seeking views on fixed timeframes and maximum fees for freeholders and managing agents to provide leasehold information.

We have held workshops with industry to develop detailed and thorough how-to-buy and how-to-sell guides to inform consumers, to be published in 2019. We have started work with industry and consumers to make conveyancing data more transparent so that buyers and sellers can make a more informed choice and we have worked with industry to develop a standardised reservation agreement. We will commission behavioural insight analysis to support its implementation; it will increase commitment between buyers and sellers much earlier in the process. Together, our reforms will create a much better process, which guides buyers and sellers and gives them the information they need at the time they need it, allowing them to make the biggest purchase of their lives with confidence.

I confirm to the hon. Member for Poplar and Limehouse that I will write to him regarding cladding and sprinklers. My hon. Friend the Member for Worthing West kindly brought up the question of VAT on service charges. As he will know, that is a matter for Her Majesty’s Treasury, but it is something that has only recently raised its head, so I will write to him about that.

On bonuses for those larger businesses, we announced in August that we are helping to improve shareholder scrutiny of executive pay, strengthen the employee voice in boardrooms and build confidence in how large companies are run. Under those reforms, all quoted companies will be required to disclose and explain annually the rationale for the chief executive’s pay and the ratio to the average pay of their UK employees. The new reforms will provide greater transparency on the impact of share growth and executive pay.

The Government have been clear that this should be a country that works for everyone. That means building more of the right homes in the right places and ensuring the housing market works for all parts of our community. We must ensure that ordinary people purchasing a new home have the protection they deserve and are treated fairly.

[Mrs Hodgson]

I was listening carefully to the Minister, but I may have missed this—if I did, I am very sorry. I wonder if she could say something about a point that both my hon. Friend the Member for Bishop Auckland (Helen Goodman) and I mentioned, about referring some of these dodgy lawyers, conveyancers or solicitors to the Law Society when they are not acting in the best interests of their client, who should be the buyer.

[Mrs Wheeler]

Absolutely. I am sorry that the hon. Lady did not hear me say it, but the Secretary of State has written to the Solicitors Regulation Authority, the SRA.

[Mrs Hodgson]

Thank you.

[Mrs Wheeler]

My absolute pleasure. We must ensure that everybody has the protection they deserve and is treated fairly, and that all efforts are made to ensure that builders build to the standards and finishes that we expect. Once again, I thank the hon. Member for Stretford and Urmston for securing this valuable debate, and I look forward to her summing-up speech, right now.

15:49

[Kate Green]

I thank all hon. Members, the Front-Bench spokespersons and the Minister for their contributions to this wide-ranging and, if I may say so, very well-informed debate. I again thank all the individuals who shared their stories with me and with other colleagues who are here—in particular those who joined in the discussion by participating in the House of Commons digital debate.

I very much welcome the Minister’s commitment this afternoon to improving protections and redress for homebuyers, and I look forward to—I hope it will be soon—the Government’s publication of their response to the consultation responses that they have received. There is considerable enthusiasm in the House for receiving further details of the homebuyer’s ombudsman scheme and further information on the strengthening of protections for leaseholders. The House will have noted the Minister’s promise of legislation when time allows, and I hope that that time will come shortly. We also will have noted that she sees industry-led reforms, although welcome, as only an interim step in underpinning the protection that buyers need.

I echo the comment made at the start of the debate by the hon. Member for Worthing West (Sir Peter Bottomley): that many builders do a good job and many buyers are delighted with their new homes. However, we are all very pleased to have had the opportunity this afternoon to give voice to the very legitimate concerns of those who have been treated shoddily. As the Minister undertakes to hold the industry to account, we in the House undertake to those individuals to hold the Minister to account. We will not allow the encouraging commitments that she has made this afternoon to our constituents simply to slip away.

Question put and agreed to.

Resolved,

That this House has considered protection for homebuyers.

16:01

Sitting adjourned.