Leasehold Reform (Ground Rent) Bill [ Lords ] (First sitting)
Tuesday 7th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Leasehold Reform (Ground Rent) Act 2022 View all Leasehold Reform (Ground Rent) Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 December 2021 - (7 Dec 2021)
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Chair
Before we begin, I have a few preliminary announcements that I am required to read out by Mr Speaker. I remind Members that they are expected to wear a face covering except when speaking or if they are exempt. That is in line with the recommendations of the House of Commons Commission. Please also give each other and members of staff space when seated and when entering and leaving the room. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. That can be done at the testing centre in the House or at home. Hansard colleagues would be grateful if Members emailed any speaking notes to hansardnotes@parliament.uk. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.
I first call the Minister to move the programme motion standing in his name, which was discussed yesterday by the Programming Sub-Committee for the Bill.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 7 December) meet—
(a) at 2.00 pm on Tuesday 7 December;
(b) at 11.30 am and 2.00 pm on Thursday 9 December;
(2) the proceedings shall be taken in the following order: Clauses 1 to 13; Schedule; Clauses 14 to 27; new Clauses; new Schedules; remaining proceedings on the Bill;
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 9 December.—(Eddie Hughes.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Eddie Hughes.)
The Chair
Copies of written evidence that the Committee receives will be made available in the room and will be circulated to Members by email.
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room and shows how the selected amendments have been grouped for debate. Grouped amendments are generally on the same or a similar issue. Please note that decisions on amendments take place not in the order in which they are debated, but in the order in which they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which the amendment relates.
A Member who has put their name to the lead amendment in a group is called first. Other Members are then free to catch my eye to speak to all or any of the amendments in that group. A Member may speak more than once in a single debate. At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendment in a group to a vote, they need to let me know.
Clause 1
Regulated leases
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)
I beg to move amendment 1, in clause 1, page 1, line 9, at end insert—
“(but see subsection (5)).”.
This amendment inserts a reference to the new subsection inserted by Amendment 2.
The Chair
With this it will be convenient to discuss the following:
Government amendment 2.
Clause stand part.
New clause 1—Ground rent for existing long leases—
“Within 30 days of the day on which this Act comes into force, the Secretary of State must publish draft legislation to restrict ground rents on all existing long residential leases to a peppercorn.”
This new clause aims to ensure that the Government introduces further legislation to remove ground rent for all leaseholders, whereas the Act currently only applies to newly established leases.
Eddie Hughes
It is a pleasure to serve under your chairmanship, Mr Hollobone, and to see the hon. Member for Weaver Vale still in his place following recent moves.
Government amendments 1 and 2, and Government amendments 3 to 5, which we will come to later, relate to the process known as a deemed surrender and regrant. For the benefit of those who are not experts in property law, me included, when the extent of the demise is changed—for example, where an extension is made to a property or to correct an error, or where there is an extension to the term of a lease—the lease is deemed to be surrendered and regranted to the leaseholder.
Government amendments 1 and 2 provide further protection for leaseholders in situations where that happens. Taken together, the two amendments disapply the requirement for a premium to be paid when a regulated lease or a lease granted before the Bill’s commencement day has been surrendered and regranted. In other words, a lease can have a peppercorn rent under this legislation after it has been regranted even if no new premium is paid.
Without these amendments, there is a significant risk that a previously regulated lease could cease to be regulated, leaving leaseholders to pay a potentially significant premium for a simple change, such as correcting an error within the lease, or leaving them to pay a ground rent. It might be helpful if I provided an example of such a situation. If a future leaseholder were to seek the correction of an error in their regulated lease and there was no premium charge for that correction, the Bill, as currently drafted, means that the lease would no longer be considered a regulated lease and therefore the peppercorn requirement would not be applicable to that newly corrected lease.
Amendments 1 and 2 will remove the requirement for a premium to have been paid for regulated and pre-commencement leases subject to a surrender and regrant, in order for the peppercorn rent to be applied. These amendments and the clarifications in amendments 3, 4 and 5 ensure that the Bill does not have unintended consequences when there is a deemed surrender and regrant and that there is fairness in the system for leaseholders and freeholders.
Mike Amesbury (Weaver Vale) (Lab)
It is a pleasure to serve under your chairmanship once again, Mr Hollobone, and to respond to the Minister. We have spent considerable time over the last few weeks, in Committee and at Second Reading, discussing vital issues of building safety and leasehold reform. These technical and tidying amendments make perfect sense. They address the potential of leasees paying a premium if this was not put in place, so the Opposition certainly welcome this.
I have one question on the potential for informal lease arrangements to sit outside the scope of the Bill. What reassurance can we give those still caught in the leasehold feudal system that there is provision to tackle this element of the industry?
Eddie Hughes
I thank the hon. Member for his support and for that question. My understanding is that the process through which leases will be regulated as part of the Bill would afford the opportunity for clarification of the informal leases to which he refers.
The Chair
So you did not give way to the Minister? Do you want to speak on new clause 1 in this group of amendments?
Mike Amesbury
No, I was allowing my good colleague the hon. Member for Garston and Halewood to speak.
Maria Eagle
I am grateful to you, Mr Hollobone. It is a pleasure to serve under your chairmanship. It is early in the morning, and therefore perfectly possible that I was wrong about my hon. Friend’s intention. Can the Minister clarify that the main intent of these provisions is to prevent those who perhaps used to be able to charge ground rent on new leases but who, following the enactment of the Bill, will only be able to charge a peppercorn if they wish to collect it, having a not very realistic, false way of getting around the Bill by deemed surrender and then reissue? Is that the main intent of these provisions? Obviously, if he had thought about this kind of trick being played when the Bill was originally drafted, he would have included something in that drafting, but it is always good to think again about the way in which people may seek to get around provisions. Have I got it right? Is that the main intent of these provisions?
Eddie Hughes
I can completely confirm that that is absolutely the main intent.
Amendment 1 agreed to.
Amendment made: 2, in clause 1, page 1, line 16, at end insert—
“(5) Where there is a deemed surrender and regrant by virtue of the variation of a lease which is—
(a) a regulated lease, or
(b) a lease granted before the relevant commencement day,
subsection (1) applies as if paragraph (b) were omitted.”.—(Eddie Hughes.)
This amendment provides that where there is a deemed surrender and regrant of a regulated lease or a pre-commencement lease, the new lease may be a regulated lease even if it is not granted for a premium.
Clause 1, as amended, agreed to.
Clause 2
Excepted leases
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Thank you. I was. I appreciate that it is not my job to be concerned on behalf of the Opposition, but I felt that there could have been some early morning settling into the rhythm of the Committee. The hon. Member for Weaver Vale may have missed the opportunity to speak to new clause 1—[Interruption.]
The Chair
Order. I actually asked the hon. Gentleman quite clearly whether he wished to speak to new clause 1, and he decided that he did not. We are now debating clause 2 stand part.
Mike Amesbury
Sorry. I made a mistake. I do apologise, Mr Hollobone. I thought you said clause 1.
The Chair
Because that particular opportunity was missed, we will ungroup—very kindly, on the Clerk’s advice—new clause 1 from that first group. When we come back to new clause 1 later in proceedings, the hon. Gentleman will have a chance to speak to it. His opportunity will come; it just has not come when we thought it would. We are now debating clause 2 stand part.
Eddie Hughes
You are very kind, Mr Hollobone. Clause 2 will be of significant interest as it sets out those leases not regulated by the Bill. We have taken care to tightly define these, as we are aware that any loopholes might lead to abuse of the system and a monetary ground rent being charged where we had not intended it. I will consider each of the exceptions in turn.
First, subsections (1) to (3) detail how business leases will be excepted. It is important that a commercial lease that contains a dwelling, such as for a shop or other business, can continue to operate as now, and that landlords of such buildings are not disadvantaged. Businesses are also likely to prefer to pay some form of rent rather than a premium for the use of the property. However, we also need to protect residential leaseholders from any argument by a landlord that a ground rent is payable because of the possibility of a business use. For that reason, subsection (1)(a) states that the lease must expressly permit the premises under the lease to be used for business purposes without further consent from the landlord.
In our response to the technical consultation on ground rent, published in June 2019, we committed that mixed-use leases would not be subject to a peppercorn rent. The example given was a flat above a shop, where these are both on the same lease. In such instances, it would be important that a commercial rent can continue to be paid, to reflect the business use of part of the building. However, we wish to ensure that the Bill does not result in a plethora of mixed-use leases that are to all intents dwellings but where the tenant pays a monetary ground rent. For this reason, subsection (1)(b) requires that, for such leases, the use of the premises as a dwelling must significantly contribute to the business purposes.
The Bill also includes provision to make sure that both parties intend and are aware of this business-use component of the lease. Subsection (1)(c) achieves this by requiring that the landlord and tenant exchange written notices at or before the lease is granted confirming the intention to use and continue to use the premises for the business purposes set out in the lease. The form of this notice will be prescribed in forthcoming regulations. Subsection (3) defines business as including a trade, profession or employment, but not a home business as under the Landlord and Tenant Act 1954.
Statutory lease extensions for flats are already required to be at a peppercorn rent, so we have excepted them from the requirements of the Bill in order to avoid duplication. We will come to so-called voluntary lease extensions for flats when we consider clause 6. Statutory lease extensions for houses are required by legislation to be for 50 years for payment of no premium, but for a modern ground rent, which is typically higher than a peppercorn. Were the Bill to require that rent to be only a peppercorn, we would deprive the landlord of income for the granting of the lease extension. For that reason, those extensions are exempted from the Bill. However, we intend to return to the wider question of enfranchisement in future legislation. Our changes to the enfranchisement valuation process, including abolishing marriage value and prescribing rates, will result in substantial savings for some leaseholders, particularly those with less than 80 years left on their lease. The length of a statutory lease extension will increase to 990 years, from 90 years for flats and 50 years for houses.
I will turn now to community housing leases and other specialist products that we do not want to compromise. Community housing schemes promote the supply of new housing to meet local need where residents contribute towards the cost of shared community services. The use of ground rent in those cases is very different from ground rent for long residential leases where no clear service is provided in return. As we have done throughout clause 2, we have taken care to tightly define community housing leases to ensure that that exception applies only where intended. It covers long leases where the landlord is a community land trust, or the lease is a dwelling in a building that is controlled or managed by a co-operative society. We expect that to cover all deserving dwellings. We have also made provision, should it be needed, to add further conditions to those definitions in order to close a loophole should one be identified in future.
The clause also exempts certain financial products in cases where a form of rent is needed for the product to operate as intended. Subsection (9) defines them as regulated home reversion plans and homes bought using a rent to buy arrangement. It is important that those specialist financial products can continue, maximising choice for homeowners over how they finance their property purchase.
Maria Eagle
I think that many people who get involved in rent to buy perhaps do not understand that they may be excluded from that provision. I notice that the Minister is securing for himself some capacity to make regulations in future in relation to those particular types of leases. Could he give the Committee an indication of what kinds of regulations he anticipates will be made under the power that the Bill will grant him in respect of those particular kinds of rent to buy leases?
Eddie Hughes
I am embarrassed to say that I cannot, and the reason is that we do not know what the loopholes might be. We have a clever bunch of people who seek to avoid legislation. It will be helpful for the Government to be able to make such changes as might be necessary depending on the inventiveness of the people we deal with in future.
Maria Eagle
I am grateful to the Minister; it is remarkably honest of him to say that he does not know. One does not always hear that from Ministers, but am I getting the sense that the intent is to ensure that there is not some kind of workaround to the regulations and to the law, and that the intention is to protect those who have taken out rent to buy plans from oppressive provisions by landlords to charge some kind of ground rent, which the Bill is seeking to get rid of generally?
Eddie Hughes
On the intent, there are some financial products that we have exempted because the structure of their operation is dependent on the continuation of rent payments, but the opportunity is to make regulation in the future should people, for example, pretend to be something they are not, or try to do so. If we have the opportunity to close that down, I think that will be the intention. I feel that the hon. Lady could be building a case for future interventions—we will see. I think she is gathering evidence.
Subsection (9)(a) is clear that in order to benefit from this exemption, home reversion plan products must be regulated by the Financial Conduct Authority. Subsection (10) defines a rent to buy arrangement, ensuring that arrangements such as Sharia mortgages are able to continue. It is important that the Bill enables legitimate activities that require payment of a rent to continue, which clause 2 does in a carefully considered way that has been informed by detailed consultation. The clause is drafted to enable such activities but with tight definitions, ensuring that the clause is not used by landlords to charge a ground rent by the back door.
Mike Amesbury
I thank the Minister for his explanation. I understand the exemptions and I am pleased that they are limited in scope. What reassurance can he give that there will be no unintended consequences in community housing, for example? He referred to ground rent as a means of recovering service charges. That has been a problem for the industry over a considerable number of years.
Eddie Hughes
It is important to point out that the Bill does not cover service charges. In the other areas that we are talking about, ground rent is paid for no discernible benefit in return, but in a community land trust there is the benefit of a shared endeavour to create high-quality community housing, so I do not think the hon. Gentleman’s concern applies.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Prohibited rent
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 3 prohibits a landlord from requiring a leaseholder to make a payment of a prohibited rent. Subsection (2) defines that as making a request that the leaseholder make the payment, and/or having received a payment of prohibited rent, failing to return it within 28 days. To ensure that landlords are held accountable for their actions, we have made a conscious decision to include current and former landlords in the Bill. That will ensure that our enforcement measures, which are detailed later in the Bill, can be used in circumstances where a landlord has sold their interest in the property.
Having focused on landlords, I now turn to those we are seeking to protect. I am sure that the Committee will agree that the protective reach of the Bill should extend beyond current leaseholders who remain leaseholders when the wrongful payment is identified. A leaseholder who has sold the lease, for example, should none the less be able to seek redress if they subsequently realise that their former lease contained a prohibited rent. That is why subsection (3) ensures that the protections afforded to leaseholders also apply to previous leaseholders, a person acting on behalf of a leaseholder, and a leaseholder’s guarantor.
Clause 3 is the foundation for restricting unjustifiable rents for future regulated leases.
Maria Eagle
What limitations will there be on the provisions? Are we talking about the limitation in contract law? How long would a former landlord be under obligation to repay a prohibited payment that he had required, and how long would the former tenant be able to recover it? It is unusual to see a provision stating that
“references to a landlord include a person who has ceased to be a landlord”,
but there is usually some limitation to the liability. Does the Minister have an answer for that?
Eddie Hughes
I am worried that my candid responses to questions are going to get me in trouble, but the honest answer is that I do not know what the limitation is. I will write to the hon. Lady to let her know.
Eddie Hughes
I strongly suspect, however, that the very clever team behind me will provide the answer, and that I will be able to inform the hon. Lady during discussions on a subsequent clause.
The Chair
Please copy in the whole Committee to that correspondence if it is necessary.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
Permitted rent: general rule
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 4 introduces the general rule for regulated leases that the permitted rent is an annual rent of one peppercorn. The effect of that is that no monetary rent will be payable in respect of most leases regulated by the Bill.
Clause 4(1) provides that this general rule is subject to clauses 5 and 6, which set out special rules on permitted rent applicable to shared ownership properties and replacement leases respectively. Use of a peppercorn rent is common practice; for example, it is used in statutory lease extensions for flats. A peppercorn is simply a token or nominal rent that in practice is not collected. The purpose of clause 4 is to protect leaseholders from being charged inappropriate rents by landlords.
Jill Mortimer (Hartlepool) (Con)
Does my hon. Friend agree that the Bill will help my constituents who have suffered in recent years from rising and excessive ground rents, and will help to prevent people from falling into the leasehold tenancy trap that we have also seen in recent years?
Eddie Hughes
The Bill will help to ensure that new long leases granted subsequent to the Bill’s coming into force are set at a peppercorn rate—so, with no financial value associated with them.
Maria Eagle
Does the Minister accept that none the less the Bill, welcome as it is, does not help existing tenants who have already signed leases for which ground rent is payable?
Eddie Hughes
The hon. Lady is quite right. The intended purpose of the Bill, very tightly drafted as it is, is to ensure that we draw a line in the sand by ensuring that new leases in the future have a peppercorn rate. I commend the clause to the Committee.
Mike Amesbury
I thank the Minister for his brief explanation. As my hon. Friend the Member for Garston and Halewood quite elaborately argued, this Bill is not about the many; it is just about the new. There are 1.5 million people who will still be in this system, many of whom write to us asking for us to advocate for them in this place. It is a particular issue in the north and north-west, and Wales. This Bill will do nothing for those people. In addition there is a plethora of complexities associated with the Bill—service charges, interesting management fees and so on—which we have spoken about at considerable length. So, while the Bill is welcome, it is narrow in scope and certainly does not deal with the situation here and now.
Maria Eagle
I very much welcome the intent of the Bill, which is to replace the standard charging of ground rent of real monetary value to leaseholders with a peppercorn rent. I welcome that very much; it is an entirely good and proper reform. Anybody who has had to deal with land law over the years—whether as a lawyer, or just as an MP trying to advise constituents—knows just how complicated it is to change these ancient and difficult land law provisions, which go back to feudal times in many ways and which very much have case law behind them. As we can see from this simple Bill alone, significant provisions have to be added to do the simplest things. I have every sympathy with the Minister, who has a record of trying to grapple with the complexities of English land law since he was Back Bencher. It is by no means easy.
I welcome, generally, clause 4, which reduces to a mere peppercorn the ground rent that is chargeable for new leaseholders. That is entirely to be welcomed. However, I want to set out to the Minister the difficulties that many of my constituents have. Thousands of them have in the last few years bought leasehold houses. This is particularly an issue in the north-west. As my hon. Friend the Member for Weaver Vale rightly said, there has arisen a penchant for selling newly built, often detached houses as leasehold properties. That has, and can only have been to enable the freehold—the reversionary interest—to be turned into a financial product that, over years, often decades, provides a stream of income for whoever retains the reversionary interest, who is often not the original developer or builder of the properties. It is sold on in financial markets to those who are interested in long-term investments providing a stream of income.
Many of my constituents, trapped in such leases, had no idea when they bought the houses that that would be the case, and that they would owe obligations for decades to whoever held the reversionary interest. They had absolutely no idea that the person who held the reversionary interest could change, and that it would be traded on financial markets and bought by people who wanted to exploit to the maximum the provision for income generation over years. The Bill, unfortunately, does not help any of my constituents who are stuck in such provision.
I am entirely in favour of changing that provision by means of the Bill, which I welcome, but there is an argument to say that the Bill actually makes things startlingly worse for those already trapped in such leasehold provisions that have ground rent and sometimes accelerated ground rent. It makes starker the fact that it is anomalous. I have many constituents on a number of estates across my constituency of Garston and Halewood who are finding it difficult to sell their properties. They have suddenly realised that they do not own a house, as they thought they did, but that they are renting it.
I am extremely anxious that the Minister does not rest on his laurels, having got this complicated piece of simple legislation through the House and on to the statute book, but that he realises that there is so much more to do to assist those who are stuck—particularly in my constituency and in the north-west—in newly built houses that they now find they do not really own. They are being financially exploited by remote owners of a reversionary interest that will endure for perhaps 99 or 999 years.
Lilian Greenwood (Nottingham South) (Lab)
Does my hon. Friend agree that the Bill, by doing the right thing for new houses, will actually make the situation even worse for those who are in existing houses, because potential entrants into the housing market will choose to buy a new leasehold house that is covered by these provisions, rather than a house that her constituent may wish to sell that is under the existing provision?
Maria Eagle
That is the very concern that I have. It not only shines a light on the dilemma and the problems of current leaseholders, who will not be covered by these provisions, but sets theirs up as an anomalous set of arrangements. Until the Minister comes back with legislation to change more thoroughly what has happened in existing cases, which I know will be difficult, these people will be in a more difficult position than they currently are. Not only will they have the ongoing financial burden of the exploitative provisions that have grown up, particularly in the north-west of England, but they will find themselves left behind. The danger is that the Minister may have to move on to other legislation of concern in his Department, and may find that doing something for existing leaseholders is very difficult in land law terms. I know it is difficult to change existing leases by statute.
Mike Amesbury
On Second Reading, my right hon. Friend the Member for Alyn and Deeside (Mark Tami) highlighted the issue that could arise where, within a single development, on one side of the road would be properties built in its first phase, under the current arrangements, and on the other side of the road properties built in the next phase, under the new arrangements. It is simply inequitable. When people come to market, which property will they purchase? The Minister is familiar with these issues, and my hon. Friend the Member for Garston and Halewood is right that they need tackling, despite the difficulty.
Maria Eagle
I have every sympathy with that point because I know of examples in my constituency. In the past few years, as these egregious excesses were coming to light and before legislation could be drafted, the Government have tried to impress upon developers that they should not do this kind of thing, and there have been voluntary arrangements. House builders have made voluntary arrangements, sometimes midway through the completion of a phased development, such that some buyers of properties built in the early phases of a development have had to pay ground rent, or accelerating ground rent, service charges and some of the other things that have not been dealt with in this legislation, but in later phases that has not been the case; so there is a difference between properties—even those built to the same design in different phases of one development.
One could say that caveat emptor is the basis of land law in England. It is indeed: “Let the buyer beware.” However, I have a lot of sympathy with constituents of mine who were rushed into buying a property so that they could access Help to Buy, who were first-time buyers, who had not done a degree in English land law before they sought to become homeowners—which, let us face it, is most people—and who relied upon the advice they were given. I have many criticisms of the legal profession and the solicitors—even conveyancers—who advised some of my constituents, because it seems to me that there has been a potential failing, in some cases, there.
In any case, the Minister has come to this, wanting to do something about it—indeed he has drawn a line in the sand, as he said—but he must not forget those individuals that, in drawing the line, he has not helped, and who may in fact find their predicament more starkly highlighted, and may find it more difficult to move on and sell the property that they now have than they would have done without this legislation.
Margaret Greenwood (Wirral West) (Lab)
My hon. Friend is making excellent points. Does she agree that there is a real human cost to this? I know of people living in my constituency who have properties elsewhere in the country, predominantly in the south, who decided to move back to Wirral because that is where they are from, only to discover that they are struggling to sell their properties. Quite often such moves are to look after an elderly family member or for similar reasons, so time is of the essence. Does she agree that we have to remember the human cost?
Maria Eagle
I very much agree with my hon. Friend. I have come across many instances myself. Perhaps a young couple, just starting out in life and on the housing ladder, wanting to be able to trade up in time when they start their family, suddenly find that they cannot because their home—their leasehold home—is of pariah status and they find it difficult to persuade somebody else to buy it. I worry that this legislation, welcome though it is—it is a good step: I emphasise that to the Minister—shines a starker light on the predicament that these people are in. It is therefore incumbent upon the Minister and the Government, who have been talking about this issue for a number of years—I am trying to be kind, Mr Hollobone—to come back swiftly with effective and challenging legislation that will do something for the people who are already stuck in this mess.
What we cannot do is say, “Oh, it’s all too difficult.” It is difficult, but as lawmakers, we are here to solve these problems. I will give every support to the Minister if he can come back, ignoring the lawyers who tell him that it is all too terribly difficult and nothing can possibly be done that would not tear up our entire English land law system of trading land. Something can and must be done. He will have my support if he comes back with much fuller legislation to deal with the existing problems of those who are already caught in this situation. Peppercorns are great. Perhaps we can have retrospective peppercornery.
Nickie Aiken (Cities of London and Westminster) (Con)
It is a pleasure to have you as Chair of the Committee, Mr Hollobone. I welcome the Bill and the Government’s obvious determination to ensure that buyers of new developments will be protected from what I can only describe as dodgy practices.
Having looked into the issue before coming to Committee, and knowing bits and pieces from the media coverage of this story in recent years, I find it shocking that property developers and renowned house builders have thought it acceptable to expect families or individuals buying a property—we all know how expensive that can be; people save for years to have enough for a deposit—to be hit with a ground rent that they do not know is going to double and double over the years. I absolutely welcome the Minister’s determination to stop that practice.
I call on house builders across the nation to think about the consequences of such practices on their customers, and their future customers. I know that a number of house builders have taken steps to stop this practice. I believe that the Competition and Markets Authority is carrying out an investigation and that some, but not enough, house builders have stopped the practice voluntarily. That is why I am glad that the Bill will protect us in the future.
I was taken aback by the fact that the chief executive of Redrow, a renowned house builder, said in a letter to the then Select Committee on Housing, Communities and Local Government that ground rent of £400 per year would not always necessarily double over 10 years, but in fact could reach £12,800 a year. For the average family, the idea of trying to find that amount of money is eye-watering. Even people on good salaries would find that amount punitive. I absolutely welcome the Bill. We must regulate to safeguard hard-working families who want to invest in homes.
Mike Amesbury
I have no doubt that members across the Committee agree with much of what the hon. Lady says, but these measures are for the future, not for the here and now. The CMA investigation is very welcome, as is the work by the Select Committee and all the campaigners who have helped to force the issue, but many people are still applying these practices. Welcome though they are, these are baby steps.
Nickie Aiken
I thank the hon. Member for his intervention; I was coming to that point. In my constituency—the Cities of London and Westminster—many leaseholders live in properties with much older tenancies that involve ground rent. I believe the vast majority are on peppercorn. I have lived in the two Cities for 25 years, as a leaseholder and now, I am glad to say, as a freeholder. There is a massive benefit to being a freeholder, even though I own a flat.
The hon. Gentleman is right, and I am sure that this Government and this Minister will be looking at legislation that can protect all leaseholders, no matter what kind of tenancy they have. I understand that the renters reform Bill will be coming through, which will be a massive step towards creating a balance between tenants and landlords. This Bill and any further legislation that the Government consider on leasehold are about balance and fairness. I welcome the Minister’s taking forward this Bill and future legislation to protect leaseholders.
Eddie Hughes
The hon. Member for Garston and Halewood referred to my previous interest in this subject as a Back-Bench MP. It is an incredible privilege to have championed changes in this area and now to be the Minister responsible for it. I can assure her that my enthusiasm for greater reform is not diminished in any way by my having the opportunity to, at least, begin the legislative process now.
I have a huge degree of sympathy with the cases that have been raised by hon. Members on both sides of the room. It is incumbent upon us, as a Government, to ensure that we do not rest on our laurels, but continue to push and be bold with legislation in the future. Certainly, that has been the case with regard to things that have been said by our previous and current Secretaries of State. The current Secretary of State is determined to be bold and ambitious in all things for which he has responsibility, and I would like to think that we will have further discussions about this subject early in the new year.
Maria Eagle
I am glad to hear it. Does the Minister expect more legislation in this Session?
Eddie Hughes
It is above my pay grade to make those sorts of decisions, but I will be working very closely—
Eddie Hughes
Perhaps one day they will make me Secretary of State and I will be able to make those decisions myself, Mr Hollobone—don’t laugh. As I said, it is our intention to come forward with proposals, so we will be talking again in the new year and discussing this in detail.
Mike Amesbury
On a point of clarity, will the legislation apply to properties that are currently being built, whether they are in Birmingham, Westminster or Manchester? Will the narrow scope of the one peppercorn policy apply to properties that are being built, but are not yet completed?
Eddie Hughes
As I referred to in the discussions about previous clauses, I believe that the legislation will apply once it has been enacted following Royal Assent, so it will apply to new contracts that come into force once the Act is in force. It would not necessarily apply to a property that is being bought today. It will apply only once the law has been enacted. We will have Royal Assent, legislation will be provided and then it will be enacted.
Eddie Hughes
Sorry, Mr Hollobone. I thought you had already decided that you were going to call my hon. Friend the Member for Penrith and The Border (Dr Hudson) next.
The Chair
As the Chair, it is not for me to call people but for the person who has the floor to decide who they will give way to.
Eddie Hughes
I defer to you in all things, Mr Hollobone, and I feel better educated. I give way to my hon. Friend the Member for Penrith and The Border.
Dr Hudson
It is great privilege to serve under your chairmanship, Mr Hollobone. I welcome the Minister’s comments and the Bill, as well as the constructive comments from the Opposition. We are all on the same page and think that this constructive Bill is a small step towards correcting future injustices.
I take on board the complexities for people in the existing system, but in respect of the comments made by my hon. Friend the Member for Cities of London and Westminster, does the Minister agree that if we can get the Bill through, it will shine a spotlight on developers that have existing leaseholders and they may well reflect, so this Bill for new leaseholders might create some retrospective good will? It is a start, and I welcome the comment from the Minister that we can try to address things moving forward. I very much welcome the Bill, and I hope that it will start to address some of the retrospective issues indirectly.
Eddie Hughes
My hon. Friend makes an important point. The Government are signalling strong intent by virtue of introducing the Bill, which backs up the suggestions we have made previously about our intent. With regards to other pronouncements that the Government have made, I think people will rightly expect that legislation will follow in due course. My hon. Friend is completely right.
Lilian Greenwood
I wish to follow up on the question asked by my hon. Friend the Member for Garston and Halewood. Clearly, the Bill will apply only from the date that it receives Royal Assent. Is the Minister concerned that some developers that have acted in unscrupulous ways that the Bill is designed to prevent will see the deadline of Royal Assent as an opportunity to place more people in the position that has been outlined by my hon. Friends and Government Members? Developers might try to get in before the deadline of Royal Assent, rather than taking the message that these sorts of leaseholds should not be offered and are inappropriate. What discussions has the Minister had with developers, and what sense does he have of whether people will act opportunistically?
Eddie Hughes
I thank the hon. Lady for her contribution but, fortunately, the evidence does not back up the concern she has voiced. We saw a prevalence of this type of construction. That has peaked, and now its popularity is decreasing, so we already see that developers understand that, effectively, the game is up and the world has moved on. I would like to think that, thanks to the efforts of hon. Members in this room, we are publicising the Bill and our constituents will become better informed as a result of our contributions to the debate. Hopefully, that will serve to protect them.
Mike Amesbury
Some developers have responded to the change in landscape and enforcement action with strong encouragement, but others out there have not done so. My hon. Friend the Member for Nottingham South is correct to say that this is another opportunity to get developments erected as soon as possible. We need only look at the skylines across our cities to see that happening, and some developers will want to continue with that cash cow at the expense of leaseholders. It is a real fear, and I would certainly welcome a Government assessment of the impact in that transitional period.
Eddie Hughes
As I said in answer to the previous question, we can already see—not just now, but over the previous few years—that there has been a rapid decrease in the number of properties being constructed and subsequently sold in this way, so the hon. Gentleman should feel reassured that the Government’s intended legislation is already having an incredibly positive effect.
Nickie Aiken
Following the previous point, does the Minister agree that the conduct of house builders such as Countryside Properties, which has voluntarily agreed to remove the doubling of ground rents from its leasehold contracts, is a step forward? The Home Builders Federation or another trade body should be working with its members to take that forward, as Countryside Properties and others have done, but too many house builders are still not doing so. Perhaps the CMA review will help, but perhaps the Bill will send a clear message to house builders that, actually, they should be looking at their own practices before they are made to do so by the legislation.
Eddie Hughes
I can say nothing other than that I completely agree with my hon. Friend’s comments.
Maria Eagle
We have to have proper scrutiny. There has been a general hope expressed by the hon. Members for Penrith and The Border and for Cities of London and Westminster that this legislation, rather than highlighting the difficulties existing leaseholders have and putting them in a more difficult position, may promote better behaviour towards existing leaseholders from those who are in a position to exploit them. We hope that that will be the case. Do the Government collect any figures that they might publish to enable us to see whether there is the positive impact hoped for by Conservative Members? Does the Minister have any figures that show that is the case—or are we just crossing our fingers and hoping?
Eddie Hughes
The figures are already publicly available.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Permitted rent: shared ownership leases
Mike Amesbury
I beg to move amendment 11, in clause 5, page 4, line 7, at end insert “, unless subsection (2A) applies”.
This is a paving amendment for Amendment 13
The Chair
With this it will be convenient to discuss amendment 13, in clause 5, page 4, line 7, at end insert—
“(2A) Where a landlord charges a service charge more than £100 per month, the permitted rent in respect of the landlord’s share in the demised premises is a peppercorn.”
This amendment provides that a landlord of a shared ownership property may not charge ground rent in respect of the landlord’s share if service charges exceed £100 per month.
Mike Amesbury
The amendments were tabled to raise the issue of the often sky-high service charges in shared ownership property—often with little given back in return. I could list any number of examples and am confident that other Members in the room could as well. The Minister will have heard, as I did, the many stories about the extortionate costs faced by shared owners, other leaseholders and social housing residents. The errors are often only exposed when residents, facing costs they cannot afford, lobby hard for information and transparency.
We have heard it all: service charges for shared owners in Kent tripling in one year; leaseholders in Essex being charged £4,275, plus VAT, per year for ground maintenance, when a local landscaping company quoted £660 per year for the same work—something that I discussed with my hon. Friend the Member for Garston and Halewood only this morning; and leaseholders in south London being charged over 400% more for their cleaning costs than they were in 2013. I know that inflation is increasing at the moment but—my God—not by that level. To get in the Christmas spirit, a rather festive example stood out to me in the Financial Times, which published an article over the summer about residents in central London being charged £200,000 for Christmas lights, without being consulted in advance.
Those costs impact on leaseholders, and some social housing tenants as well. For shared owners, a particular concern is being charged 100% of the service costs while only owning a small portion of the property. We have seen that up and down the country through the building safety scandal and historical remediation costs. The Opposition welcome the narrow scope of the Bill on peppercorn ground rents, but the fear is that there will be other means or opportunities to rake in the money, and to continue treating leaseholders as a cash cow.
Eddie Hughes
Clause 5 is essential if the Bill is to avoid creating unintended consequences for future shared ownership leases. It will protect leaseholders by ensuring that they pay only a peppercorn rent on their share of the property, but it will also allow landlords to collect a monetary rent on their own share. Without the clause, landlords could not collect a monetary rent on the share of the property that is rented.
Clause 5 applies to qualifying shared ownership leases. Subsection (4) defines a qualifying shared ownership lease as one in which the tenant’s share of the premises is less than 100%. Subsection (7) clarifies that, in a situation in which a shared ownership lease does not distinguish between rent on the tenant’s share and rent on the landlord’s share, any rent payable under the lease is to be treated as payable in respect of the landlord’s share. Subsection (8) means that the clause no longer applies if clause 6 applies. For example, if the leaseholder undertakes a so-called voluntary lease extension in regard to a shared ownership lease, where the leaseholder chooses to enter into a new lease that replaces an existing lease outside the statutory lease extension process, the treatment of that is dealt with under clause 6. We will consider clause 6 shortly.
Clause 5 ensures that the shared ownership model can continue to operate for new leases.
The Chair
Order. The Minister is meant to be speaking about the amendment rather than the clause. Does he have any more comments about the amendment?
Eddie Hughes
About the amendments, Mr Hollobone. Amendments 11 and 13, tabled by the hon. Member for Weaver Vale, seek to reduce the payment of rent on a shared ownership property. Shared owners are leaseholders of a share of their property. Most shared ownership properties fall within the terms of the Government’s shared ownership scheme, and the providers will be registered with the Regulator of Social Housing. In the Government’s existing shared ownership scheme, owners have a full repairing lease and are financially responsible for all maintenance charges and outgoings in the same way that any other homeowner is.
On 1 April, the Government confirmed the new model for shared ownership, which introduces a 10-year period during which the landlord will support the cost of repairs and maintenance on new build homes. Under the shared ownership model, landlords can collect rent on their share of the property, and I reiterate that the Bill will allow them to continue to do so. The payment of rent reflects the fact that the shared owner has purchased a share of their home, and pays rent on the remaining share, which is owned by their landlord. The rent paid is not the same as the service charge paid for repairs and maintenance previously described.
The effect of amendments 11 and 13 would be to remove the ability of a landlord to receive the rent that they are rightly due on the share of the property that the leaseholder rents in cases in which the service charge is more than £100 per month. The law is clear that service charges must be reasonable and that, where costs relate to work or services, the work or services must be of a reasonable standard.
Nickie Aiken
I just wish to mention service charges in central London, as the hon. Member for Weaver Vale did. I am very aware of extortionate service charges in central London, particularly for private blocks. Service charges of £100,000 are not unknown, but the properties in those cases are worth around £35 million; I suggest that, if someone can afford to buy a £35 million flat, they may be able to afford a £100,000 service charge. However, the hon. Member for Weaver Vale makes an important point, and I would like the Minister to consider it. We must not put all service charges into the same pot. We have to ensure that homes within the community—rent to buy, social housing and community housing—are different from very expensive properties. We cannot put them all into the same position. We must give landlords the ability to charge a fair service charge that is in keeping with the value of the home. There has to be a balance. There is a big difference between a £35 million flat and a rent-to-buy property.
Eddie Hughes
I completely understand my hon. Friend’s point, and I appreciate the extenuating circumstances that might apply to some of the properties in her constituency. We certainly do not experience that in Walsall North.
The amendments proposed by the hon. Member for Weaver Vale would be unfair to shared ownership landlords and would therefore undermine confidence in the sector. I urge the hon. Member to withdraw his amendment.
Mike Amesbury
The evidence out there grows by the week. There is a genuine fear that landlords, freeholders and developers will look for other opportunities in response to the legislation. We already see those service charges up and down the country. I know it is a particular issue in London and the south-east, but every city across the country has seen some interesting non-transparent service charges—that includes estates and houses.
Maria Eagle
Does my hon. Friend agree that it is important that the Committee prevents the inclusion of loopholes in the Bill that could be widened by clever lawyers and then exploited by developers and those with a financial interest in keeping things as they are? His proposals are trying to prevent loopholes from being left in this admirable but small piece of legislation.
Mike Amesbury
I concur. That is exactly my point. I know that a similar amendment was tabled in the other place, as the Minister will be aware. We certainly need reassurance. There are lots of good intentions from the Minister and his Department with regard to this legislation, but we need to look at every opportunity to close those loopholes. I would like to have further discussions as the Bill continues its parliamentary journey—it is a conversation we need to continue. However, in that spirit, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mike Amesbury
I beg to move amendment 12, in clause 5, page 4, line 7, at end insert “, unless subsection (2B) applies”.
This is a paving amendment for Amendment 14.
The Chair
With this it will be convenient to discuss amendment 14, in clause 5, page 4, line 7, at end insert—
“(2B) Where a landlord charges any remedial costs during the course of the lease, the permitted rent in respect of the landlord’s share in the demised premises is a peppercorn.”
This amendment provides that a landlord of a shared ownership property may not charge ground rent in respect of the landlord’s share if any remedial costs are charged.
Mike Amesbury
Taken together, the amendments revisit a question that I have posed to Ministers many a time in previous debates in Committee, on Second Reading and so forth: what about the costs of remediation for leaseholders? It is something we are all familiar with—here in Committee and well beyond—in particular for leaseholders caught in the scandal. We are of course waiting for the next stage of the Building Safety Bill—Report—in the Commons after spending many weeks in Committee. I see the Minister and some other familiar faces. While we wait, hundreds of thousands of leaseholders are receiving bills for astronomical amounts of money to remediate dangerously cladded housing. The cost is for more than cladding, as many people know—there are missing fire breaks, wooden balconies and so forth. Some of the bills top £100,000. I know my hon. Friend the Member for Salford and Eccles—a not too far distant neighbour—is very familiar with those kinds of bills in her constituency.
The cost of remediation on shared owners’ shoulders can equal the value of their share of the property. Again, shared ownership leaseholders are too often charged 100% of the remediation cost for properties that they own only a small proportion of. Meanwhile, the associated costs of the building safety crisis, such as waking watch and insurance premiums continue to go up—we have examples of 1,000% and 1,400% right across the country. Despite repeated promises from Ministers—at my last count we were at 19 if I include the new Secretary of State—the issue is very much ongoing.
The amendment will not solve the problem. The Opposition have repeatedly set out a plan to get the building safety crisis fixed and ensure that developers, not leaseholders, bear the brunt of the costs. I am interested in the recent language from the Secretary of State in that regard. He seems to say some of the right things—there are some warm words—but we are now desperate for action. The amendment would at least ensure that shared ownership leaseholders cannot be charged for ground rents while they are also being charged for remediation work, taking one of the many costs of the crisis off their shoulders. I look forward to the Minister’s response.
Lilian Greenwood
I certainly recognise the situation that my hon. Friend describes. I have a large number of constituents living in flats and being asked to pay astronomical costs for the remediation of their properties for which they bear no responsibility. Will he clarify whether the amendment would apply only where remediation costs are unfairly distributed between the freeholder and leaseholder, or would it apply in all situations where leaseholders are being asked to pay remediation costs?
Mike Amesbury
My hon. Friend makes a very good point. This is about historical remediation costs, but it is a good point to raise. I look forward to the Minister’s response.
Eddie Hughes
Amendments 12 and 14, proposed by the hon. Member for Weaver Vale, seek to reduce the payment of rent on a shared ownership property in different circumstances. As I have said, in the Government’s existing shared ownership scheme, owners have a full repairing lease and pay rent on the landlord’s share of the property. The role of ensuring that the fabric of the building is maintained and safe for residents is an essential part of the relationship between landlord, leaseholder and, in some cases, a managing agent. Reasonable service charges remain the proper and accountable way through which landlords should recover costs for maintaining a building and provision of services.
I reiterate that the Bill is focused entirely on the issue of ground rents, so remediation costs are outside its scope. The Building Safety Bill is the appropriate legislative mechanism for addressing remediation, as it contains the appropriately detailed legislation for a complex issue of this nature. I ask the hon. Member to withdraw the amendment.
Mike Amesbury
We will put this to a vote.
Question put, That the amendment be made.
Eddie Hughes
I beg to move amendment 3, in clause 6, page 4, line 30, after first ‘of’ insert ‘premises which consist of, or include,’.
This amendment clarifies that clause 6 can apply to a replacement lease which includes some premises not demised by the pre-commencement lease.
The Chair
With this it will be convenient to discuss the following:
Government amendment 4.
Government amendment 5.
Clause stand part.
Eddie Hughes
Earlier, we considered amendments 1 and 2, which relate to disapplying the premium requirement for a lease where there is deemed surrender and regrant. This set of amendments is also connected to the deemed surrender and regrant process, but more specifically, they clarify the matter raised by Lord Etherton with regard to a lease variation.
As currently drafted, it was not clear, where there was a pre-commencement lease where a demise was changed, whether such leases would be captured by clause 6. It was raised in the other place that, if not, any existing ground rent in those leases would be reduced to a peppercorn. We recognise that that might make some landlords reluctant to agree to such changes, thereby disadvantaging their leaseholders, which is not the Bill’s intention. The amendments make clear that the demise of a lease can be changed and the resulting surrender and regrant will not reduce the ground rent on the balance of the term of the pre-commencement lease to a peppercorn.
Any extension to the term of the pre-commencement lease will be required to be a peppercorn, in the same way as for voluntary lease extension. By clarifying that ground rent in pre-commencement leases can continue in this way, the amendment ensures that freeholders need not withhold consent for a lease variation unnecessarily. It also ensures that there is a consistent approach towards existing leaseholders throughout the Bill. As with amendments 1 and 2, the amendments are designed to avoid unintended consequences.
Maria Eagle
I just want a little clarity from the Minister about the circumstances in which this extensive clause would apply. Is the amendment seeking to exclude just the issue of a voluntary lease variation? One might argue, quite plausibly, that any kind of leasehold is entirely voluntary, because the parties to the lease voluntarily sign it—caveat emptor and all that. One can say that any signature of a lease is voluntary in that sense.
Eddie Hughes
I am incredibly concerned that the hon. Lady has me at a disadvantage with regard to her legal expertise. However, I think we understand and accept the distinction between voluntary and statutory when it comes to lease extensions. This principle is well understood within the legal profession. I understand the concern she raises, but I feel it is misplaced, or at least should be assuaged. The intention of the measures is to close a loophole so that people are not deterred in any way from granting a lease extension because they feel they will be disadvantaged as a result.
I beg your indulgence, Chair, to say that, on the hon. Lady’s previous concern about how far back people could go when making a claim if a leasehold has been sold, my understanding is that the statute of limitations will apply, which is generally within six years.
Mike Amesbury
To pick up on the point of my hon. Friend the Member for Garston and Halewood on “voluntary”, a freeholder might offer a seemingly reasonable deal to voluntarily and formally extend a lease, but there is a real risk that elements of that could have a premium applied and ground rent could continue. What reassurance is there that that cannot happen? We have seen lots of examples of that. The mis-selling of leasehold properties was mentioned, which the Competition and Markets Authority has investigated and seen evidence of, and which we are all familiar with from constituents. If there is any possibility of a loophole here to do that, unfortunately there are people in this field who will do it, so again it is about that reassurance that the measure closes down those potential loopholes.
Eddie Hughes
I think the hon. Member should be reassured. However, to ensure that that is the case, the Government will communicate regularly and frequently with professional legal bodies to ensure that they understand the case completely. No matter what legislation we introduce, it will not be possible to get away from the fact that, in seeking to enter into a legal contract, members of the public should engage good, independent legal advice. Unfortunately, some people will not and will be disadvantaged as a result.
Mike Amesbury
That goes back to the point that, at the end, people seemed to seek legal advice, which they thought was independent and objective, but clearly it was not. This is about that reassurance. On behalf of our constituents, many of whom are trapped in that situation and still somewhat nervous, I seek that reassurance.
Eddie Hughes
I feel that the clause strikes the right balance between, first, ensuring that the loophole is closed and, secondly, landlords feeling reassured that they will not be disadvantaged in any way by granting a lease extension. I think that both the points that the hon. Gentleman made are covered.
Amendment 3 agreed to.
Amendments made: 4, in clause 6, page 4, line 39, after “period” insert “(if any)”.
This amendment clarifies that clause 6 can apply to a replacement lease for a term that does not extend beyond the end of the term of the pre-commencement lease.
Amendment 5, in clause 6, page 5, line 7, after first “of” insert—
“premises which consist of, or include,”.—(Eddie Hughes.)
This amendment clarifies that clause 6(5) can apply to a new lease which includes some premises not demised by the lease to which subsection (2) applied.
Clause 6, as amended, ordered to stand part of the Bill.
Clause 7
Term reserving prohibited rent treated as reserving permitted rent
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 7 will apply if a regulated lease includes a prohibited rent. Should a lease include such a rent, the effect of the clause is that the term in the lease is in effect replaced by the correct rent term under clauses 4, 5 or 6 of the Bill.
The clause means that, should a lease include a prohibited rent, there is no requirement on the leaseholder to pay that rent. Any requirement in the lease to pay a prohibited rent has effect as if it were a requirement to pay the relevant permitted rent as established under the Bill.
Later in the Bill, with clause 16—in a moment—we will come to the provision in the Bill that enables a leaseholder to seek a declaration from the first-tier tribunal as to the effect of clause 7 on their lease. Clause 7 is important because it has the effect of immediately rectifying, in law, any lease that includes a prohibited rent.
Clause 16 is an important measure to ensure that parties to a lease can seek clarity as to whether a term in the lease is a prohibited rent and, if so, what the permitted rent is. Clause 7, as the Committee will recall, sets out the rent that should apply in cases where a lease reserves a prohibited rent. We expect that in most cases the effect of the clause will be clear, and that the landlord will accept that a prohibited rent is not enforceable. However, where that is not the case, clause 16 means that a leaseholder, or landlord, can apply to the appropriate tribunal for a declaration. If the tribunal is satisfied that the lease includes a prohibited rent, it must make a declaration as to the effect of clause 7 on the lease. In other words, the tribunal must also clarify what rent is payable.
Under clause 16(3), where there are two or more leases with the same landlord, it will be possible for a single application to be made. That may be made either by the landlord or by one of the leaseholders with the consent of the others. That will mean that if there are several properties in the same block, or perhaps in different blocks but with the same landlord, it will not be necessary for a separate application to be made in respect of each lease.
Clause 16 also states that where the lease is registered in the leaseholder’s name with the Land Registry, the tribunal may direct the landlord to apply to the Chief Land Registrar—the Land Registry—for the declaration to be entered on the registered title. The landlord must also pay the appropriate fee of about £40 for that. This will ensure that there is a record of the declaration for any successor in title to the lease. It will also mean that if the leaseholder wishes to sell, the true position will be clear to their purchaser’s conveyancer.
In the case that the tribunal does not direct the landlord to apply to the Land Registry, the leaseholder may do so themselves. That will involve the payment of a modest fee of around £40. I hope that we can agree that it is important that a leaseholder does not encounter difficulties when selling and that future leaseholders clearly benefit from the actions taken to address the prohibited rent included in their lease. The clause achieves that by ensuring that the correct position in relation to ground rent under their lease can be made clear on the register of title.
Mike Amesbury
I thank the Minister for his explanation. If we look at the evidence provided by the National Leasehold Campaign and the Leasehold Knowledge Partnership, and take our mind back to the Select Committee call for evidence, I think in 2018, which I know he had a keen interest in at the time, there was a real concern about access to tribunals. Decisions seemed to be weighted against leaseholders. On the worry about access to, and supported provided to, tribunals, what reassurance can he give that the situation can improve as a result of the changing legal landscape?
Maria Eagle
I wish to ask the Minister a question. I apologise to him; obviously we have not yet reached the debate on the commencement provisions, but he might be able to enlighten us on the Government’s intention. Clearly, it is entirely welcome that clause 7 would simply replace the unfair term in the lease that asks for real money for ground rent rather than the peppercorn, which the legislation is intended to outlaw, but the commencement provisions are not totally clear about when that provision will be commenced.
My understanding is that there will be a regulation-making power for the Government to bring into force the Act on the day that they wish to do so. My concern about not being clearer about when clause 7 comes into force is that there may be a gap between when the Bill is passed and when the clause is commenced by the Government, because they will have to make a regulation to do so. Does that leave a space for unscrupulous landlords to continue to have unfair contract terms in their leases after Royal Assent but before the commencement of the legislation?
I wonder whether the Minister could assuage concerns by making it clear that it is the Government’s intention not to have a big gap between Royal Assent and commencement such that a loophole could be created in which clause 7 has not yet been commenced, preventing unscrupulous characters who may want to induce potential tenants into leases with contract terms that would be outlawed by the Bill from doing so. A simple commitment from him that there will be no such gap would satisfy me entirely.
Eddie Hughes
We are here to help. Lord Greenhalgh has already said in the other place that that gap would be no more than six months.
Eddie Hughes
Given the pace at which legislation moves, that feels to me quite quick. With regard to the concerns of the hon. Member for Weaver Vale about the tribunal, I guess time will tell. We will need to monitor the situation closely, to ensure that people have access to tribunals. We are expecting the number of cases covered by this legislation to be relatively small. Given that the Government have signalled their intent, we have already seen reactions in the market, but I would look forward to working closely with the hon. Member, should concerns arise in future, in order for us to address them collectively.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8
Duty to inform the tenant
Question proposed, That the clause stand part of the Bill.
The Chair
Is the Government Minister absolutely sure that he wants to vote aye to clause 8?
The Chair
I will suspend the Committee until this matter is resolved, which I hope will be done extremely quickly.
The Chair
I am going to start that debate again. We now come to the Question that clause 8 stand part of the Bill. I call the Minister.
Eddie Hughes
Mr Hollobone, I apologise sincerely for that small confusion on my part.
Clause 8 imposes on landlords a duty to inform whereby they are required to inform an existing leaseholder of the changes introduced by the Act, but only if those provisions in the Act have not yet come into force. This amendment was passed in the other place, and I support the principles behind the Lords amendment. It is vital that there is transparency in the leasehold system. However, there are doubts as to whether the amendment is the most effective means of achieving that objective. As drafted, it places a duty on all landlords. The amendment does not specify how—
Maria Eagle
Does the Minister mean the clause? I cannot see an amendment to clause 8.
The Chair
Order. What we are debating now is that clause 8 stand part of the Bill. No amendment has been moved to clause 8. We are debating whether clause 8, as inserted by the noble Lords, stays part of the Bill.
The Chair
Order. I am going to speak with the Clerk.
This is most unsatisfactory. The Minister can redeem himself by talking about “the clause”, not “the amendment”. If there is any more inappropriate language, I have a mind to suspend the sitting for the rest of the morning until the Government sort themselves out. The clause was tabled as an amendment in the Lords, but is now a clause in the Bill. If the Minister refers to it as “the clause”—we are debating clause stand part—I will allow him to continue.
Eddie Hughes
That is very kind, Mr Hollobone; thank you.
I support the principles behind the clause—it is vital that there is transparency in the leasehold system—but there are doubts as to whether the clause is effective in achieving that objective. It places a duty on all landlords but does not specify how each landlord must satisfy that duty. Furthermore, it relates only to the short period between Royal Assent and the peppercorn limit coming into effect. It would therefore place a significant burden on enforcement authorities for a limited period. Additionally, the changes that the clause requires for the penalty enforcement process to align with the rest of the Bill would delay the implementation of new peppercorn rents.
We are looking closely at how to best achieve the objectives that informed the clause. On Second Reading, the hon. Member for Weaver Vale and my hon. Friend the Member for Wimbledon (Stephen Hammond) raised very good points about the importance of transparent, objective legal advice during the purchase process.
I firmly believe that the Government’s provisions will lead to fairer, more transparent homeownership. I hope the Committee will agree that the clause should not stand part.
Mike Amesbury
I thank the Minister for his explanation. He referred to the fact that I and a considerable number of other Members spoke about this matter on Second Reading and have done so throughout the campaign to reform the feudal leasehold system. I cannot quite understand the objection to the clause, given that the lack of transparency has been a major factor in the leasehold landscape—we have referred to the CMA investigation and mis-selling by solicitors. The clause would help to improve the landscape and improve the situation for leaseholders. It makes perfect sense to include provisions on transparency of information in the Bill that the Government are arguing for and which we are scrutinising and challenging. We support clause stand part.
Maria Eagle
I have some concerns about the Minister’s suggestion that we should not keep clause 8 in the legislation, partly because of the exchange that we just had on clause 7. I expressed a little sedentary shock that six months may pass between Royal Assent and the commencement of clause 7. A lot of leases can be signed in six months, which I consider an extended period, and clauses that will become prohibited may not be at the time.
Leases are difficult enough to read as a layperson without having to be aware that the law has been changed to prohibit a particular clause and that a rent set out in a lease should be replaced with a peppercorn rent. One would have to follow Hansard reports of Bill Committees carefully, as well as the commencement of legislation, to have an understanding that there was a prohibited clause in a lease that one had just signed. Even then, one must understand the legal language in leases, which is not the easiest thing for lay people, perhaps first-time buyers. It is extremely useful to have a provision such as clause 8 in the legislation to make it clear that there is an obligation on landlords to inform tenants of this interim period of time.
If the Minister had said in our debate on clause 7 that the delay was going to be a week or two weeks, then perhaps I would not have risen to support this clause, but we are talking about six months. Many leases have clauses that are to become prohibited later on, but the tenant who signed them may not understand that. We wish that were not the case but there are some landlords out there who wish to induce people to sign leases with charges attached that are shortly to become unlawful. Perhaps then there will be some money paid over, and it is more difficult to get that back than not to pay it in the first place.
Given that there is likely to be a period of up to six months between Royal Assent and commencement of the legislation, clause 8 is a valuable provision to keep in the Bill. I cannot understand why the Minister wants it removed. I would be happy if he were to tell me that commencement of the legislation would take place within a week or two of Royal Assent. I would not then be so concerned about this gap. I am concerned that we are creating or allowing too many loopholes that enable our constituents who are signing new leases to fall into traps that those who wish them to sign leases want to induce them into. The fewer loopholes, the better. Clause 8 is an important provision to leave in the Bill and I would vote for it to stand part of the Bill.
Eddie Hughes
Clearly, six months is the limit that we have set. I am sure that people will be working assiduously to try to ensure that that period is minimised. The suggestion that the hon. Member for Garston and Halewood made—that she would be reassured to hear that it would be a week—is nigh on impossible. We will continue to work hard to limit that period. During that time, we will communicate regularly with professional bodies to ensure that all solicitors are informed of and understand the changes that are coming.
Eddie Hughes
We are placing a duty on the landlord, and the unintended consequences might be that there are a number of cases that are highlighted and then brought to a tribunal in a very condensed period of time, placing an unnecessary burden. I think it would make for a slightly chaotic approach to the system. We are aiming for a smooth transition. Given the effort that we have put into communicating with legal bodies and the work that hon. Members are doing to highlight the changes the Government have made, it feels like an unnecessary process. However, we will continue to work with the hon. Member during the passage of the Bill to see if there is anything else we can do to meet the objective of the clause.
Question put, That the clause stand part of the Bill.
Eddie Hughes
We must ensure that the breaches of prohibited rent that I set out in clause 3 are acted on. Clause 9 will place a duty on local weights and measures authorities in England and Wales, that is to say trading standards authorities, to act where a breach of clause 3 occurs in their area. It also gives them the power to act where a breach occurs elsewhere in England and Wales.
In addition, through subsection (2), English district councils that are not trading standards authorities will be given the power to enforce clause 3 but, unlike trading standard authorities, will not be required to do so. That will maximise our ability to act against perpetrators. Both local weights and measures authorities and district councils will be able to retain the financial proceeds from the penalties they impose to cover the costs incurred in carrying out their enforcement functions in relation to residential leasehold property.
Subsection (3) clarifies the area in which a breach occurs and, to be thorough, captures areas where a premises is located on a local authority boundary, although we think that those will be few and far between. I am sure we all agree that although it is important for enforcement authorities to have the necessary duties and powers to act on breaches, it is also important that we provide protection against the duplication of penalties, which is what subsection (4) does.
Equally, I am sure we all agree that it is right to expect landlords to understand the requirement of the new legislation and abide by it. It is our hope, therefore, that enforcement action will not be needed in most cases, but by conferring duties and powers on enforcement authorities, the clause will be instrumental in ensuring that any breach of the restrictions on ground rents can be robustly enforced. That is vital as a deterrent and to protect leaseholders from unfair practices.
Mike Amesbury
My only concern is the obvious one about resources. I refer to my declaration in the Register of Members’ Financial Interests, as I am a vice-president of the Local Government Association. Over the last 11 years, resources have been somewhat depleted as a result of austerity and Government cuts. Although there is the control and skill capacity locally to be the foot soldier for enforcement, it is a matter of having the people and resources to carry that out and implement it.
I notice that on the Bill’s journey in the other place, a reference was made to future local government settlements. The last 11 years have not been good if we use them as an example of potential resources. I would be interested in the Minister’s reply on that important and vital matter.
Maria Eagle
It is good to see that there is some provision about enforcement because there is often a gap in legislation, so the law is made and practical enforcement is not set out. I find it quite an interesting approach to enforcement to say that local trading standards or weights and measures authorities in England and Wales “must enforce” in their own area the standard statutory obligation of such an authority but
“may enforce…elsewhere in England and Wales.”
I may be wrong, but that seems a fairly novel approach to enforcement. I am not saying it is bad, but I would like the Minister to set out in a little more detail why the clause is worded in this manner and whether there are any precedents in respect of other enforcement arrangements that have been drawn on to set out the provision.
Subsection (2) says:
“A district council that is not a local weights and measures authority may enforce section 3 in England (both inside and outside the council’s district).”
We have the prospect of roving entrepreneurial weights and measures departments perhaps thinking that they can go and levy fines of up to £30,000 for a breach somewhere else entirely. I think I have read somewhere that they get to keep the proceeds, so this is quite an interesting tax farming idea—perhaps going back to old England, whereby the collector is given a percentage of the takings. Like my hon. Friend the Member for Weaver Vale, I was going to ask what provision the Government will make to enable a local authority’s trading standards department to search out such breaches. Perhaps they intend to enable trading standards from elsewhere in the country to come galloping in.
Ian Byrne (Liverpool, West Derby) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hollobone. On the point raised by my hon. Friends the Members for Garston and Halewood and for Weaver Vale, Liverpool has lost £465 million of funding since 2010, and another £34 million of savage cuts are mooted for the upcoming budget. How does the Minister expect a council such as Liverpool City Council to finance a trading standards team that can actually carry out what the Bill proposes under what we are experiencing through austerity?
Maria Eagle
I agree with my hon. Friend about the savage reduction in available resource that the Government have visited on Liverpool. I am interested to hear from the Minister about the intention of this formulation and whether he anticipates that trading standards from out of area will be galloping around the country doing enforcement work in the manner that the clause lays out, because it is not something that I have seen before in legislation. I may be wrong, but it is not something that I can recall seeing.
Mike Amesbury
Perhaps there will be a VIP fast lane for the new hit squad that goes across the country.
Maria Eagle
I will be interested to see whether there is any kind of entrepreneurialism undertaken by trading standards around the country, but I would like to hear what the Minister has to say.
Nickie Aiken
I thank the Government for including effective enforcement in the Bill. There is no way that the Bill will work, and landlords will not be held to account, unless there is proper enforcement. Having been the cabinet member for public protection at Westminster City Council, which trading standards came under, I know at first hand the brilliant work that trading standards officers do day in, day out in Westminster and across the country. I would really appreciate it if the Minister could give assurances that trading standards teams across the country will have the funding to carry out the extra workload. I certainly think it is important that we ensure they can do so, because we do not want to be giving leaseholders any false hope, and I certainly welcome the ability for local authorities to keep the proceeds of any fines that they may be able to extract from a landlord.
The Chair
Order. I must ask the hon. Lady to resume her seat. It is nothing against the hon. Lady at all—I am enjoying her speech immensely—but it is now time to adjourn.
Commercial Rent (Coronavirus) Bill (First sitting)
Tuesday 7th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Commercial Rent (Coronavirus) Bill 2021-22 View all Commercial Rent (Coronavirus) Bill 2021-22 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 December 2021 - (7 Dec 2021)
The Chair
We are now sitting in public and the proceedings are being broadcast. Before we begin, I have a few announcements. Please switch electronic devices to silent. No food or drink is permitted during sittings of the Committee except for the water provided. Members are expected to wear masks when they are not speaking, in line with current Government guidance and that of the House of Commons Commission. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. That can be done either at the testing centre in the House or at home. Please also give one another and members of staff space when seated and when entering and leaving the room. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Date Time Witness Tuesday 7 December Until no later than 10.10 am UKHospitality; British Retail Consortium Tuesday 7 December Until no later than 10.55 am British Property Federation; Lightstone Properties Tuesday 7 December Until no later than 11.25 am Chartered Institute of Arbitrators Tuesday 7 December Until no later than 3.00 pm ukactive; Federation of Small Businesses; British Independent Retailers Association
We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication, and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters formally, without debate.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 7 December) meet—
(a) at 2.00 pm on Tuesday 7 December;
(b) at 11.30 am and 2.00 pm on Thursday 9 December;
(c) at 9.25 am and 2.00 pm on Tuesday 14 December;
(d) at 11.30 am and 2.00 pm on Thursday 16 December;
(2) the Committee shall hear oral evidence in accordance with the following Table;
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 22; Schedule 1; Clause 23; Schedule 2; Clauses 24 to 26; Schedule 3; Clauses 27 to 30; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 16 December.—(Paul Scully.)
The Chair
The Committee will therefore proceed to line-by-line consideration of the Bill on Thursday at 11.30 am.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Paul Scully.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room and circulated to Members by email.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Paul Scully.)
The Chair
Q
Kate Nicholls: Thank you. I am Kate Nicholls, chief executive of UK Hospitality, which is the national trade body representing hospitality businesses, from single site to multi-chain. We have 700 member companies and 95,000 outlets—about 95% of the market.
The Chair
Do you have any introductory remarks to make about the Bill?
Kate Nicholls: In the interest of brevity and given the time, I will not make any introductory remarks.
The Chair
Thank you. Dominic, will you introduce yourself and make any introductory remarks that you may have?
Dominic Curran: Thank you, Chair. I am Dominic Curran, property policy adviser at the British Retail Consortium. I will follow Kate’s lead and incorporate any remarks that I might have made into the evidence that I give.
The Chair
Thank you very much. In that case, I will open up the floor to questions. Seema Malhotra.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Kate Nicholls: I will begin by saying that we have had unprecedented engagement in terms of the preparation for the Bill and all the way through the coronavirus crisis. In terms of when we first started talking to Ministers in the various Departments about the impact on rent and rent debt and the ability of businesses that were forced to close to pay rent debt, the engagement began in March of last year and has continued throughout the process. Certainly over the course of the summer since the intention to legislate was announced, we have had extensive dialogue and consultation meetings with Ministry of Housing, Communities and Local Government and Department for Business, Energy and Industrial Strategy officials.
Seema Malhotra
Q
Kate Nicholls: I do not have any concerns about the definition of tenant in this legislation. I think it is important that this piece of legislation sits within the existing canon of property law. There are some very clearly defined terms and references there, so the definitions do not cause us any degree of concern. An area that we may have wanted greater clarity on—we would hope that that would come forward in the guidance to arbitrators—is around the importance of sharing the burden of outstanding rent debt for those businesses that are covered by the ongoing moratorium and the mandatory arbitration process. It is also important to make sure that we have clarity around affordability and the affordability tests, but that could come through in guidance to arbitrators.
In terms of the challenges that businesses have faced over the course of the pandemic, I have to say that in large part landlords and tenants have worked very closely together to try to get through the crisis and, over the period of time that has been affected, about half to two thirds of landlords and tenants have been able to reach agreement on the treatment of rent debt and ongoing rent liabilities during that period, before the Government introduced legislation. The decision and the announcement of the intention to legislate gave a further nudge to those parties that had outstanding rent debt or which refused to negotiate or come to the table over that period. At that point, about a third of our businesses in hospitality had not got a negotiated settlement. The announcement of legislation pushed that towards resolution, and we have more businesses undergoing negotiations now. It is not all resolved. About 60% of our members say that all their outstanding rent debt is resolved and they have agreement as to how it will be treated, but that still leaves around one in five who have not got any form of negotiated settlement yet, the balance of the two being those that are in the process of negotiating while this legislation is introduced.
We see a small number of businesses that have been directly affected and continue to be directly affected. That is why this legislation is important—because without it, we would see an unsustainable rent debt that would be borne by a small number of tenants and would undoubtedly result in damage to their business and their businesses becoming unviable, or an impact on jobs, growth and investment going forward. The legislation remains vital to be able to provide the extended protection and to provide a negotiated solution for the remaining businesses that are unable to negotiate that themselves.
Seema Malhotra
Q
Kate Nicholls: That remains an ongoing discussion with officials and Ministers. Clearly, there is an indicative fee level that is set out for an application to the arbitration process, which is consistent with other arbitration schemes. It is reasonable and relatively small scale. Obviously, even if it is a paper process—let alone if it goes to a hearing—there will be considerable additional arbitration costs. We would welcome a cap on that and direction to arbitrators about the treatment of costs that are incurred as part of an arbitration process. Particularly where there is one party who is being deliberately obstructive or who has not co-operated, it would be helpful to have an ability to award costs.
As we go forward and understand in more detail what the arbitration process will look like, and as the guidance to arbitrators comes out, we as the trade association will work to make sure that we have got template systems in place to allow small independent lessees in particular to have access to the resources—the burdens of proof and the benchmarking data—that would help them to make their case at arbitration, so that we can try to keep the costs as low as possible and avoid the need for small businesses in the sector to require professional advice and support. That is where the costs will ratchet up, rather than the entry point costs to arbitration—where people feel they need to have expert witnesses and expert support to be able to build a case. We will work to make sure that we can do whatever we can to help businesses access that in a cost-effective way.
Seema Malhotra
Q
Dominic Curran: The British Retail Consortium, in the call for evidence that the Government published last spring, did call for a scheme that extended the moratorium to a future date and ringfenced the protection of the arrears that arose during the process, and it called for a process of compulsory arbitration. At least at headline level and in terms of the core principles of the Bill, this is what we have called for and what our members want. We do welcome it.
We have a slight concern about the definition of a business tenancy. The Bill appears to suggest that it is only a tenancy that is not contracted out of the Landlord and Tenant Act 1954. We have been assured by officials in separate meetings that that is not the intention of the Bill and that actually the Bill covers any tenancy that would be within the scope of the 1954 Act, whether it is contracted out or not, which does give us some comfort. That might be an area you would want to clarify in the course of scrutiny of the Bill.
Engagement with officials and Ministers has been fantastic, actually, throughout the pandemic and through the drafting of the Bill. We have a similar concern to UK Hospitality about the approach that will be taken on viability. Some of the definitions that the Government have said they do not want to enshrine in legislation—which is, I suppose, understandable—will be left to guidance for arbitrators. More than ever, the devil will be in the detail on that. We would want to see what that guidance is as soon as possible to give as much clarity as possible to businesses that might be thinking about using this route.
We would want to make sure that that guidance also directed arbitrators to take as broad a concept of viability and affordability as possible, so that there is enough understanding of a business’s circumstances that they could build in an allowance for the uncertainty of future cash flow and turnover, not least because there will be tax rises coming from April onwards when this process will effectively kick in—both higher businesses rates liabilities for many businesses and further tax increases on Business Network International contributions. We would want to see as much certainty in advance as possible and as much understanding of the need for businesses to have a buffer to enable them to trade while all these adverse headwinds are hitting them. We certainly share some of the concerns of UK Hospitality. I think the approach taken on fees is exactly right, as Kate outlined. While there may be a nominal, reasonable amount to enter the arbitration process, we would want the process to be as straightforward as possible, particularly for smaller businesses, which will not have access to in-house or agency consultants to support them through the process, so that it really is open to all and seen as fair and equitable.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
Q
Dominic Curran: I think it is less of a problem than it is for UK Hospitality. That is not to say that it is not a problem, but I think retail rent collection levels are higher than hospitality, as you would expect, given that the retail sector includes businesses that were allowed to open throughout the pandemic, particularly grocery and pharmacy businesses, so turnover has probably been higher proportionately in retail than it has been for hospitality.
I think it affects a smaller proportion of our sector in terms of the quantum of rent arrears, but it is still significant. It is estimated that there are still several billions of outstanding rent arrears in the retail sector during the pandemic period that the Bill covers, as far as we know. Some of that surveying does not take account of agreements that will have been reached off the books, as it were, or outside the formal rent collection dates, so it is an uncertain figure. When we have spoken to members, and this is an informed guesstimate rather than a thorough survey, it feels like we are at about 80% to 90% of rent having been collected and deals having been done, so it is a very small proportion of the outstanding rent liabilities that is left to be resolved. With each extension of the moratorium every three months, as we have seen over the past year and a half, and particularly with the announcement of this Bill and the process that it proposes, we have seen that percentage chipped away. Ever more landlords and tenants are reaching agreements. While it is a significant problem, it is probably less of a problem than it is for UK Hospitality, but it is still really important that even if businesses do not take advantage of the arbitration process, that process is there—if for no other reason than to help chivvy both landlords and tenants into making new arrangements.
Paul Scully
Q
Dominic Curran: In all honesty, members report that the code of practice did not aid them particularly. Its voluntary nature was the real sticking point. It was not necessarily the content, which was developed in very deep and meaningful consultation with us, UK Hospitality and other interested parties, but it was the fact that it was voluntary that was the sticking point. Because it was good practice, those who were going to use that approach did so anyway, almost regardless of the code’s existence, and those who were not going to use the approach did not feel like the code applied to them, because there were no sanctions on the requirement to negotiate in line with it.
What has helped—in so far as people are aware of it—is the suggestion, and Kate alluded to it, that if you do not negotiate in line with the principles of the previous code and the revised code, there may be some penalty in terms of costs being awarded against you in any subsequent arbitration process. That may help focus minds somewhat.
Paul Scully
Q
Dominic Curran: I would not be able to say significantly, but certainly anecdotally speaking to members, yes, it has helped.
Kate Nicholls: I agree with what Dominic said. The code of practice content was really helpful, and it gave a steer towards negotiations and how you should negotiate in good faith. A mandatory backstop and a legislative backstop are absent. It was limited in its impact in bringing recalcitrant players to the table. When Ministers announced that they were intending to legislate, a third of our businesses still had no negotiations and a large amount of outstanding debt, with no agreement as to how that was to be treated. That has dropped from a third to 20% and it keeps getting chipped away every time we move further forward in the legislative process.
The introduction of the legislative backstop is really important. The code of practice principles will be important to guide discussions for those businesses that fall outside the legislative solution, because obviously there will be parts of the business that will not be covered by the arbitration process. It is about giving the legislative backstop and the clearer direction towards sharing the pain, coming to a negotiated solution and being able to support what would otherwise be viable businesses.
The ministerial forewords in the legislation and the call for evidence are immeasurably helpful in giving a clear direction that landlords should do whatever they can to support businesses that would otherwise be viable. That was the piece that was missing from the code of practice that gives a clearer steer of the intent of the legislation.
Ruth Cadbury (Brentford and Isleworth) (Lab)
Q
Dominic Curran: On the arbitrators who will be used, the Bill says, if I remember it correctly, that the Secretary of State will nominate or choose which arbitrating bodies will be eligible to provide arbitrators to the process, so it remains a bit of an open question. All I would say—having spoken to officials, this point is well understood and well heard—is that given the nature of the discussions that inevitably will be had during the arbitration process, we would prefer to see arbitrators who have a strong accountancy background, perhaps more so, or at least as much as, those who have a property conflict resolution background.
The nature of the process is to look at tenants’ accounts and to make sure that their income, liabilities and forecasts for turnover are such that they can pay a relevant and viable proportion of their rent arrears. So rather than it being a dispute over the interpretation of a lease or the duties of a tenant or a landlord, it should really be about understanding the finances of that business and enabling it to pay a proportion of rent between 0% and 100%, while being able to continue to trade viably at the same time. We certainly want to see the accountancy profession well represented in that.
Whether any other trade bodies, beyond those that represent accountants, are given the right to carry out the process by the Secretary of State remains to be seen. If you wanted to get the confidence of businesses that are tenants, however, you would want to make sure that you had accountants rather than property dispute arbitrators fulfilling the duty.
Ruth Cadbury
Q
Dominic Curran: No, I think it is a reasonable set of stages. There is a helpful flowchart in the revised code. The only point I would make is that we have a situation where the arrears, at least in retail, are historical in that they go up only to April 12 or the end of March, given rent payment dates. We want the legislation to be passed as quickly as possible, the arbitrators to be announced as quickly as possible and the process to start sooner rather than later, because it is the uncertainty that is particularly damaging for any business.
Kate Nicholls: I agree with Dominic that the key thing is that we need to have confidence from both parties to be able to and want to use the process to resolve these outstanding matters as rapidly as possible. I am therefore more attracted to using a multiple variety of arbitration bodies, rather than just one, because we need to make sure that there is no delay in appointing arbitrators and their being able to take on the work. I also agree with Dominic that it is hugely important that they have broad-based financial and business understanding and sector-specific—in our case—understanding of the businesses.
This is not necessarily a legal issue or a dispute resolution issue. This is a financial issue that centres on viability and affordability, and therefore an understanding of the nature of the business, the way it operates, the cost of business and the costs coming down the line, as Dominic alluded to, is critical to an understanding of affordability and ability to pay. Those are the key elements that we want to see. Confidentiality, given that you are effectively opening books and sharing financial information, is really important because tenants clearly need confidence that that will be protected. However, I do not see any problems with the Bill as it is currently drafted.
Sara Britcliffe (Hyndburn) (Con)
Q
Kate Nicholls: As soon as we have got the legislation through, we need the communication out there as rapidly as possible that this is coming, so that the scope of the Bill, as it goes through the House, is clearly understood. We are doing a wide range of outreach through the trade press and through our own communication channels to cascade that information out, not only through the trade association but more broadly. We are working closely with BEIS and MHCLG to make sure that that communication goes out there.
I think it is then about making sure that we have a communications plan post the Bill being enacted to ensure that there is confidence in the arbitration process and the arbitrators, and that we encourage people to use it. It will then be down to the industry to make this work. We will work flat out to do that, and to facilitate the tools that people need to enter into confidential negotiations, using the code of practice, and then arbitration if they absolutely need to as a last resort. Arbitration should be a matter of last resort in this case. Success for the Bill and the trade associations helping commercial tenants through this will be if a small number of cases actually need to go to arbitration to be resolved.
Sara Britcliffe
Q
Kate Nicholls: Clearly, it affects our ability to pay and it affects viability. It is quite clear, and Ministers have been quite clear about this over the course of the last week, that we now know and understand in full the economic effects of any restrictions on businesses, such as in hospitality, which have been asked to bear a disproportionate burden over the course of the whole pandemic. It is quite clear that businesses would not survive without further additional support if additional restrictions were imposed. That would be one measure that would be necessary. Your ability to pay your rent on time a quarter in advance is significantly impaired if your ability to trade is restricted. Trading remains quite soft, and consumer confidence remains fragile, so restrictions would have an immediate and significant effect on ability to pay, viability and affordability—all the tests we are talking about. As a minimum, you would need to extend some of these protections going forward.
Sara Britcliffe
Dominic, do you want to add something?
Dominic Curran: Kate said exactly what I would have said; if you just replace “hospitality” with “retail”, you are more or less there. The only thing I would add to Kate’s comments is that, just as at the peak of the pandemic, with the business rates holiday and restart and reopening grants, when retail and hospitality were able to reopen, you would need to see a package of measures to support businesses in the event of any further restrictions.
Peter Dowd (Bootle) (Lab)
Q
Kate Nicholls: If you look at the pub-owning businesses and the tied pub companies, there has been a far greater degree of forgiveness of rent among those businesses. It might not be 100% for all of them, but significant rent concessions have been granted throughout the periods of closure, and immediately granted. There has also been a greater willingness to defer rent, allowing rent debt to be accrued and rescheduled over a longer period of time.
If you look at the commercial sector, there has been a variety of different approaches, and there is not anything that really reflects the size of landlord or of tenant businesses in terms of a willingness to negotiate and to reach agreement. Some very small landlord companies have been very willing to give rent holidays, concessions and deferments, and some large commercial companies have been very difficult and intransigent in coming to the table and negotiating, and are taking further enforcement action. It is less to do with the size; it is more the nature of the landlord that has caused the biggest challenges, and the ones that we have found taking enforcement action tend to have been the larger commercial landlords, who have taken a more robust line.
Seema Malhotra
Q
Dominic Curran: Thank you very much for asking that. That is a really important issue for our members. We have been asking for action on county court judgments and High Court judgments since October last year. We are very pleased that the Government listened and took account of our concerns to the extent that it was announced alongside the Bill that there would be no ability for landlords to pursue court processes for rent arrears after 10 November, when the Bill was introduced. Unfortunately, that means that any landlord who started those proceedings before 10 November is now in a more advantageous position than any landlord who was perhaps negotiating in line with the code and taking a more reasonable approach with their tenants.
We have the slightly perverse situation that the “more aggressive” landlords are actually better off now than those who might have been taking a longer, more reasonable and more timely approach. I do not see why it should be impossible for there to be a direction to courts to stay any court hearing—county court or High Court—for rent arrears pending the outcome of any arbitration process, or the period in which you could make an arbitration process after the Bill gets Royal Assent. I do not see why it is right that those landlords who have been more aggressive are able to carry on their approach.
We saw that problem early on in the process. The Government rightly and laudably made it effectively impossible in England for landlords to take properties back, to seize goods to the value of the debt, and to effectively start the process of winding up a tenant. That was the rent protection moratorium, which was very welcome and was extended, but it left, as we have been saying since October last year, a gap in the ringfence that unfortunately some landlords sought to exploit very early on. Landlords’ lawyers were sending tenants letters demanding rent arrears, and they could effectively impose the costs of that process on to the tenant.
The tenant was therefore liable for not only the rent arrears and any interest due but their landlords’ lawyers costs, which some suggested might have been slightly inflated, as well as their own legal costs in defending themselves. One member said to me, “It’s a bit like a water running downhill; it will always find a way.” That was the situation with CCJs. While it is fantastic that there has been recognition of that loophole, unfortunately it applies only from 10 November. Any CCJ that had not reached a final decision but was in train in the courts should be stayed pending the outcome of the arbitration process.
Seema Malhotra
Q
Kate Nicholls: I would echo everything that Dominic has said. CCJs have remained a cause for concern throughout this process, and we have been flagging it as a potential loophole that some landlords are exploiting. The key point about a CCJ is that it seeks to establish that the rent—a debt—is due in full, and the confirmatory judgment that it is due in full cuts across the arbitration process, which talks about a fair sharing, a fair split or fair dealing with the rent debt, so you are pre-empting that discussion. There are significant effects for the business that has a CCJ against it, in terms of credit rating, so there is an onus on a business to try to resolve the matter and prevent it from being heard in court. So this has always been a major source of concern. What we have seen is landlords—even after the date of the ministerial statement that the Government intended to legislate and about the intent on the code of practice and the arbitration process—tabling and starting CCJ processes. That is a particular cause for concern when the intention and the direction of travel are quite clear.
So I agree with Dominic. The concern is that you have this cut-off date of 10 November, which is when the legislation was published, but we would want to see direction to courts to stay all those proceedings, to avoid unnecessary costs to businesses in having to defend cases that should not be being brought and should be set to one side. I think it would be helpful if that was taken forward. Yes, we have raised that as part of the consultation process and we have raised that repeatedly with Ministers and officials over the course of the last year. As Dominic says, we have been highlighting CCJs since October of last year, but, more importantly, highlighting the continued use of them since spring of this year, when the intention was announced. I understand the challenges of legislating retrospectively, but I think it would be helpful to give direction to the courts, and clarity and certainty around that.
Seema Malhotra
Q
Kate Nicholls: Yes, I think that would be helpful to take into account, in terms of both arbitration fees and more general costs, if people are having to incur costs to go to arbitration because of a refusal to negotiate. I think that would be a sensible, pragmatic principle to put into the guidance to arbitrators in order for them to be able to take that into account.
Seema Malhotra
Q
Dominic Curran: We certainly have been making representations to officials since it was clear that this was the direction of travel the Government wanted to go in, and I am sure they have heard loud and clear the points that we have made, which will have been made by UK Hospitality and others. I think they completely understand and appreciate that.
It would probably be helpful, as I think I said earlier, for the Government to set out as far in advance as possible, or as early as possible, who they are thinking of as eligible bodies that could undertake the arbitration process, or whose members could undertake the arbitration process, and perhaps some of the principles that they would like to see for arbitrators—as I said earlier, making sure that there is a strong understanding of accountancy issues, rather than property dispute issues. I am sure that there will be an announcement as soon as the Bill allows the Government the freedom to make that announcement. It will be all set out in secondary legislation. We want people with a strong understanding of the financial issues, rather than property issues.
Seema Malhotra
Q
Dominic Curran: The Government were right not to put in a clear definition of viability, because I think it will be different for every business, let alone every sector. However, at the same time, there needs to be reflected in the guidance to arbitrators as broad a definition of viability as possible, or as broad a set of criteria as possible to be taken into account when assessing viability. Not only will there be the known knowns, if you like, of higher business rates and tax costs, but there will still be a great deal of uncertainty. Who knows where we will be in March and April, but consumer confidence still has not returned to the levels we saw pre-pandemic. While in retail, particularly, there were reasonably good sales figures for October and November, those are perhaps reflective of people spreading out their December purchases and so are not necessarily reflective of a higher level of consumer spending in the economy generally. In that context, I think it is wise to build in as much of a buffer as possible within the assessment of viability and affordability, because we are still dealing with a hugely uncertain situation, in terms of the ability of businesses to trade.
Seema Malhotra
Kate Nicholls: The questions that you raise on issues pertinent to future trading, future recovery and the costs coming down the line are more relevant to a discussion about affordability, rather than viability. Go back to the principles and the ministerial foreword to the legislation and the call for evidence, which talk about making sure that businesses that would otherwise be viable, had it not been for covid, are able to continue trading through the covid recovery period. That means that you need a longer timeline. I think it is helpful to look at, in our case, the hospitality strategy and the tourism recovery plan, which talk about the length of time it will take our businesses to recover. The domestic and international tourism recovery will be in 2023 to 2024, so you need to look at businesses that will be viable over that longer period and will return to a level of viability that they enjoyed previously.
The questions you ask are much more related to ability to pay and affordability, and the key thing we need there is that longer timeline that looks at the sustainability of making this rent debt payment, either in full or in part, at an immediate point or over a longer period. Those are the questions that the arbitrators will look at. For the tenants’ businesses, it is about making sure that you can factor in all those costs that are coming through and the recovery. That is where I go back to the templates and the benchmarking that business organisations and trade associations are able to provide, so you can look at what happens to the margin.
What we know has happened over the course of covid and over the course of the recovery period since reopening—the point at which the rent debt is fixed; it is 19 July, in our case—is a significant increase in the costs of doing business. Revenues have not tracked upwards to the same level, and we are not back at 2019 levels, and therefore the margin of profitability has been squeezed quite dramatically. It takes more sales to make a profit and to break even at this point in time, when you are looking at cost-price inflation of about 13% in hospitality businesses and revenues that are still around 75% to 80% of 2019 levels. Those are the factors, and that is why it is so important that the arbitrators who are making those judgments about affordability and ability to pay can take account of and understand all of those issues and plug in the future changes.
As Dominic alluded to, you have got the business rates, which need to be looked at site by site, as well as on a business basis. You have got changes in the VAT rate that are plugged in for hospitality. The VAT rate will change from 12.5% to 20%, so there will be a significant cost increase in tax that will be passed on to consumers. Therefore, you need to be able to look at what that will do to the end-point pricing, the affordability and the ability of those businesses to pay if we are not going to have inflation.
The Chair
Order. I am sorry to cut across you in full flow, but I am afraid we are at the end of the time allocated for these questions. I thank the witnesses very much indeed. We will now prepare for the next panel.
Examination of witnesses
Melanie Leech and Astrid Cruickshank gave evidence.
The Chair
Before we start with the next panel, I remind Members that they are expected to wear masks in Committee when not speaking. We will now hear oral evidence from Melanie Leech CBE, chief executive at the British Property Federation, appearing by Zoom, and Astrid Cruickshank, director of Lightstone Properties, also appearing by Zoom. For this session we have until 10.55 am. Can the witnesses please introduce themselves for the record? If there are any very brief introductory remarks, you are more than welcome to make them.
Melanie Leech: Good morning, everyone. Thank you for inviting me to join you this morning. I am Melanie Leech, chief executive of the British Property Federation, which is a membership organisation for all parts of the property sector in the UK, including owners, agents, developers, investors and advisers. We represent an industry that contributes over £100 billion a year to the economy and employs around 1.2 million people. Chair, I will follow the precedent of earlier witnesses by not making any introductory remarks and saving what I want to say for the questioning.
The Chair
Thank you. Astrid?
Astrid Cruickshank: I am Astrid Cruickshank. Thank you for inviting me to join you. I run a small property company called Lightstone Properties. Our investments are mainly car dealerships, retail and leisure. We own all of our investments jointly with joint venture partners, who are all private individuals. I will also wait for the questions.
Seema Malhotra
Q
Melanie Leech: We have surveyed our members at various points over the pandemic, and our latest survey, which represents around 16,000 leases across the whole of the UK and within our membership, shows that around 86% to 87% of those leases are now covered by some form of agreement. We believe that the challenge that is left for the arbitration scheme to solve and tackle is a very small part of the total market.
I must caveat that by saying that one of the challenges in all of this for Government, as much as for anybody trying to work to create solutions and outcomes, is that we do not really know how many commercial leases there are in the UK or in the retail and hospitality sector, which is the hardest hit part of the whole market by the pandemic. Business rates data from the valuation office suggests that there are about 620,000, but they vary immensely from very large property owners and very large tenants to individuals who may not be incorporated but who may have invested their savings or their pension pot in a single property and, similarly, sole traders who may be their tenants.
In any of the data that will be shared with you, it is quite hard to get a handle on what that represents in terms of the totality. There will always be a long tail outside any of the data that we present to you. What I can say is that, from the data that I have seen and that is available to me, we think that the vast majority of leases that we surveyed are now covered by agreements.
Seema Malhotra
Q
Melanie Leech: In most cases, we have seen people behaving well and coming together—not always immediately, but over time. Increasingly, there is a recognition that the relationship between a property owner and a tenant is an economic partnership and that the two partners need to work together and navigate a way through together. As I say, that has happened as time has gone on and everyone has seen that this is not a short-term hit, but a long-term challenge and problem that needs to be approached in that way.
We have seen a number of examples that have been quite widely reported of tenants who can afford to pay their rent but choose not to do so or to engage in any way, shape or form with their property owners. How do we know that they can afford to pay? Because we can see the backing that they have. We can see that, increasingly, they are now starting to pay dividends and bonuses to senior management and they are starting to invest in new properties. Our view is that if they can afford to do those things, it is a clear indicator that they are not in such distress that they need support with their rent. When they are not even talking to their property owners, they cannot have that conversation.
Seema Malhotra
Q
Astrid Cruickshank: For me, the absolute key is that they have good, sound financial knowledge; they are able to look at a set of accounts—both filed and management accounts—really understand them and work out from them how the underlying business is performing.
One of the things that helped me enormously in my negotiations was doing a compare and contrast of my landlord companies, because each of my properties is in a different one. I looked at my net assets and my cash balance, and at my tenants’ net assets and their cash balance, and then I used that, where I had a much larger tenant, as a way to explain to them our respective positions. I think it is critical that the arbitrators can understand the financial positions of both parties and the financial impact that their decision could have.
For us, insolvency was a major concern, and it has been throughout, because if you have a company that owns just one property and it has bank debt, and that tenant stops paying, you are insolvent. All you can then do is inject additional cash. As I said, my joint venture partners are all private and have their own businesses that were also affected, so it is a difficult thing for me to then send them a note saying, “Please send me £10,000 by Friday,” when I know that their main business is hospitality, for example, and they are struggling themselves.
Melanie Leech: I largely agree with Ms Cruickshank. The key decisions that need to be made are about viability and affordability, which require a financial understanding rather than a particular understanding of property contracts and property leases, so I agree.
Seema Malhotra
Q
Melanie Leech: My understanding is that the Government want as few cases as possible to reach the arbitration process, and we share that ambition. We agree that that is right. For us, it is quite hard to see how the same scheme will be accessible both to very small landlords—including private individuals, either themselves or through syndicates and so on, and small companies—and to small tenants, as well as dealing with the very complex nature of the relationship between very large property owners and very large multinational tenant businesses.
The aim is for simplicity and a relatively straightforward and speedy system. I think that is more naturally likely to be able to deal with relatively simple relationships and relatively small-scale sets of books. It is much harder for us to see how larger players will be able to enter the scheme, particularly in a situation where there is either one tenant with multiple landlords, and you are trying to deal with multiple different relationships, or the reverse: multiple tenants with a single landlord. It is really hard to envisage how, in practice, the scheme will be able to cope with those kinds of relationships.
I suspect that it is the Government’s intention that those kinds of cases should not come to the arbitration scheme so that it can be kept simple. In that case, such things as accessibility and the cost structure, and people’s ability to go into it unsupported by ranks of advisers that they cannot afford to pay for, become much more critical. Ms Cruickshank can probably speak more to that.
Seema Malhotra
Q
Astrid Cruickshank: I am pretty pleased with the scheme as it has come forward for landlords of my size. I take on Melanie’s points about larger landlords—going back 20 years, I was a fund manager, and it is a completely different situation—but for me, I think the scheme works well. I like the fact that it includes references to ensuring that the landlord remains solvent, which was critical to me. In terms of fees, a sliding scale that is somehow related to the rent seems the easiest way to keep it affordable. I appreciate that there will have to be a minimum, but if it could be somehow linked to the sum in question that could work for us.
The Chair
We have a sound issue, Ms Leech. Hold on one second.
Melanie Leech: Can you hear me now? I will abandon the headphones. Apologies. Our view is that for the larger, more complex relationships, this scheme should not be the way forward. They should be taken as they would have been before the pandemic. Outside the confines of the ringfencing of this scheme, that will be through the courts. These are, ultimately, legal relationships, and the courts are there to resolve legal disputes. I think the scheme can work well for smaller businesses and less complex relationships, but for those larger, more complex relationships, redress should be through the courts, as it always was and will be again outside the confines of the scheme.
Paul Scully
Q
Melanie Leech: I think what is really important, not only for the individual property owners in the sector but for the market, the health of the sector and the future—I go back to that £1.2 billion GVA that we create every year—is that certainty that you, the Government, understand the importance of contracts as part of what makes UK real estate an attractive investment proposition for pension funds, saving funds and those institutional long-term investors. When we talk about property owners, that is largely who we are talking about. We are talking about our money as individuals, our pensions and savings. In order to protect them appropriately in these circumstances and to secure the future—particularly thinking about the levelling-up agenda, for example, and the investment that will be needed across the country—it was really important that, as part of this announcement, the Government made clear that, if tenants can afford to pay their rent, they should pay their rent in full, and that this scheme is designed to support and facilitate agreement being reached between tenants that are vulnerable and need support and property owners that can afford to give that support. That builds on what has already happened in the market, where millions of pounds of support has already been provided to the most vulnerable tenants. That underlying principle protects the sanctity of the contract for the long term and protects UK real estate as an investment proposition, which we badly need in this country, while also allowing the outstanding cases in which agreement has not been reached to have some kind of resolution.
Paul Scully
Thank you. Astrid, same question to you.
Astrid Cruickshank: I have to say that I think it is quite unfortunate that we need this system at all. I try to speak to all my tenants. I have four who just point-blank refuse to engage. I knew a finance director prior to covid who was always happy to take my call, so it was somewhat disappointing to find, when trying to speak to them to try to agree a way forward, that they just will not engage. I have to say that I have been able to unlock mine now, so unless there are further lockdowns—fingers crossed—I will not need to avail myself of this. I have stuck with the consultation process because I think it is important that there is a voice from a small landlord. People tend to assume all landlords are enormous, and I wanted to make the point that that is not the case.
Mark Eastwood (Dewsbury) (Con)
Q
Melanie Leech: I hope that a binding arbitration scheme will be a neutral process that allows both sides’ views to be heard and a resolution to be reached between those two positions. As I said in response to the Minister, the principles should be that someone who can pay their rent should pay it, but if they can demonstrate that they need support, because they cannot afford to pay their rent, that case should be heard, and a landlord who is able offer support should give it. I think those principles, if they remain in place and underpin the scheme, should lead to a fair outcome.
The other thing we have concerns about—although I think the process is designed to avoid this—is that it is not a case of both parties starting in an equal position. We start from the position that there is a contract that says that the tenant should pay rent, and the tenant is seeking support to set aside that contractual obligation. The evidence base is primarily driven by the tenant’s position; I have heard concerns that if a landlord wants to go into the arbitration process, they need evidence from the tenant to underpin their position, and, if the tenant does not provide that evidence, the landlord is at a disadvantage in the process.
The process is designed to deal with that by allowing them to initiate the process from a starting position that says the tenant should pay in full. If the tenant gives evidence to demonstrate why they need a concession, the landlord can consider that and put in a revised proposal before getting to arbitration. As long as that is in place, the landlord need not be disadvantaged by not having the information up front. It is important to recognise that the burden of proof for both viability and affordability is primarily on the tenant; it is only at the stage at which the tenant’s case is made, as it were, that the question of whether the landlord can afford to give a concession comes into play, at which time they also need to provide evidence. I think that the Government understand that, and that it is built into the process. That is one of the things that property owners will be nervous about.
Mark Eastwood
Do you want to add anything, Astrid?
Astrid Cruickshank: No, I am happy with that. I think Melanie has covered it.
Peter Dowd
Q
There is an issue about landlords. I think you accepted that landlords agree with the principle that both landlords and tenants might have to share the burden of rent arrears that built up during the period of coronavirus restrictions, in the light of the examination of evidence. Do you accept the principle that there may have to be a sharing of the loss for both the tenant and the landlord? Unlike Government Members, I do not think that this is a laughing matter.
Astrid Cruickshank: May I answer that? Our tenants have had varying experiences throughout the pandemic, and some have made more profit during covid than they did the year before, which is down to their ingenuity—pivoting their business and moving more online. I have had at least five tenants file accounts with Companies House that show a higher profit in the first year of covid than the year before. In such a case, there is no loss to share.
Our tenants in hospitality and the gyms that we own have clearly made losses. We have restructured the leases in all such cases. We have put more money into our entities so that we could give them some rent free to help them through the lockdown. We extended the lease, got a break dropped or got some kind of quid pro quo.
Melanie Leech: In my experience, most larger landlords have been working to a sort of grid. They have tried to look at each of their tenants and see the position they are in, and they have prioritised support to help the most needy. The most support has been given to smaller business, independent businesses and businesses that do not have strong financial backing; it has been given overwhelmingly to the hospitality sector, because everyone has recognised that the majority of those businesses do not have the kind of alternative routes that Ms Cruickshank was just talking about. Millions of pounds have been given in rent write-offs already, as reflected in the data that I referenced at the start.
Forgive me if I was not clear in what I said; let me come back to my point. We believe that those tenants who can afford to pay their rent or who cannot demonstrate need should pay their rent in full. Tenants who can demonstrate significant impact on their businesses and have no way of paying should get support from landlords who can afford to give it. We absolutely believe in that principle, because we believe that property owners and their tenants are economic partners and they should be working together.
It is not, by the way, in a property owner’s interest to either evict a tenant or have a tenant go bust if they believe they are a viable tenant, because an empty building is generating no rent at all—whether it is a debt or whether it is being paid. It becomes a business rates liability that the property owner then has to pay. It becomes a dead building. When a month’s footfall goes from an area, it does not come back. If you have empty buildings, people leave that area and they forget what took them there in the first place. That has an impact on both immediate rent and on the value of the property. It is not in a property owner’s interest not to keep tenants in place wherever it is possible to do so.
Seema Malhotra
Q
Melanie Leech: I have not had any concerns about that raised with me by my members.
Astrid Cruickshank: I do not have any concerns about that either.
Seema Malhotra
Q
Astrid Cruickshank: Personally, I would like to see them be in private if I were to take part in one, because I would be disclosing confidential financial information to make the point about my solvency and what I can and cannot offer. Potentially, that would even go as far as who is behind you, who the actual owners are and their ability to inject money or not. I am pleased to see that the Bill says that you would not be required to restructure, so that is good. I feel that in order to make my case properly, I would want to share confidential information. Therefore, I would like it to be private.
Melanie Leech: I would agree with that. By the nature of this, there is going to be a lot of confidential information that is going to be disclosed.
Seema Malhotra
Q
Melanie Leech: I think there are precedents already in the legal system for dealing with sensitive information. The principle is well understood. I am assuming that the Government will look at those precedents to shape how the scheme will work in practice. There are parts that will not be sensitive, and there are parts that will be. Whether it is better to have the whole thing protected or whether it is possible to split the evidence and have it dealt with in two parts, I am not sure.
The other point to make is that some of this may not be heard, as it were. It may well be a paper process at a desk, in which case it does not seem to me that there is any particular need to do anything other than give the documents to the arbitrator in confidence and for them to deal with it. I assume that there will need to be some kind of public statement on the outcome, because I assume that arbitrators will want to see precedents emerging and a pattern of what is happening, particularly if there are multiple situations of different cases with the same tenant or landlord. As I say, I am sure the Government are well aware of these kinds of issues.
Seema Malhotra
Q
Melanie Leech: We have worked quite a lot with various small property owners, although they are not in our membership, over the last 18 months. What I have heard from them is that unless there is a cap at a relatively modest level, the scheme will not be accessible to them. Clearly it is a different matter for larger companies. As for poor behaviour, yes, we absolutely think that if parties do not go into or act through this process in good faith, the arbitrators should be able to award costs against them as part of the outcome.
Astrid Cruickshank: I would agree with that. If the example that I gave you—three tenants just refusing to acknowledge any attempt to communicate with them—ended up in arbitration, it would seem entirely unfair that I should be picking up the costs, when I was prepared to make them an offer but they were not willing to even acknowledge that I had made it or respond in any way.
Mark Eastwood
Q
Melanie Leech: We have a lot of the larger ones as part of our membership, so yes, I think so. They act for both property owners and tenants, so I have been able to draw on their advice about what is happening in the market—what the relationships are—as well as some of the data that is published. The remit data in particular is drawn from the evidence that they collect. The one thing that they would say, and that I would say, is that we were disappointed that service charges were brought within the ringfence and the protection, because that is money that has already been spent by property owners and agents in maintaining buildings. The tenants might not be able to use them for their primary business purpose while they have been shut, but the buildings still need to be maintained and kept safe, and those costs have increased in some cases.
I know that some on the tenants’ side have suggested that those costs should be reduced because the buildings cannot be occupied. Where we can see that service charges have been reduced, that reduction absolutely should be passed on to tenants—I am not for a minute arguing against that—but where those costs have been incurred, we think that they should be paid and that they should not have been able to benefit from the protection of the ringfencing in the Bill, because that is money that has already been spent by property owners. That is debt that has already been incurred, so we were disappointed by that, and I think the agents would echo that point of view. Beyond that, I think they are supportive of this Bill, as we are.
The Chair
Thank you. Are there any final questions? No. In that case, I thank the witnesses very much for their evidence.
Examination of witness
Lewis Johnston gave evidence.
The Chair
Q
Lewis Johnston: Thank you, Chair. My name is Lewis Johnston and I am assistant director for policy and external affairs at the Chartered Institute of Arbitrators. We are a professional body for all forms of alternative dispute resolution. We have 18,000 members across the world, operating across all forms of ADR—arbitration, adjudication and mediation—and we have 6,000 members here in the UK. I will keep my introduction as brief as possible, following the previous witnesses.
Seema Malhotra
Q
Lewis Johnston: In common with some of the previous witnesses, I suggest that financial and accounting expertise will be quite crucial. Obviously, the Bill makes provision for some quite detailed assessments of viability and affordability. There are provisions about the kind of evidence that would have to be given regard to in reaching some of those decisions and making the award, and one of the impressions we got from digesting the Bill was that some of that analysis might require some reasonably in-depth expertise. Within the arbitration profession, there are experts across lots of different fields: there are surveyors, there are property experts who have already acted in property dispute schemes, and there are also financial experts, accountants and so on, but I would say that financing and accounting are probably near the top of the list, given the nature of the decision-making process.
Seema Malhotra
Q
Lewis Johnston: The essence of this choice is about the balance between prioritising the scheme’s affordability and accessibility—obviously, it is meant to be a simple, low-cost way of obtaining redress and getting a resolution—and the need to ensure an adequate supply of suitably qualified arbitrators. As you mentioned in your previous question, some of the required skillsets would be quite specialised, and may be at premium. There are precedent models for this kind of thing. One example, which is not a direct parallel, is the business arbitration service run by the Chartered Institute of Arbitrators, which is designed for relatively low-value disputes—between £5,000 and £100,000. The costs are fixed at £1,250 plus VAT per party, and that includes the appointment fee and the fee for the arbitrator. It may differ in this regard, but there would need to be certainty and transparency, certainly for the parties involved, and one of the benefits of the business arbitration scheme is that there is no chance of the costs spiralling out of control.
The other thing to mention, which may be a pertinent lesson from the business arbitration scheme, is that it is designed to be a documents-only, very simple, quite streamlined process, which will not require representation for either party, because representation can take up quite a good proportion of the costs. It is done with an assumption against having an oral hearing. Obviously, there is always the option of having an oral hearing if the parties require it; that is in the Bill. I think it is correct that that is open to them, but I suggest that the default assumption should be against that and for it being a documents-only process. Given the simplicity of the kind of cases that are intended to go to the scheme, that would be a good way of managing the costs. I note that the Secretary of State will have the power to introduce either a cap or a sliding scale, and again I emphasise the need for really forthright clarity. It needs to be very simple so people understand how it would apply to different levels of dispute.
Seema Malhotra
Q
Lewis Johnston: There is a degree of uncertainty around that, based purely on the pipeline of cases. As the previous witnesses alluded to, most of these cases, most of these disputes over the ring-fenced rent, will be or already have been settled through negotiation, so you are talking about a relatively small proportion, although it is still going to be quite a high number. There is a margin of error to take into account. On the supply side, in terms of the level of interest, there are lots of very well qualified arbitrators out there who would be forthcoming to handle cases like this. As I say, there is quite a strong precedent of arbitrators with the requisite level of skills and experience taking on fixed-fee or low-fee cases like this, but again I point out that the low fee would still have to take account of and cover the fact that a certain skillset and investment of time would be required. It is important that quality is not compromised. I think, overall, there is a good level of interest and there would be a healthy pipeline of arbitrators to take these cases.
Seema Malhotra
Q
Lewis Johnston: Certainly. I was pleased to see, in clause 21 of the Bill, that guidance will be provided. There are several areas in which guidance might be necessary. The first is something that I know will be coming when applications open for approved bodies to appoint arbitrators, and that is around the precise skillsets needed. We have a reasonably good idea of what that would entail, but a bit more detail would be helpful. For the arbitrators themselves, I think the crux point is around viability and affordability. The Bill and the code of practice go into a bit of detail about the kind of evidence that could be assessed as part of that. I think there should be clarity over exactly how much power the arbitrator will have to be inquisitorial as part of the process, the extent to which they can order discovery and so on, and the kind of evidence they can ask for from the parties.
The Bill is very clear about its intention to balance the interests of tenants and landlords and to maintain the viability of otherwise viable businesses, while also having regard to the solvency of the landlords. There may need to be more guidance, and I appreciate that that might come when cases start to go through the system, about balancing the request of the tenant on what is viable for them with what is consistent with maintaining the solvency of the landlord, when those are at odds. Exactly how that could be decided is a bit of a moot point at this stage.
Peter Dowd
Q
Lewis Johnston: That is a good question, and the discussions we have had with the BEIS team initially focused on the question of capacity, because obviously we are talking about quite a large number of cases. The decision to go for more of a market-based approach, with a list of approved bodies rather than a single monolithic provider, was probably the right one. I appreciate that the Bill is taking more of a principles-based approach than saying that the arbitrators have to be accredited in a certain way. It is more about having the competency and impartiality.
Each of the bodies, if they are to be approved, will have to meet the criteria in one way or another. Speaking just for the Chartered Institute of Arbitrators, all our members are bound by our code of ethical and professional conduct, which covers issues such as integrity and fairness, disclosing conflicts of interest, ensuring that you are competent to take on the appointments you are given, trust and confidence in the process, and transparency around fees. That would address a lot of things.
Also, anyone that we were to appoint—should we become one of those approved suppliers—would have to make clear and sign a declaration at the outset, which disclosed any potential conflicts of interests or anything that might be perceived as such, as well as declaring they were competent and had the capacity to take on these cases. That would mitigate the risk of them having to resign or of delays in processing the case.
Peter Dowd
Q
Lewis Johnston: I would welcome more detail on exactly what the approval criteria would be and what the role of the approved suppliers under the scheme would be. There has been a good degree of engagement from the Department so far, but what the criteria would be has not yet been published. However, I know that they are coming shortly. That will be the crucial point in terms of assessing what the role of these appointing arbitration bodies would be.
Paul Scully
Q
Lewis Johnston: I understand the intention is that it would be the simpler, perhaps smaller party cases going through to the scheme, and I think that is correct. Given that the emphasis is on simplicity, accessibility and managing the costs, any scheme that had to accommodate the intricate, large-scale cases would encounter some problems in terms of balancing the two. Again, I point to precedents with things like the business arbitration scheme. It is difficult at this point to assess exactly what the appropriate fee level would be, because you would have to properly assess exactly how much work will be involved in each case—obviously not until they had come through—but I think that in the simpler cases that could be set at a level that was affordable. As some of Melanie’s members had made clear, it needed to be at quite a modest level for it to be accessible to them.
In terms of how the arbitration bodies would manage a variation in the complexity of cases, even it was perhaps the smaller, more simpler end of the spectrum, there will still be variation. We would maintain—this would apply to other bodies as well—lists and databases of arbitrators who would be suitable. Based on the nature of the case that came through, there would be a shortlist drawn up based on who had the requisite skill sets to handle that case. The pool that we would draw from should be broad enough to be able to cater to different types of cases and different sectors and so on.
Sara Britcliffe
Q
Lewis Johnston: I would not want to commit to exactly what it would involve until we got to that stage, but I refer again to the precedent set by our own business arbitration service, which is designed to produce an award within 90 days. It is meant to be documents only, and that is £1,250 plus VAT per party. If it was a very straightforward case—if it was documents only and it followed the same processes—I imagine it could be in the same ballpark in terms of fee level. The best thing would be to have real clarity around what the fees were and how they apply to each case, and for there to be perhaps an assumption against having a hearing, and, if there was a hearing to be requested, very clear guidance on what fee that would entail. Perhaps for a half-day hearing, a certain level. For the business arbitration scheme, there is an option for that. It is £500 for a half-day hearing. Again, the assumption is that the cost could be fixed at those initial costs per party, and that a hearing would not be necessary. It would be documents only.
Sara Britcliffe
Q
Lewis Johnston: I think so. I think that would be the assumption. I think it is right that there is an option to go for a hearing if it is requested, but I think that the default assumption should be that it is documents only. That is most in keeping with the intention and aim of the Bill, which is to have very clear, rapid-fire means of redress.
The Chair
Q
Lewis Johnston: No, that has covered most of it. The Chartered Institute of Arbitrators will be making a written submission to the Committee later this week as well, so that might clarify or refine some of the points that I have raised. We are very pleased to have been invited to give evidence here today, and we will be pleased to engage with the Committee as you continue with the work of refining exactly what the scheme and the process will be.
The Chair
Thank you very much for your evidence.
Ordered, That further consideration be now adjourned.—(Felicity Buchan.)
Commercial Rent (Coronavirus) Bill (Second sitting)
Tuesday 7th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Commercial Rent (Coronavirus) Bill 2021-22 View all Commercial Rent (Coronavirus) Bill 2021-22 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 December 2021 - (7 Dec 2021)
The Chair
Good afternoon, gentlemen. We will now hear oral evidence from Jack Shakespeare, director of research, policy and communications at UK Active, Andrew Goodacre, chief executive officer of the British Independent Retailers Association, and Martin McTague, national vice chair of the Federation of Small Businesses. We have until 3 pm for this session. Could I ask you to introduce yourselves? If you have any brief remarks to make, please do so now.
Jack Shakespeare: My name is Jack Shakespeare. I am the director of research, policy and communications at UK Active. We are the membership body for the health and fitness sector.
Andrew Goodacre: I am Andrew Goodacre, chief executive officer of the British Independent Retailers Association. We have 4,000 members throughout the UK.
Martin McTague: I am Martin McTague, vice chair of the Federation of Small Businesses. We have 150,000 members across all four nations of the UK.
Mick Whitley (Birkenhead) (Lab)
Good afternoon, panel. I think we met last week, didn’t we?
Andrew Goodacre: We did.
Mick Whitley
Q
Andrew Goodacre: The period we have is about right, actually. Part of the challenge is in scope of what is covered here. Some businesses that have been able to operate throughout the pandemic—essential businesses—but have been in the wrong location have suffered badly with trade. That is still ongoing. Even though businesses are open, if they are in a location near a travel hub or something, footfall will be considerably lower than they are used to—certainly pre-pandemic levels. There is an argument that those businesses are not being protected enough because of that.
Mick Whitley
Q
Jack Shakespeare: Absolutely. I would echo that. The extension and the timescale seem about right; that is the message we are getting from our members. Each sector has its own characteristics. Our sector has a unique recovery curve, in that it is largely subscription focused. Recovery does not cover the cost of service straight away. That impacts recovery. The extended period of time is welcome. I am sure that we will come back to it today, but a guiding principle that needs to sit at the heart of this process is the message of sharing the burden. This is clearly a collective problem that needs a collective solution.
Martin McTague: I think it was about right when we first started discussing this, but omicron has changed all that. It is clear that we are now into a lot more uncertainty. It would be nice to have the flexibility to be able to move that date to respond to what seems to be an ever-changing virus.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Martin McTague: Around the beginning of November, most landlord-tenant arrangements—probably close to 90%—had settled, but the hard-core 10% had got into an acrimonious stand-off. We engaged with the Department for Business, Energy and Industrial Strategy to try to find a way in which those more acrimonious relationships could be dealt with. As for the cut-off date, I realise that it will leave some people on the wrong side of it, but I think that it was about right when it was chosen.
Andrew Goodacre: On the cut-off date, you have to choose a date. There is never a good time, from that point of view. It comes back to an understanding of what negotiations were taking place beforehand, and how they were being managed. Martin referred to a hard-core 10%—we are probably hearing about 15% to 20%. There is a hard core of people on both sides who seem unwilling to reach a negotiation. It would be good to include at the arbitration point an insight into what negotiations and actions were taking place beforehand, and whether those actions were reasonable in the circumstances.
The arbitrator has to decide how to resolve the debt issue. We have heard stories of landlords seeking side agreements or even being willing to write off a level of debt if the tenant gave up their secured tenancy. That kind of negotiation is going on as well. Is that fair? I do not know, because the security may be worth a lot more than half the rental debt, but it is not explained properly. If evidence of what was being said before the ninth can be put forward as part of the arbitration process, that may be a happy halfway house.
Seema Malhotra
Q
Andrew Goodacre: Most of our members deal with smaller landlords, who are possibly not quite so difficult.
Seema Malhotra
Q
Jack Shakespeare: I would support that notion. I think this comes in two parts. I think it comes back to that notion of sharing the burden, and we think the process of county court judgments does not chime with the spirit of the initial code of practice and, obviously, the revised one. I also think that a ringfence should be just that and should not have holes in it. It feels like CCJs are a hole in the ringfence. I would—we would—support the notion that the CCJs process prior to 10 November should be looked at and should be included in protection.
Seema Malhotra
Q
Andrew Goodacre: Looking at what their task is, I would expect arbitrators to have knowledge of leases and the legality around that side, but the biggest judgment that they probably have to make is one before the process starts: is the business viable? So they would need to have a good insight into business. Not all retail businesses operate on the same business model and the same margins and with the same overheads. If the first crunch question is whether the business is viable, because only viable businesses can go to arbitration, they really need to understand business knowledge and business expectations and profitabilities.
Martin McTague: I would endorse that. I think, in this particular form of arbitration, what you are looking for is to protect the interests of both parties, and clearly, if it is not a viable business, that undermines the position and enhances or makes the risk worse for the landlord, but I think most arbitrators are able to take evidence on that kind of issue anyway.
Seema Malhotra
Q
Jack Shakespeare: To go back to the first question, I would endorse the responses from my fellow panellists. For the first question, around viability, that business sense is utterly crucial. The first arbitration case is very important, because it is going potentially to set a precedent, so of course it is incredibly important that these people are chosen correctly.
With regard to cost, I think my answer would be “low”, for understandable reasons. Just because of the wide scope and the differences in size of the businesses that are included in the scope, I think the cost needs to be low. I think that there needs to be an opportunity or option for fees to be re-awarded in the face of bad practice or ineffective decision making. So my answer would be “low”, but of course the affordability of it is down to each business.
Seema Malhotra
Q
Jack Shakespeare: Yes.
Andrew Goodacre: On the cost side, I agree with what Jack is saying: the lower the better. If it is too high, it becomes a barrier to the business, the tenant initiating the action, because it is payable on initiating the arbitration, as I understand it. If a landlord thinks that it is prohibitive to the tenant, the landlord could well play the long game and keep waiting and waiting, because if you do not get the application within six months of the Act being passed, you have missed the opportunity for arbitration. It could well be that if it is too much of a barrier and too high for the individual tenant, they miss that opportunity, so it needs to be kept as low as possible.
Martin McTague: The reason why we are trying to avoid legal action is that when there is an asymmetry of power, when the landlord can use the muscle that they have to try to bully their tenant, you get unfair solutions. I think the principle must be that the cost is as low as possible. I would not want to put a number on that, but I think it needs to be as low as possible.
Seema Malhotra
Q
Martin McTague: My biggest concern is the cut-off date. Given that we are now entering another period of uncertainty, if we ended up with squeeze, where cases were being brushed or pressure being put on because we were getting close to that cut-off date, that could lead to some unfair outcomes.
Seema Malhotra
Q
Martin McTague: Yes. In other words, that is a hard cut-off. We all know that the current situation is changing rapidly.
Seema Malhotra
Q
Martin McTague: We are seeing a lot of retail businesses hanging on by their fingernails, hoping for the best in this last quarter, and trying to get through the Christmas period, which is often make or break for them. If they get even a partial success, and start creeping towards a solution at the end of spring next year, it would be disastrous to try to drive those businesses under when they have survived all the trials and tribulations of covid so far.
Andrew Goodacre: I think the way the code of practice and the Bill have been put together is not bad, and they really try to cover all eventualities. The cost element of arbitration is a barrier to businesses, and puts the legislation at risk. The viability question—how you determine viability, and the clarity and transparency around that—needs to be addressed early on.
I know that we have asked this question and been given the answer, but there needs to be absolute clarity that the Bill applies to all businesses in scope, including those that are contracted out of the Landlord and Tenant Act 1985. That was one of the earlier questions that came back from some members, and we were told that it does include all those contracted-out businesses, but we need to be clear on that, because we do not want to end up with an unnecessarily ambiguous area that leads to legal argument.
There are also tenancy-at-will situations. When negotiations on a new lease are ongoing but have not been resolved during the closure period—the protected period—the tenant is operating on a tenancy at will. Arguably, there is no guarantee that that tenancy at will is covered by the Bill. Again, that will need clarity and understanding.
Martin McTague: There is another point that I should have raised. A lot of supply-chain businesses supply those that are directly affected and covered by the scope of the Bill—they have been seriously affected by what has gone on so far. If you take a retailer, for example, virtually everybody who is supplying that retailer has gone through the same sort of trauma as the retailer, but none of them will be protected in the same way.
Jack Shakespeare: I echo and endorse Martin’s point: one of the prospective risks is the uncertainty around the next few months. It feels like a bit of a “hold your breath” moment. You could talk about it being make or break for our sector and for different characteristics across sectors. A make or break part of the year for the gyms, pools and leisure centres sector is January to March. That is a hugely important quarter of the year, and it rolls into that time period. I would just echo that: the uncertainty of the next few months is a major risk.
Peter Dowd (Bootle) (Lab)
Q
Andrew Goodacre: Contracted out?
Peter Dowd
Yes.
Andrew Goodacre: I would not know the percentages. Over the years, people have come out of it, sometimes incentivised by the landlord because it is preferential for the landlord to have the tenant contracted out. This is not my absolute field of expertise, but there is a wider view that the Landlord and Tenant Act could be rewritten as well in the near future, to reflect a more modern business environment. There are concerns about that Act in general.
On the issue of whether a business is in or not, we are told that everyone is in—it does not matter. The tenancy at will is slightly different. That is where a temporary tenancy agreement is created because the negotiation for a new one has not been completed, but a tenant is given the opportunity to operate at will until such time as a new one is agreed. A tenancy at will gives no protection whatsoever to either party. Either person could walk away at a week’s notice—at very short notice.
Peter Dowd
Q
Andrew Goodacre: We need to be clear that the Bill is designed, I believe, to protect businesses that were mandated to close in the timeframe of March ’20 to, depending on the sector, August ’21, and it should not matter whether that business is contracted out under the Landlord and Tenant Act—we are told it does not matter—and it should not matter if they have, through circumstances during that timeframe, ended up on a tenancy at will, simply because they could not agree their new tenancy under normal circumstances. Those are the areas where we want to make sure that the legal loopholes do not exist for highly paid lawyers to exploit.
Peter Dowd
Q
Andrew Goodacre: I am sure he has. What we have been told is absolutely correct and reassuring. We just want to see it written with absolute clarity.
Peter Dowd
I am sure the Minister has got that tagged and will be paying due attention to it.
Peter Dowd
Q
Martin McTague: There is a very clear dividing line. The retail, hospitality and leisure sectors are the ones most badly damaged by this whole crisis. It also reflects the point I made earlier. There are extended supply chains within those sectors as well, which have also been affected. In terms of the top of the supply pyramid, retail, hospitality and leisure are without doubt the most affected sectors.
Peter Dowd
Q
Martin McTague: You will probably anticipate my first answer, which is that trade bodies are probably a good way of getting the message out. I think lawyers as well. The first thing that most people in this situation will do is to refer to their lawyer. There has to be a clear duty on lawyers to explain that arbitration is an option that they can take up.
In our experience, the smaller businesses tend to respond better to social media, so a BEIS publicity campaign based on social media contacts. The other obvious one is local government, which could do a lot to get this message back to retailers, especially in their area.
Jack Shakespeare: I support that, absolutely. As a trade body, engagement from the Department to us has been very positive. That communication has been great. We have been able to disseminate as much information as we could accurately and efficiently. I would echo that starting point. Again, use local government, lawyers and social media, recognise the characteristics across each sector and work with trade bodies to get the right messages across. They are obviously the experts in talking to those different businesses.
Andrew Goodacre: The communications have been covered well by my colleagues. To go back to your earlier point on what people have done to get through the crisis, we only do retail businesses, and they worked really hard as always. They have shown great creativity and determination, but one telling fact is that their level of debt has increased five times, by taking out bounce back loans, for instance. The larger retailers would have taken out a business interruption loan.
There was some research done in the summer of this year that suggested that the debt in independent businesses —which is not the usual business model; they do not normally do debt—is five times higher. It is estimated at about £2.2 billion. That has to be repaid. Then you have got rental debt on top of that. It leads back to this argument of viability. When you are assessing a business, you take a cold, hard look at its balance sheet. If a small business has a business loan or rental debt on there—and you have to counter the liability—before you know it, it is technically balance-sheet insolvent. It still may be viable as an operation, but there is a technical balance-sheet insolvency because of the level of liability it is are carrying, which it would not normally be carrying.
Whether it is rental or business loan debt, debt is a problem. Businesses have had to do it because they needed to survive. They wanted to trade and give themselves the chance of re-establishing themselves. Many are doing that. If we get a good Christmas, hopefully they can look to ’22 with some positivity.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
Q
Martin McTague: I saw a definite change in the atmosphere. I know the Minister will be aware of this, but I think there was some doubt as to whether you, as a Department, would go this far. Free-market instincts would suggest that you would not. As soon as you had made it clear that compulsory arbitration was going to play a part, the whole atmosphere in these negotiations seemed to change. People entered into much more constructive arrangements. Some of them completely avoided or did not want to go down an arbitration route and settle on payment terms, which I do not think they would have done prior to that decision, so I think it has had a wholly positive impact.
Andrew Goodacre: I would say that when we first started looking at the problem in 2020, it was 40% to 50% that had experienced challenges with trying to negotiate something with landlords. I said earlier that we are down to a hard-core 15%—maybe 20%, but it is probably nearer to 15%. There is entrenchment on both sides at that point. The message about sharing a burden that Jack referred to earlier is really crucial in that. People on both sides, where they are entrenched, realise that they stand the risk of losing something from that position. People are beginning to come to it now.
If I have a concern, it is about things I have been hearing from tenants who are saying that landlords are trying to leverage negotiations before getting to arbitration. I mentioned asking people to give up security, or even saying, “We’ll write off part of that debt, but we’re going to increase your overall rent up to this level.” They are using a bit of power, fear and the realisation that cash is king to the business in order to influence a decision that may not be in the best interests of the business in the longer term, but in the short term looks like a natural solution. Some of that may be right. I am not saying that it is not, but there is an indication of some of those behaviours starting to manifest.
Jack Shakespeare: To endorse that, I think it has changed the atmosphere. It has certainly turbo-charged the conversations. It goes back to a few things. The ability to disseminate the information is really important. You have picked up on the clarity before. How that comes out through trade bodies and goes out through lawyers and local government is really important. That will maintain the pace of conversations. It is really important that it does not drop, so that people access that information. The overriding sense of uncertainty looking ahead is a massive dynamic right now, but holistically it has really changed the atmosphere and advanced the conversations.
Paul Scully
Q
Martin McTague: The code of practice has worked, in that it has set an expected behaviour and the way in which the parties should relate to each other. I accept completely that if you tried to expand the scope dramatically it would damage the impact, but clearly it does not stop with the retailer; a lot of people are impacted by this.
Paul Scully
Q
Andrew Goodacre: This code is so much stronger than the previous code in 2020. We are moving in the right direction. It links into your earlier question about changing behaviours, and the code has been instrumental in that. On what would enhance the code, I appreciate that the information is not entirely available yet, but it is about who will be arbitrating, the costs of that arbitration and the decisions around the viability, so that people get to know as early as possible what they need to do to submit, if they feel that they will end up in that situation. Preparing for arbitration will be quite scary to some people—the mere thought of putting all that information together. As soon as we can release what they need to have recorded and prepared, the earlier they can start doing it. You do not want to try to collate all the information with two months to go on the process.
Jack Shakespeare: I have nothing to add to that.
Mick Whitley
Q
Martin McTague: It might do, but the alternative is that they would have to take legal action, which is likely to be much more expensive and protracted. It is not an ideal solution, but it is certainly a step in the right direction.
Andrew Goodacre: Yes, it could do. If you were looking at costs in the hundreds instead of the thousands that would obviously be better. You have to put it in context. As I think one of your colleagues said, next year an awful lot of cost increases are coming through to business, whether it is the national minimum wage or energy costs, which have tripled for many businesses. Suddenly, whether it is £1,000 or £2,000, it looks like a lot of money. That may lead to a better negotiation and solution before you get to arbitration, but it plays to the landlord to play the waiting game at that point in terms of initiating the arbitration. That is the threat of it.
Jack Shakespeare: To go back to one of Andrew’s last points, as much foresight and clarity on that up front would be beneficial, so that people can make informed decisions on how they go forward.
The Chair
Given that there are no further questions, I thank the witnesses for their evidence. That brings us to the end of today’s oral evidence session. The Committee will meet again on Thursday at 11.30 am in Committee Room 10 to begin line-by-line consideration of the Bill.
Ordered, That further consideration be now adjourned. —(Felicity Buchan.)
Leasehold Reform (Ground Rent) Bill [Lords] (Second sitting)
Tuesday 7th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Leasehold Reform (Ground Rent) Act 2022 View all Leasehold Reform (Ground Rent) Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 December 2021 - (7 Dec 2021)
Nickie Aiken (Cities of London and Westminster) (Con)
It is a pleasure to serve under your chairmanship, Ms Elliott. As I was saying earlier, having been the cabinet member for public protection at Westminster City Council, I know that enforcement is the cornerstone by which we put words into action and ensure that what we pass in legislation has the intended effect in real life.
It is a welcome provision that the income from financial penalties will be kept by local authorities, but we need sustainable funding sources for enforcement ahead of the game. Local authorities may eventually keep the income from penalties, but work will need to be undertaken before that by the trading standards teams to bring enforcement cases to fruition. That funding is particularly important given the increase in the range of new enforcement duties being placed on trading standards departments across the country.
It is also important to recognise that no two councils are the same. They come in all shapes and sizes—rural, urban, global cities such as my own—which all have different numbers of leaseholders who will be affected by the Bill. I would welcome the Minister giving consideration to the kinds of measures that councils will need in order to be appropriately supported, in proportion to the number of leaseholders they may have within their local authority area and the duties being placed upon them.
Of course, as I have said, I welcome the Bill—it does so much to ensure fair enforcement—but we need assurances that there will be guidance for trading standards teams, particularly on the new provisions we will be introducing on leasehold and freehold law, to ensure that trading standards officers are adequately trained to deal with what may become difficult enforcement situations. Trading standards officers may not be trained in landlord and tenancy law; they may require some more training. Ultimately, we need the provisions in the Bill that place additional duties on trading standards teams to be under- pinned by proportionate support and adequate guidance.
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)
It is a pleasure to serve under your chairmanship, Ms Elliott. I thank my hon. Friend the Member for Cities of London and Westminster for her contribution, and also the Opposition spokespeople for their contributions.
I was asked why we are allowing authorities to range outside of their geographical area of responsibility, and whether there is precedent. There is precedent in the Tenant Fees Act 2019. A similar approach has been applied. There might be a landlord in one local authority area that owns some properties in another, and then it is most appropriate for a single local authority to pursue that claim. That is why that ranging is allowed. I much preferred the evocative imagery from the hon. Member for Garston and Halewood of people gallivanting across the country and trying to claim money in other areas, but the explanation is unfortunately much more mundane.
On associated costs for councils from the duty, because the move has been well telegraphed and we expect people to be compliant, we expect the number of claims to be small, but we will continue to review them and will work with the Local Government Association and others to ensure that local authorities are properly remunerated in preparation and that they are properly resourced.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Financial penalties
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
The Bill will allow enforcement authorities to act on unfair practices against leaseholders. Clause 10 enables an enforcement authority to impose a financial penalty on a landlord who has required a leaseholder to pay a prohibited rent. There is a separate power under clause 11 to make a recovery order to repay the prohibited rent.
It is important to note at this point that a conscious decision has been made for former landlords to be subject to penalties for breaches of the ground rent restrictions and to remain accountable for their actions at the commencement of the legislation. I am sure that the Committee will agree that we would not wish to see the development of the poor practice of landlords selling their leases in order to avoid financial penalties.
Clause 10 sets clear parameters for enforcement authorities to work within, but we must of course ensure adequate checks and balances so that those in breach are not unfairly treated. Before imposing a financial penalty, enforcement authorities must be “satisfied beyond reasonable doubt” that a breach has occurred. Where an enforcement authority is satisfied, subsection (2) clearly defines the parameters of the financial penalty that may be imposed. The Government’s decision to increase the maximum penalty from £5,000 to £30,000 shows that we have listened to parliamentary stakeholders, who felt that a stronger deterrent was needed.
Subsection (3) permits only one financial penalty to be issued where multiple breaches have occurred on a single lease. However, where enforcement action has been taken against a landlord, and that landlord is found to have breached clause 3(1) again, they may be subject to a further financial penalty after their initial fine. I am sure that the Committee will agree that that is the right thing to do.
In a case in which a landlord has committed breaches in relation to multiple leases, an enforcement authority may impose a single financial penalty to cover all breaches. In that scenario, the minimum or maximum amount of the financial penalty is the sum of the minimum and maximum penalties that could have been imposed if each breach had been dealt with separately. If a landlord has breached clause 3 on two of their leases, for example, the enforcement authority could not decide to issue a single penalty of £600 as that total would mean that the landlord had paid a penalty below the minimum amount of £500 per breach. The enforcement authority will be required to consider issuing a penalty of at least £1,000.
Importantly, clause 10 ensures that landlords are protected from being charged twice for the same breach by two separate enforcement authorities. Should the minimum and maximum penalty thresholds need updating, the Secretary of State has the power to change them through regulations for England, and Welsh Ministers can do so for premises in Wales. Subsection (10) makes it clear that this may be done only to reflect changes in the value of money. Financial penalties are an important deterrent, but they must be managed appropriately. The clause sets out a clear framework for enforcement authorities to work within and provides a balanced and fair approach towards those in breach.
Clause 11 forms an important part of the Bill’s deterrent measures to discourage landlords from including an inappropriate monetary ground rent in a regulated lease. Subsection (1) enables an enforcement authority to order the repayment of a prohibited rent where they are satisfied, on the balance of probabilities, that the leaseholder has made such a payment and the landlord has not already refunded it.
Subsection (2) sets out who the enforcement authority may order to repay the prohibited rent, including the landlord at the time when the payment was made, and the current landlord. That means, for example, that if it is not possible to trace a previous landlord, a leaseholder will still be able to recover the ground rent that they were wrongly charged. That is fair; a new landlord must take responsibility for the leases that he has taken over. Subsection (2)(c) makes it clear that an agent acting on behalf of the landlord may also be ordered to repay any prohibited rent that the leaseholder paid to them. That is important, as we know that there may be cases where the landlord is absent or unresponsive. A responsible managing agent would wish to ensure that leases, and their own practices, comply with the law.
There are protections in the clause to prevent duplication of recovery orders. Where the tenant has applied to the appropriate tribunal for a recovery order, the enforcement authority may not make such an order. If an enforcement authority has already made an order in respect of that payment, no further order may be made in respect of it.
Subsection (4) enables some administrative ease to assist enforcement authorities. It enables an enforcement authority to make a single order in respect of a number of prohibited rent payments, provided that they all relate to the same lease. The clause is vital to ensuring that an enforcement authority can act where a prohibited rent has been charged and order the landlord to repay it so that the leaseholder is not out of pocket.
On clause 12, it is only fair that where a prohibited rent has been wrongly paid, it should be possible for the leaseholder to recover interest on the amount that they are out of pocket. The clause makes provision for that. Interest is payable from the date of a payment of a prohibited rent until the date that it is repaid. The interest rate, as is standard practice for such matters, is the rate specified in section 17 of the Judgments Act 1838.
To ensure that the amount of interest to be paid is not disproportionate, subsection (5) places a cap on that amount. It must not exceed the original amount of prohibited rent that the landlord is required to repay. It is only fair that a leaseholder should not only be recompensed for the amount that they are out of pocket, but recover the interest on that amount.
Mike Amesbury (Weaver Vale) (Lab)
It is a pleasure to welcome you to your place, Ms Elliott. I welcome the Minister’s and the Government’s response to some of the debates on the Bill in the other place about the maximum level of fine. Given that a number of landlords and freeholders have deep pockets, it will act as a more effective deterrent.
On multiple breaches, I am making an assumption that an element of sense will be applied, so that someone with multiple breaches would be looking at the maximum fine. I know that that will be a judgment call for the enforcement authorities and trading standards, which will be well resourced—we have had the assurance from the Minister today.
The clause picks up on several earlier points made on both sides of the Committee. It is essential that people are informed from the outset of the duties that will be not only implied but overt as a result of the Bill. Residents and leaseholders will be particularly keen to ensure that where they have been wrongly charged and levied—essentially, ground rent should never have happened in the first place—they will be able to retrieve that quickly. I welcome the clauses but there are still a number of questions for the Minister.
Maria Eagle (Garston and Halewood) (Lab)
It is a pleasure to serve under your chairmanship, Ms Elliott. I have a couple of points for the Minister. There are extensive provisions on the recovery of prohibited rent, which I generally welcome. I notice that on page 14 of the explanatory notes, under the heading “Financial implications of the Bill”, it says:
“An Impact Assessment has been prepared for the Bill and covers the implications on private sector bodies and home purchasers… The Impact Assessment illustrates a de minimis impact of less than £5m.”
It then says that there is an assumption
“that the number of enforcement cases will be very small.”
One would hope that that would be the case, because one would hope that landlords will not seek to charge and benefit from ground rent in the interim between the Bill coming in and peppercorn becoming payable, when it becomes commenced, by putting provisions into new leases that charge ground rent. One hopes that that is a correct interpretation. The explanatory notes then say:
“Over and above the use of the proceeds arising from the enforcement action, a further amount of expenditure will be required to provide additional capacity within the National Trading Standards function to support local weights and measures authorities. Leasehold law is a complex area, and it is felt that a central support function will aid the effective introduction of the provisions of this Bill. The cost estimate of this support function is £29,000 per annum”,
which is very precise. It is sort of a round figure, but it is quite a small sum. I wonder whether the Minister could explain the assumptions underlying the explanatory notes.
Eddie Hughes
I have two points. The hon. Member for Weaver Vale and I will be aligned in hoping that people decide to fine those who commit multiple breaches at the higher rather than the lower end of the spectrum. That would be our hope. We will have to see. It is not for he and I to decide those things; we need to leave that to others, and hopefully they will base that on their experience.
On the figure of £29,000 and the impact assessment, my understanding is that, given that we expect there to be a small number of cases, we would not necessarily expect all local authorities to need to stand up some sort of specialism. In the natural development of things, one local authority may develop some expertise and be able to act on behalf of others, and it will therefore be contained and concentrated in one place. This is obviously a developing theme. Until the law is enacted, we do not know exactly how it will work and how landlords might behave. It is something that we will need to return to and be mindful of. We must ensure that we keep an eye on it to see where the burden falls and then resource appropriately.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clauses 11 and 12 ordered to stand part of the Bill.
Clause 13
Enforcement authorities: supplementary
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider the following:
Government amendment 9.
That schedule 1 be the First schedule to the Bill.
Eddie Hughes
Clause 13 makes various supplementary provisions in relation to enforcement authorities. Importantly, it requires them to have regard to any guidance that may be issued by the Secretary of State and Welsh Ministers, depending on the location of the property. We have made it clear that the Government intend to issue guidance on various matters to ensure that enforcement authorities act with consistency. Subsection (3) amends schedule 5 to the Consumer Rights Act 2015 to ensure that enforcement authorities have the investigatory powers that they need to enforce the ground rent restrictions in the Bill.
The final subsection of clause 13 introduces the schedule, which sets out how an enforcement authority may impose a financial penalty or make a recovery order. This includes the relevant time limits, rights of appeal, the recovery of a financial penalty or an amount ordered to be paid if the landlord does not comply and retention of sums received. We will consider these details when we come to consideration of the schedule. The clause contains important supplementary provision to ensure that enforcement authorities receive the guidance necessary to perform their role properly and consistently. It gives them the powers they need to be effective and sets out procedures that are appropriate and fair.
I turn to Government amendment 9. Members will know that the Bill applies to both England and Wales. They will also know that in the other place the Government made a series of changes to give certain powers to Welsh Ministers. I would like to take this opportunity to once again thank colleagues in the Welsh Government for working constructively with us on these issues. Amendment 9 in my name is one more change in a similar spirit.
Clause 13 and paragraph 11 in the schedule allow enforcement authorities to keep the proceeds of any action to cover the cost of that action. With penalties of up to £30,000 per lease, that is vital so that local authorities or local trading standards are not left out of pocket for implementing the provisions in the legislation. To act as an effective deterrent, freeholders, landlords and managing agents need to understand that action will be taken if they charge a prohibited rent.
However, enforcement penalties have not been designed as a new income stream for the authorities. As such, any excess proceeds from a penalty beyond what is needed to cover the enforcement action in relation to the Bill and other residential leasehold enforcement cannot be kept, ensuring penalties remain proportionate to the breach and enforcement costs are still covered. In these circumstances, the Bill would see all such excess proceeds being paid to the Secretary of State. Amendment 9 would make sure that, if the penalty is imposed in relation to leases of premises in Wales, the excess proceeds would go instead to Welsh Ministers. This is a small but sensible change, and I hope it will be supported by the Committee.
The schedule sets out the procedure that an enforcement authority must follow when they wish to impose a financial penalty or make an order requiring the repayment of a prohibited rent under the legislation. This will help to ensure consistency and fairness in enforcement. Enforcement authorities must give the relevant person notice of their intention to impose a financial penalty within six years of the breach occurring and within six months of the authority having evidence that they consider justifies serving the notice. The relevant person will usually be the landlord, but where the notice relates to a recovery order it may be a former landlord or agent. The notice must contain relevant information about the reasons for imposing the penalty or making the recovery order, the amount of the penalty or the terms of the order, and the right to make representations. The landlord then has 28 days to respond.
If, after considering any representations, the enforcement authority decides to impose a penalty or make a recovery order, it must give a final notice. This must set out the amount of penalty and/or terms of the recovery order and the reasons for the penalty or order. It must address how these will be paid, the landlord’s rights of appeal and the consequences of failing to comply. An enforcement authority may at any time withdraw or amend a notice of intent or final notice by providing written notice to the relevant person. The landlord, or person acting on their behalf, has a right of appeal to the appropriate tribunal against the decision to impose the penalty or make the order, the amount of the penalty, or the terms of the order.
Any appeal must be brought within 28 days of the final notice and is to be a re-hearing of the enforcement authority’s decision. However, the appropriate tribunal may admit new evidence that was not previously before the enforcement authority. In those cases, the existing final notice is suspended until the appeal is determined or withdrawn. The appropriate tribunal may confirm, vary or quash the final notice. It may increase or decrease the penalty imposed, but it is bound by the same minimum and maximum limits as the enforcement authority.
If the landlord fails to pay all or part of the financial penalty, or to repay a prohibitive rent, the enforcement authority can seek repayment on the order of the county court as if the penalty or payment were payable under an order of the county court.
I am aware that concerns have been raised about the resources of local authorities to enforce the legislation. I trust the fact that the schedule enables an enforcement authority to retain the proceeds of any financial penalty for future residential and leasehold enforcement is very welcome. My officials have discussed with national trading standards and the Local Government Association what further options can be considered to support the Bill’s implementation. Furthermore, we are producing guidance to which enforcement authorities must have regard and which will support those authorities in fulfilling their enforcement responsibilities under the legislation, as called for by my hon. Friend the Member for Cities of London and Westminster.
Mike Amesbury
With regard to the excess that could be generated, and terms of the clause and the amendments, there could be a transfer to the Welsh Secretary. Does the Minister envisage that happening in reality, given the situation that many local authority trading standards have faced over the past 11 years? That point has been echoed across the Committee today. Could the Minister elaborate on the discussions that he has had with the Welsh Government, because there are elements of a tidying up exercise here? The Minister said that he had further discussions of other mechanisms that would help trading standards effectively conduct and resource their enforcement role. What are those mechanisms and sources of other potential income?
Maria Eagle
I have a couple of probing questions. There is no doubt that it is good to see some enforcement provisions. Given the range of penalties from £500 to £30,000 and given that trading standards have to effectively obtain their costs from the proceeds when undertaking the enforcement activity, is the Minister concerned that that might offer an incentive to trading standards—the enforcement authority—to pitch their fine or notice at a higher level than perhaps might otherwise be the case? Does he agree that going through this administrative fining arrangements, with all the appeals that we see in the schedule, would probably not be worth it for an enforcement authority if it were only going to get £500 at the end of the day, given the difficulty of understanding all the nuance of landlord and tenant law and leases? Is it therefore much more likely that there will not be much enforcement activity?
One of the other concerns for such an officer and an enforcement authority, might be that if there is an appeal to the administrative tribunal by the landlord against the amount being levied by way of penalty, that might be reduced from what the authority originally set out to cover its costs, say, to a much lower figure, closer to £500, which would perhaps most certainly not cover its costs. Is there an incentive in part for the enforcement authority to pitch the fine high, but any tribunal that considers an appeal may cut the fine to such a level that the enforcement authority might not be able to obtain its costs back from the proceeds? Perhaps, therefore, the overall impact will be that the enforcement authority thinks better of engaging in enforcement if it does not have resources it can guarantee will be used to do that. I would be interested to know what the Minister and his Department have considered in respect of the incentives built into the system in the Bill.
Eddie Hughes
In answer to both those points, there could be some confusion as to the motivation behind the level at which the fine is imposed. Our intention is to impose fines at a level that is a deterrent, and that is why the maximum limit has been lifted; however, as I said, the fines are not intended to be an income stream for the relevant authorities. The hon. Member for Garston and Halewood suggests that there might be a perverse incentive for authorities to impose fines at a higher level in order to increase their income. However, as the hon. Member for Weaver Vale said, how often would I expect money to be returned to the Secretary of State? The intention is to pitch the fine at the appropriate level, which is commensurate with the level of crime—let us put it that way—rather than associating it with the income that needs to be covered.
Eddie Hughes
I think it would be helpful if I conclude my contribution, and then the hon. Lady can come back in. [Interruption.] Well, it might be helpful if the hon. Lady let me respond to the points she made first. As I said, if the fine is set at a level that is appropriate to the crime, that might be in excess of what is necessary in order to cover the costs incurred by the authority. In that case, as it is not meant to generate revenue, the money would go back to the Secretary of State or the Welsh Minister, as appropriate.
The natural equilibrium of things will be reached by ensuring that the money generated covers the costs of administering the programme. If it does not, the Government will need to be mindful of that. As I have said, we are in conversation with the Local Government Association and we will see how that progresses. The hon. Lady is wise to raise that point. We do not want to see anything that disincentivises authorities from prosecutions because they do not think their costs will be covered. That is a really important point, and we will need to be mindful of it.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Amendment made: 9, in schedule 1, page 19, line 16, leave out from “paid” to end of line 17 and insert—
“(a) where the penalty was imposed in relation to a lease of premises in England, to the Secretary of State, and
(b) where the penalty was imposed in relation to a lease of premises in Wales, to the Welsh Ministers.”—(Eddie Hughes.)
This amendment provides that penalty proceeds not used by the enforcement authority to meet enforcement costs must be paid to the Secretary of State, if the penalty was imposed in relation to premises in England, and the Welsh Ministers, if the penalty was imposed in relation to premises in Wales.
Schedule 1, as amended, agreed to.
Clause 14
Recovery of prohibited rent by tenant
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 14 provides leaseholders with an alternative route for redress should they wish to take action directly, instead of by approaching an enforcement authority. It enables the leaseholder to apply directly to the appropriate tribunal for a recovery order that requires the landlord to repay the prohibited rent.
The clause mirrors the provisions in clause 11 in relation to enforcement authorities, enabling a leaseholder—or someone acting on their behalf—to apply to the tribunal for a recovery order if they have paid a prohibited rent and it has not been refunded. As in clause 11, the recovery order may apply to the landlord at the time the prohibited rent was paid, or to the current landlord. It may also apply to a person acting on the landlord’s behalf, where that person received the money. As I said, the provisions are fair, and are included in the Bill to ensure that the prohibited rent can be recovered effectively and repaid to the leaseholder. The person ordered to repay the rent has up to 28 days following the date of the recovery order to make the repayment. That ensures that the repayment is made promptly. Later in our discussion we will come to provisions in the Bill for the landlord to appeal if they consider it appropriate.
The clause also includes, as clause 11 did, provision that a single order may be made in respect of multiple wrongful payments. It prevents duplication by clarifying that the tribunal may not make an order if one has already been made successfully by an enforcement authority in respect of the same payment. The clause gives choice to leaseholders, which I am sure we are all in favour of, to seek their own resolution to any prohibited rents that have been paid. They can choose to apply to the appropriate tribunal without involving their local enforcement authority. I hope that we can all agree that that is a helpful provision to ensure that leaseholders can take their own action if desired.
Clause 15 makes equivalent provision to that in clause 12 in relation to interest that may be ordered on top of an order to repay prohibited rent. Clause 15 applies where the recovery order is made by the appropriate tribunal rather than an enforcement authority. As in clause 12, the clause provides that interest is payable from the date of a payment until the date it is repaid. The interest rate is the normal rate that applies to court judgments: a simple interest rate of 8% per annum. To ensure that the amount of interest to be paid is not disproportionate, there is a cap on the amount of interest that a person may be required to pay. It must not exceed the amount of the wrongly paid rent that the tribunal orders to be repaid. As I said in relation to clause 11, which clause 15 mirrors, it is only fair that a leaseholder should not only be recompensed for the amount that they are out of pocket but recover interest on it.
Mike Amesbury
With regard to the tribunal, I referenced the evidence from the National Leasehold Campaign and the Leasehold Knowledge Partnership, and that David versus Goliath arena. I do not think it is a matter of choice; I wonder why anyone would opt for this route versus the other provisions in the Bill. Clause 15 is very straightforward, applying the same principle.
Eddie Hughes
I thank the hon. Gentleman for his contribution. Just because we cannot imagine the circumstances in which it would be necessary does not mean that they do not exist. Whether a person should choose to pursue it themselves depends on how well informed and able they are. Perhaps they might find it easier or quicker. I am not sure, but the option should at least be available to them.
Mike Amesbury
That demonstrates why clause 8 and the duty to inform were so important. That would, again, help with this potential.
Eddie Hughes
I can say only what I said earlier: I do not think that clause 8 and the duty to inform are required. I am not sure that it would necessarily make it easier. The hon. Gentleman questioned why somebody would want to pursue it themselves. As I said, they would no doubt be a well informed and able person. I am not sure that the duty to inform would have applied.
Lilian Greenwood (Nottingham South) (Lab)
Will the Minister expand on clause 15(5), on the amount of interest payable not exceeding
“the amount ordered to be paid under section 14”,
and the equity of that? It strikes me that if someone is required to make a payment and a long period has expired, which is why interest is being added to the amount, for what reason would that be deemed not payable? How would that be fair on someone who has been disadvantaged in that way?
Eddie Hughes
I think it simply represents the fact that, in reality, we will ensure that we pursue these things more quickly. We should not be in a position where the two are of equal level. I understand the hon. Lady’s point and will consider this further as the Bill progresses.
Maria Eagle
The difference between these clauses and the previous clauses we discussed is that the organisation that will in the first instance decide the size of the fine is the tribunal, rather than the enforcement authority—I think I am right about that—because the tenant will make an application to the tribunal for a fine to be levied and to get back the money they have wrongly paid. Do the Government intend to give some guidance to the tribunal as to how to set that fine? There is quite a wide range; it is between £500 and £30,000. Does the Minister expect that the tribunal, in making such a determination, will follow the same kind of guidance as the enforcement authority would follow were it initially setting the level of fine? Has he given any thought to consistency between the two ways of getting to a fine in this instance—whether through the tribunal or the enforcement authority?
Eddie Hughes
It would absolutely be our intention, through guidance or otherwise, to ensure consistency across both approaches.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clauses 15 and 16 ordered to stand part of the Bill.
Clause 17
Assistance
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 17 enables enforcement authorities to assist leaseholders, where they request it, with various applications to the appropriate tribunal for redress. We have discussed that a leaseholder may apply to the tribunal for a recovery order to recover any permitted rent, along with any interest that would have been payable. We have also discussed the provision to apply to the tribunal for a declaration that will establish for the record whether a term in a lease is a prohibited rent, and if so, what the permitted rent is.
We want to ensure that the system of redress for leaseholders is easy to navigate. That is why we have taken a belt-and-braces approach whereby enforcement may take place via the enforcement authorities or a leaseholder may seek redress directly by application to the appropriate tribunal. Should a leaseholder wish to do this, the clause makes it clear that an enforcement authority may offer assistance to the leaseholder with that process. I hope hon. Members agree that it is important to give enforcement authorities the power to offer appropriate assistance to leaseholders who wish to seek redress directly from the tribunal. The clause achieves that.
Mike Amesbury
The clause seems fairly proactive, essentially hand-holding through the process, which in one dimension is most welcome. However, I still question the incentives for people to go down the enforcement authority route—trading standards—rather than the tribunal route for cost recovery. I am curious.
Maria Eagle
I have a similar concern to my hon. Friend’s. The clause states that, “An enforcement authority may,” not “must”, which means that it may not. It may decide that it does not wish to. If it were to take enforcement action itself, it can retain the proceeds of any enforcement that occurs, but there is no indication that the costs of assisting a tenant, which may be just as an extensive as if it were to carry out the enforcement action itself, are recoverable in any way. Does that not suggest that the relevant enforcement authority may choose not to?
Eddie Hughes
I feel as though the hon. Lady has almost answered her own question. If somebody comes to the authority seeking advice, and it decides that, given its expertise in the field, it would be better if it pursued the claim itself, perhaps it might be minded to do that. In that case, it would be “may” rather than “must”. That leaves the leaseholder with a choice as to the route that they take. It is appropriate that both options are available to them.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18
Interpretation of enforcement provisions
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 18 defines which is the appropriate tribunal for a lease of premises that is in England or in Wales. The clause also glosses the meaning of “tenant” in clauses 11 and 14, which relate to recovery orders, and in clause 17, which relates to assistance by an enforcement authority.
I should note that, in discussing the Bill, I have generally referred to “leaseholders”, rather than tenants, as that is the term that most people are familiar with in the context of a long lease. However, Members will have observed that the Bill uses the term “tenant”. The clause defines “tenant” for the enforcement clauses in the Bill, so to avoid confusion I shall refer to “tenant” in my comments on this clause.
Clause 18 has the effect that in those clauses, references to tenants include former tenants and people acting on behalf of a tenant, but not former tenants or people who have guaranteed the payment of a rent for a tenant in relation to making an application as to the effect of clause 7 on the terms of a regulated lease. That wide definition will ensure that any party that has been affected by a breach of the terms of the Bill will be able to seek redress.
The clause excludes former tenants and guarantors from the definition of tenant in clause 17(1)(b), because that provision relates to an enforcement authority helping a tenant to seek a declaration of the application of the Bill to a lease, something that will not be needed by a former tenant and cannot be actioned by a guarantor. For example, a former tenant who has sold on their interest in a property will have no need to seek a declaration as to whether a rent term in that sold-on lease should be a peppercorn. I commend the clause to the Committee.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19
Administration charges for peppercorn rents
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 19 is included to prevent a potential loophole whereby a landlord might charge an administration fee in relation to a peppercorn rent. This measure is achieved by amending the Commonhold and Leasehold Reform Act 2002, thereby requiring that no administration charge is payable in relation to the collection of any ground rent that is restricted to a peppercorn by this Bill. Subsection (5) provides a leaseholder with recourse to redress, if needed. It enables a leaseholder to apply to the first-tier tribunal in England or to a leasehold valuation tribunal in Wales for an order varying the lease on the ground that such an administration charge is not payable.
A further measure, should it be needed, is included in subsection (6), which amends the Landlord and Tenant Act 1987. This enables a leaseholder to apply to the relevant tribunal to request that it makes an order appointing a manager where prohibited administration charges have been made. A tribunal-appointed manager does not act on behalf of the landlord; they are appointed by the tribunal to take over the landlord’s right to manage the building. This is a strong measure, intended to provide a deterrent to help ensure that a landlord does not continue to seek administration charges in relation to a peppercorn rent under the Bill. Clause 19 is necessary to ensure we guard against any potential loopholes in this legislation.
Mike Amesbury
I welcome clause 19. The interest in charges that are applied under various titles is well documented. I think the clause does close a loophole. Of course, the Opposition have stated our desire and concern to see these provisions extended to some 4.5 million leaseholds. There are 1.5 million households that are in leaseholds, with some 270,000 in the north-west and a similar figure in Wales. This measure obviously applies to those going forward. I welcome the clause within the narrow scope of the Bill.
Eddie Hughes
I commend the clause to the Committee.
Question put and agreed to.
Clause 19 accordingly ordered to stand part of the Bill.
Clause 20
Amendments to the Housing Act 1985
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 20 makes two amendments to the Housing Act 1985. Specifically, they amend part V of the Act on the right to buy. The purpose of the amendments is the same: they update the 1985 Act to ensure that requirements in it relating to ground rent are aligned with the provisions in the Bill.
Clause 21 gives the Secretary of State the power to make provision that is consequential on the Bill through regulations, including provisions amending an Act of Parliament. We do not take such a power lightly, and in drafting this legislation we have sought to identify and make all necessary consequential amendments on the face of the Bill. The changes to the Housing Act 1985 in clause 20 are a good example of this.
However, long residential leasehold is a complex and interdependent area of law. Therefore, we consider it prudent to take the power in clause 21 to ensure that, should any further interdependencies be identified at a later date, these can be addressed appropriately. There are various precedents for such provisions, including section 92 of the Immigration Act 2016, section 213 of the Housing and Planning Act 2016 and section 42 of the Neighbourhood Planning Act 2017.
The Delegated Powers and Regulatory Reform Committee considered the powers in the Bill, including this one, and noted that there was nothing in the Bill that it would wish to draw to the attention of the House.
Maria Eagle
Clause 21(2) states that
“the provision that may be made by regulations under subsection (1) includes provision amending an Act (including an Act passed in the same session as this).”
Can the Minister tell the Committee why that is? What Act being passed in this Session could possibly need to be amended as a consequence? Is there another Bill that has provisions about such things? Why is that part in parentheses included?
Eddie Hughes
My understanding is that consideration has been given and we do not think there is anything, but we need to be prepared should the circumstance arise. That is my understanding of the requirement.
Mike Amesbury
What would those circumstances be? Can the Minister give us examples?
Eddie Hughes
As I said in my speech, the law is complex and there are interdependencies between various Acts. The provision makes sure that there is nothing that we have missed in terms of another piece of legislation that would be relevant and would have an impact; it gives us the opportunity to make an amendment appropriately. That is my understanding.
Maria Eagle
I am sorry to press the Minister on this, but clause 21 says,
“including an Act passed in the same session as this”.
What other Bill or Act in this Session could possibly have a provision that may need amending as a consequence of the Department overlooking something? This is complex housing law. What other Bill that is being passed through Parliament in this Session has complex housing law in it?
Eddie Hughes
I can only say again that we do not know the answer to that, otherwise we would obviously have made the necessary amendment at this point.
Eddie Hughes
I appreciate that the hon. Lady is not happy with the answer, but unfortunately that is the circumstance.
Clause 22 makes provision relating to regulations under the Bill. Subsection (1) is a standard provision that enables consequential, supplementary, incidental, transitional, saving or differential provision to be made, if necessary, in connection with the exercise of powers under the Bill. As is usual, subsection (2) provides that regulations under the Bill must be made as a statutory instrument. Subsections (3) to (4) relate to the procedure for making regulations under the Bill. Regulations under the Bill will follow the negative procedure, unless they make provision under clause 20 amending an Act. As we have discussed, for provisions under clause 20, the affirmative procedure will be followed, requiring active approval from both this House and the other place.
Dr Neil Hudson (Penrith and The Border) (Con)
It is a great pleasure to serve under your chairship, Ms Elliott. I am grateful to the Minister. I very much welcome the Bill. It is a tightly scripted, focused Bill, which will accelerate its passage. I welcome these clauses, which allow the Secretary of State and the Government to bring in subsequent and consequent amendments, if need be.
One of the key themes of the Bill is that it gives homeowners and leaseholders more of a sense that they have rights over the building they own and that is their home. Currently, in many cases, the leaseholder has to apply to the freeholder for permission to do things to the property that they consider to be their home. That can include whether they can keep a pet in the building. Is that something that the Government will look at as we move forward? When someone owns their home, they should have the right, as a responsible pet owner, to keep a pet. I declare a strong interest in that, both personally and professionally—I am a veterinary surgeon and am fully aware of the physical and mental health benefits to people and animals of the companionship of responsible pet ownership. Will the Government look at those rights moving forward?
Mike Amesbury
The hon. Gentleman spoke about people owning their home. This is the whole issue with leasehold; people do not own their home. I wish him well with the pets, and his practice.
Dr Hudson
I take on board that comment, but a key theme for leaseholders is having more of a sense of belonging, ownership and ability to make decisions such as whether to keep a pet. I realise that this is a tightly worded Bill, but can the Minister say whether we will consider that issue in future?
Maria Eagle
I have every sympathy with the hon. Gentleman’s plea that homeowners—leaseholders think they are homeowners, but they do not own everything—should have the right to do things such as own pets. The Minister will tell me if I am wrong, but I think that the regulations and consequential amendments that we are discussing relate only to the power to deal with landlords seeking to continue ground rent, other than peppercorn rent, in the interim period between Royal Assent to the Bill and when the regulations are brought in to commence it properly, which we understand might be in six months’ time.
Talking about these provisions is a bit like dancing on the head of a pin. I know I have been contributing significantly to that, but they apply in a very narrow range of circumstances that relate to landlords who seek to continue to charge ground rent, or put clauses into leases that come into existence after Royal Assent but before the commencement of the provision seeking to get ground rent payments from their leaseholders-to-be. We are dealing here with a very narrow range of circumstances in what one hopes would be a very short period. The Minister has suggested a period of six months until commencement. I suppose that if a landlord were then to continue to try to have leases with provision for ground rent that was other than peppercorn, these provisions could apply in those circumstances. We are talking about badly behaved landlords after the commencement of the legislation that keeps ground rent as peppercorn. Can the Minister confirm that the regulations that we are talking about do not relate to anything other than that?
Eddie Hughes
That is my understanding. My hon. Friend the Member for Penrith and The Border rightly said again that this is a tightly crafted Bill. The point that he made would fall outside the scope of the Bill, but given the importance that many people place on ownership and his expert experience as a vet, I look forward to discussing this topic with him as we look at future legislation next year.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clauses 21 and 22 ordered to stand part of the Bill.
Clause 23
Interpretation
Eddie Hughes
I beg to move amendment 7, in page 14, line 13, leave out “consideration in money or money’s worth” and insert “pecuniary consideration”
This amends the definition of a premium so that only pecuniary consideration, rather than any consideration in money or money’s worth, is included.
Government amendment 7 makes a minor technical change to clarify the definition of “premium” used in the Bill. Members who are closely watching proceedings in the other place will know that the Government amended the Bill there to make it clear that it applied only to leases where a premium was paid. That was done to ensure that the legitimate practice of longer leases on a rack or market rent could continue. This amendment is a further clarification, again in response to concerns raised in the other place by the Earl of Lytton, about the impact that the newly added definition of a premium would have on properties with a “repairing covenant”. We are talking about a relatively small number of properties where a leaseholder agrees to take on the cost of repair works in a property. That could be, for example, for the renovation or upkeep of a home. As currently drafted, the definition risks inadvertently reducing the rack rent on such properties to a peppercorn. That is not, and never has been, the intention of this legislation. We are therefore removing the words “money or money’s worth” and substituting for them the words “pecuniary consideration”. “Pecuniary consideration” is of course a much more preferable phrase, as it is broadly any consideration sounding like or expressed in terms of money. This amendment will ensure that the Bill operates as intended.
Amendment 7 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Eddie Hughes
Clause 23 defines key terms for the purposes of the Bill. For example, it defines “long lease” and “rent”. Only long leases are regulated by the Bill. A long lease is generally a lease granted for more than 21 years, although some other types of lease are also captured. These are leases for a term fixed by law under a grant with a covenant or obligation for perpetual renewal—that excludes a situation where the lease is a sublease from a lease that is not a long lease—and leases terminable after a death, marriage or civil partnership. In the Bill, “rent” includes
“anything in the nature of rent, whatever it is called.”
Clause 23 also signposts where other terms, such as “peppercorn rent” and “regulated lease”, are defined elsewhere in the legislation.
We have arrived at these definitions after careful consideration. They have been drafted with the intention of avoiding the creation of loopholes that could be exploited to get around the intention of the legislation. The fact that ground rent has not been specifically defined is a very conscious decision, and has been arrived at following a great deal of deliberation. Rent has been defined broadly, and in the way it has been, to ensure that it captures the nature of ground rent without being too specific and risking landlords reintroducing it by another name.
Changing these definitions risks undermining the intention of the legislation. We have, however, provided some further clarification to the definition of rent in response to issues raised in the other place. Specifically, clause 23(3) makes it clear that other legitimate charges—such as service charges, insurance and so on—that might be reserved as rent in a lease will not be reduced to a peppercorn under the legislation merely because they are reserved as rent in the lease.
Mike Amesbury
Again, I welcome the intention of the clause and its various provisions and the amendment, but in relation to service charges, which relate to an earlier narrative under other clauses, there is still the potential that, as we deal with the issue of ground rents, the issue will become service charges. They are not at all transparent. We can look at managing agents, for example. They seem to be accountable to nobody other than themselves. You, Ms Elliott, or I, or anybody in this room, could set up as a management agent and tuck away some interesting so-called service charges. As I said, they are not transparent. We are absolutely clueless as to what some of them are for. An example is car-parking payments. Additional charges for that are sometimes astronomical. I think we could see those consequences that I referred to before. I gave the example of charges going up by 500% or 400% across the country as a result of this measure. We need assurances about that. I know that the Government and the Minister have tried to tighten things up, to prevent those loopholes, but assurance is needed, particularly for leaseholders out there who may be listening to our proceedings.
Eddie Hughes
I completely understand the hon. Gentleman’s point. It is incumbent on the Government to ensure that when the legislation is in force, we are in contact with professional organisations, tenants groups and so on to ensure that, if we see a pattern of egregious behaviour of the type that he has described—people effectively trying to reclaim costs through some other route—we find a means to address it. I understand his concern, and I look forward to working with him, once the legislation has taken effect, to ensure that we track any unfortunate consequences.
Question put and agreed to.
Clause 23, as amended, accordingly ordered to stand part of the Bill.
Clause 24
Crown application
Question proposed, That the clause stand part of the Bill.
Eddie Hughes
Clause 24 deals with the issue of Crown land and makes it clear that the Bill will apply to Crown land, including that belonging to the Crown Estate, the Duchy of Lancaster, the Duchy of Cornwall or a Government Department. Prior to the introduction of the Bill, both the Queen and the Prince of Wales granted consent in writing.
Clause 25 states the territorial extent of the Bill, which extends to England and Wales. We have worked closely with the Welsh Government throughout the passage of the Bill to ensure that the legislation meets the needs of leaseholders in England and Wales. As a result, the Bill specifically transfers executive competence to Welsh Ministers in a number of areas, including on the definition of community housing leases in clause 2(6)(b); the penalty amounts to account for the value of money, in clause 10(9); and the provision of guidance in clause 13(1)(b). That will ensure that the legislation works for leaseholders in both England and Wales.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Scott Mann.)
Skills and Post-16 Education Bill [ Lords ] (Sixth sitting)
(3 years ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee consisted of the following Members:
Chairs: Clive Efford, † Mrs Maria Miller
† Ali, Tahir (Birmingham, Hall Green) (Lab)
† Bradley, Ben (Mansfield) (Con)
† Burghart, Alex (Parliamentary Under-Secretary of State for Education)
† Carter, Andy (Warrington South) (Con)
† Clarke-Smith, Brendan (Bassetlaw) (Con)
† Gwynne, Andrew (Denton and Reddish) (Lab)
Hardy, Emma (Kingston upon Hull West and Hessle) (Lab)
† Hopkins, Rachel (Luton South) (Lab)
† Hunt, Jane (Loughborough) (Con)
† Hunt, Tom (Ipswich) (Con)
Johnson, Kim (Liverpool, Riverside) (Lab)
† Johnston, David (Wantage) (Con)
† Nici, Lia (Great Grimsby) (Con)
† Perkins, Mr Toby (Chesterfield) (Lab)
† Richardson, Angela (Guildford) (Con)
† Tomlinson, Michael (Lord Commissioner of Her Majesty's Treasury)
† Western, Matt (Warwick and Leamington) (Lab)
Sarah Thatcher, Bradley Albrow, Committee Clerks
† attended the Committee
Public Bill Committee
Tuesday 7 December 2021
(Afternoon)
[Maria Miller in the Chair]
Skills and Post-16 Education Bill [Lords]
The Chair
A point of order was raised this morning about there not being a debate on new clauses 1 and 4 at the beginning of proceedings today. I am happy to cover the new clauses if the Government and Opposition want that. Although they could have been debated at the time, and Opposition Members did not take the opportunity to do so, out of a sense of fairness this is a way of getting through this slight wrinkle.
Clause 21
List of relevant providers
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Education (Alex Burghart)
What a pleasure it is to reach our sixth and final sitting on this important Bill.
Clause 21 will allow the Government to introduce a list of post-16 education or training providers. To be on the list, providers will need to meet conditions that help to protect learners against the negative impacts of provider failure. It will also help to protect public funds by preventing or mitigating the risks of provider failure. Currently, there is a risk that the short-notice exit of a provider from education and training can significantly disrupt the experience of many young people and adults. This can be because of delays in finding a new provider and insufficient planning on what happens next in these circumstances. This clause focuses the operation of a list on the types of providers that the Department considers are most at risk of an unregulated and disorderly exit from provision—independent training providers.
While we value the role of ITPs in helping to provide a more diverse and innovative learning offer, it is not right that these types of providers should operate with less in-built protection for learners than other types of further education provider. Fundamentally, we want to protect learners and public funds if providers cease to provide education or training. Where other regulatory mechanisms are not in place, we want to ensure that there is a consistent set of requirements placed on providers to protect learners and public funds, even where the provision is funded by local commissioning bodies or through subcontracts from directly funded providers.
Where a provider is not directly funded by the Secretary of State—as can be the case with ITPs—the existing levers for the Secretary of State to protect learner interests are not as strong. Contractual conditions of funding to prevent disorderly exits may also not be consistent. The Bill will allow commonality and consistency across funding streams to mitigate provider failure risks. The clause also allows the Secretary of State to set out other matters in connection with the keeping of the list of post-16 education or training providers.
We intend to consult before deciding on the detail of the way in which the scheme will operate. The Secretary of State is required to do so before making the regulations that establish the list for the first time.
Mr Toby Perkins (Chesterfield) (Lab)
May I record my thanks, Mrs Miller, for what you said a few moments ago about ensuring that new clauses 1 and 4 may be debated? I appreciate your flexibility.
We do not intend to divide the Committee on this subject, but I re-emphasise the point that I made in the discussion on the amendment. I entirely appreciate what the Minister says about the need to ensure protection for learners, but a small number of providers have a long track record of providing a small amount of provision that is none the less important in certain sectors and geographies. If this becomes a bureaucratic or economic minefield, they will simply withdraw from the sector, which will be the poorer for it. We received representations from the Manchester combined authority, which has a long history of working closely with smaller providers. It has real concerns that a national list will lead to smaller providers being missed out.
We do not intend to divide the Committee but we will continue to scrutinise the Government and ensure that the provisions put in place do not, as we fear they may if they are not carefully handled, exclude important, worthwhile providers from the list.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clause 22
Prohibitions on entering into funding arrangements with providers
Alex Burghart
I beg to move amendment 24, in clause 22, page 28, line 15, leave out from first “to” to “paid” in line 16 and insert “an agreement for the funding authority to provide funding to the provider includes a reference to an agreement or arrangements between the funding authority and the provider by virtue of which amounts can or must be”
This amendment makes clear that an agreement between the Secretary of State and an education provider that must be in place in order for student loans to be paid directly to the provider counts as “funding arrangements” for the purposes of clause 22. It also covers arrangements other than agreements.
Amendment 24 is a minor and technical amendment that clarifies that advanced learner loan funding routed through the Student Loans Company is in the scope of clause 22. This has always been the intention of clause 22(9), and this amendment is merely a technical adjustment to the drafting. It ensures that advanced learner loan funding arrangements are captured by the “funding arrangements” definition in clause 22. Without the amendment, clause 22 may not be adequately applied in relation to providers who receive advanced learner loan funding.
Mr Perkins
We appreciate that clarification.
Amendment 24 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Alex Burghart
Clause 22 is important in ensuring that a funding authority is prevented from entering funding arrangements with a provider that is not on the list. It also makes sure that the funding authority can take action to terminate funding arrangements in an orderly way should a provider cease to be on the list.
The short-notice exit of a provider from the provision of education or training can significantly disrupt the educational experience of young people and adults. The transfer of learners to another provider can take time, be extremely disruptive and increase the risk of learner disengagement. The provision of post-16 education or training is commissioned by various funding bodies and is often subcontracted. As a result, there is a wide variation in the range of obligations and requirements currently imposed on providers.
The provisions in the clause are intended to ensure that a consistent set of requirements is placed on providers and funding authorities to protect learners and public funds, even where the education or training is funded by local commissioning bodies or through subcontracts. The clause also sets out that a provider must not rely on anything in clause 22 as a reason for not carrying out existing obligations under a funding agreement. A funding authority could continue to enforce those obligations even if a provider was not on the list, as the contract would remain valid. This may be important to allow a provider to teach existing learners until they had completed their course where the risk posed by the provider could be managed.
The clause also includes the power for the Secretary of State to set out in regulations the particular characteristics of the funding arrangements that are subject to these funding controls. This is necessary so that the Department can ensure that the controls are applied proportionately. For example, de minimis requirements may be needed so that short-term and low-value arrangements for the provision of relevant education or training are not captured by the requirement for the particular provider to be on the list. The clause is essential in ensuring that there are certain restrictions and controls on the public funding of education or training providers in the scope of the list.
Mr Perkins
It is important to ensure that information is shared widely, not only with providers that might be outside mainstream education provision but with funding authorities such as mayoral or combined authorities, to ensure dialogue and so that smaller providers are not missed out.
The clause clarifies that providers must be approved and have an agreement in place for them to be allowed to have student loans paid directly. Building on the contribution I made in the debate on clause 21, it would be useful if the Minister clarified the steps the Government will take to ensure that only providers with quality offerings and financial stability and robustness receive direct payments and that these steps will not prevent quality, innovative smaller providers from accessing the important opportunities to attract new students.
Further to that, does the Minister anticipate that the extension of student finance will mean that a greater variety of private sector organisations will be able to receive student loan applications? I have met people in my constituency, and have written to his predecessor about other courses whose students have previously been excluded from getting student loans to access them, despite having a long track record of their students going into employment. To what extent does the Minister think the Bill will increase the number of learners who can get student loans for their courses, and how will he ensure that quality, innovative, smaller providers can access those opportunities?
Alex Burghart
The Government are fully aware that ITPs come in all shapes and sizes, and play an essential part in the skills ecosystem. We are very mindful that we do not want to drive good providers out of the market by creating a list. The sole purpose of the list is to ensure that all providers have in place provisions to ensure that they have contingency plans for their students should they go under. That is something that exists elsewhere in the skills space. We are extending it to ITPs, and intend to do so in such a way that will not create a bureaucratic overload. To the hon. Member’s point on student loans, it will very much depend on how the system evolves from this point.
Question put and agreed to.
Clause 22, as amended, accordingly ordered to stand part of the Bill.
Clause 23
Funding arrangements: interpretation
Question put, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss clause 24 stand part.
Alex Burghart
Clause 23 provides definitions for key terms in this part of the legislation relating to funding arrangements with post-16 educational training providers, and ensures that the correct legal person and funding arrangements that they are party to are in scope of the relevant obligations. The clause is essential to the interpretation of the list of post-16 educational providers, and should stand part of the Bill.
Clause 24 provides that the regulations for creating or keeping the list, altering the categories of education and training in scope of it, or amending primary legislation will be subject to the affirmative procedure. That means that they will be subject to an appropriate level of parliamentary scrutiny over the use of those powers, and must be approved by both Houses prior to becoming law. The clause provides that the powers to make regulations in clauses 21 and 22 include the power to make supplementary, incidental, transitional or saving provision.
By way of example, once regulations have been made under clause 21, the Department may consider it necessary to amend statutory powers to provide financial assistance for relevant educational training so that they signpost the prohibitions that will apply, and which effectively constrain those financial assistance powers. One such power will be in section 2 of the Employment and Training Act 1973. Clause 24 will ensure that there is appropriate parliamentary scrutiny over the use of the powers, and should stand part of the Bill.
Mr Perkins
We appreciate that clarification. The clause and its subsections clarify the powers to make regulations under clauses 21 and 22, and we have no desire to oppose it.
Question put and agreed to.
Clause 23 accordingly ordered to stand part of the Bill.
Clause 24 ordered to stand part of the Bill.
Clause 25
Provision of opportunities for education and skills development
Mr Perkins
I beg to move amendment 53, in clause 25, page 30, line 17, leave out from “education” to end of line 17.
The Chair
With this it will be convenient to discuss the following:
Amendment 54, in clause 25, page 30, line 17, leave out from “has” to “level.” and insert
“is earning below the Living Wage, as identified by the Living Wage Foundation.”
New clause 7—Level 3 qualifications provision—
“(1) Employer Representative Bodies may prescribe additional Level 3 qualifications, as part of the Lifetime Skills Guarantee.
(2) Additional Level 3 qualifications may be prescribed under subsection (1), in instances where the Employer Representative Body identifies a local need or skills shortage.”
Mr Perkins
The clause addresses the lifetime skills guarantee and the provision of opportunities for education and skills development. Subsection (1) says:
“Any person of any age has the right to free education on an approved course up to Level 3 supplied by an approved provider of further or technical education, if he or she has not already studied at that level.”
Amendment 53 would simply remove the final eleven words of the sentence. It is a probing amendment to test the reasons why the Government are seeking effectively to remove the word “guarantee” from the lifetime skills guarantee, and instead offer a significant limitation on the number of people who are able to study under it.
We think it is vital that people in low-paid employment have the chance to take additional level 3 qualifications to support them into better paid work or into new sectors. We also think it is crucial that people in industries or sectors that are diminishing have the opportunity to retrain. Substantial financial barriers would prevent them from accessing those courses.
When the Prime Minister made his speech announcing the lifetime skills guarantee in Exeter, he seemed to understand that point. The speech was all about the need for people to retrain and to be able to move from one sector where there were not going to be jobs in the future to jobs in other sectors. He wanted them to seize those opportunities. Unfortunately, the lifetime skills guarantee, which is going to take a long time to come into being anyhow, already has limitations.
Amendment 53 seeks to test the Government’s view on ensuring that more people are able to access a second qualification. Earlier, we gave the Government the opportunity to support a quite limited amendment on a second qualification.
I remind the Committee that a lifetime skills guarantee was in place for level 3 qualifications for everyone until 2013, when the former Chancellor George Osborne removed it. The decision to reintroduce this poor relation of that policy shows how the Government are learning at least some lessons from the mistakes they have made, but it lacks the ambition needed to reverse the failures of previous Government policy. More than 9 million jobs are excluded, many in sectors that have skills shortages and vacancies, such as tourism and hospitality.
I was speaking to a business in my constituency just this weekend that owns a number of establishments in the hospitality sector. It is desperate to attract members of staff into the sector. This is an organisation with a long track record of training up and developing members of staff, and ensuring that people make the best of their careers. It would be alarmed to hear that those kinds of opportunities are excluded from the lifetime skills guarantee. It is essential that the Government get this right. We hope they support our proposals.
Amendment 54 is an attempt to put on to a legal footing the promise made by the Secretary of State at the Association of Colleges conference in November. He said that
“from next April any adult in England who earns a yearly salary below the National Living Wage will also have the chance to take these high value Level 3 qualifications for free.”
That is precisely what the amendment seeks to do. It says that if anyone has a level 3 qualification and is earning below the living wage, as identified by the Living Wage Foundation, they would be able to take another level 3 qualification.
As we have laid out, we think that restricting the opportunities for students to take a second level 3 qualification is a huge missed opportunity. As the Committee has rejected our more ambitious amendment to allow all students the right to take a second level 3 qualification, we believe that the Government should at least be willing to support an amendment that supports what the Secretary of State has said.
New clause 7 relates to students wishing to do a level 3 qualification in an area where the local skills improvement plan has identified a local skills shortage. It would allow the local skills improvement plan to approve funding for a second level 3 qualification where local labour market shortages are identified.
The Bill contradicts itself. Reportedly, its aim is to ensure that skills policy is determined locally. New clause 7 would ensure that local skills improvement plans were able to identify that there was a skills need in the area and encourage people to retrain in that sector. Anyone who votes against that once again will seize power from local skills improvement plans and place it in the hands of the Secretary of State. We look forward to hearing what I imagine will be universal support for our amendments from hon. Members who are keen to support people in their constituencies.
Andrew Gwynne (Denton and Reddish) (Lab)
I rise briefly to support my hon. Friend the Member for Chesterfield in his amendments 53 and 54 and new clause 7. We have had this debate already in Committee and I still think that the Committee made the wrong decision to prevent learners having a second chance at a level 3 qualification for the reasons that I set out.
Those reasons were as valid the other day as they are now for these amendments, because we live in a dynamic economy where industries come and go. The industry that my town was historically dependent on, and that the town of my hon. Friend the Member for Luton South is equally famous for, is hatting. Those industries have pretty much died out, but the hatting industry made Denton famous. The Bowlers of bowler hat fame came from Denton, although they made their money at Lock & Co. Hatters in St James’s in London. However, that industry and those skills have gone.
In the past 50 or 60 years, my constituency has had to diversity and the workforce has had to retrain. That pace of chance will be prevalent in the decades ahead as technology advances, the global economy shrinks to make the world a smaller place, and international trade becomes the norm, meaning that we buy goods from other countries rather than make them here.
If we are going to have an industrial strategy that says that we want to be the lead nation in the new green industrial revolution, we need to ensure that we have the skills and the workforce to match that ambition. I am supportive of that and, if we are being honest, every Member of the House recognises the challenges and is supportive of it. That is not a top-level ambition, however; it has to be dealt with in the nitty-gritty of legislation.
We have a Bill going through Parliament that is rightly focused on skills and training and on ensuring that the next generation of the workforce has a built-in dynamism to be able to diversify, retrain and fill skills in the areas of the economy that have shortages. As the Opposition have said, that may mean someone has to have a second bite of the cherry at a level 3 qualification. If the subject in which someone has a level 3 is no longer fit for purpose, or relevant to the modern workplace, are we going to leave them languishing with inappropriate qualifications and skills that are no longer needed, or are we going to give them the opportunity to retrain, reskill and join the workforce, hopefully in highly paid, decent jobs? That is why I support amendments 53 and 54, which would put that idea on a legal footing, as my hon. Friend the Member for Chesterfield rightly said.
The voice of local businesses and the economic partnership between local government, businesses, academia and training providers are setting out local skills improvement plans. They identify key skill shortages in their economic areas, and they should be given the flexibility to say, “You know what, in my area, we have an absolute shortage of skills in a particular sector. We want to make sure that our area is really dynamic in that sector and therefore it is a key priority for our partners to skill up to level 3 adequate numbers of the workforce.” That is sensible. It is devolution as it is meant to work, from the bottom up, and that is why I also support my hon. Friend’s new clause 7.
Rachel Hopkins (Luton South) (Lab)
It is a pleasure to follow my hon. Friend the Member for Denton and Reddish, because I agree with everything he said.
The amendments and the new clause address the issue from the relevant two angles. They are designed to offer a genuine lifetime skills guarantee for individuals—one that is aspirational and does not fall back on the argument that because someone got a couple of A-levels 30 years, they cannot now retrain for a level 3 qualification to meet a skills need in the local area. I think about the changing world of work, and how much more is now digital or IT-based. There has been a shift in skills, which is driving our economy. Unless we agree to the amendments, so many people will be locked out from making a genuine shift in their skillset and acquiring a higher skilled job, which would put them on a sustainable footing. It is short-sighted to attempt to restrict that opportunity.
We have heard much about the responsibility of employers to lead the development of skills plans for their areas, given that they understand their local economies. New clause 7 is positive because it would genuinely enable employer representative bodies to shape what that level 3 qualification should be, based on the skills shortages in their areas. The new clause would meet the purpose of ERBs in developing the skills plans and ensure the lifetime skills guarantee for local people.
I support the terms of the amendments and the new clause. I should add that there are still a few hat factories in Luton producing artisan hats, and very good they are, too.
Matt Western (Warwick and Leamington) (Lab)
I will speak to the amendments and the new clause that appear in my name and that of my hon. Friend the Member for Chesterfield.
Of course we all want to see a high-skill, high-wage workforce. We need that for our economy. A crucial part of that is the retraining of employees. I am sure that most people in the room agree that the evolving workplace means that we need a process of continuous development if we are to adapt and ensure that our economy thrives, against an ever-competitive global marketplace.
One need only think back to what happened to clerks working in yesteryear—the Minister might say that that was in my time—to see how they had to retrain and develop typewriting skills, and then progress to work on computers and so on. With the advent of computer technology and handheld devices, simply picking items in a logistics centre moved from literally picking things up against a piece of paper to the use of mobile technology. These are skills that demand more of the workforce. We have to put that in the context of having the lowest productivity of the major European nations and among the lowest in the OECD. That is why the skills agenda is important, and I commend the idea behind the Bill the Government have brought forward.
A lot of this work was developed by a former Member of this place, Gordon Marsden, who did a huge amount of work. That was well remembered by my hon. Friend the Member for Denton and Reddish on the very Back Bench, who will have known him far better than me. Gordon Marsden was the one who really pushed the notion of a lifetime learning entitlement. It is right that we are looking to introduce that.
Amendments 53 and 54 would give any person the right to free education on an approved course to level 3 if they earn below the living wage as identified by the Living Wage Foundation. The wording of the Bill ensures that the LLE is available only to those who have not already studied at that level. That undermines one of the defining aspects of the LLE and what Gordon Marsden envisaged. The vast majority of people obtain a level 3 qualification between the ages of 16 and 18. This qualifier would limit the LLE too restrictively, as my hon. Friends have said.
Our amendments seek to expand the application of the LLE to those who need it most—those who are furthest from skilled work and who earn below the living wage—redefining the parameters to adapt the policy to fit the needs of the population. In fact, there was widespread support for the Lords amendments, including from Universities UK, that widened the eligibility so that an individual could access the LLE regardless of their prior level of study.
As my hon. Friend the Member for Chesterfield highlighted, the Secretary of State for Education announced just a few days ago in a speech to the Association of Colleges that the Government will be launching a pilot, which will see adults who earn below the national living wage able to undertake national skills fund level 3 qualifications for free. That is to be embraced. I am sure many of us, certainly on this side of the Committee, think that that is right. Why not actually commit it to the Bill, as my hon. Friend said? If there really is true ambition and a will to see proper levelling up and the reskilling of our economy, we should commit it to the Bill. It seems bizarre, or perhaps it has not been considered as fully as the Secretary of State led us to believe in his speech. Elsewhere, many are calling for and supporting the removal of the restriction in the Bill for those who have not already done a level 3 qualification. That would facilitate those who want to reskill rather than upskill, which are both equally valid and necessary.
New clause 7 would widen the availability of courses that form part of the lifetime skills guarantee by allowing employer representative bodies to prescribe additional qualifications as approved courses falling within the lifetime skills guarantee. The Augar review—the post-18 review—recommended an all-age level 3 entitlement. The Government have put this into effect, but only for a limited list of level 3 qualifications. The Association of Colleges wants that to be changed. My local college, which I referred to before—Warwickshire College Group—is one of the finest colleges in the country and certainly one of the biggest. Its principal is very vocal about wanting to see that change.
My question to the Minister is, therefore, what is the justification for such limits? The reform has the potential to be wide ranging and revolutionary. Before further meat is added to the bones in the form of the subsequent White Paper, the Bill in its current state will introduce unnecessary limitations on the LLE. That is why new clause 7 and the two amendments are important to ensure that we can broaden the skillset of our workforce and our population, ensuring that we are able to adapt to an ever rapidly changing global economy.
Alex Burghart
Amendments 53 and 54 taken together would alter the eligibility criteria for the proposed legal entitlement to a level 3 qualification for all adults. Amendment 53 in particular is intended to make anyone in England eligible for those qualifications, regardless of their prior qualification level; and amendment 54 is intended to make anyone in England eligible if they earn less than the living wage.
Amendments 53 and 54 highlight the reason why we are opposed to putting such an entitlement into the legislation in the first place: it could constrain our ability to respond quickly and flexibly to adapt such entitlements to benefit adults who are most in need of support. For example, if we wanted to change the offer within the legislative framework, we would have to change the legislation. We have already announced that, from April next year, we will also expand the free courses for jobs offer to include any adult in England who earns below the national living wage or is unemployed, regardless of their prior qualification level. We are able to do that without needing legislation.
By targeting eligibility on the lowest-paid earners and the unemployed, we will ensure that we support those most in need of support to access better job opportunities and to improve their prospects. I hope that the hon. Member for Chesterfield agrees with that, given that amendment 54 seeks to target those same adults. However, it is also not a good use of public funding to expand eligibility in a non-targeted way to anyone, regardless of their wages or prior qualification level, which is what amendment 53 appears to do. We therefore do not support the inclusion of amendments 53 and 54 in the Bill.
Mr Perkins
That was a useful and interesting little debate. We heard a lot about the—I want say burgeoning, but at least still existing—hat industry. My hon. Friends the Members for Luton South and for Warwick and Leamington will be glad to know that I have seen at least two colleagues in hats recently—one was my hon. Friend the Member for Cardiff West (Kevin Brennan), who as they know is quite a trend-setter—so it might well be that a recovery in the hat industry is looming. It was a useful debate, and we heard some valuable contributions on why the amendments are important.
Turning to the Minister’s remarks, I accept that the amendment has similarities to and is possibly even more wide ranging than one that has already been rejected by the Committee, so we will withdraw it. However, we will press amendment 54 to a vote, because all that it seeks to do is to put on to a legal footing the promise that was made. I hear what the Minister says—“Don’t worry, we are going to deliver the policy; we just aren’t going to vote for it”—but I think there will be real value in ensuring that the Government commit to the thing that they say are going to do, which is about those who earn below the national living wage, as defined by the Living Wage Foundation, being able to access level 3 qualifications.
Given what we heard earlier in the passage of the Bill about the importance of local decision making, local skills improvement plans and local employers deciding their priorities, it would seem a sensible approach to allow them to identify local priorities and allow people to study a second level 3 qualification if addressing a known skills shortage. We will therefore look to press new clause 7, as well as amendment 54, to a Division. However, I beg to ask leave to withdraw amendment 53.
Amendment, by leave, withdrawn.
Amendment proposed: 54, in clause 25, page 30, line 17, leave out from “has” to “level.” and insert
“is earning below the Living Wage, as identified by the Living Wage Foundation.”—(Mr Perkins.)
Question proposed, That the clause stand part of the Bill.
Alex Burghart
The Government agree with the ambition to ensure that people in England have access to education no matter their age. We are committed to helping everyone get the skills that they need at every stage in their lives.
In April, we launched the free courses for jobs offer as part of the lifetime skills guarantee. That gives all adults in England the opportunity to take their first level 3 qualification for free, regardless of age. It is not right, however, to put the free courses for jobs offer into legislation. That would constrain the Government in allocating resources in future, and make it harder to adapt the policy to changing circumstances. The Secretary of State recently announced, for example, that from April next year we will expand the offer to include any adult in England who earns below the national living wage or is unemployed, regardless of their prior qualification level.
Through the adult education budget, full funding is also available through legal entitlements for adults aged 19 and over to access English and maths qualifications and fully-funded digital skills qualifications for adults with no or low digital skills. In areas where adult education is not devolved, the adult education budget can fully fund eligible learners studying up to level 2 if they are unemployed or earning below around £17,300 per year.
The spending review has provided a fixed quantum for adult skills, and the level of provision that is funded in any year needs to fit that quantum. Funding increases to follow increased numbers of learners, or a higher-funded mix of provision, will have to be subject to affordability within the overall envelope. The spending review process, rather than legislation, is the appropriate way for determining how the Government allocate resources over the long term. Funding for the free courses for jobs offer will be available throughout the three-year spending review period, giving further education providers the certainty that they need to invest in the delivery of the offer.
Moreover, the Bill is not an appropriate place to create new legal entitlements when we are in the process of reforming further education funding and of carrying out a review of qualifications at level 3 and below. Those vital programmes will ensure our skills system is fit for the future. By creating a legal entitlement for anyone to access their first qualification up to level 3, we would cut across those vital reforms and pre-empt the consultation process.
I now turn to the proposal in the clause that any employer receiving apprenticeship funding must spend at least two thirds of that funding on people who begin apprenticeships at levels 2 and 3 before the age of 25. The Chancellor’s spending review commitment delivers the first increase to apprenticeships funding since 2019-20. Funding will grow to £2.7 billion by 2024-25.
There have been some changes in the make-up of apprenticeships since the reforms: a higher proportion of apprentices are now aged over 25. In 2020-21, 16 to 24-year-olds still accounted for 50% of apprenticeship starts. In the same period, level 2 and level 3 starts made up 69% of the total. I know that there are concerns about the fall in starts among young people. I recognise the value of apprenticeships to young people embarking on their careers, and I am determined to ensure that there are good apprenticeship opportunities at all ages and stages, but I am concerned about the implications of trying to address that in the Bill.
The clause restricts opportunities for older and younger employees, and it restricts employer choice. Eighty per cent. of the UK’s 2030 workforce is already in work, so it cannot be right that only a third of apprenticeships funding is made available to those who are over 25. We want older people to be able to use apprenticeships to progress or retrain. The Confederation of British Industry estimates that one in six workers—5 million people—will go through radical job change and require re-training by 2030.
Age should not be a barrier to opportunities to learn or a limiting factor in our ambitions. I do not want to restrict young people to starting at level 2 or 3 apprenticeships. I also want an 18-year-old with good A-levels to see an apprenticeship as a strong alternative to university. They should be able to start a level 6 apprenticeship and gain a degree.
Employers agree. In evidence submitted to the Committee, the Open University sets out that 82% of employers, both large and small, believe that it is important for apprenticeships to be available for those of all ages and at all levels. Our work on accelerated apprenticeships clearly shows our ambitions for young people. The institute has already published progression routes from T-levels on digital production, design and development, civil engineering and building services design to level 4 apprenticeships. As an example, a T-level graduate in digital production, design and development could move on to a level 4 DevOps engineer apprenticeship and reduce the length of the apprenticeship training by up to 12 months. I want the apprenticeships programme to be responsive to the different needs of individuals, employers and the economy. I therefore believe that we should remove clause 25 from the Bill.
Mr Perkins
There is a real concern about the number of apprenticeships that are available for people between the ages of 16 and 24. The Minister makes an important point, which I would not remotely disagree with, that many people, for a variety of reasons, seek investment in their skills beyond the age of 24. Of course, opportunities should be there for them, but the lifetime skills guarantee, which might more accurately be described as a one-off skills guarantee, is really important. I do not agree with his description of 50% of apprenticeships going to 16 to 24-year-olds as a really big achievement. Too little apprenticeship funding is targeted at those under the age of 25.
Many people are concerned that since the introduction of the apprenticeship levy businesses have sat on this pot of funds, looking to utilise them. They have often not taken people on at entry level, but instead utilised the apprenticeship levy to provide MBAs for level 6 or 7 qualifications for their managerial staff. That is really what clause 25(3) seeks to address. Had the Minister said, “We’ve got a different approach to targeting that,” that would have been one thing, but simply to wipe the clause from the Bill is very concerning, and will be met by real disappointment from many of those who share the view that too little apprenticeship funding is being targeted at those under the age of 25.
Question put, That the clause stand part of the Bill.
Clause 25 disagreed to.
Clause 26
Further education in England: intervention
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Colleges and designated institutions play a crucial part in their local communities by enabling young people and adults to gain the skills they need. In the small numbers of cases in which an institution is failing to deliver an acceptable standard of education or training, or is failing in other ways, Government must be able to intervene to secure improvement.
Existing powers under the Further and Higher Education Act 1992 to intervene in colleges in the FE sector can be used in certain prescribed circumstances in which there are serious failings: mismanagement, for example, or financial or quality failures. In those circumstances, action can be taken to remove or appoint members of the governing body, or to give direction. Clause 26 extends those existing powers to allow for intervention where the education or training provided is failing, or has failed, to adequately meet local needs. Where the prescribed circumstances are met, clause 26 also enables the Secretary of State to direct the governing body to transfer “property, rights or liabilities” to another body.
The statutory intervention powers that we are amending through clause 26 are intended to be used only as a last resort. Our core support and intervention activity is delivered through administrative processes set out in the published guidance, “College oversight: support and intervention”. The Government are not seeking these powers in order to implement a new wave of mergers across the college sector—that is not the purpose of intervention. However, there is good evidence that structural change can, in the right circumstances, play a valuable role in securing improvement. We have also been clear that decisions on the college curriculum are for the governing body, not for Ministers to second-guess. We are working with Ofsted to increase the focus of inspections on how well colleges are meeting skills needs. The Government’s primary focus is on supporting colleges and designated institutions, and preventing things from going wrong.
In conclusion, strengthening the existing statutory intervention powers is necessary to ensure that, as a last resort, the Government are able to act where there is failure and there is no alternative means of securing improvement.
Mr Perkins
Clause 26 sets out in detail some additional powers relating to further education colleges in England, and the desire of the Secretary of State to intervene. The intervention regime for colleges is already complex, having been noted as a cause for concern by the Independent Commission on the College of the Future. Dame Mary Ney’s independent review of college financial oversight also identified the complexity of the regime, and in this Bill the Secretary of State is looking to find additional reasons to intervene, beyond financial failure. There is a real risk that this clause will just add to that complexity, going precisely against the apparent aim of establishing a simpler system.
Crucially, the Bill proposes new powers of intervention for the Secretary of State without giving colleges the freedoms to deliver. Last week, the Government passed an amendment that removed colleges from being strategic partners in the establishment of local skills improvement plans, so colleges are left accountable, but not empowered. Indeed, in a way, it goes further than that: if a college were to disagree with what was in the local skills improvement plan—if it were to consider that a local skills improvement plan that had been approved did not meet the needs of all of its learners—its failure to follow that plan could lead the Secretary of State to intervene and its being considered to be a failing college.
We accept that there needs to be an understanding of interventions, but there are questions that we would like to test the Minister on. First, why is it appropriate to hold colleges accountable for the delivery of LSIPs, but not treat them as strategic partners in developing those LSIPs? Secondly, do the new intervention powers apply equally to all post-16 education providers? If not—if they apply only to FE colleges—what consultation has the DfE undertaken with the Office for Students in order to ensure that this aligns with its approach to the oversight of higher education provision? Thirdly, what happens in circumstances where colleges believe that a poor or inappropriate LSIP has been produced that is not in the long-term interests of their locality? Do they simply deliver on a plan that they believe to be inappropriate, or are there mechanisms available to them to make representations on that point? If the needs of the local learning community have altered but the LSIP has not, how would a college be able to raise that? What consequences would be available to the Secretary of State if a college was seen not to fit in with what the LSIP said, even if the circumstances on the ground had changed?
Alex Burghart
As we have made clear throughout the Bill, the Government are on a mission to create an employer-led system in which the provision of skills reflects the skills that employers in a community need. We are absolutely set on ensuring that we get qualifications designed by employers to give students the skills the economy needs, at both local and national level. The clause sets about creating an accountability framework that places colleges in that sphere. We want colleges to respond to the ideas set out in a local skills improvement plan. However, as I have also made clear, these are absolutely powers of last resort. What we are really looking for is a profitable relationship between employer representative bodies and local providers. For that reason, we hope the clause will stand part of the Bill.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27
Further education bodies in education administration: application of other insolvency procedures
Mr Perkins
I beg to move amendment 61, in clause 27, page 33, line 19, at end insert—
“(2C) Before applying to a court for an education administration order in relation to a further education body in England, the Secretary of state will conduct a review of the impact of the closure of a Further Education institution on learning opportunities in the local area and provide a report to Parliament on steps taken to ensure that the opportunities for learners are not restricted by his application for an education administration order.”
Amendment 61 is a probing amendment that would require the Secretary of State to review further education provision prior to applying for an education administration order for a college. There should also be a review of the impact of closing a college; if the impact of such a closure would be a reduction or complete removal of provision, we would request that the Secretary of State report to Parliament to allow for appropriate parliamentary scrutiny.
It is crucial for the Secretary of State to ensure that local areas have adequate further education provision before deciding to merge and close colleges. The colleges most likely to be closed are often those in more rural areas, those that are smaller, those that are facing specific challenges or those in communities that face specific challenges because they do not have the density of population. Although we recognise that there may be financial collapse as a result of their geographic isolation, that should not necessarily mean that the provision their students rely upon disappears with the merger of the college.
It is important to have scrutiny at both a local and national level. We believe that it should be parliamentary scrutiny, to ensure that the Secretary of State commits to reporting to the House before announcing such a decision, and to ensure that there is a review of the impact of a closure on the local labour market and on the courses available to people in that local community.
Alex Burghart
Amendment 61 would require the Secretary of State to conduct a review of the impact of the closure of an FE institution on learning opportunities in a local area and provide a report to Parliament on the steps taken to ensure that opportunities for learners are not restricted ahead of an application for an education administration order. We will hear about education administration orders in the next few minutes.
I appreciate what Labour Members are trying to do, but the effect would be to delay an application for an education administration order, which would run counter to the purpose of the amendment. First, if an FE body becomes insolvent, it risks being placed into a regular insolvency procedure by a creditor or its board. The primary objective of a regular insolvency procedure is to prioritise the interests of creditors. This means that any closure scenario could result in the best returns to creditors being prioritised over the needs of keeping the body open for learners. Going down a standard insolvency route with a college will prioritise creditors, risking students studying there being pushed to one side.
That is not the case with an education administration order. Education administration was brought into force via the Technical and Further Education Act 2017 for this very reason. An education administrator has a special objective to prioritise the interests of learners by avoiding or minimising disruption to student studies, which sits above the interests of creditors. This means that an education administration order does not immediately result in the closure of that FE body. Depending on the time available in any given insolvency situation, the Department conducts rigorous contingency planning in the run-up to a particular education administration—it is front-loaded; it happens before we actually place the order—including a review of the options available that best prioritise learners. Once an FE body is in education administration, all options to exit, including closure, are further reviewed by the Department in conjunction with the education administrator. When considering the various options to exit education administration, the interests of learners are paramount, given that special objective. The Department also conducts public sector equality duty reviews as part of that.
First, the requirement to undertake a review of learner opportunities and produce a report to Parliament, as the amendment proposes, would significantly delay an education administration application. Any delay at this time would risk the FE body being placed into a normal insolvency procedure, which would not prioritise the interests of learners.
Secondly, although I acknowledge the importance of transparency, a public report at that stage of the process would not be helpful. Without knowing specifically what hon. Members intend to be covered in such a report, the broadness of the amendment means that a report would likely contain sensitive information, which in turn could jeopardise an education administrator’s sale or transfer negotiations with other education bodies. This, too, could cause delays and actually reduce priority for learners.
Thirdly, reporting is already in place as part of an education administration. Education administrator reports, published according to statutory deadlines, are available from Companies House and include details of how the administrator has undertaken the education administration, the options considered and the reasons for a preferred course of action, together with financial information such as the statement of affairs of the FE body and the education administrator’s receipts, payments and time costs.
Finally, I stress that education administration happens mercifully rarely. Only two further education colleges have been placed into education administration to date. The amendment would not introduce anything that is not already intended in an education administration and would, I am afraid, adversely affect the interest of learners. I therefore suggest that it is not added to the Bill.
Mr Perkins
I listened carefully to the Minister. As I said at the outset, this is a probing amendment to identify the extent to which the interests of learners are considered within education administration. I also listened to the Minister’s point regarding the creditors of such an institution, which was important and well made. I accept what he said about the need to go into education administration with due urgency. In that process that follows, which he laid out, there is a real need for the Government to say more, perhaps through a parliamentary statement, for people to better understand the situation on the ground in regard to future provision and those affected by any change in that provision. Notwithstanding that, it is not our intention to push the amendment to a vote.
Mr Perkins
Within my intention not to push the amendment to a vote, I would like to give way.
Matt Western
It is like “Just a Minute”. I thank my hon. Friend for giving way. I just want to elaborate on the point in his concluding remarks about how many colleges face financial uncertainty. According to the Times Educational Supplement, it was one in seven in a recent survey. We saw with Hadlow College—one of the two that the Minister was referring to—that 2,000 students suddenly lost their places. That can have a huge impact on a town and a region.
Mr Perkins
It absolutely can. Cases such as that impact not only the learners affected at that very moment, but on the provision for the next generations coming through. It has a very detrimental impact on the local community. My hon. Friend’s point is well made. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider clause 28 stand part.
Alex Burghart
Clause 27 proposes to clarify ambiguities in the Technical and Further Education Act 2017 regarding the use of company voluntary arrangements—a procedure allowing a company or corporation in insolvency proceedings to come to an agreement with its creditors over the payment of debts. Company voluntary arrangements can be used as an exit route for normal administration, as set out in insolvency legislation.
Company voluntary arrangements can also be used as an exit route from education administration under the FE insolvency regime, which we have just been debating. That has been clarified in case law, which has been in place since March 2020, when the High Court of Justice Business and Property Courts of England and Wales ruled that in the education administration of West Kent and Ashford College, education administrators had the power to propose a company voluntary arrangement.
We are using the opportunity to legislate in the Bill to clarify ambiguities in the current legislation and cement that existing case law into legislation. To be clear, we are cementing what the courts have already decided on. To achieve that, clause 27 proposes to extend the existing power of the Secretary of State for Education to make regulations related to the application of insolvency legislation to FE bodies so that express provision may be made in respect of the use of company voluntary arrangements.
Clause 28 deals with the potential conflict related to the treatment of secured creditors as between the transfer scheme provisions of the Technical and Further Education Act 2017 and the provisions of the Insolvency Act 1986, as applied by the 2017 Act. Specifically, the proposal amends schedules 2, 3 and 4 to the 2017 Act, making it clear that, where a transfer scheme looks to transfer secured assets free of the security, that can happen only with either the consent of the secured creditor or a court order. That is in line with protections for secured creditors in normal administration in insolvency proceedings.
Clause 28 also cements into legislation the Government’s response to the technical consultation for the insolvency regime for further education and sixth-form colleges, which was made in June 2018. We have informed the three main lenders to the FE sector—Barclays, Lloyds and Santander—of our proposed changes, and I am pleased to report that they are supportive. Barclays said:
“As a lender with significant loan exposure to the English FE sector (and desire to continue to support colleges with new loans) we are in favour of the changes proposed. The Transfer Scheme changes in particular provides welcome clarity on a point that had previously had a negative impact on sector risk profile and our appetite to lend.”
These clauses are good for the sector and good for the law, and I believe they should be good enough for us.
Mr Perkins
As the Minister was reading out that very positive quote from Barclays about his clause, it occurred to me how rarely he has had the opportunity to read out support for his Bill over the course of its passage. That is unsurprising, of course, when he is pressing ahead with amendments that 86% of respondents to his consultation are against. None the less, it was good to hear that full-throated support for this proposal from Barclays.
We do not intend to vote against clauses 27 or 28. I will simply make the point that the financial pressures facing our further education sector over the past 11 years, and particularly the past 12 months or so, have been truly unprecedented. I regularly meet representatives of colleges who are absolutely at their wit’s end, and not only about the scale of the funding cuts they have experienced over the past 11 years, but about the extent to which last-minute decisions are constantly made that leave them in a position in which they have to make redundancies in order to stay afloat, only then to discover sometimes that there is a change in the Government’s policy and they have to recruit for some positions that they had made redundant only a few months before.
So it was with the recent announcement about the adult education clawback. I have asked parliamentary questions on this issue. A number of colleges received a clawback from their adult education fund and were told that there was no right to any appeal. Then the previous Secretary of State said that they would allow appeals and I believe that in some cases the appeals were granted. In the meantime, however, those colleges were forced to cut their cloth accordingly.
Consequently, I say to the Government that although we do not oppose clauses 27 or 28, we believe that there needs to be a much greater sense of responsibility about the Government’s role in the financial distress that many of our colleges are currently suffering, which my hon. Friend the Member for Warwick and Leamington referred to earlier, and about the impact on those colleges of the constant last-minute decision making that they have suffered over the past 11 years.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28 ordered to stand part of the Bill.
Clause 29
Meaning of “relevant service” and other key expressions
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss clause 30 stand part.
Alex Burghart
Clause 29 is the first of a chapter of clauses that relate to the criminalisation in England and Wales of contract cheating services, which are more widely known as essay mills. Taken together, this chapter of clauses will make it an offence for an organisation or individual to complete, or arrange for another person to complete, all or part of an assignment on behalf of a student. It also criminalises the advertising of these cheating services. Essay mills threaten to undermine the reputation of our education system and to devalue the hard work of those who succeed on their own merit. They also prevent students from learning themselves and risk students entering the workforce without the knowledge, skills or competence they need.
Clause 29 provides clarity on the exact meaning of the key terms used throughout this chapter of clauses; removes the potential for unintended consequences to arise from the clause; and allows for fraudulent essay mill companies, their employees and contractors to be captured by the legislation. Because of the way that we have defined “relevant service”, we have also ensured that generally permitted study support, such as revision guides, will not be in scope, but essay mill companies that complete assignments on behalf of students will be in scope.
Clause 30 criminalises providing essay mill services or arranging for such services. It is therefore crucial in our fight against essay mills. It provides a powerful legislative tool to tackle these deplorable organisations and individuals.
I will talk briefly about the practicalities of the offence that we are creating. It will be for the prosecution to prove that the cheating service has been provided to the student. However, the burden of proof in relation to the defence is on the defendant. For example, the defendant would need to prove that they could not have known, even with reasonable diligence, that the student would or might use the material provided to complete an assignment. For example, simply asking a student to sign a contract that states that they will not use the work in a certain way is not a defence. Clause 30 states that clearly.
If someone were to be found guilty, they would be liable to be punished with a fine. The appropriate fine will be determined by the courts in accordance with Sentencing Council guidelines. Clause 30 will help to tackle the existence of these companies and to fine them appropriately if they continue to carry out these illicit services.
Mr Perkins
Clause 29 defines the term “relevant service” and other key expressions. We have no desire to vote against it.
I am interested in the representations that the Minister has received about the way clause 30 is drafted. Subsection (4) will immediately set those with more experienced legal minds than mine—there are such people in this place—to consider how difficult it may be to achieve a successful prosecution under these provisions. If there is a defence that enables a defendant to say, “I had no idea what the legislation was”, that starts to bring home how difficult it might be to get successful prosecutions in this area.
Notwithstanding that point, we support the Government in seeking to bring the provisions in the clause into being. We think this is an area of real importance. Every single student who diligently does their revision and their work, and who has a qualification in their hands that they have earned, needs to know that the qualification has meaning. If other people can win that qualification not through the same diligence and hard work but by accessing these cheating services, that undermines the qualification and those hard-working students. We support the intentions behind the clause, but are interested to see what representations the Minister has received on the drafting.
Will the Minister also tell us how he anticipates that the fines and offences will be regulated? For example, will the provision of a cheating service that is utilised by five different students be five offences or one? It is the technological advances that have taken place that make such a clause necessary—it would not have been previously. If, for example, an organisation was putting things on the internet that were subsequently being used in a way that was considered to be cheating, where is the line between the sale of those services and that information, and simply selling access to a website? Will the Minister tell us a little more about what he anticipates will be seen as a cheating service? That would be helpful.
Matt Western
I have a few points to add to my hon. Friend’s remarks. In principle, these clauses make some important points about essay mills and the advertising of relevant services. There is a long-overdue need to legislate to prevent such services, and this will give the issue the importance that the sector has been demanding for some time. Back in 2018, something like 40 vice-chancellors wrote to the then Secretary of State demanding action on this issue. We are three years on. The problem has grown to an industrial scale and needs tackling.
The problem has become so—well, I would not say endemic, but it is widespread, and there are many students out there who seek to access these services or feel under pressure because of the need to get good grades. There was a case not so long ago where Coventry University students were blackmailed by an essay mill company, which said that if they did not pay yet more money, it would tell their university. There is a lot to be covered in this respect, and that is why the clause is very important.
Alex Burghart
I am pleased to see that the Opposition support our move to legislate on this matter. We are all of one mind that cheating services actually end up undermining the good work of the vast majority of students, and they introduce an unnecessary element of doubt.
I reassure the Opposition that the Bill has been carefully drafted with some excellent Government lawyers. Clause 33 is designed to ensure that convictions are much more likely and that some of the easy defences—for example, that these services were just providing information and had no idea that it would be used in cheating services—cannot be used as a get-out-of-jail card. We are confident that it is a major step forward in combating this insidious crime and we look forward to its enactment.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Clause 30 ordered to stand part of the Bill.
Clause 31
Offence of advertising a relevant service
Mr Perkins
I beg to move amendment 61, in clause 27, page 33, line 19, at end insert—
‘(2C) Before applying to a court for an education administration order in relation to a further education body in England, the Secretary of state will conduct a review of the impact of the closure of a Further Education institution on learning opportunities in the local area and provide a report to Parliament on steps taken to ensure that the opportunities for learners are not restricted by his application for an education administration order.”
This probing amendment is designed to find out the Government’s anticipated tariff for such offences. To what extent is it seen as a serious offence? To us, it is absolutely obvious that the fine needs to be of a sufficient sum to make it not worth providing such services. Although we support the Government’s intentions, we seek further clarification about the level of the anticipated tariff for such an offence. Will perpetrators get off with a fine that costs them the equivalent of a week’s dinner money, or are the Government taking such offences seriously? Will they set the fine at a high enough level to act as a deterrent?
To return to the question to which I do not believe the Minister responded when we considered clause 29, in the event of a cheating service that is utilised by five students, would that be judged as five offences or one?
Mr Perkins
That is useful clarification. Can the Minister also clarify whether perpetrators would be guilty of a civil or criminal offence? Would they get a criminal record? In the event that a business was perceived to be providing those services, what would be the impact on that business? Or is an individual judged to have committed the offence? I would be grateful for that clarification.
Overall, we believe it is vital that there is a level playing field. We support the Government’s intention to prevent the use of fraudulent services, such as essay milling, and we believe that the fines should be such to act as a deterrent. We also believe that there should be a corresponding damage to reputation provision when people or businesses commit that offence. It is crucial that the amount of the fine and the publicity surrounding those fines reflect the severity of the offence. As we have said, the practice significantly undermines the efforts of all students who work hard to achieve their qualifications legitimately.
Matt Western
It would be interesting to hear from the Minister what form of penalty the Government imagine. We heard the probing question from my hon. Friend the Member for Chesterfield about the case of five individuals. Can the Minister elaborate on what sort of penalties he envisages for the business behind the essay mill? If he does not agree with our suggestion, what scale of punishment does he believe would be appropriate? Is it more akin to dropping litter, fly-tipping or another offence?
Alex Burghart
We are in agreement that essay mills need to be driven out of business, and that is why the clauses are in the Bill. In response to the hon. Gentleman’s points, these are serious criminal offences.
Andy Carter (Warrington South) (Con)
I suspect that the Minister is about to say that the Sentencing Council will have a view on the issue, and actually it is for the Sentencing Council to determine the length and type of sentences that might be involved in criminal activities.
Alex Burghart
My hon. Friend is extremely prescient, and I congratulate him on that. This is a criminal offence and we want to see it seriously punished. However, for reasons I will set out, we do not think that amendment 62 would solve the problem in the right way. It would amend clause 31 by setting a minimum penalty of a fine of no less than £5,000 for the offence of advertising a cheating service. As drafted, the Bill does not state the level of fine payable on conviction. Instead, conviction of either offence carries the penalty of an unlimited fine—as the name implies, that is a fine imposed without financial limit. That approach carries serious potential consequences and provides a significant deterrent effect to those planning to advertise contract cheating services.
The Government do not believe that setting a minimum amount is appropriate, where maximum fines are unlimited. Setting a minimum fine of £5,000 risks that level of fine being seen by essay mill providers as a likely fine, rather than a minimum. Sentencing and the precise size of a fine should be matters for the independent judiciary, in accordance with Sentencing Council guidelines, based on the full facts of the case. I would draw hon. Members attention to the fact that Ireland, which has a similar legal system and a similar offence, imposes a fine of up to €100,000 per offence and/or a prison sentence. That is the sort of thing that might go through the minds in our justice system. We do not therefore think that the amendment is necessary.
Mr Perkins
I accept what the Minister says. I do not accept that introducing a minimum fine of £5,000 would necessarily lead to essay mill services thinking that that would be the likely level, but I take his point. The amendment was a probing amendment to try to reach some understanding of the Government’s position. If there have been fines of the level that he outlined, that will be heartening for all those who want to see the issue addressed. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 31 makes it an offence to advertise essay mills. Marketing and advertising are the lifeblood of any successful industry, and we do not want this industry to be successful or to have lifeblood. Many essay mill companies use marketing techniques that seem to indicate that they offer legitimate academic writing support for students, when in fact they are providing cheating services. Students who use essay mills risk their academic education and future employment prospects if they are caught cheating. Anecdotal reports indicate that some essay mills are even seeking to blackmail students who have used the services, as the hon. Member for Warwick and Leamington mentioned. The clause will put beyond doubt that advertising cheating services in England and Wales is not just unethical but illegal, and will provide the means to prosecute those who fail to comply with the law in England and Wales.
Mr Perkins
I have already outlined our support for this move. We believe that this is a serious offence. It is important that any perceived legitimacy of essay mill services is aggressively challenged. On that basis, we will support the clause.
Question put and agreed to.
Clause 31 accordingly ordered to stand part of the Bill.
Clause 32
Offences: bodies corporate and unincorporated associations
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss clause 33 stand part.
Alex Burghart
Clause 32 relates to which bodies can be prosecuted under the essay mill provisions in the Bill. Cheating service providers can range from UK-based organisations registered at Companies House with offices and permanent staff to lone individuals operating with minimal infrastructure. Where offences are committed by companies, unincorporated bodies and partnerships, the clause enables certain individuals, such as the directors of companies, to also be prosecuted in particular circumstances. It also sets out some relevant procedural rules. For example, it clarifies that proceedings for offences committed by an unincorporated body should be brought in the name of the body and not its members, and any fine imposed on conviction of an unincorporated body should be paid out of the funds of the body. The clause will enable the legislation to function with legal certainty. Clause 33 sets out the definitions of certain terms in this chapter, allowing for absolute clarity on the intended purpose of the clause.
Mr Perkins
We welcome clause 32. It is important that where offences are committed by bodies of this sort there are consequences for their officers. The clause ensures that directors, managers, secretaries or other similar officers of the body corporate are guilty of an offence, if an offence under this chapter is committed by their body corporate and either they are known to have consented and been in connivance, or it is attributable to neglect of their duties under the organisation. We will therefore support clause 32. Clause 33 is simply an interpretation clause that makes sense of the terms in clause 32.
Question put and agreed to.
Clause 32 accordingly ordered to stand part of the Bill.
Clause 33 ordered to stand part of the Bill.
Clause 34
16 to 19 Academy: designation as having a religious character
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss clauses 35 and 36 stand part.
Alex Burghart
Clause 34 provides the Secretary of State with an order-making power to enable the designation of 16-to-19 academies as having a religious character. It also provides for the Secretary of State to make regulations about the procedures relating to the designation. In addition, it sets out the freedoms and protections relating to religious education, collective worship and governance that the designation provides. The clause will ensure that when existing sixth form colleges designated with a religious character convert to academies they retain their religious character and associated freedoms and protections. It will also enable new and existing 16-to-19 academies to be designated with a religious character in the future. The Government are committed to supporting existing sixth-form colleges to convert to academy status. I am pleased that a significant proportion of them have already taken that step, and are making a strong contribution to strengthening the academy sector.
Clause 35 improves the efficiency of administration of the further education sector. It is thankfully rare for a further education body to enter into insolvency proceedings. However, where a designation order can form part of a rescue procedure, we need to ensure that it can take place swiftly, minimising disruption to learners and costs to the taxpayers. For some FE bodies in financial difficulty, it may be desirable to transfer the college institution from the insolvent FE body to a new solvent company as part of the process of exiting insolvency proceedings. To ensure that the institution remains within the statutory further education sector in order to keep it appropriately regulated, it would then need to be immediately designated accordingly. Existing legislation requires the Secretary of State to make a statutory instrument when he seeks to carry out such a designation. That process can take several months, and needs a completion date to be specified significantly in advance, which could complicate and delay the exit from insolvency proceedings. Delays impose a longer period of disruption on learners and could generate extra costs to the taxpayer. As such, clause 35 allows the Secretary of State to use an administrative order, which can be enacted relatively quickly, to designate an institution as being within the statutory further education sector.
Clause 36 relates to the high-level quality rating for higher education providers without an approved access and participation plan, which is currently an award under the teaching excellence and student outcomes framework. Higher education providers with a TEF award currently benefit from an uplift to their fee limit, meaning that they are able to charge a higher level than HE providers without such an award. There is currently an error in the legislation that could prevent a timely link between TEF awards and a provider’s fee limit. To take an example, let us consider a provider that does not have an approved access and participation plan. If that provider is entitled to the TEF fee uplift in any academic year, it is dependent on whether it had an award on 1 January in the calendar year before the relevant academic year. That means that a provider seeking to charge the TEF fee uplift in academic year 2022-23 could only do so based on an award that was in force in January 2021, rather than January 2022, which was the original intent. Clause 36 will correct that error and ensure a more timely link between fee limits and the TEF award, helping to further incentivise excellence in higher education.
The Chair
I call Mr Perkins.
Mr Perkins
Sorry, I have got all tangled up here; give me a moment, Mrs Miller. For the sake of those listening on the radio, my hearing aid has got stuck in my mouth.
The Chair
It is usually an earring with me, I have to say.
Mr Perkins
Sorry, what did you say? [Laughter.]
We do not intend to divide the Committee on clauses 34 to 36. We think it is important that the law does not discriminate against academies or institutions for having a religious character designation, should they wish to do so. Clause 34 would change the rules so that when the Department next seeks to create 16-to-19 academies, it will be possible for organisations to apply to set up one with a religious character. Ministers intend to change the law to ensure equality for technical education in school careers advice, and to allow religious sixth forms to academise. A group of 14 sixth-form colleges that are Catholic run have so far been prevented from doing so due to their religious character; this clause would overturn that obstacle.
We recognise that there are many excellent academies out there, just as there were many excellent state-maintained schools. We think it is regrettable that the Government have decided to prioritise academies over schools run by local authorities. I have a very personal reason for saying that: my children went to an outstanding school that was run under the local council. Unfortunately, due to its finances, it was forced into a position where it took on academy status, and ultimately, that academy was described as a failing school. The desire to drive that school into academy status caused really significant problems. It is my view that the academies that the Labour Government created were a positive thing, and that there are many excellent academies out there. However, we think that the Government should remain neutral on this issue, rather than trying to force schools down one route or the other.
Notwithstanding that, we support the changes in clause 34. Sixth-form colleges should not be discriminated against if they have a religious designation and wish to become academies.
Clause 35 assigns a designation to terms in the Further and Higher Education Act 1992. We can support the clause given that is sets out the designations of institutions in the FE sector relating to the 1992 Act. Clause 36 is a technical change that clarifies the relevant date, for purposes of fee limit, for certain higher education courses, as set out by the Minister. We are happy to support the clause, which sets out the determination of the fee limit.
Question put and agreed to.
Clause 34 accordingly ordered to stand part of the Bill.
Clauses 35 and 36 ordered to stand part of the Bill.
Clause 37
Extent
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss clause 38 stand part.
Alex Burghart
Clause 37 sets out the territorial extent of the provisions. Obviously, Westminster does not normally legislate on devolved matters without the consent of the relevant devolved Administration. However, we have sought the support of the Welsh Government to lay a legislative consent motion where there is an impact on the competence of Senedd Cymru. We have agreed with the Scottish Government and with the Northern Ireland Executive that legislative consent motions are not required.
Clause 38 sets out when provisions in the Bill come into force. General provisions on extent commencement and short title come into force on the day of Royal Assent. Subsection (2) sets out the provisions that will come into force two months after the Act is passed. All other provisions will come into force on a day, or days, appointed by the Secretary of State through regulations made by statutory instrument.
Mr Perkins
Clause 37 sets out the extent of the Bill. I heard what the Minister had to say about the Welsh Assembly; can he just confirm that he has consulted the Welsh Assembly on the extent to which this Act applies to Wales and, given that there are differences between what is offered in England and in Wales, that there is nothing in the Bill that has led to problems in that relationship? Notwithstanding that point, we agree with the extent to which the clause applies to England and Wales, and also the specific provisions that extend to Scotland and Northern Ireland. We agree with clause 38 on commencement and understand what it is saying.
Alex Burghart
I reassure the hon. Gentleman that we have consulted Welsh Ministers, and we are of one mind with our counterparts in Wales.
Question put and agreed to.
Clause 37 accordingly ordered to stand part of the Bill.
Clause 38 ordered to stand part of the Bill.
Clause 39
Short title
Alex Burghart
I beg to move Government amendment 26, in clause 39, page 42, line 13, leave out subsection (2).
This amendment removes the privilege amendment inserted in the Lords.
For Bills starting in the House of Lords, a privilege amendment is included to recognise the right of this place to control any charges on the people and on public funds. It is standard practice to remove such amendments at this stage of the Bill’s passage through the House of Commons.
Mr Perkins
The Labour party is always enthusiastic for powers to be centred in the hands of those with democratic accountability, so we are very keen on clause 39. The Government have not yet had an opportunity to explain why they thought it was sensible to start the passage of the Bill in the other place, notwithstanding the excellent job that their lordships have done, which the Minister has sought to wreck over the course of the past week and a half. It would be interesting to hear from the Government why they made the decision to start the Bill in the other place. Notwithstanding that, we have no reason to oppose the amendment.
Alex Burghart
I have been a Minister for only a short time, and I have to say I am unaware why the Bill started in the Lords, but I have nothing but admiration for their lordships, who did a wonderful job. Obviously, we have had to amend some of their amendments in order to make the Bill as good as it can be, but I am sure that everyone can see that the parliamentary process is being done to the full, even if it is being done this way round.
Amendment agreed to.
Clause 39, as amended, accordingly ordered to stand part of the Bill.
New Clause 1
Information about technical education and training: access to English schools
“(1) Section 42B of the Education Act 1997 (information about technical education: access to English schools) is amended as follows.
(2) In subsection (1), for “is an opportunity” substitute “are opportunities”.
(3) After subsection (1) insert—
“(1A) In complying with subsection (1), the proprietor must give access to registered pupils on at least one occasion during each of the first, second and third key phase of their education.”
(4) After subsection (2) insert—
“(2A) The proprietor of a school in England within subsection (2) must—
(a) ensure that each registered pupil meets, during each of the first and second key phases of their education, at least one provider to whom access is given (or any other number of such providers that may be specified for the purposes of that key phase by regulations under subsection (8)), and
(b) ask providers to whom access is given to provide information that includes the following—
(i) information about the provider and the approved technical education qualifications or apprenticeships that the provider offers,
(ii) information about the careers to which those technical education qualifications or apprenticeships might lead,
(iii) a description of what learning or training with the provider is like, and
(iv) responses to questions from the pupils about the provider or approved technical education qualifications and apprenticeships.
(2B) Access given under subsection (1) must be for a reasonable period of time during the standard school day.”
(5) In subsection (5)—
(a) in paragraph (c), at the end insert “and the times at which the access is to be given;”;
(b) after paragraph (c) insert—
“(d) an explanation of how the proprietor proposes to comply with the obligations imposed under subsection (2A).”
(6) In subsection (8), after “subsection (1)” insert “or (2A)”.
(7) After subsection (9) insert—
“(9A) For the purposes of this section—
(a) the first key phase of a pupil’s education is the period—
(i) beginning at the same time as the school year in which the majority of pupils in the pupil’s class attain the age of 13, and
(ii) ending with 28 February in the following school year;
(b) the second key phase of a pupil’s education is the period—
(i) beginning at the same time as the school year in which the majority of pupils in the pupil’s class attain the age of 15, and
(ii) ending with 28 February in the following school year;
(c) the third key phase of a pupil’s education is the period—
(i) beginning at the same time as the school year in which the majority of pupils in the pupil’s class attain the age of 17, and
(ii) ending with 28 February in the following school year.””—(Alex Burghart.)
This new clause replaces clause 14. It removes requirements about university technical college access to pupils, requires access to pupils to be given in each key phase once (rather than three times), requires proprietors to ensure pupils meet at least one provider (or a prescribed number), and makes technical changes.
Brought up, and read the First time.
Alex Burghart
I beg to move, That the clause be read a Second time.
I will now discuss new clause 1, which seeks to replace clause 14. We all agree that we need to strengthen provider access legislation. The Government introduced provider access legislation in 2018 to ensure that all young people get information about technical options when planning their careers, but too many schools have disregarded the law and are reluctant to promote alternatives to A-levels and university. We announced our three-point plan to improve compliance with that legislation in the “Skills for Jobs” White Paper back in January, and that included plans to strengthen the duty.
As it stands, clause 14 would require schools to deliver nine provider encounters per pupil—three during each of the first, second and third phases of their education. We are concerned that nine encounters would place unnecessary pressure on schools and risk taking up too much curriculum time. The clause would also name university technical colleges on the face of the Bill as one of the providers that every pupil must meet where practicable. That would give more weight to one provider than the rest, and we want to act in the interests of all providers, not just university technical colleges. The new clause strengthens existing provider access legislation by requiring schools to provide a minimum of three meetings with providers of technical education or apprenticeships for pupils in school years 8 to 13.
Mr Perkins
We understand the reasons for the new clause, but what is the Government’s view about why the existing Baker clause has not been as successful as they might have liked? Has it taught the Minister anything with regard to the limitations of the statutory guidance, on which he may have chosen to reflect, and to why having things on the face of the Bill often carries greater weight than purely putting things into statutory guidance or secondary legislation?
Alex Burghart
The hon. Gentleman knows full well that Governments often keep things in statutory guidance in order to retain flexibility. The last Labour Government did that time and again. As a mere parliamentary researcher, I remember consideration of what is now the Apprenticeships, Skills, Children and Learning Act 2009, in which there were many examples of powers introduced through statutory guidance and secondary legislation. It is a time-honoured custom that is there for good reason.
In this case, we believe that there is a need to strengthen practice. In particular, I want to mention the need to strengthen quality. The other day, I was talking to a friend who has a 16-year-old daughter and who is herself in education. Her daughter had come home saying, “There is absolutely no way I’m going to do an apprenticeship.” My friend asked why and her daughter replied, “Because the man who came to talk to us today was so boring it has put me off.”
We need to ensure that we have interventions of quality. That is very much where our position is centred. The new clause includes the power for the Secretary of State to set out further details about the number and type of providers that pupils should meet under the terms of this duty. Putting the detail in secondary legislation will give us flexibility.
The new clause strikes the correct balance between widening pupil access to information on technical options in apprenticeships, without placing undue pressure on schools. It will set out in primary legislation that every state school must provide the three encounters of which I have spoken. Of course, we must ensure that those provider encounters are of high quality. That is why, for the first time, we are setting parameters for the content of the encounters in primary legislation.
We want to ensure that every encounter is meaningful and gives pupils the opportunity to explore what the provider offers, what career routes those options could lead to and what it might be to learn or train with that provider. We intend to consult school and provider representatives on the underpinning statutory guidance to ensure that we have provider access legislation that works for them and, most importantly, for young people.
With the Government’s large-scale reforms to technical education, it has never been more important for every young person to understand the full range of options that are available to them. The new clause will be crucial in ensuring that every pupil, whatever their ambitions, can explore apprenticeships, T-levels and other technical education qualifications. We want to send a clear message that schools must open their doors to other providers, so that pupils get broad and balanced information about all their options.
Mr Perkins
The Minister outlines why he believes the new clause is necessary. Given his remarks at the end there, I have to say that he would have better achieved what he set out to achieve had his party not voted against clause 14. All new clause 1 does is weaken the clause 14 that was in the Bill and that the Committee voted against this morning.
Notwithstanding that, we recognise that the new clause will be better than not having it at all. It removes requirements for university technical college access for pupils. The Minister suggested that that would be prioritising UTCs above other organisations, but I did not see it like that. I thought that they were simply referred to as another provider, and no doubt ones that Lord Baker is particularly enthusiastic to see given access.
The points that Lord Baker made in his contribution in the House of Lords are important, however, and they need to be considered. The noble Lord suggested that many schools—through either lack of time or a deliberate attempt to ensure that their students looked only at the school’s own sixth form, for financial or other reasons—were not implementing the original Baker clause and were indeed subverting the opportunities that were placed in front of children. I would be interested in hearing whether the Minister agrees with Lord Baker about that, or whether he believes that there are other reasons why alternative providers are not getting access to young people at each of those three crucial stages.
The Committee will be aware that, as part of the Labour party’s offer at the next general election, my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) has brought forward a plan for the equivalent of two weeks’ compulsory work experience for every pupil, and for face-to-face professional careers advice to be something that every student can rely on. We think it vital that children and young people have access to professional and appropriate careers advice. Work experience can be genuinely life-changing for many young people, particularly those from more deprived backgrounds. It is crucial that work experience is seen as a mark of an excellent school provision, rather than an additional thing that is nice to do.
It has very much been my experience that many schools leave the responsibility for work experience to the child and their parents to sort out. Effectively, the only commitment that schools require is that the child does not die or get injured while they are there. There is no real assessment of the quality of that work experience, so the milkman’s son ends up doing a milk round, while the MP’s son spends a week in an MP’s office—everyone just does the stuff that they already know. Worst of all, some children do work experience in a school, which is the one environment that they have been in for their entire lives, and that is considered acceptable.
Alternative opportunities for young people to look at different environments and learn about different opportunities are absolutely crucial. As clause 14 was rejected, we will support the new clause, but we believe it less ambitious than what their noble lordships had already introduced. Much of what the Minister said about the importance of the sector is undermined by his tabling of a clause that is weaker than the one that came from the Lords.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Lifelong learning: special educational needs
“When exercising functions under this Act, the Secretary of State must ensure that providers of further education are required to include special educational needs awareness training to all teaching staff to ensure that all staff are able to identify and adequately support those students who have special educational needs.”—(Mr Perkins.)
This new clause would place a duty on the Secretary of State to ensure that there is adequate special educational needs training for teachers of students in further education.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
New Clause 3
Report on the performance of employer representative bodies
“(1) Within six months of the passing of this Act, and every twelve months thereafter, the Secretary of State must publish a report on the performance of employer representative bodies and lay it before both Houses of Parliament.
(2) Each report must contain a statement setting out—
(a) the role of employer representative bodies,
(b) the accountability of employer representative bodies,
(c) the cost of employer representative bodies,
(d) the number of employer representative bodies in England and the areas covered,
(e) the number of employer representative bodies that have been removed and the reason why.
(3) Each report must contain an independent assessment of the impact of each employer representative body on—
(a) the development of local skills improvement plans, and
(b) local rates of participation in further education.”—(Mr Perkins.)
This new clause requires the Secretary of State to publish and lay before both Houses of Parliament an annual report on employer representative bodies to allow for scrutiny of their role and performance.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
New Clause 4
Access to Sharia-compliant lifelong learning loans
“(1) The Secretary of State must make provision by regulations for Sharia-compliant student finance to be made available as part of the lifelong learning entitlement.
(2) Regulations under this section are to be made by statutory instrument, and a statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”—(Mr Perkins.)
This new clause allows the Secretary of State to make provision for Sharia-compliant LLE loans to ensure that the LLE is not a barrier to participation and upskilling.
Brought up, and read the First time.
Mr Perkins
I beg to move, That the clause be read a Second time.
The new clause, tabled by my right hon. Friend the Member for East Ham (Stephen Timms), relates to access to sharia-compliant lifelong learning loans. It is important that students do not feel excluded from applying for lifelong learning loans because they are not sharia-compliant. There are many different aspects to loans under sharia law. Though their effect may be similar to that of other loans, the way in which they are set up and implemented is different, and the funds are also utilised in different ways.
It is incredibly important—and I think this is recognised by Members of both main parties—that action is taken on sharia-compliant lifelong learning loans. It is regrettable, however, that thus far nothing has been done. We have been given to believe that the Augar review may result in sharia-compliant lifelong learning loans, but we have not yet seen anything to that effect. My right hon. Friend’s new clause therefore encourages the Secretary of State to
“make provision by regulations for Sharia-compliant student finance to be made available as part of the lifelong learning entitlement.”
Alex Burghart
I am grateful for the opportunity to discuss sharia-compliant student finance. The Government have been considering an alternative student finance product, compatible with Islamic finance principles, alongside their other priorities as they conclude the post-18 review of educational funding.
New powers were taken in section 86 of the Higher Education and Research Act 2017 to enable the Secretary of State to make alternative payments, in addition to grants and loans, to enable the implementation of ASF. Clause 15 already makes provision for such alternative payments to be made as part of the lifetime loan entitlement. As such, when coupled with the existing provisions in HERA, the new clause would not give the Secretary of State any additional powers. The clause 15 provisions for alternative payments would come into force should the Government decide to commence the provisions in HERA that enable alternative payments to be provided to students. The Government will reach a decision on the availability of a sharia-compliant student finance product as part of the full and final conclusion of the post-18 review, and will provide an update on ASF at that time.
In relation to the second part of the new clause, the Secretary of State may already lay student support regulations using the affirmative procedure contained in section 42 of the Teaching and Higher Education 1998, should he choose to do so. The new clause would not add any powers beyond those already under the Bill or existing legislation, and so should not be added to the Bill.
Rachel Hopkins
I rise to support new clause 4, tabled by my right hon. Friend the Member for East Ham. The Minister says we will see the outcome of the post-18 review with regards to HERA. However, the reason why it is so important that the new clause is added to the Bill relates to further education. Because no finance or loans fit with the principles of Islam, many people end up saving up until they have sufficient funds to be able to afford their degree. The whole point of the Bill is the emphasis on ensuring that people can up their skills at level 3. If they are not able to access a loan that is compliant with the principles of Islam, and if they are on a low income, they really have no chance of being able to save up to afford to fund up front from their savings. The proposal of a lifelong learning entitlement through a loan therefore becomes a vicious circle, and they will not be able to access the training and gain the skills that they need.
For many people, this really is a matter of urgency if we are genuinely going to help people to reskill or upskill, particularly for many constituents of mine in Luton South. It is important to push the Government on this, particularly because HERA was published in 2017, and because of the commitment from the former Prime Minister, Mr Cameron, in 2013 when this first started to be talked about. This long-term delay and lack of action is not good enough. I support new clause 4.
Question put, That the clause be read a Second time.
New Clause 5
National review and plan for addressing the attainment gap
“Within six months of the passing of this Act, the Secretary of State must undertake a review to understand how to support those who have not achieved grade 4 or above in GCSEs in—
(a) English, or
(b) mathematics,
for the purposes of issuing a plan to support such people to achieve a level of attainment in those subjects through higher education, further education or technical education, as is necessary to advance their skills and education.”.—(Mr Perkins.)
This new clause intends to ensure that everyone is supported to attain the level of English and/or maths skills they need by ensuring there is a requirement for the Department for Education to have a plan to close the attainment gap based on a review of current policies and barriers to attainment in English and/or maths.
Brought up, and read the First time.
Mr Perkins
I beg to move, That the clause be read a Second time.
The new clause was tabled by my hon. Friend the Member for Rotherham (Sarah Champion). It would introduce a national review and plan for addressing the attainment gap and intends to ensure that everybody is supported to obtain the level of English and/or maths skills they need by requiring the Department for Education to have a plan to close the attainment gap based on a review of current policies and barriers to attainment in English and/or maths. Our attainment levels as a nation, particularly in maths, are noticeably behind many of our competitor nations, and particularly the major nations in Europe. It is crucial that there are both local and national strategies to raise attainment for English and maths at grade 4.
I think there is widespread agreement on that across the House. The Government’s approach has often been to say, “Well, until you have achieved this, you cannot do that.” The Labour party’s approach has always been much more of a carrot. We recognise that there needs to be greater investment, specifically in picking out those students who, for a variety of different reasons—whether as a result of learning disabilities or of social disadvantages—are less likely to attain grade 4 level in English and maths. We think it is crucial that we have a strategic approach to attaining that.
A large amount of the recent catch-up funding that was identified by the Government was never actually provided, and there has been a discrepancy between the amount of the catch-up funding that was directed to those in the most deprived communities and the amount that was provided overall. Catch-up funding, more than anything else as a result of the lockdown, particularly needed to be focused on those in the most deprived communities, who saw that attainment gap grow over the course of the covid pandemic. That the Government have a strategic plan and are operating a national review of the attainment gap—particularly setting out to achieve the reduction in their cap within six months of the passing of the Bill—is an important amendment. We therefore support the new clause.
Alex Burghart
New clause 5, tabled by the hon. Member for Rotherham, seeks to require the Secretary of State to undertake a national review and have a plan for addressing the attainment gap within six months of the Act passing in relation to those who have not achieved grade 4 or above in GCSE English or maths. The Government are clear that supporting people who are yet to achieve GCSE grade 4 or above in English or maths—the equivalent of level 2—is of the utmost importance, given that good levels of English and maths are linked to better economic and social outcomes. We want young people and adults to have the literacy and numeracy skills to thrive in work, education and life. That is why we already have a clear plan and are taking significant steps to support those who have not achieved grade 4 or above in English and maths.
All learners aged 16 to 19 are required to continue studying English and maths if they do not have a level 2 qualification in these subjects already, including, for example, those studying T-levels. Additionally, apprenticeships in particular have an exit requirement in English and maths in order to complete the programme. We also support adults by fully funding GCSE and functional skills qualifications in English and maths up to level 2 through the adult education budget. In addition, as of next year, we are rolling out Multiply, a new £559 million programme for adult numeracy, announced by my right hon. Friend the Chancellor at the spending review. This will significantly increase the provision and opportunities for adults to improve their maths skills.
More broadly, we have reformed functional skills qualifications, which are a widely acceptable alternative to GCSEs, improving their rigour and relevance. The Government have also established 21 centres for excellence in mathematics, designing new and improved teaching resources, building teacher skills and spreading best practice across the country through their wider networks. In response to disruption to education during the pandemic, a further £222 million has been provided to continue the 16-to-19 tuition fund for an addition two years from the 2022-23 academic year, allowing students to access one-to-one and small group catch-up tuition in subjects that will benefit the most, including English and maths.
Improving English and maths attainment is already a key part of the Government’s plans across higher, further and technical education. In 2020, 68% of 19-year-olds held grade 4 or above in both English and maths GCSE, which is an increase of 6 percentage points since 2013-14, the year before we required students to continue studying English and maths. This is a major step forward. The OECD’s 10-yearly survey of adult skills showed that in England people aged 16 to 65 currently perform significantly above the OECD average for literacy and around the OECD average for numeracy. The Government continually review the impact of policy, so a formal review at this time is not necessary.
Andrew Gwynne
I am heartened by what the Minister highlighted in his response to my hon. Friend the Member for Chesterfield about some of the Government’s attempts to close the attainment gap, but the reality is that it still exists and we should redouble our efforts to close it. I feel passionately about that because failing to get a good GCSE in English and maths can hold a young person back and deprive them of real opportunities later in life.
I know that from experience, because as I mentioned last Tuesday, in 1990 I left high school with a clutch of good GCSEs, but they did not include maths. I really struggled with maths at high school, much to the frustration of my dad, who was a maths teacher. It turned out that I had dyscalculia, so I struggled with numbers.
I desperately wanted to be a teacher—in my heart, I would still love to teach in schools. The best bit of this job is on a Friday when, as Members of Parliament often do, I go to local schools and think about what could have been if I had got a C or above in my maths GCSE. I resat it and still could not get a C—I got a D —so that was my teaching dream gone. Frustratingly, I went on to study a higher national diploma in business and finance, as I have already said, which is NVQ level 5, where I got a distinction and commendation in managerial economics, finance and advanced numeracy—but I cannot get the piece of paper that says “General Certificate of Secondary Education”.
I strongly believe that we have to close the attainment gap and give young people every opportunity to get that piece of paper, because if they do not have a GCSE, even if they have subsequent pieces of paper that are worth far more, so many doors are shut, so many opportunities are missed and so many dreams are dashed. I recognise that the Minister will not support the new clause of my hon. Friend the Member for Rotherham, but I urge him to carry on doing all he can to ensure that every child, young person and adult has the opportunity to do the best they can with the basic skills of English and maths.
Mr Perkins
Those of us who have been on the Committee in the last week or so may well have been wondering what the next episode in the life story of my hon. Friend the Member for Denton and Reddish was, and we were not disappointed. [Laughter.] Joking aside, he makes an incredibly important point.
Too often in this place, there is a suggestion or an implication that if only the teaching was a bit better or there was a bit more application, everyone would have those GCSEs in maths and English. Actually, as my hon. Friend has laid out and as many others will know, students who are brilliant in many regards can have barriers that prevent them attaining those grades. It is a crucial issue for us. Thousands of other people out there have had their dreams similarly dashed by being unable to achieve those qualifications, so I appreciate what he has just said, which adds weight to the debate on new clause 5.
Question put, That the clause be read a Second time.
New Clause 6
T-levels: Duty to review
“(1) Two years after the date on which the first T-levels are completed, the Secretary of State must perform a review of the education and employment outcomes of students enrolled on T-level courses.
(2) No qualifications may be defunded until the Secretary of State’s duty under subsection (1) has been undertaken.”—(Mr Perkins.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
New Clause 7
Level 3 qualifications provision
“(1) Employer Representative Bodies may prescribe additional Level 3 qualifications, as part of the Lifetime Skills Guarantee.
(2) Additional Level 3 qualifications may be prescribed under subsection (1), in instances where the Employer Representative Body identifies a local need or skills shortage.”—(Mr Perkins.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Alex Burghart
On a point of order, Mrs Miller. I hope you will indulge me for a few moments so that I can thank you and Mr Efford for the way in which you have shepherded us through these six sittings. It has been an honour and a pleasure to serve under your chairmanship, particularly as this is my first Bill Committee on the Front Bench—
Alex Burghart
Who knows? Perhaps it will be the last. It has been a pleasure to hear a debate of this quality, to enjoy Opposition Members’ paeans to the heady days of Thatcherism when there were great opportunities in the Manchester region, and to hear their fulsome praise for former Conservative Secretaries of State for Education. It is has been a privilege to listen to the sometimes philosophical debates about whether BTECs are brands. I feel that for the sake of future historians, we should put in Hansard how cold it has been in Committee Room 14. On one occasion, an hon. Lady had to bring in a blanket and wrap herself in it. Mrs Miller, thanks to you and Mr Efford, we have survived, and we look forward to taking the Bill forward.
The Chair
I thank the Minister for his very kind words.
Mr Perkins
On a point of order, Mrs Miller. On behalf of all my colleagues here, I add my thanks to you and Mr Efford for the work that you have both done and for your support through this debate, which has been very good natured and constructive, even if it was not, ultimately, as successful as we might have desired. I also place on record our thanks to the Clerks, who have been tremendously helpful in the enormous amount of work that we asked them to do. As always, we all very much appreciate the quality and timeliness of their work, and their diligence. I thank everyone who served on the Committee for their varying contributions, whether they were here for all of it or not.
The Chair
I thank the Opposition Front-Bench spokesman for those kind words. I thank you all for your constructive debate throughout the Committee, and I thank the Clerks and Hansard.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Committee rose.
Written evidence reported to the House
SPEB14 Sandwell College (Level 3 (T level) Qualification Reform – Strengthening their implementation)
SPEB15 Sandwell College (The Defunding of BTECs)
SPEB16 Sandwell College (Qualifications, T Levels and Work Placement feedback and suggested improvements)
SPEB17 Chegg Inc.
SPEB18 Mencap
SPEB19 Yorkshire Purchasing Organisation (YPO)
SPEB20 Community trade union
SPEB21 The Tutors' Association
SPEB22 CBI
Skills and Post-16 Education Bill [ Lords ] (Fifth sitting)
Tuesday 7th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Skills and Post-16 Education Act 2022 View all Skills and Post-16 Education Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 December 2021 - (7 Dec 2021)
The Committee divided: - Ayes: 3 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 3 - Question accordingly agreed to.
The Committee divided: - Ayes: 4 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 4 - Question accordingly agreed to.
The Committee divided: - Ayes: 4 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 10 - Question accordingly negatived.
The Chair
We now come to clause 14 and Government new clause 1.
Question put, That the clause stand part of the Bill.
Mr Toby Perkins (Chesterfield) (Lab)
On a point of order, Mrs Miller. Am I correct that new clause 1 has not been put to the Committee? I expected us to deal with it alongside clause 14. In the absence of the Minister, will you clarify what has happened?
The Chair
I can clarify that Government new clause 1 will be voted on later. It was grouped for debate with clause 14 stand part, but there was no debate.
Clause 16
Lifelong learning: amendment of the Higher Education and Research Act 2017
The Parliamentary Under-Secretary of State for Education (Alex Burghart)
Clause 16 amends the definition of “higher education course” in the Higher Education and Research Act 2017 to make express provision for the regulation of modules and to make it clear what a module of a higher education course is, as distinct from a full course.
The current post-18 student finance system does not specifically provide for modules. The lifelong loan entitlement will transform student finance by supporting more flexible and modular provision. This legislative change is needed to provide the explicit underpinning for the delivery of modular provision. This clause makes specific provision for modules by amending part 1 of HERA 2017, which relates to the regulatory regime under the Office for Students.
The amendments relieve higher education providers of certain additional burdens that would otherwise arise from the addition of the concept of modules under HERA.
Mr Perkins
I am grateful to the Minister for moving the clause; he was not here to move clauses 14 or 15 stand part. He has offered no apology to the Committee. As we did not have the opportunity to hear from him before those clauses were voted on, will he explain what happened this morning?
Alex Burghart
I am happy to respond to the hon. Gentleman, and I apologise to the Committee: I was unexpectedly held up on my way here. I apologise to everyone for the inconvenience and for any discourtesy, particularly to you, Mrs Miller. The amendments relieve higher education providers of certain additional burdens that would otherwise arise from the addition of the concept of modules under HERA. These relate to certain requirements to provide or publish information under section 9 of that Act.
We want to reduce the bureaucratic burden on providers where possible, and these changes will ensure that the introduction of funding for modules through the LLE will not add to this.
We will consult on the detail and scope of the lifelong loan entitlement in due course. We will take this and other wider engagement into account before we reach a final position on fee limits and will bring forward further primary legislation on this matter.
Overall, the changes in the Bill will help to pave the way for more flexible study and for greater parity between further and higher education.
Mr Perkins
On a point of order, Mrs Miller. I appreciate the Minister’s apology—these things happen—but I was under the impression that in the event of a Minister being unable to move a motion someone else stands in. As a result of no one being here, clauses to the Government’s Bill have passed without debate. For those who made representations, that feels like quite a discourtesy.
I accept the Minister’s apology for his being unavoidably detained, but people listening to our deliberations might well wonder what the Government’s intentions are as the Bill has been unable to be amended.
May we have your advice on how this unavoidable situation can be put right so that people can at least understand the Government’s thinking?
The Chair
It is for the Government to decide how they deliberate on their business in the House. I certainly agree with Mr Perkins that it is unusual not to have a Minister here to move clauses, but the Minister has given us an explanation. New clause 1 has not been moved; it will be moved and voted on later. I think you have made your point, Mr Perkins.
Matt Western (Warwick and Leamington) (Lab)
In fact, there is no need to extend this debate.
Question put and agreed to.
Clause 16 ordered to stand part of the Bill.
Clause 17
Universal credit conditionality
Question proposed, That the clause stand part of the Bill.
The Chair
With this, it will be convenient to discuss new clause 8— Benefit eligibility: lifelong learning.
The secretary of state must ensure that no learner’s eligibility to a benefit will be affected by their enrolment on an approved course for a qualification which is deemed to support them to secure sustainable employment.
Alex Burghart
Clause 17 seeks to change the law so that some students could keep their universal credit entitlement while studying.
It may help if I explain to the Committee that financial support for students comes from the current system of learner loans and grants designed for their needs. Section 4(1)(d) of the Welfare Reform Act 2012 sets out that one of the basic conditions of entitlement to universal credit is that the person must not be receiving education, which is defined in regulations made under subsection (6).
Where students have additional needs that are not met through this support system, exceptions are already provided under regulation 14 of the Universal Credit Regulations 2013, enabling those people to claim universal credit. This includes, for example, those responsible for a child—either as a single person or as a couple—or those aged 21 or under studying non-advanced education, such as A-levels, who do not have parental support.
It is an important principle that universal credit does not duplicate the support provided by the student support system. The core objective of universal credit is to support claimants to enter work, earn more or prepare for work in the future. There is an expectation that people who are able to look for work or prepare for work do so as a condition of receiving their benefit.
Let me reassure the Committee about the important work already that is under way. Officials at the Department for Education and the Department for Work and Pensions are working closely together to help to address and mitigate the barriers to unemployed adults taking advantage of our skills offers. For example, DWP Train and Progress is a new initiative aimed at increasing access to training opportunities for claimants. As part of this, in April 2021, a temporary six-month extension in the flexibility offered by UC conditionality was announced. As a result of this change, adults who claim universal credit and are part of the intensive work search programme can now undertake work-related full-time training for up to 12 weeks —or up to 16 weeks as part of a skills bootcamp in England—without losing their entitlement to UC. That builds on the eight weeks during which claimants were already able to train full time without losing their UC entitlement. This flexibility has now been extended to run through to the end of April 2022. Such measures are helping to ensure that UC claimants are supported to access training and skills that will improve their ability to gain good, stable and well-paid jobs. Claimants who enrol on a longer course that is not advanced education can also retain their entitlement to UC, provided they can still meet their UC conditionality requirements.
More broadly, we are continuing to support working families on UC. As we set out at the spending review, we have reduced the taper rate to 55% and increased work allowances to £500 per year, allowing UC claimants to keep more of what they earn. This is an effective tax cut worth £2.2 billion, meaning that almost 2 million of the lowest paid in-work claimants are better off overall by around £1,000 a year on average. We do not think it is necessary for the UC regulations to be amended in this way, and the clause should therefore be removed from the Bill.
New clause 8 seeks to ensure that eligibility to benefit is retained for claimants undertaking certain courses deemed to support them to secure sustainable employment. In addition to what I have stated on universal credit and Train and Progress, claimants on new-style jobseeker’s allowance are able to undertake a full-time course of non-advanced study or training—not above level 3—for up to eight weeks if work coaches identify a skills gap and are satisfied that it will improve the claimant’s prospects of moving into work more quickly.
The time spent on the course can be deducted from the hours of work search that the claimant is expected to undertake. Claimants on new-style employment and support allowance can already receive benefits while in education, whether full or part-time study, as long as they satisfy the eligibility conditions.
The DWP is monitoring the impact of Train and Progress, with the review date due in April, and will make decisions on continuing based on the evidence available. This will include the potential to extend the legacy benefit groups that have not transitioned to UC.
New claims for legacy benefits are no longer possible, so this is a diminishing case load. Existing claimants can still study part time as long as they meet their conditionality requirements and are willing to give up their study for employment, which they have agreed to look for.
The core objective of universal credit and other working-age benefits is to support claimants to enter work where appropriate, earn more or prepare for work in the future. There is an expectation that people who are able to look for work or prepare for work do so as a condition of receiving their benefit. We therefore do not think it is necessary or appropriate to change eligibility criteria to benefits for those who enrol on a course, so the clause should not stand part of the Bill.
Mr Perkins
It is vital that the cross-party support in the House of Lords on ensuring that those in receipt of universal credit are not penalised for undergoing level 3 training is upheld in the Bill.
What the Minister just said, however, somewhat undermines other things that we have heard from him and other members of the Government about the importance of skills training and education. Much of the Government’s approach to skills, which we support, has been about the importance of qualifications and apprenticeships being proper qualifications that are given depth and that develop people’s learning. For that purpose, apprenticeships are a minimum of one year; level 3 qualifications are longer, and even level 2 apprenticeships are a minimum of one year.
It appears that the Government’s approach to universal credit is that those who are seeking to get themselves into the jobs market should be allowed to do very basic training of the sort I have seen on many excellent work programmes, but that if they want to develop the qualifications they would gain on a one-year course they will be unable to do so while claiming universal credit.
It is essential that those who are furthest from the labour market have every opportunity to find work.
Alex Burghart
What one-year courses is the hon. Gentleman thinking of where claimants may continue on universal credit while studying?
Mr Perkins
Apprenticeships are a one-year course. Many people might be on an apprenticeship and on universal credit. I have had the opportunity to see many courses that people are not on for longer than what the Minister said and face perhaps significant barriers to accessing the world of work. We have real concerns, which were shared by those in the other place, that rather than helping people to move from universal credit into work this programme will prevent them from doing so.
Rachel Hopkins (Luton South) (Lab)
It is a pleasure to speak for the first time in this important Committee under you, Mrs Miller.
One of the key points that we have seen is the move to online learning for many people, which would be time away from seeking work. Many of the modules last for a quarter, six months or a year. Does my hon. Friend agree that, under the clause, many people will feel uncertain about whether they can undergo training?
Mr Perkins
I absolutely do agree. Under the original drafting of the clause it was clear that to access universal credit people had to be on an approved course that took them towards the world of work. It fits in with the principles of universal credit, as we are led to understand them. Under the clause,
“the Secretary of State must review universal credit conditionality with a view to ensuring that adult learners who are—
(a) unemployed, and
(b) in receipt of universal credit, remain entitled to universal credit if they enrol on an approved course for a qualification which is deemed to support them to secure sustainable employment.”
The word “sustainable” is very important. The Government’s approach seems to be that it is better to get anyone off unemployment and into work in any capacity, even if it is only a few days of casual employment, than to allow them to take sustainable steps to develop skills and get a job on which they can rely in the long term. My hon. Friend, many Labour Members and possibly Conservative Members will have come across constituents who are bedevilled by unstable employment—a day here or a few days there—without anything on which they can rely in the long term to sustain their families financially. Sustainable employment that they can trust is vital.
Ben Bradley (Mansfield) (Con)
I shared many of the hon. Gentleman’s concerns so I went to the Department for Education to seek clarity. As I understand it, many of the things that he is suggesting are already possible. Under both the current system and the new proposals, if a job coach accepts that a qualification would help someone into work, that coach can already approve that qualification and allow someone to do that training instead of job seeking under the work-based requirements for universal credit. Someone can also do a part-time qualification outside of working hours and still receive universal credit. Does he accept that that is true and perhaps contradicts some of his comments?
The Chair
Before Mr Perkins responds, may I remind Members that an intervention is just that; if you want to make a speech, make a speech.
Mr Perkins
A very well made point, Mrs Miller.
I accept that what the hon. Gentleman describes may be true on some occasions. However, the way in which the Bill is drafted and the very fact that the Government seek to oppose it, means that many job coaches, and many learners, will think that the Government would prefer to get them off the dole and into any job, at any moment, rather than invest in their skills. I have met many people in a variety of projects who are employed by the private sector, social enterprise or Jobcentre Plus to support people into work whose absolute focus seems to be to get one person from one list on to another. I fear that the long-term contribution to that person and ensuring that their training and qualifications are sustainable—the purpose of the Lords amendment—is lost as a result.
The hon. Member for Mansfield appears to be saying that the principles of the Lords amendment are already in operation given how job coaches operate. If that is the case, what is the harm of including the amendment in the Bill? If those rights and opportunities already exist for people, I cannot see the point in the Government’s opposition to the amendment.
The noble peers saw the value in the amendment, which enjoyed cross-party support. It is disappointing that, by their attitude, the Government are continuing to create the impression that people on universal credit who have the audacity to invest in their skills rather than simply take the very first opportunity to get off the dole and into work, however unsustainable or unreliable, should be discouraged from that.
On Second Reading, I was struck by the contribution from the hon. Member for Waveney (Peter Aldous). He said:
“the Government have placed much emphasis both on the importance of making work pay and on the current high level of job vacancies. Unfortunately, many people are currently some distance from the workplace and are not able to take advantage of these opportunities. However, many of them would be able to do so if universal credit conditions were reformed so that they could more readily access education and training. With that in mind, I urge the Government to consider carefully the amendment tabled by the Lord Bishop of Durham.”—[Official Report, 15 November 2021; Vol. 703, c. 416.]
As I said at the time, the hon. Gentleman was absolutely right to say that.
Given the twin challenges of Brexit and covid, Ministers must do all that they can to ensure that those who are furthest from the labour market are able to retrain or upskill. It has never been more important to ensure that we make the best of every single person. We know that there are staff shortages and we can respond to that in two ways. We could say, “Well, we have got shortages in staff, so let’s just get people into those jobs and fill the gap with a body.” Or we could say, “Let’s make sure we upskill the people who are currently furthest from the labour market, so that they are able to make a sustainable, long-term contribution.” That is the approach adopted by the Labour party.
The Opposition believe that it is a travesty that people in receipt of universal credit can be penalised for taking up an opportunity that could help them move into sustainable employment. We understand that the Government want to prevent people from undertaking qualifications for the sake of it, but those in receipt of universal credit should be supported to undertake training that is deemed appropriate by their work coach, in line with the principles outlined in the Bill. I hope that Members recognise the importance of supporting the clause.
New clause 8 is designed to probe why the Government may be against people in receipt of other benefits developing their skills so that they get closer to the labour market. Many people who are on a variety of benefits, such as incapacity benefit and other legacy benefits, may be very nervous about losing their entitlements to them. We all know that it is much easier to be taken off those benefits than to be put back on them. With some patience, tolerance and support, those people would be able eventually to join the world of work. There is a false dichotomy between those who Jobcentre Plus says are ready to go into work and should be spending every hour of every day looking for a job and other people who the Government accept will never get into work. Instead, we should be supporting everyone, rather than threatening them. We tabled new clause 8 to understand for what reason the Government would be against people developing their skills in a manner that pushes them to the labour market, even if they are in receipt of benefits that do not prompt the immediate response from Government that they should be doing all that they can to find work. I commend the new clause and clause 17 to the Committee.
Matt Western
It is a pleasure to serve under your chairship, Mrs Miller.
I support clause 17 and new clause 8, tabled by my hon. Friend the Member for Chesterfield and me. The new clause relates to the universal credit conditionality clause that was inserted during Lords consideration of the Bill by the Lord Bishop of Durham and Baroness Bennett of Manor Castle. It relates to the issues surrounding adult learners who are unemployed and in receipt of universal credit, who would remain entitled to that benefit within law if they were on an approved course.
To put it simply, the current welfare system actively discourages people from getting the skills that they need. A person loses their rights to receive unemployment benefits if they take an educational training course. Surely that cannot be right. The “Let them Learn” report from the Association of Colleges that was published recently highlights the great work of colleges with Jobcentre Pluses to support unemployed people into work. In fact, the Association of Colleges described the current system as “unjustifiable and incoherent”. Indeed, the principal of my local college wrote to me ahead of our consideration of the Bill to express her concern about the universal credit restrictions. She viewed them as causing barriers to retraining and upskilling. That cannot be right.
The truth is that unemployed people, or those in low-paid jobs, are the least likely to take out a loan for fear of risking greater indebtedness and poverty for themselves and their families. As someone who in the course of their career did courses at evening classes, I know that access to such courses is really important. However, if someone cannot afford to get to them, they simply will not take them up. The truth is that this will impact far more on certain groups than on others. We know that 53% of those on universal credit are women. We know that, as of July 2021, 30% of claimants were aged 16 to 29; 40% of people on universal credit are working.
How can those workers justify taking a cut in their monthly pay and finding time to reskill? Indeed, the Department for Education’s impact assessment reveals that the cost of study is the greatest barrier to further study. That is why we propose new clause 8 and will vote against the Government. We believe that the clause introduced by the Bishop of Durham and Baroness Bennett of Manor Castle should be in the Bill.
Alex Burghart
We believe that it is important that the welfare system helps people to get into work as quickly as possible, but we are not blind to the fact that some people will need or desire additional training. I referred to the flexibilities we have introduced to allow people to do bootcamps—a very productive way of reskilling at speed. On my visits to Salford, Bedford and Doncaster I met people who had been referred by their work coaches and were acquiring new skills that would often lead them into new professions.
Similarly, as the hon. Member for Chesterfield mentioned, it is possible for people to be on apprenticeships while claiming universal credit if their pay is low enough, and courses for the new lifetime skills guarantee that the Prime Minister made will often be available to people who are on universal credit.
We have shown that the system is capable of flexibility. We do not believe that people ought to be able to claim benefit while on long courses. However, there are opportunities to skill up, move into work and still receive some protection from universal credit.
Question put, That the clause stand part of the Bill.
Mr Perkins
I beg to move amendment 50, page 22, line 6, at end insert—
‘(1A) The Secretary of State must also prepare and publish a review of student maintenance entitlements.”
This amendment would require the Secretary of State to review the maintenance support available to further education students and courses.
The amendment ensures that those from the most disadvantaged backgrounds have the opportunity to undertake level 3 qualifications in order to get a job or gain higher-paid qualifications.
The success of the lifetime skills guarantee depends on those who need training or upskilling being able to take up the opportunity. In his speech at Exeter college, the Prime Minister outlined, in a great fanfare, his intention—in the midst of the pandemic—that people should be able to retrain. It was clear that he appeared to have those people in mind, but little attention has been paid to how they will take up the offer if they cannot afford to put food on the table while they are studying.
We believe that it flies in the face of reason not to set out during the passage of the Bill maintenance support for those from marginalised groups and those furthest from the labour market. I believe that the Government are minded to say that they will respond in due course, but as the lifetime skills guarantee will not be fully implemented until 2023, which signals the Government’s too little, too late approach to the skills challenge, we believe that it makes sense to announce maintenance support in the Bill, which is why we tabled amendment 50.
Alex Burghart
Amendment 50 would require the Secretary of State to publish a review of student maintenance entitlements, to be conducted annually, I believe. We agree wholeheartedly with the importance of ensuring students are supported to enable them to succeed in their studies. The Government’s ambition for the lifelong loan entitlement is to help those studying at higher levels to have the opportunity to choose the best course or modules based on their learning needs, rather than just choosing the funding system that is most advantageous for them.
In our forthcoming consultation on the LLE, we are seeking to understand better the barriers that learners might face in accessing it, and how the availability of maintenance loans and other forms of support could help. It is crucial that we consider the importance of creating a sustainable student finance system.
Rachel Hopkins
I thank the Minister for taking my intervention. In the earlier part of the debate, when the Minister was not in place, we were not able to consider Sharia-compliant loans. Will the Minister please include that in his comments?
Alex Burghart
I believe we will come later in the debate to another clause that treats the subject of Sharia, and I will be happy to address the hon. Lady’s point then. It is something that the Government will consider.
It is crucial to consider the importance of creating a sustainable student finance system, alongside what will be necessary to ensure that the Government can offer all eligible students the opportunity to study. However, as with clause 18, imposing an annual reporting requirement would create an unnecessary burden upon Government and the taxpayer. The student support regulations are updated annually, as it is, providing the Government with a regular opportunity to introduce improvements. In addition, introducing a review requirement before the maintenance policy is finalised would be untimely, and would pre-empt the outcome of the LLE consultation.
The Bill already provides the necessary powers for maintenance support to be introduced as part of the LLE, if the decision taken is that it should, following the consultation. Advanced learner loans are currently available in further education. Learner support funds are available for adult learners aged 19 and over, and there are bursaries of up to £1,200 a year for students in specific vulnerable groups, such as care leavers. With that in mind, and given that the amendment is burdensome, pre-emptive and unnecessary, we cannot support it.
Matt Western
I rise to speak in favour of amendment 50, which would require the Secretary of State to review maintenance support available to further education students and courses. The Augar review recommended that student maintenance should be extended to cover students in further education as well as higher education. That was one of the important findings in that review. We have been waiting two and a half years for some outcome from the Government, which I hope we will get soon.
The Association of Colleges reminds us in its briefing that many adults will be unable to take up lifelong learning opportunities, because there is no support for living costs when taking a course at that level. Such people will be prevented from transforming their life chances. The Minister will be aware that the Government’s own impact assessment reveals that one of the main barriers to adult learners is the cost of study, including living costs.
Right across the higher and further education landscape, there are calls from many, including the Open University, for an extension of maintenance support to FE students. The Welsh model is interesting: the Welsh Government introduced reforms to tackle that issue by extending maintenance support including, importantly, means-tested grants to all students, regardless of mode of study, while maintaining low tuition fees for part-time study.
Elsewhere, in the written evidence, Birkbeck University argued for a maintenance grant to prevent further hurdles to taking up study. Universities UK states:
“We would…welcome further details on the government’s plans for introducing maintenance support for individuals studying through the”
lifelong learning entitlement
“and, specifically, what would the minimum intensity of study be for individuals to be eligible for maintenance loans.”
Those factors are important. My hon. Friend the Member for Denton and Reddish talked about his own experience the other day. I was lucky enough to go to university many decades ago—
Matt Western
It is hard to believe. The Minister is right on that point but, as a third child, I would not have been able to go were it not for the maintenance grant, back in those days. That is why being given a maintenance grant is very much a mobilising and enabling part of the provision of education, to allow young people the chance to study. Since the removal of the EMA—education maintenance allowance—many have not been able to access education, because they just cannot afford to take the courses without some form of maintenance support.
For those reasons, we tabled the amendment. I very much hope that everyone in Committee will support it.
Mr Perkins
Apologies for the slight delay, Mrs Miller, I was still musing on how long ago it was that my hon. Friend went to university. It was quite a shock. The points he made are important. For that reason, we believe the amendment has merit. We have heard what the Government have said. We will get the opportunity to vote on clause stand part, so we look forward to supporting it. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Alex Burghart
The Government agree that many learners need to access courses in a more flexible way to fit their study around work, family and personal commitments, and to retrain as their circumstances and the economy change.
Existing equivalent or lower qualification rules, however, were designed to help maintain a sustainable system. As such, we are designing the lifelong loan entitlement not only to support students pursuing higher and further education flexibly, but to share the costs fairly. We want the lifelong loan entitlement to provide value for money to students, the education sector and the taxpayer.
The complexity of that balance and the transformative nature of the LLE is one of many reasons why we intend to consult on its detail and scope before legislating on eligibility. It is crucial that careful consideration of the needs of providers, learners and stakeholders informs our final policy design, and that we do not pre-empt the consultation’s findings; however, introducing an ongoing obligation to report annually on eligibility before the policy detail is yet finalised may prejudice the outcome of the consultation, as it could indicate a future path for ELQ rules before there has been a chance for open consultation to happen.
Beyond that, the Government believe that a yearly reporting duty in perpetuity would be an undue and disproportionate burden at this stage. Placing such a duty in primary legislation would be restrictive and out of kilter with prior similar legislation passed by Parliament on student finance. For example, the Teaching and Higher Education Act 1998 gave significant powers to the Secretary of State over student finance, with much of the detail of the policy covered in a complex suite of regulations, including eligibility, repayments and fee limits to name but a few.
It would be disproportionate to put a requirement to report in primary legislation when the system is already under continuous review and subject to frequent amendment. Previously, much of the detail on how the system works has been set out in secondary legislation, with necessary monitoring and review undertaken only after changes have been implemented and had time to embed. The Government will of course address plans for review and monitoring as we work towards the roll-out of the lifelong loan entitlement from 2025 and post implementation. I therefore believe that the clause should be removed from the Bill.
Mr Perkins
It is regrettable that the Government will seek to remove clause 18 from the Bill. It was introduced by the Lords for entirely the right reasons. On many occasions we have all seen the Government having to be dragged to the House in order to answer for their performance. The country also faces significant skills challenges. Who would have known a year ago that we would have spent so much of the last few months talking about the heavy goods vehicle driver crisis? Such things arise suddenly.
Given the dynamic state of skills policy—particularly, at the moment, legislatively but also in terms of employers’ ability to access skills—we think that clause 18 is proportionate. It requires the Secretary of State purely to prepare and publish a report on the impact on the overall level of skills in England and Wales of the rules regarding the eligibility for funding of those undertaking further or higher education courses. There is a lot of scope within that. The level of tuition fees in this country is so disproportionate to any other nation around the world, or any of the other major competitor nations in Europe, that inevitably it pushes students to access the courses that will lead them towards the jobs that pay the most.
There are many crucial public servants in this country who might not end up earning king’s ransoms but are performing roles of incredible importance to our country. A regular review of funding and maintenance support in the context of the level of skills is of real value. As a result of that review, the Government might think about being more flexible on tuition fees for certain courses, or taking specific steps to support learners in a variety of areas to study for the specific skills that the Government think will be of most use to our country and economy, and providing incentives for them to do so.
There are all kinds of different professions for which the Government rack their brains about how they can get more people to study. Each year we hear of courses in medical environments, for example, where thousands of places go unutilised. Such a review could push the Government to take the steps required to ensure that the country addresses those areas of skill shortages. It was a sensible amendment by their lordships, and it is regrettable that that very minimal commitment expected of the Secretary of State should be too much for the Government.
Question put, That the clause stand part of the Bill.
Alex Burghart
I beg to move amendment 23, in clause 19, page 22, line 34, leave out subsection (3).
This amendment leaves out clause 19(3) of the Bill (regulations about courses of initial teacher training for further education to include provision about special educational needs awareness training), which was inserted at Lords Report.
The Chair
With this it will be convenient to discuss new clause 2—Lifelong learning: special educational needs—
“When exercising functions under this Act, the Secretary of State must ensure that providers of further education are required to include special educational needs awareness training to all teaching staff to ensure that all staff are able to identify and adequately support those students who have special educational needs.”
This new clause would place a duty on the Secretary of State to ensure that there is adequate special educational needs training for teachers of students in further education.
Alex Burghart
We can all agree that it is vital for teachers to be trained to identify and respond to the needs of all their learners. That must include those with special educational needs and disabilities. However, the Government do not prescribe the content of further education initial teacher training. We believe that experts from the sector are best placed to design training programmes to meet the needs of learners, using a clear occupational standard as their benchmark.
The new occupational standard for FE teaching, published in September, has been developed by representatives from the sector who themselves work alongside and employ teachers. The standard clearly articulates the key knowledge, skills and behaviour that FE teachers must demonstrate. That includes an explicit requirement to actively promote equality of opportunity and inclusion by responding to the needs of all students. We believe that the standard is the right place to set out the expectations of teachers and what their training should cover, and that view is shared by sector experts themselves.
The Universities’ Council for the Education of Teachers has stated that the new occupational standard for teachers in the FE sector
“provides an appropriate framework for the design and delivery of FE initial teacher training programmes—including the new qualification that UCET and other sector groups are currently helping to develop”.
UCET is of the view that
“the standard and qualifications based on it will help to ensure that all new FE teachers are properly equipped to recognise and respond to the needs of their learners—including those with SEND”.
Furthermore, UCET has said:
“It is vital that providers of FE ITT should be able to use their expertise and judgement to tailor training programmes to the needs of trainees and learners within the framework provided by the occupational standard.”
It concludes that
“it would be unhelpful to remove this flexibility by mandating the content of FE ITT programmes in legislation.”
I believe that it is important that we listen to the voices of expertise in the sector and do not unduly tie their hands. We have been clear that we intend to make public funding available only to FE ITT programmes that meet the new occupational standard.
Clause 19(3) as drafted, although honourable in intent, is unhelpfully restrictive. It would require the Secretary of State, when making regulations for the first time under this power, to make provision relating to SEND awareness in FE ITT even if the regulations being made did not bear at all on the content of training programmes. This is, in our view, the wrong way to achieve the right aim.
I want to directly address new clause 2. The Government are already driving up the quality of teaching in further education and strengthening the professional development of the FE workforce. We provide significant funding for programmes to help to spread good, evidence-based practice in professional development. Examples are the T-level professional development offer, which integrates support for learners with SEND throughout its offer, and the FE professional development grant pilot. Making sure that teachers have access to high-quality training and professional development will ensure that learners, including those with SEND, receive the highest standard of teaching.
Our continuing professional development offer for teachers also includes provision delivered by the Education and Training Foundation. That training improves the capability and confidence of the FE workforce to identify and meet the needs of learners with SEND.
Ultimately, providers themselves must make decisions about what training is relevant and necessary for their teachers. That means that they can respond to the specific needs of their learners and those who teach them.
It is also important to note, outside professional development, that under the SEND code of practice there should be a named person with oversight of SEND provision in every college. Those people co-ordinate, support and contribute to the strategic and operational management of the college.
The Government are committed to ensuring that all learners, including those with SEND, are benefiting from outstanding teaching in the FE sector.
Mr Perkins
I rise to oppose Government amendment 23, and to discuss new clause 2, tabled by my hon. Friend the Member for Kingston upon Hull West and Hessle. I believe that clause 19 is an important clarification added to the Bill by the Lords. The Minister spoke passionately about the need for ensuring that those who attended ITT further education courses have awareness of special needs. However, it is precisely because of that that we believe clause 19 is sensible. Government amendment 23 removes clause 19(3), which ensures the duty for initial teacher training providers to provide special educational needs awareness training.
That is particularly important because a huge number of people, later in life, are identifying that they have learning difficulties, be that autism, attention deficit disorder, or Asperger’s syndrome. These were not picked up throughout their school career because there has been such a low level of awareness about such issues within much of the teaching profession.
We know that awareness of issues like autism has improved a great deal in recent years, but there are still many people going through our school system with other conditions, such as dyslexia, dyspraxia and others. With access to the right support, teaching could have been provided that recognised their disability and enabled them to access the curriculum to the best of their ability. It would have also enabled them to understand themselves. That is a crucial point about special needs; we must help people to understand themselves. I have spoken to many people who say, “I always knew I was different, but I never knew what it was. It was only in my 20s or my 30s that I realised.” There is a family member of mine in their 40s who has recently identified having a disability of this kind.
Tom Hunt (Ipswich) (Con)
I speak as someone with both dyslexia and dyspraxia; I was diagnosed when I was 12. Does the hon. Member agree that it is important to ensure that every single teacher—not just SEN specialists, but regular teachers—have a certain level of understanding of different types of disability, and that not all young people, or adults, process information in the same way?
Mr Perkins
The hon. Gentleman makes an important point. That is precisely the value of this provision. It makes this not the responsibility of the special needs co-ordinator—who, if they get an opportunity to sit down with someone would have that professional awareness— but, instead, makes sure that people right across the sector are able to identify these needs. We would not expect every teacher to become a full SENCO expert, but it is about them having the awareness to identify that there may be issues that need to be given further consideration—that is what I think is of real value.
New clause 2 attempts to find a different way to deliver the same initiative as the one proposed by their noble lordships in clause 19, whose subsection (3) places a duty on teacher training providers to ensure that SEN training is part of their work. In new clause 2, the obligation is on all providers of FE colleges to ensure that all their staff have been provided with special needs awareness training. There are two different ways to deliver that training. It can be delivered at the point where someone is qualifying, or can be certified at the point where someone is employed. There is merit in either approach; simply to dismiss both approaches is really disappointing.
New clause 2 would place a duty on the Secretary of State to ensure that there was adequate special educational needs training for teachers of students in further education. Given the high number of students with special educational needs who access further or adult education, often as a second chance when they have had a negative experience of school, it is particularly crucial that trainee teachers in the sector have an awareness of the issues the students face.
We must remember that people within the further education sector are far more likely to have an identified special educational need than those in mainstream schooling. The sector needs this kind of awareness. The Department for Education’s own figures show that the percentage of pupils with a special educational need, but no education, health and care plan, has increased to 12.2%, continuing an upward trend.
Tom Hunt
As the hon. Member will know, it is important to provide support at that stage, but it is also important to start as early as possible. What are his views on the ten-minute rule Bill being introduced today by my right hon. Friend the Member for West Suffolk (Matt Hancock), which would require the assessment of every primary school kid for dyslexia, and whether that should be extended to dyspraxia?
The Chair
I am sure Mr Perkins will draw that comment back to the subject of the debate here today, as opposed to what might be going on elsewhere.
Mr Perkins
I am fiercely conscious of that point, Mrs Miller. I take the restriction that has been issued by the Chair, but would say briefly that there is real value in the hon. Gentleman’s point about identifying issues as early as possible—I think every one of us would appreciate that point. But, accepting that that has not happened, it is crucial to ensure that people at every level in the further education environment understand and are aware of the issues.
The new clause proposed by the noble Lords has real value, and I urge the Government to consider ensuring in the Bill that people across our FE sector have that awareness. The Minister has said there may be many people in that environment who do not have the need to have that awareness. As I have laid out, it is my view that it should be the responsibility of everyone to ensure that they are able to identify various kinds of special need and know how best to support learners with special needs in all kinds of environments.
Matt Western
I rise to speak in favour of new clause 2 and against Government amendment 23. I have various concerns with clause 19 and where the Government seem to be going with the review on initial teacher training, including the market review that the Government are consulting on and where it seems to be heading. It would be easy to conclude that they are seeking to centralise control of how teacher training is being delivered and to move away from the diverse approach that we currently enjoy. I have real concerns about what clause 19 proposes, and specifically what the Government propose with amendment 23.
Alex Burghart
We fully understand the sentiment behind the changes that the Lords and the Opposition are trying to make, but we disagree with the way that they are going about them. We think that the occupational standard is the best place to contain such provisions and that the occupational standard is best owned by the profession itself. We believe that the profession ought to hold the ring on such matters. We do not want to set a precedent that every detail of initial teacher training should be set out in primary legislation. For that reason, we are acting as we are.
Question put, That the amendment be made.
Alex Burghart
It is important that the further education sector has enough suitably trained teachers to deliver the high-quality outcomes all learners deserve and that we all want to see. That is why a consistently high-quality initial teacher training offer in further education is needed. Initial teacher training in further education is not regulated, nor is there any primary legislation to allow for regulation. The clause gives the Secretary of State the flexibility to introduce measures through secondary legislation to secure or improve the quality of further education initial teacher training provision. The clause does not place requirements on trainee or practising FE teachers. To be clear, the Government have no intention of reintroducing mandatory qualifications for individual teachers in the FE sector.
We are already working with the sector to bring about the change and improvement needed. For example, we worked with a group of sector employers to support the development of a revised employer-led occupational standard for further education teaching. The clause sends a clear message that the provision of high-quality FE initial teacher training is vital, and therefore that secondary legislation should be introduced to complement and strengthen non-legislative measures where appropriate.
Mr Perkins
We do not oppose the clause. It is of real importance that initial teacher training for the further education sector is put on a statutory footing. We think that this is of particular importance given the scope and scale of the sector, and that many people in FE—probably more than in any other academic establishment—move directly into lecturing from the workplace. There has often been a two-way path between people in all kinds of different vocational environments. For example, mechanics, plumbers and painter-decorators may sometimes practise their chosen trade and at other times move into the further education sector. For that reason, it is important that the best standards of training for those teachers is in place, so we welcome the Government’s putting this on a statutory footing.
Obviously, it remains a regret that clause 19(3) has been deleted. We will continue to press the Government to ensure that, although that provision has been removed from the Bill, there is a real commitment to ensuring a high standard of awareness of special educational needs. On that basis, we will not oppose the clause.
Question put and agreed to.
Clause 19, as amended, ordered to stand part of the Bill.
Clause 20
Office for Students: power to assess the quality of higher education by reference to student outcomes
Matt Western
I beg to move amendment 60, in clause 20, page 24, line 13, at end insert—
“(5A) When measuring student outcomes under subsection (5), the OfS must take account of mitigating circumstances, such as the impact of the Covid-19 pandemic.”.
The Chair
With this it will be convenient to discuss the following:
Amendment 56, in clause 20, page 24, line 16, at end insert—
“(6A) The OfS must consult the higher education sector before determining a minimum level in relation to a measure of student outcomes.”.
This amendment requires the OfS to consult the higher education sector before determining minimum levels.
Amendment 57, in clause 20, page 24, line 17, leave out “not”.
This amendment requires the OfS to determine and publish different levels to reflect differences in student characteristics, different institutions or types of institution, different subjects or courses, or any other such factor.
Amendment 58, in clause 20, page 24, line 23, leave out “or subject being studied”.
This amendment is intended to probe the OfS’s powers of intervention at subject level.
Amendment 55, in clause 20, page 24, line 24, at end insert—
“(7A) When making decisions of a strategic nature in relation to a measure of student outcomes, the OfS must have due regard to the potential impact on the participation in higher education of students from disadvantaged and underrepresented groups.”.
This amendment seeks to ensure that the OfS’s measure of student outcomes does not jeopardise widening participation for students from disadvantaged and underrepresented groups.
Amendment 59, in clause 20, page 24, line 28, at end insert—
“(8A) The OfS must work together with the devolved authorities to minimise the potential for different assessments of the quality of higher education with a view to protecting the United Kingdom’s higher education sectors’ international reputation.”.
This amendment probes the impact that moving the English higher education sector out of line with the UK Quality Code will have upon the coherence and consistency of UK quality assessment and the UK’s HE sectors’ international standing.
Matt Western
It is a pleasure to be able to give my hon. Friend the Member for Chesterfield a bit of a break this morning, given that he has been doing so much hard work in the past hour or so. The amendments essentially relate to the role of the Office for Students. I have been in my role a short time—slightly longer than the Minister—but I have to say that I have some reservations about what the Office for Students is doing presently. I understand its remit and purpose, but I am not sure what direction it seems to be taking us in. That direction comes from its leadership. It is a shame that the chief executive is standing down. We need more continuity there, and I await the appointment of her replacement with great interest.
We have tabled several amendments. Amendment 60 would require the Office for Students to bear in mind mitigating measures—for example, the past 22 months of the covid-19 pandemic and the impact it has had on students and therefore on outcomes. When assessing quality, it is important that quality is understood in the context of such factors. In the case of the past two years, there has clearly been a huge impact on students and their ability to learn, despite the best efforts of lecturers and the teaching profession to deliver as much as possible as well as possible in really challenging circumstances, whether face to face or mostly online. So much of the normal teaching framework has been greatly challenged.
The most recent pilot of the student covid insight survey showed that students’ experience has changed dramatically because of coronavirus. On the academic experience, 29% of students reported being dissatisfied or very dissatisfied with their experience in the first term. Statistics from the Library highlight employment levels for those aged 16 to 24; I am not talking about outcomes. It is easy to look at what has happened to employment as an obvious measure of outcome, but employment levels have fallen 9%, which has clearly had a huge impact on the student outcome as a result of the national crisis.
The Institute for Fiscal Studies has also found that the impact of the pandemic has been very likely to disrupt the career progression of those in the early stages, with many graduates potentially delaying their entry to the labour market by staying in education. Research by jobs website Milkround provides us with further evidence. It shows that, compared with the typical 60%, just 18% of graduates are securing jobs this year—a third of the figure we would normally expect.
The purpose of the amendment is to identify and recognise the need to establish a link between what we might call force majeure events such as the pandemic and ensuring that the OfS is more flexible when considering student outcomes. It cannot be a static metric. That point is echoed by a significant representative body for the higher education sector, Universities UK, which states:
“Employment outcomes will also be impacted by national and local economic conditions.”
It is important that the OfS bears that in mind in any framework that it establishes for outcomes.
Amendment 56 has been tabled because we want to see true and substantive consultation with the higher education sector before the outcomes are defined. The Government should talk to the Universities UK representative body, which has been exploring the development of a framework in England for an institutional programme and course review process centred on best practice. Given that Universities UK represents 140 institutions, collaborating with them and exploring the work that already exists would be a sensible start for the Government to focus on. Universities UK also says that it is “unclear whether the baselines” of minimum assessment of standards
“will be subject to thorough consultation.”
I hope the Government will start a consultation programme with all the representative bodies to understand how they may structure student outcomes.
Alex Burghart
I rise to speak to this monster group of amendments: 60, 57, 56, 58, 55 and 59.
Amendment 60 would add to the power in clause 20 an obligation on the Office for Students to assess and consider mitigating circumstances such as the pandemic. The OfS is already required to take into account wider factors when assessing the performance of providers. It has a general duty to have regard to the need to promote equality and opportunity and is subject to the public sector equality duty. It also has a public law obligation to take all material factors into account when reaching a decision.
The OfS will therefore consider a range of different contextual factors that may explain the reasons for a provider’s performance before reaching any final judgment. For example, this may include factors such as the relative proportions of students from disadvantaged or under-represented backgrounds. This could also include information from the provider about the actions it has taken, or plans to take, to improve quality, and external factors that may be outside a provider’s control such as the pandemic.
The OfS has previously produced guidance on how it expects providers to comply with the quality and standards-related registration conditions in the light of the pandemic. It is well aware that particular circumstances may be in play at a particular time, including the disruption caused by the covid-19 pandemic.
Amendment 57 would leave out the word “not” and in doing so completely reverse the purpose of this clause. Students would be expected to accept that they might achieve different outcomes—and, in some cases, lower outcomes—depending on their background, which risks entrenching disadvantage in the system. That cannot be right. Every student, regardless of their background, has a right to expect the same minimum level of quality that is likely to improve their prospects in life. That is why we included the provision in this clause to make clear that there is no mandate on the OfS to benchmark the minimum levels of standards it sets based on factors such as particular student characteristics. The OfS will none the less continue to consider appropriate contexts, including student characteristics, and make well-rounded judgments when assessing individual providers.
Amendment 56 would require the OfS to consult before determining minimum levels of student outcomes. I reassure the Committee that, under the Higher Education and Research Act 2017, the OfS already has a statutory duty to consult before publishing any revised version of its regulatory framework, including on quality measures. In relation to student outcomes specifically, it has already undergone one round of consultation, while a further consultation on specific outcome levels and how the OfS will take wider context into account will be published early next year. The amendment is therefore unnecessary.
Amendment 58 suggests that the OfS may be required to determine different expected outcome levels by reference to each subject, which would be inappropriate. Requiring the OfS to determine different minimum outcome levels for different subjects would mean that students studying certain subjects would be expected to accept different and, in some cases, lower outcomes than if they had chosen a different subject. All students should expect that minimum levels of continuation and completion rates, as well as the proportion of students that achieve employment commensurate with their qualifications, will be the same for all subjects.
Amendment 55 would require that the OfS has regard to widening participation for disadvantaged and under-represented groups.However, I assure the Committee that the OfS already has to take due regard of the impact of its decisions on disadvantaged and under-represented groups. The minimum expected levels of student outcomes will form only part of the overall context the OfS takes into account as it makes rounded judgments. When itexercises any function, it must, under section 2 of the Higher Education and Research Act 2017, have regard to the need to promote equality of opportunity in connection with access to and participation in higher education, and that duty applies when the OfS looks at how disadvantaged students and traditionally under-represented groups are supported and what they go on to achieve. It includes access, successful participation, outcomes and progression to employment or further study. The OfS has a public law obligation to consider relevant wider factors, which could include, amongst other things, the characteristics of a provider’s students, where appropriate.
Amendment 59 would require the OfS to work with devolved Administrations to minimise different assessments of higher education quality. HE is a devolved matter, and it is right that each Administration should be free to drive up quality in the way they think best. I understand that there is a concern about the removal of direct reference to the UK quality code from the guidance in the OfS’s regulatory framework and its impact on the reputation of the UK’s higher education sector, but the OfS has already made clear that its regulatory requirements would continue to cover the issues in the expectations and core practices of the quality code, which will remain an important feature of the regulatory framework. The OfS is not proposing to abolish the UK quality code—indeed, it has no power to do so. The code will continue to be important in the sector and providers will still be able to use it.
I would like to take this opportunity to announce the Government’s intention to table an amendment on Report that will give the OfS an explicit power to publish information about its compliance and enforcement functions, in particular when investigating higher education providers for potential breaches of registration conditions, which will give the OfS protection from defamation claims when it does so. That increased transparency will be in line with other regulators’ powers and protections, including appropriate safeguards.
Rachel Hopkins
I rise to support my hon. Friend the Member for Warwick and Leamington and the proposed amendments, in particular those including the requirement to consult the higher education sector before determining the standards. My constituency, Luton South, is home to the fantastic University of Bedfordshire, which takes many non-traditional students—for want of a better term. The majority of its students are older and may be working and studying additional qualifications to support their work. Many come from disadvantaged and under-represented groups. It is vital that we understand the difference that universities like the University of Bedfordshire make to those people’s lives when considering the clauses and the amendments proposed.
Matt Western
I thank the Minister and my hon. Friend the Member for Luton South for their comments. Let me pick up on the points my hon. Friend just made. Educators and educationalists are concerned that these measures could lead to a reduction in opportunity and access, and that many could feel marginalised in the education process. I am not a specialist and have no background in education, but I understand that many schools have started to direct and encourage students to take certain GCSEs, to stay on to take A-level, BTECs or whatever. They may be prevented from doing so because of concern about the results achieved by that school or college, which could dissuade them.
It can never be known at the start what will happen to a student with the right sort of teaching and course. That education could bring alive their interest in a subject. I would underline the sense of caution that motivates the amendments. The Government need to tread incredibly carefully, for fear of reducing access and participation in our education sector. I appreciate that you may wish to restrict the number of amendments put to a vote, Mrs Miller, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 56, in clause 20, page 24, line 16, at end insert—
‘(6A) The OfS must consult the higher education sector before determining a minimum level in relation to a measure of student outcomes.”—(Matt Western.)
This amendment requires the OfS to consult the higher education sector before determining minimum levels.
Question put, That the amendment be made.
Alex Burghart
Clause 20 clarifies the provisions set out in section 23 of the Higher Education and Research Act 2017, known as HERA, which relate to the assessment of the quality of higher education provided by a registered provider. Section 23 of HERA currently places no restrictions or stipulations on how the Office for Students might assess quality or standards. Clause 20 provides some much-needed clarity. It puts beyond doubt the OfS’s ability both to determine minimum expected levels of student outcomes and to take those into account alongside many other factors when it makes its overall and well-rounded assessment of quality. It also makes clear that if outcome measures are to be used, the outcomes can be any the OfS considers appropriate.
The OfS looks at important indicators of high-quality higher education that are hugely valuable to students. They may include student continuation and completion rates and progression of graduates to professional or skilled employment or further study. The OfS is already regulating on that basis. The Government believe strongly that every student, regardless of background, has a right to expect the same minimum level of quality and the same opportunities to go on to achieve successful outcomes. Students from underrepresented groups should not be expected to accept lower quality, including poorer outcomes, than other students. That is why the clause also makes clear that there is no mandate on the OfS to benchmark the minimum levels of standards it sets based on factors such as particular student characteristics. The use of minimum levels for student outcomes is not and will not be a blunt instrument that relies only on data.
Absolute outcomes are only one aspect of a provider’s performance. To make a well-rounded judgment on a provider’s absolute performance, the OfS will consider a higher education provider’s appropriate context before determining whether a registration condition has been met. Alongside that work on baselines, the new Director for Fair Access is tasked with rewriting national targets to focus on social mobility and ensuring that higher education providers rewrite their access and participation plans. New and ambitious targets will be set to raise standards in schools, reduce drop-out rates at university and improve progression into high-paid, high-skilled jobs.
Clause 20 is an important element of the Bill because it serves to ensure that higher education provision delivers quality for all students, the taxpayer and the economy.
Matt Western
I do not have any further points to make and will not press any other amendments.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
List of relevant providers
Mr Perkins
I beg to move amendment 29, in clause 21, page 25, line 10, at end insert—
‘(aa) for mayoral combined authorities or other authorities as defined by the Secretary of State, to keep a list of relevant education or training providers who meet the conditions specified by the authority in respect of that education or training;’.
The effect of this amendment is that mayoral combined authorities or other authorities as defined by the Secretary of State will be able to establish a list of their own relevant education or training providers.
The Chair
With this it will be convenient to discuss the following:
Amendment 30, in clause 21, page 26, line 12, at end insert ‘including mayoral combined authorities or other funding authorities.’
This amendment is consequential on Amendment 29.
Amendment 31, in clause 22, page 27, line 8, after ‘(a)’ insert ‘or (b)’.
This amendment is consequential on Amendment 30.
Mr Perkins
It is a great pleasure to move the amendment in the name of the hon. Member for Bury South (Christian Wakeford), my hon. Friend the Member for Warwick and Leamington and myself. The amendments concern the Government’s plans to have a list of preferred providers. What could go wrong with this Government and a list of preferred providers, I hear hon. Members ask? There have been reasons to question the Government’s record when it comes to relevant providers. The particular concern that the hon. Member for Bury South and I, and others, have is that when it comes to the Secretary of State and his Whitehall colleagues providing a list of providers to be considered appropriate by metro Mayors and combined authorities in Birmingham, Manchester, Leeds or anywhere else, important local providers will be missed out.
The amendment was tabled because of those local providers, both private sector providers and social enterprises, which might not have the huge ability to do detailed tenders but are important and proven in many local areas. There is a real concern in Manchester from the metro Mayor, which I suspect is where the interest of the hon. Member for Bury South comes from, and in other areas, that their importance should be recognised.
The amendment says that provision should be made,
“for mayoral combined authorities or other authorities as defined by the Secretary of State, to keep a list of relevant education or training providers who meet the conditions specified by the authority in respect of that education or training”.
Amendment 30 would add,
“including mayoral combined authorities or other funding authorities”,
to clause 21. It is really important that those local providers can be utilised by local combined authorities and metro Mayors.
During the Bill’s stages, there has been much talk about devolution and the importance of local decision making, but at every turn, we see the opposite—the Secretary of State is clawing back power for himself. In this case, without the amendment, that would be at the expense of local decision making, because if the mayoral combined authority was in a position to say, “We’ve worked really closely with a provider,” but for whatever reason, the provider was not on the Secretary of State’s list, it could be missed out.
The amendment seeks to ensure that the Government, who once passionately championed devolution, do not allow Whitehall decision makers to prevent the continuation of local arrangements and relationships that are delivering for local communities. As I said, there is concern that the Secretary of State’s list of relevant providers will exclude local providers that may not offer the scale and scope of national providers but are proven and have a successful track record in local areas. I have been to Manchester and discussed in great detail the strong relationship that the Mayor’s office has established with local small and medium-sized enterprises and social enterprises that are doing great work locally.
It sometimes feels as though the Government have a love affair with major firms that promise them the world. We fear that smaller providers will inevitably be missed off the Secretary of State’s list and that local learners and local businesses will be the biggest losers. It is vital that mayoral combined authorities, and other authorities that have local expertise, can continue those agreements with existing providers and that there is no break in provision where funding contracts are in place for adult education. Again, it feels as though the clause seeks to centralise power in the hands of the Secretary of State without paying due consideration to local representation, which is why I am keen to support amendment 29.
Alex Burghart
The amendments aim to give mayoral combined authorities and other authorities the power to keep their own lists of relevant education or training providers, specify their own conditions and exercise discretion about whether certain conditions have been met by relevant providers. The list of post-16 education and training providers that can be established under the powers in the clause aims to put in place guiding principles for a coherent and consistent scheme to protect learners in the case of provider failure. This important, specific point is made in subsection (5), which says:
“A condition may be specified in regulations under subsection (1)(a) only where the Secretary of State considers that specifying the condition in relation to a relevant provider may assist in preventing, or mitigating the adverse effects of, a disorderly cessation in the provision of education or training by the relevant provider.”
The whole clause is there to prevent circumstances in which providers crash out of the market and leave those in training with nowhere to go.
Mr Perkins
The Minister has a tendency to sit down rather abruptly before he has had the opportunity to respond to things that have been raised, so I just wanted to catch him at this moment. Will he explain what about subsection (5) in any way secures the quality and robustness of those providers? Is it his view that the Secretary of State’s list will somehow ensure the finances or quality of that provider? What assurances can he give the hon. Member for Bury South and myself, and all those who have those local relationships, that those local relationships will not be the victim of this desire for consistency?
Alex Burghart
The hon. Gentleman makes a fair point. If he looks at subsection (7)(b), he will see that one key thing we seek—this is relevant to the point I am making regarding preventing provider failure—is providers having relevant insurance cover, which we might consider through regulations. There have been a number of cases in the past where some providers have not had that, and there has been a real risk of a break in the provision given to certain students. We do not want to exclude small, local providers of the type he mentions at all. If ever it was felt that the Government were doing that, I draw his attention to subsection (10)(d), which says that an appeals process will be set out in regulations. I hope he can take some comfort from that.
Members will note written evidence from Learning Curve Group, an independent training provider, stating:
“Learning Curve Group welcomes the Government’s proposal…to include a register of providers who meet certain conditions as we believe this will increase overall quality and ensure high standards.”
We intend to work closely and collaboratively with mayoral combined authorities and other funding authorities on the creation of the list and the conditions that will apply. We will continue to engage with MCAs in designing the conditions and operation of the list. Through collaboration, we can ensure that we set a high bar for all providers for protecting learner interests. We certainly value the expertise and input that MCAs will have in this. As I said last week, we recognise the importance of the work of MCAs and their vital work in supporting local communities.
Mr Perkins
Subsection (7)(b) relates to the relevant provider having insurance cover. Will the Minister confirm whether that means insurance cover in the context of employer liability in the event of an apprentice or other adult learner being injured, or is it insurance cover in the event of the failure of the business and additional costs that might be attached to that? Will he clarify what the clause refers to?
Alex Burghart
It is the latter—in the case of business failure. The Bill sets out that we will consult on the conditions and provisions for being on the list prior to making the first set of regulations, to help ensure that those conditions manage and mitigate the risk of disorderly exit. That consultation will allow us to take into account fully the views of those affected by the scheme, including MCAs.
Mr Perkins
The Opposition are not opposed to clause 21 standing part, but there is a real danger that the way it is drafted will create much greater bureaucratic responsibilities. Inevitably, the result is going to be smaller providers not ending up on that list, either because they consider that their relatively small provision means that the Government’s requirements make it prohibitive for them to carry on, or because they get missed, as inevitably happens when dozens of local lists are turned into one major one.
We are not opposed to the Government introducing conditions and having standards and the register, but there is a real danger that the concerns raised by the hon. Member for Bury South and a number of different combined authorities will mean that really important local relationships will end up falling by the wayside and that provision may end up getting lost. We will press amendment 29 to a vote. Amendments 30 and 31 are conditional on amendment 29.
Skills and Post-16 Education Bill [ Lords ] (Sixth sitting)
Tuesday 7th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Skills and Post-16 Education Act 2022 View all Skills and Post-16 Education Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 December 2021 - (7 Dec 2021)
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Chair
A point of order was raised this morning about there not being a debate on new clauses 1 and 4 at the beginning of proceedings today. I am happy to cover the new clauses if the Government and Opposition want that. Although they could have been debated at the time, and Opposition Members did not take the opportunity to do so, out of a sense of fairness this is a way of getting through this slight wrinkle.
Clause 21
List of relevant providers
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Education (Alex Burghart)
What a pleasure it is to reach our sixth and final sitting on this important Bill.
Clause 21 will allow the Government to introduce a list of post-16 education or training providers. To be on the list, providers will need to meet conditions that help to protect learners against the negative impacts of provider failure. It will also help to protect public funds by preventing or mitigating the risks of provider failure. Currently, there is a risk that the short-notice exit of a provider from education and training can significantly disrupt the experience of many young people and adults. This can be because of delays in finding a new provider and insufficient planning on what happens next in these circumstances. This clause focuses the operation of a list on the types of providers that the Department considers are most at risk of an unregulated and disorderly exit from provision—independent training providers.
While we value the role of ITPs in helping to provide a more diverse and innovative learning offer, it is not right that these types of providers should operate with less in-built protection for learners than other types of further education provider. Fundamentally, we want to protect learners and public funds if providers cease to provide education or training. Where other regulatory mechanisms are not in place, we want to ensure that there is a consistent set of requirements placed on providers to protect learners and public funds, even where the provision is funded by local commissioning bodies or through subcontracts from directly funded providers.
Where a provider is not directly funded by the Secretary of State—as can be the case with ITPs—the existing levers for the Secretary of State to protect learner interests are not as strong. Contractual conditions of funding to prevent disorderly exits may also not be consistent. The Bill will allow commonality and consistency across funding streams to mitigate provider failure risks. The clause also allows the Secretary of State to set out other matters in connection with the keeping of the list of post-16 education or training providers.
We intend to consult before deciding on the detail of the way in which the scheme will operate. The Secretary of State is required to do so before making the regulations that establish the list for the first time.
Mr Toby Perkins (Chesterfield) (Lab)
May I record my thanks, Mrs Miller, for what you said a few moments ago about ensuring that new clauses 1 and 4 may be debated? I appreciate your flexibility.
We do not intend to divide the Committee on this subject, but I re-emphasise the point that I made in the discussion on the amendment. I entirely appreciate what the Minister says about the need to ensure protection for learners, but a small number of providers have a long track record of providing a small amount of provision that is none the less important in certain sectors and geographies. If this becomes a bureaucratic or economic minefield, they will simply withdraw from the sector, which will be the poorer for it. We received representations from the Manchester combined authority, which has a long history of working closely with smaller providers. It has real concerns that a national list will lead to smaller providers being missed out.
We do not intend to divide the Committee but we will continue to scrutinise the Government and ensure that the provisions put in place do not, as we fear they may if they are not carefully handled, exclude important, worthwhile providers from the list.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clause 22
Prohibitions on entering into funding arrangements with providers
Alex Burghart
I beg to move amendment 24, in clause 22, page 28, line 15, leave out from first “to” to “paid” in line 16 and insert “an agreement for the funding authority to provide funding to the provider includes a reference to an agreement or arrangements between the funding authority and the provider by virtue of which amounts can or must be”
This amendment makes clear that an agreement between the Secretary of State and an education provider that must be in place in order for student loans to be paid directly to the provider counts as “funding arrangements” for the purposes of clause 22. It also covers arrangements other than agreements.
Amendment 24 is a minor and technical amendment that clarifies that advanced learner loan funding routed through the Student Loans Company is in the scope of clause 22. This has always been the intention of clause 22(9), and this amendment is merely a technical adjustment to the drafting. It ensures that advanced learner loan funding arrangements are captured by the “funding arrangements” definition in clause 22. Without the amendment, clause 22 may not be adequately applied in relation to providers who receive advanced learner loan funding.
Mr Perkins
We appreciate that clarification.
Amendment 24 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Alex Burghart
Clause 22 is important in ensuring that a funding authority is prevented from entering funding arrangements with a provider that is not on the list. It also makes sure that the funding authority can take action to terminate funding arrangements in an orderly way should a provider cease to be on the list.
The short-notice exit of a provider from the provision of education or training can significantly disrupt the educational experience of young people and adults. The transfer of learners to another provider can take time, be extremely disruptive and increase the risk of learner disengagement. The provision of post-16 education or training is commissioned by various funding bodies and is often subcontracted. As a result, there is a wide variation in the range of obligations and requirements currently imposed on providers.
The provisions in the clause are intended to ensure that a consistent set of requirements is placed on providers and funding authorities to protect learners and public funds, even where the education or training is funded by local commissioning bodies or through subcontracts. The clause also sets out that a provider must not rely on anything in clause 22 as a reason for not carrying out existing obligations under a funding agreement. A funding authority could continue to enforce those obligations even if a provider was not on the list, as the contract would remain valid. This may be important to allow a provider to teach existing learners until they had completed their course where the risk posed by the provider could be managed.
The clause also includes the power for the Secretary of State to set out in regulations the particular characteristics of the funding arrangements that are subject to these funding controls. This is necessary so that the Department can ensure that the controls are applied proportionately. For example, de minimis requirements may be needed so that short-term and low-value arrangements for the provision of relevant education or training are not captured by the requirement for the particular provider to be on the list. The clause is essential in ensuring that there are certain restrictions and controls on the public funding of education or training providers in the scope of the list.
Mr Perkins
It is important to ensure that information is shared widely, not only with providers that might be outside mainstream education provision but with funding authorities such as mayoral or combined authorities, to ensure dialogue and so that smaller providers are not missed out.
The clause clarifies that providers must be approved and have an agreement in place for them to be allowed to have student loans paid directly. Building on the contribution I made in the debate on clause 21, it would be useful if the Minister clarified the steps the Government will take to ensure that only providers with quality offerings and financial stability and robustness receive direct payments and that these steps will not prevent quality, innovative smaller providers from accessing the important opportunities to attract new students.
Further to that, does the Minister anticipate that the extension of student finance will mean that a greater variety of private sector organisations will be able to receive student loan applications? I have met people in my constituency, and have written to his predecessor about other courses whose students have previously been excluded from getting student loans to access them, despite having a long track record of their students going into employment. To what extent does the Minister think the Bill will increase the number of learners who can get student loans for their courses, and how will he ensure that quality, innovative, smaller providers can access those opportunities?
Alex Burghart
The Government are fully aware that ITPs come in all shapes and sizes, and play an essential part in the skills ecosystem. We are very mindful that we do not want to drive good providers out of the market by creating a list. The sole purpose of the list is to ensure that all providers have in place provisions to ensure that they have contingency plans for their students should they go under. That is something that exists elsewhere in the skills space. We are extending it to ITPs, and intend to do so in such a way that will not create a bureaucratic overload. To the hon. Member’s point on student loans, it will very much depend on how the system evolves from this point.
Question put and agreed to.
Clause 22, as amended, accordingly ordered to stand part of the Bill.
Clause 23
Funding arrangements: interpretation
Question put, That the clause stand part of the Bill.
Alex Burghart
Clause 23 provides definitions for key terms in this part of the legislation relating to funding arrangements with post-16 educational training providers, and ensures that the correct legal person and funding arrangements that they are party to are in scope of the relevant obligations. The clause is essential to the interpretation of the list of post-16 educational providers, and should stand part of the Bill.
Clause 24 provides that the regulations for creating or keeping the list, altering the categories of education and training in scope of it, or amending primary legislation will be subject to the affirmative procedure. That means that they will be subject to an appropriate level of parliamentary scrutiny over the use of those powers, and must be approved by both Houses prior to becoming law. The clause provides that the powers to make regulations in clauses 21 and 22 include the power to make supplementary, incidental, transitional or saving provision.
By way of example, once regulations have been made under clause 21, the Department may consider it necessary to amend statutory powers to provide financial assistance for relevant educational training so that they signpost the prohibitions that will apply, and which effectively constrain those financial assistance powers. One such power will be in section 2 of the Employment and Training Act 1973. Clause 24 will ensure that there is appropriate parliamentary scrutiny over the use of the powers, and should stand part of the Bill.
Mr Perkins
We appreciate that clarification. The clause and its subsections clarify the powers to make regulations under clauses 21 and 22, and we have no desire to oppose it.
Question put and agreed to.
Clause 23 accordingly ordered to stand part of the Bill.
Clause 24 ordered to stand part of the Bill.
Clause 25
Provision of opportunities for education and skills development
Mr Perkins
I beg to move amendment 53, in clause 25, page 30, line 17, leave out from “education” to end of line 17.
The Chair
With this it will be convenient to discuss the following:
Amendment 54, in clause 25, page 30, line 17, leave out from “has” to “level.” and insert
“is earning below the Living Wage, as identified by the Living Wage Foundation.”
New clause 7—Level 3 qualifications provision—
“(1) Employer Representative Bodies may prescribe additional Level 3 qualifications, as part of the Lifetime Skills Guarantee.
(2) Additional Level 3 qualifications may be prescribed under subsection (1), in instances where the Employer Representative Body identifies a local need or skills shortage.”
Mr Perkins
The clause addresses the lifetime skills guarantee and the provision of opportunities for education and skills development. Subsection (1) says:
“Any person of any age has the right to free education on an approved course up to Level 3 supplied by an approved provider of further or technical education, if he or she has not already studied at that level.”
Amendment 53 would simply remove the final eleven words of the sentence. It is a probing amendment to test the reasons why the Government are seeking effectively to remove the word “guarantee” from the lifetime skills guarantee, and instead offer a significant limitation on the number of people who are able to study under it.
We think it is vital that people in low-paid employment have the chance to take additional level 3 qualifications to support them into better paid work or into new sectors. We also think it is crucial that people in industries or sectors that are diminishing have the opportunity to retrain. Substantial financial barriers would prevent them from accessing those courses.
When the Prime Minister made his speech announcing the lifetime skills guarantee in Exeter, he seemed to understand that point. The speech was all about the need for people to retrain and to be able to move from one sector where there were not going to be jobs in the future to jobs in other sectors. He wanted them to seize those opportunities. Unfortunately, the lifetime skills guarantee, which is going to take a long time to come into being anyhow, already has limitations.
Amendment 53 seeks to test the Government’s view on ensuring that more people are able to access a second qualification. Earlier, we gave the Government the opportunity to support a quite limited amendment on a second qualification.
I remind the Committee that a lifetime skills guarantee was in place for level 3 qualifications for everyone until 2013, when the former Chancellor George Osborne removed it. The decision to reintroduce this poor relation of that policy shows how the Government are learning at least some lessons from the mistakes they have made, but it lacks the ambition needed to reverse the failures of previous Government policy. More than 9 million jobs are excluded, many in sectors that have skills shortages and vacancies, such as tourism and hospitality.
I was speaking to a business in my constituency just this weekend that owns a number of establishments in the hospitality sector. It is desperate to attract members of staff into the sector. This is an organisation with a long track record of training up and developing members of staff, and ensuring that people make the best of their careers. It would be alarmed to hear that those kinds of opportunities are excluded from the lifetime skills guarantee. It is essential that the Government get this right. We hope they support our proposals.
Amendment 54 is an attempt to put on to a legal footing the promise made by the Secretary of State at the Association of Colleges conference in November. He said that
“from next April any adult in England who earns a yearly salary below the National Living Wage will also have the chance to take these high value Level 3 qualifications for free.”
That is precisely what the amendment seeks to do. It says that if anyone has a level 3 qualification and is earning below the living wage, as identified by the Living Wage Foundation, they would be able to take another level 3 qualification.
As we have laid out, we think that restricting the opportunities for students to take a second level 3 qualification is a huge missed opportunity. As the Committee has rejected our more ambitious amendment to allow all students the right to take a second level 3 qualification, we believe that the Government should at least be willing to support an amendment that supports what the Secretary of State has said.
New clause 7 relates to students wishing to do a level 3 qualification in an area where the local skills improvement plan has identified a local skills shortage. It would allow the local skills improvement plan to approve funding for a second level 3 qualification where local labour market shortages are identified.
The Bill contradicts itself. Reportedly, its aim is to ensure that skills policy is determined locally. New clause 7 would ensure that local skills improvement plans were able to identify that there was a skills need in the area and encourage people to retrain in that sector. Anyone who votes against that once again will seize power from local skills improvement plans and place it in the hands of the Secretary of State. We look forward to hearing what I imagine will be universal support for our amendments from hon. Members who are keen to support people in their constituencies.
Andrew Gwynne (Denton and Reddish) (Lab)
I rise briefly to support my hon. Friend the Member for Chesterfield in his amendments 53 and 54 and new clause 7. We have had this debate already in Committee and I still think that the Committee made the wrong decision to prevent learners having a second chance at a level 3 qualification for the reasons that I set out.
Those reasons were as valid the other day as they are now for these amendments, because we live in a dynamic economy where industries come and go. The industry that my town was historically dependent on, and that the town of my hon. Friend the Member for Luton South is equally famous for, is hatting. Those industries have pretty much died out, but the hatting industry made Denton famous. The Bowlers of bowler hat fame came from Denton, although they made their money at Lock & Co. Hatters in St James’s in London. However, that industry and those skills have gone.
In the past 50 or 60 years, my constituency has had to diversity and the workforce has had to retrain. That pace of chance will be prevalent in the decades ahead as technology advances, the global economy shrinks to make the world a smaller place, and international trade becomes the norm, meaning that we buy goods from other countries rather than make them here.
If we are going to have an industrial strategy that says that we want to be the lead nation in the new green industrial revolution, we need to ensure that we have the skills and the workforce to match that ambition. I am supportive of that and, if we are being honest, every Member of the House recognises the challenges and is supportive of it. That is not a top-level ambition, however; it has to be dealt with in the nitty-gritty of legislation.
We have a Bill going through Parliament that is rightly focused on skills and training and on ensuring that the next generation of the workforce has a built-in dynamism to be able to diversify, retrain and fill skills in the areas of the economy that have shortages. As the Opposition have said, that may mean someone has to have a second bite of the cherry at a level 3 qualification. If the subject in which someone has a level 3 is no longer fit for purpose, or relevant to the modern workplace, are we going to leave them languishing with inappropriate qualifications and skills that are no longer needed, or are we going to give them the opportunity to retrain, reskill and join the workforce, hopefully in highly paid, decent jobs? That is why I support amendments 53 and 54, which would put that idea on a legal footing, as my hon. Friend the Member for Chesterfield rightly said.
The voice of local businesses and the economic partnership between local government, businesses, academia and training providers are setting out local skills improvement plans. They identify key skill shortages in their economic areas, and they should be given the flexibility to say, “You know what, in my area, we have an absolute shortage of skills in a particular sector. We want to make sure that our area is really dynamic in that sector and therefore it is a key priority for our partners to skill up to level 3 adequate numbers of the workforce.” That is sensible. It is devolution as it is meant to work, from the bottom up, and that is why I also support my hon. Friend’s new clause 7.
Rachel Hopkins (Luton South) (Lab)
It is a pleasure to follow my hon. Friend the Member for Denton and Reddish, because I agree with everything he said.
The amendments and the new clause address the issue from the relevant two angles. They are designed to offer a genuine lifetime skills guarantee for individuals—one that is aspirational and does not fall back on the argument that because someone got a couple of A-levels 30 years, they cannot now retrain for a level 3 qualification to meet a skills need in the local area. I think about the changing world of work, and how much more is now digital or IT-based. There has been a shift in skills, which is driving our economy. Unless we agree to the amendments, so many people will be locked out from making a genuine shift in their skillset and acquiring a higher skilled job, which would put them on a sustainable footing. It is short-sighted to attempt to restrict that opportunity.
We have heard much about the responsibility of employers to lead the development of skills plans for their areas, given that they understand their local economies. New clause 7 is positive because it would genuinely enable employer representative bodies to shape what that level 3 qualification should be, based on the skills shortages in their areas. The new clause would meet the purpose of ERBs in developing the skills plans and ensure the lifetime skills guarantee for local people.
I support the terms of the amendments and the new clause. I should add that there are still a few hat factories in Luton producing artisan hats, and very good they are, too.
Matt Western (Warwick and Leamington) (Lab)
I will speak to the amendments and the new clause that appear in my name and that of my hon. Friend the Member for Chesterfield.
Of course we all want to see a high-skill, high-wage workforce. We need that for our economy. A crucial part of that is the retraining of employees. I am sure that most people in the room agree that the evolving workplace means that we need a process of continuous development if we are to adapt and ensure that our economy thrives, against an ever-competitive global marketplace.
Alex Burghart
Amendments 53 and 54 taken together would alter the eligibility criteria for the proposed legal entitlement to a level 3 qualification for all adults. Amendment 53 in particular is intended to make anyone in England eligible for those qualifications, regardless of their prior qualification level; and amendment 54 is intended to make anyone in England eligible if they earn less than the living wage.
Amendments 53 and 54 highlight the reason why we are opposed to putting such an entitlement into the legislation in the first place: it could constrain our ability to respond quickly and flexibly to adapt such entitlements to benefit adults who are most in need of support. For example, if we wanted to change the offer within the legislative framework, we would have to change the legislation. We have already announced that, from April next year, we will also expand the free courses for jobs offer to include any adult in England who earns below the national living wage or is unemployed, regardless of their prior qualification level. We are able to do that without needing legislation.
By targeting eligibility on the lowest-paid earners and the unemployed, we will ensure that we support those most in need of support to access better job opportunities and to improve their prospects. I hope that the hon. Member for Chesterfield agrees with that, given that amendment 54 seeks to target those same adults. However, it is also not a good use of public funding to expand eligibility in a non-targeted way to anyone, regardless of their wages or prior qualification level, which is what amendment 53 appears to do. We therefore do not support the inclusion of amendments 53 and 54 in the Bill.
Mr Perkins
That was a useful and interesting little debate. We heard a lot about the—I want say burgeoning, but at least still existing—hat industry. My hon. Friends the Members for Luton South and for Warwick and Leamington will be glad to know that I have seen at least two colleagues in hats recently—one was my hon. Friend the Member for Cardiff West (Kevin Brennan), who as they know is quite a trend-setter—so it might well be that a recovery in the hat industry is looming. It was a useful debate, and we heard some valuable contributions on why the amendments are important.
Turning to the Minister’s remarks, I accept that the amendment has similarities to and is possibly even more wide ranging than one that has already been rejected by the Committee, so we will withdraw it. However, we will press amendment 54 to a vote, because all that it seeks to do is to put on to a legal footing the promise that was made. I hear what the Minister says—“Don’t worry, we are going to deliver the policy; we just aren’t going to vote for it”—but I think there will be real value in ensuring that the Government commit to the thing that they say are going to do, which is about those who earn below the national living wage, as defined by the Living Wage Foundation, being able to access level 3 qualifications.
Given what we heard earlier in the passage of the Bill about the importance of local decision making, local skills improvement plans and local employers deciding their priorities, it would seem a sensible approach to allow them to identify local priorities and allow people to study a second level 3 qualification if addressing a known skills shortage. We will therefore look to press new clause 7, as well as amendment 54, to a Division. However, I beg to ask leave to withdraw amendment 53.
Amendment, by leave, withdrawn.
Amendment proposed: 54, in clause 25, page 30, line 17, leave out from “has” to “level.” and insert
“is earning below the Living Wage, as identified by the Living Wage Foundation.”—(Mr Perkins.)
Alex Burghart
The Government agree with the ambition to ensure that people in England have access to education no matter their age. We are committed to helping everyone get the skills that they need at every stage in their lives.
In April, we launched the free courses for jobs offer as part of the lifetime skills guarantee. That gives all adults in England the opportunity to take their first level 3 qualification for free, regardless of age. It is not right, however, to put the free courses for jobs offer into legislation. That would constrain the Government in allocating resources in future, and make it harder to adapt the policy to changing circumstances. The Secretary of State recently announced, for example, that from April next year we will expand the offer to include any adult in England who earns below the national living wage or is unemployed, regardless of their prior qualification level.
Through the adult education budget, full funding is also available through legal entitlements for adults aged 19 and over to access English and maths qualifications and fully-funded digital skills qualifications for adults with no or low digital skills. In areas where adult education is not devolved, the adult education budget can fully fund eligible learners studying up to level 2 if they are unemployed or earning below around £17,300 per year.
The spending review has provided a fixed quantum for adult skills, and the level of provision that is funded in any year needs to fit that quantum. Funding increases to follow increased numbers of learners, or a higher-funded mix of provision, will have to be subject to affordability within the overall envelope. The spending review process, rather than legislation, is the appropriate way for determining how the Government allocate resources over the long term. Funding for the free courses for jobs offer will be available throughout the three-year spending review period, giving further education providers the certainty that they need to invest in the delivery of the offer.
Moreover, the Bill is not an appropriate place to create new legal entitlements when we are in the process of reforming further education funding and of carrying out a review of qualifications at level 3 and below. Those vital programmes will ensure our skills system is fit for the future. By creating a legal entitlement for anyone to access their first qualification up to level 3, we would cut across those vital reforms and pre-empt the consultation process.
I now turn to the proposal in the clause that any employer receiving apprenticeship funding must spend at least two thirds of that funding on people who begin apprenticeships at levels 2 and 3 before the age of 25. The Chancellor’s spending review commitment delivers the first increase to apprenticeships funding since 2019-20. Funding will grow to £2.7 billion by 2024-25.
There have been some changes in the make-up of apprenticeships since the reforms: a higher proportion of apprentices are now aged over 25. In 2020-21, 16 to 24-year-olds still accounted for 50% of apprenticeship starts. In the same period, level 2 and level 3 starts made up 69% of the total. I know that there are concerns about the fall in starts among young people. I recognise the value of apprenticeships to young people embarking on their careers, and I am determined to ensure that there are good apprenticeship opportunities at all ages and stages, but I am concerned about the implications of trying to address that in the Bill.
The clause restricts opportunities for older and younger employees, and it restricts employer choice. Eighty per cent. of the UK’s 2030 workforce is already in work, so it cannot be right that only a third of apprenticeships funding is made available to those who are over 25. We want older people to be able to use apprenticeships to progress or retrain. The Confederation of British Industry estimates that one in six workers—5 million people—will go through radical job change and require re-training by 2030.
Age should not be a barrier to opportunities to learn or a limiting factor in our ambitions. I do not want to restrict young people to starting at level 2 or 3 apprenticeships. I also want an 18-year-old with good A-levels to see an apprenticeship as a strong alternative to university. They should be able to start a level 6 apprenticeship and gain a degree.
Mr Perkins
There is a real concern about the number of apprenticeships that are available for people between the ages of 16 and 24. The Minister makes an important point, which I would not remotely disagree with, that many people, for a variety of reasons, seek investment in their skills beyond the age of 24. Of course, opportunities should be there for them, but the lifetime skills guarantee, which might more accurately be described as a one-off skills guarantee, is really important. I do not agree with his description of 50% of apprenticeships going to 16 to 24-year-olds as a really big achievement. Too little apprenticeship funding is targeted at those under the age of 25.
Many people are concerned that since the introduction of the apprenticeship levy businesses have sat on this pot of funds, looking to utilise them. They have often not taken people on at entry level, but instead utilised the apprenticeship levy to provide MBAs for level 6 or 7 qualifications for their managerial staff. That is really what clause 25(3) seeks to address. Had the Minister said, “We’ve got a different approach to targeting that,” that would have been one thing, but simply to wipe the clause from the Bill is very concerning, and will be met by real disappointment from many of those who share the view that too little apprenticeship funding is being targeted at those under the age of 25.
Question put, That the clause stand part of the Bill.
Alex Burghart
Colleges and designated institutions play a crucial part in their local communities by enabling young people and adults to gain the skills they need. In the small numbers of cases in which an institution is failing to deliver an acceptable standard of education or training, or is failing in other ways, Government must be able to intervene to secure improvement.
Existing powers under the Further and Higher Education Act 1992 to intervene in colleges in the FE sector can be used in certain prescribed circumstances in which there are serious failings: mismanagement, for example, or financial or quality failures. In those circumstances, action can be taken to remove or appoint members of the governing body, or to give direction. Clause 26 extends those existing powers to allow for intervention where the education or training provided is failing, or has failed, to adequately meet local needs. Where the prescribed circumstances are met, clause 26 also enables the Secretary of State to direct the governing body to transfer “property, rights or liabilities” to another body.
The statutory intervention powers that we are amending through clause 26 are intended to be used only as a last resort. Our core support and intervention activity is delivered through administrative processes set out in the published guidance, “College oversight: support and intervention”. The Government are not seeking these powers in order to implement a new wave of mergers across the college sector—that is not the purpose of intervention. However, there is good evidence that structural change can, in the right circumstances, play a valuable role in securing improvement. We have also been clear that decisions on the college curriculum are for the governing body, not for Ministers to second-guess. We are working with Ofsted to increase the focus of inspections on how well colleges are meeting skills needs. The Government’s primary focus is on supporting colleges and designated institutions, and preventing things from going wrong.
In conclusion, strengthening the existing statutory intervention powers is necessary to ensure that, as a last resort, the Government are able to act where there is failure and there is no alternative means of securing improvement.
Mr Perkins
Clause 26 sets out in detail some additional powers relating to further education colleges in England, and the desire of the Secretary of State to intervene. The intervention regime for colleges is already complex, having been noted as a cause for concern by the Independent Commission on the College of the Future. Dame Mary Ney’s independent review of college financial oversight also identified the complexity of the regime, and in this Bill the Secretary of State is looking to find additional reasons to intervene, beyond financial failure. There is a real risk that this clause will just add to that complexity, going precisely against the apparent aim of establishing a simpler system.
Crucially, the Bill proposes new powers of intervention for the Secretary of State without giving colleges the freedoms to deliver. Last week, the Government passed an amendment that removed colleges from being strategic partners in the establishment of local skills improvement plans, so colleges are left accountable, but not empowered. Indeed, in a way, it goes further than that: if a college were to disagree with what was in the local skills improvement plan—if it were to consider that a local skills improvement plan that had been approved did not meet the needs of all of its learners—its failure to follow that plan could lead the Secretary of State to intervene and its being considered to be a failing college.
We accept that there needs to be an understanding of interventions, but there are questions that we would like to test the Minister on. First, why is it appropriate to hold colleges accountable for the delivery of LSIPs, but not treat them as strategic partners in developing those LSIPs? Secondly, do the new intervention powers apply equally to all post-16 education providers? If not—if they apply only to FE colleges—what consultation has the DfE undertaken with the Office for Students in order to ensure that this aligns with its approach to the oversight of higher education provision? Thirdly, what happens in circumstances where colleges believe that a poor or inappropriate LSIP has been produced that is not in the long-term interests of their locality? Do they simply deliver on a plan that they believe to be inappropriate, or are there mechanisms available to them to make representations on that point? If the needs of the local learning community have altered but the LSIP has not, how would a college be able to raise that? What consequences would be available to the Secretary of State if a college was seen not to fit in with what the LSIP said, even if the circumstances on the ground had changed?
Alex Burghart
As we have made clear throughout the Bill, the Government are on a mission to create an employer-led system in which the provision of skills reflects the skills that employers in a community need. We are absolutely set on ensuring that we get qualifications designed by employers to give students the skills the economy needs, at both local and national level. The clause sets about creating an accountability framework that places colleges in that sphere. We want colleges to respond to the ideas set out in a local skills improvement plan. However, as I have also made clear, these are absolutely powers of last resort. What we are really looking for is a profitable relationship between employer representative bodies and local providers. For that reason, we hope the clause will stand part of the Bill.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27
Further education bodies in education administration: application of other insolvency procedures
Mr Perkins
I beg to move amendment 61, in clause 27, page 33, line 19, at end insert—
“(2C) Before applying to a court for an education administration order in relation to a further education body in England, the Secretary of state will conduct a review of the impact of the closure of a Further Education institution on learning opportunities in the local area and provide a report to Parliament on steps taken to ensure that the opportunities for learners are not restricted by his application for an education administration order.”
Amendment 61 is a probing amendment that would require the Secretary of State to review further education provision prior to applying for an education administration order for a college. There should also be a review of the impact of closing a college; if the impact of such a closure would be a reduction or complete removal of provision, we would request that the Secretary of State report to Parliament to allow for appropriate parliamentary scrutiny.
It is crucial for the Secretary of State to ensure that local areas have adequate further education provision before deciding to merge and close colleges. The colleges most likely to be closed are often those in more rural areas, those that are smaller, those that are facing specific challenges or those in communities that face specific challenges because they do not have the density of population. Although we recognise that there may be financial collapse as a result of their geographic isolation, that should not necessarily mean that the provision their students rely upon disappears with the merger of the college.
It is important to have scrutiny at both a local and national level. We believe that it should be parliamentary scrutiny, to ensure that the Secretary of State commits to reporting to the House before announcing such a decision, and to ensure that there is a review of the impact of a closure on the local labour market and on the courses available to people in that local community.
Alex Burghart
Amendment 61 would require the Secretary of State to conduct a review of the impact of the closure of an FE institution on learning opportunities in a local area and provide a report to Parliament on the steps taken to ensure that opportunities for learners are not restricted ahead of an application for an education administration order. We will hear about education administration orders in the next few minutes.
I appreciate what Labour Members are trying to do, but the effect would be to delay an application for an education administration order, which would run counter to the purpose of the amendment. First, if an FE body becomes insolvent, it risks being placed into a regular insolvency procedure by a creditor or its board. The primary objective of a regular insolvency procedure is to prioritise the interests of creditors. This means that any closure scenario could result in the best returns to creditors being prioritised over the needs of keeping the body open for learners. Going down a standard insolvency route with a college will prioritise creditors, risking students studying there being pushed to one side.
Mr Perkins
I listened carefully to the Minister. As I said at the outset, this is a probing amendment to identify the extent to which the interests of learners are considered within education administration. I also listened to the Minister’s point regarding the creditors of such an institution, which was important and well made. I accept what he said about the need to go into education administration with due urgency. In that process that follows, which he laid out, there is a real need for the Government to say more, perhaps through a parliamentary statement, for people to better understand the situation on the ground in regard to future provision and those affected by any change in that provision. Notwithstanding that, it is not our intention to push the amendment to a vote.
Mr Perkins
Within my intention not to push the amendment to a vote, I would like to give way.
Matt Western
It is like “Just a Minute”. I thank my hon. Friend for giving way. I just want to elaborate on the point in his concluding remarks about how many colleges face financial uncertainty. According to the Times Educational Supplement, it was one in seven in a recent survey. We saw with Hadlow College—one of the two that the Minister was referring to—that 2,000 students suddenly lost their places. That can have a huge impact on a town and a region.
Mr Perkins
It absolutely can. Cases such as that impact not only the learners affected at that very moment, but on the provision for the next generations coming through. It has a very detrimental impact on the local community. My hon. Friend’s point is well made. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 27 proposes to clarify ambiguities in the Technical and Further Education Act 2017 regarding the use of company voluntary arrangements—a procedure allowing a company or corporation in insolvency proceedings to come to an agreement with its creditors over the payment of debts. Company voluntary arrangements can be used as an exit route for normal administration, as set out in insolvency legislation.
Company voluntary arrangements can also be used as an exit route from education administration under the FE insolvency regime, which we have just been debating. That has been clarified in case law, which has been in place since March 2020, when the High Court of Justice Business and Property Courts of England and Wales ruled that in the education administration of West Kent and Ashford College, education administrators had the power to propose a company voluntary arrangement.
We are using the opportunity to legislate in the Bill to clarify ambiguities in the current legislation and cement that existing case law into legislation. To be clear, we are cementing what the courts have already decided on. To achieve that, clause 27 proposes to extend the existing power of the Secretary of State for Education to make regulations related to the application of insolvency legislation to FE bodies so that express provision may be made in respect of the use of company voluntary arrangements.
Clause 28 deals with the potential conflict related to the treatment of secured creditors as between the transfer scheme provisions of the Technical and Further Education Act 2017 and the provisions of the Insolvency Act 1986, as applied by the 2017 Act. Specifically, the proposal amends schedules 2, 3 and 4 to the 2017 Act, making it clear that, where a transfer scheme looks to transfer secured assets free of the security, that can happen only with either the consent of the secured creditor or a court order. That is in line with protections for secured creditors in normal administration in insolvency proceedings.
Clause 28 also cements into legislation the Government’s response to the technical consultation for the insolvency regime for further education and sixth-form colleges, which was made in June 2018. We have informed the three main lenders to the FE sector—Barclays, Lloyds and Santander—of our proposed changes, and I am pleased to report that they are supportive. Barclays said:
“As a lender with significant loan exposure to the English FE sector (and desire to continue to support colleges with new loans) we are in favour of the changes proposed. The Transfer Scheme changes in particular provides welcome clarity on a point that had previously had a negative impact on sector risk profile and our appetite to lend.”
These clauses are good for the sector and good for the law, and I believe they should be good enough for us.
Mr Perkins
As the Minister was reading out that very positive quote from Barclays about his clause, it occurred to me how rarely he has had the opportunity to read out support for his Bill over the course of its passage. That is unsurprising, of course, when he is pressing ahead with amendments that 86% of respondents to his consultation are against. None the less, it was good to hear that full-throated support for this proposal from Barclays.
We do not intend to vote against clauses 27 or 28. I will simply make the point that the financial pressures facing our further education sector over the past 11 years, and particularly the past 12 months or so, have been truly unprecedented. I regularly meet representatives of colleges who are absolutely at their wit’s end, and not only about the scale of the funding cuts they have experienced over the past 11 years, but about the extent to which last-minute decisions are constantly made that leave them in a position in which they have to make redundancies in order to stay afloat, only then to discover sometimes that there is a change in the Government’s policy and they have to recruit for some positions that they had made redundant only a few months before.
So it was with the recent announcement about the adult education clawback. I have asked parliamentary questions on this issue. A number of colleges received a clawback from their adult education fund and were told that there was no right to any appeal. Then the previous Secretary of State said that they would allow appeals and I believe that in some cases the appeals were granted. In the meantime, however, those colleges were forced to cut their cloth accordingly.
Consequently, I say to the Government that although we do not oppose clauses 27 or 28, we believe that there needs to be a much greater sense of responsibility about the Government’s role in the financial distress that many of our colleges are currently suffering, which my hon. Friend the Member for Warwick and Leamington referred to earlier, and about the impact on those colleges of the constant last-minute decision making that they have suffered over the past 11 years.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28 ordered to stand part of the Bill.
Clause 29
Meaning of “relevant service” and other key expressions
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 29 is the first of a chapter of clauses that relate to the criminalisation in England and Wales of contract cheating services, which are more widely known as essay mills. Taken together, this chapter of clauses will make it an offence for an organisation or individual to complete, or arrange for another person to complete, all or part of an assignment on behalf of a student. It also criminalises the advertising of these cheating services. Essay mills threaten to undermine the reputation of our education system and to devalue the hard work of those who succeed on their own merit. They also prevent students from learning themselves and risk students entering the workforce without the knowledge, skills or competence they need.
Clause 29 provides clarity on the exact meaning of the key terms used throughout this chapter of clauses; removes the potential for unintended consequences to arise from the clause; and allows for fraudulent essay mill companies, their employees and contractors to be captured by the legislation. Because of the way that we have defined “relevant service”, we have also ensured that generally permitted study support, such as revision guides, will not be in scope, but essay mill companies that complete assignments on behalf of students will be in scope.
Clause 30 criminalises providing essay mill services or arranging for such services. It is therefore crucial in our fight against essay mills. It provides a powerful legislative tool to tackle these deplorable organisations and individuals.
I will talk briefly about the practicalities of the offence that we are creating. It will be for the prosecution to prove that the cheating service has been provided to the student. However, the burden of proof in relation to the defence is on the defendant. For example, the defendant would need to prove that they could not have known, even with reasonable diligence, that the student would or might use the material provided to complete an assignment. For example, simply asking a student to sign a contract that states that they will not use the work in a certain way is not a defence. Clause 30 states that clearly.
If someone were to be found guilty, they would be liable to be punished with a fine. The appropriate fine will be determined by the courts in accordance with Sentencing Council guidelines. Clause 30 will help to tackle the existence of these companies and to fine them appropriately if they continue to carry out these illicit services.
Mr Perkins
Clause 29 defines the term “relevant service” and other key expressions. We have no desire to vote against it.
I am interested in the representations that the Minister has received about the way clause 30 is drafted. Subsection (4) will immediately set those with more experienced legal minds than mine—there are such people in this place—to consider how difficult it may be to achieve a successful prosecution under these provisions. If there is a defence that enables a defendant to say, “I had no idea what the legislation was”, that starts to bring home how difficult it might be to get successful prosecutions in this area.
Matt Western
I have a few points to add to my hon. Friend’s remarks. In principle, these clauses make some important points about essay mills and the advertising of relevant services. There is a long-overdue need to legislate to prevent such services, and this will give the issue the importance that the sector has been demanding for some time. Back in 2018, something like 40 vice-chancellors wrote to the then Secretary of State demanding action on this issue. We are three years on. The problem has grown to an industrial scale and needs tackling.
The problem has become so—well, I would not say endemic, but it is widespread, and there are many students out there who seek to access these services or feel under pressure because of the need to get good grades. There was a case not so long ago where Coventry University students were blackmailed by an essay mill company, which said that if they did not pay yet more money, it would tell their university. There is a lot to be covered in this respect, and that is why the clause is very important.
Alex Burghart
I am pleased to see that the Opposition support our move to legislate on this matter. We are all of one mind that cheating services actually end up undermining the good work of the vast majority of students, and they introduce an unnecessary element of doubt.
I reassure the Opposition that the Bill has been carefully drafted with some excellent Government lawyers. Clause 33 is designed to ensure that convictions are much more likely and that some of the easy defences—for example, that these services were just providing information and had no idea that it would be used in cheating services—cannot be used as a get-out-of-jail card. We are confident that it is a major step forward in combating this insidious crime and we look forward to its enactment.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Clause 30 ordered to stand part of the Bill.
Clause 31
Offence of advertising a relevant service
Mr Perkins
I beg to move amendment 61, in clause 27, page 33, line 19, at end insert—
‘(2C) Before applying to a court for an education administration order in relation to a further education body in England, the Secretary of state will conduct a review of the impact of the closure of a Further Education institution on learning opportunities in the local area and provide a report to Parliament on steps taken to ensure that the opportunities for learners are not restricted by his application for an education administration order.”
This probing amendment is designed to find out the Government’s anticipated tariff for such offences. To what extent is it seen as a serious offence? To us, it is absolutely obvious that the fine needs to be of a sufficient sum to make it not worth providing such services. Although we support the Government’s intentions, we seek further clarification about the level of the anticipated tariff for such an offence. Will perpetrators get off with a fine that costs them the equivalent of a week’s dinner money, or are the Government taking such offences seriously? Will they set the fine at a high enough level to act as a deterrent?
To return to the question to which I do not believe the Minister responded when we considered clause 29, in the event of a cheating service that is utilised by five students, would that be judged as five offences or one?
Alex Burghart
I am sorry, I forgot to reply to that. It would be five offences.
Mr Perkins
That is useful clarification. Can the Minister also clarify whether perpetrators would be guilty of a civil or criminal offence? Would they get a criminal record? In the event that a business was perceived to be providing those services, what would be the impact on that business? Or is an individual judged to have committed the offence? I would be grateful for that clarification.
Overall, we believe it is vital that there is a level playing field. We support the Government’s intention to prevent the use of fraudulent services, such as essay milling, and we believe that the fines should be such to act as a deterrent. We also believe that there should be a corresponding damage to reputation provision when people or businesses commit that offence. It is crucial that the amount of the fine and the publicity surrounding those fines reflect the severity of the offence. As we have said, the practice significantly undermines the efforts of all students who work hard to achieve their qualifications legitimately.
Matt Western
It would be interesting to hear from the Minister what form of penalty the Government imagine. We heard the probing question from my hon. Friend the Member for Chesterfield about the case of five individuals. Can the Minister elaborate on what sort of penalties he envisages for the business behind the essay mill? If he does not agree with our suggestion, what scale of punishment does he believe would be appropriate? Is it more akin to dropping litter, fly-tipping or another offence?
Alex Burghart
We are in agreement that essay mills need to be driven out of business, and that is why the clauses are in the Bill. In response to the hon. Gentleman’s points, these are serious criminal offences.
Andy Carter (Warrington South) (Con)
I suspect that the Minister is about to say that the Sentencing Council will have a view on the issue, and actually it is for the Sentencing Council to determine the length and type of sentences that might be involved in criminal activities.
Alex Burghart
My hon. Friend is extremely prescient, and I congratulate him on that. This is a criminal offence and we want to see it seriously punished. However, for reasons I will set out, we do not think that amendment 62 would solve the problem in the right way. It would amend clause 31 by setting a minimum penalty of a fine of no less than £5,000 for the offence of advertising a cheating service. As drafted, the Bill does not state the level of fine payable on conviction. Instead, conviction of either offence carries the penalty of an unlimited fine—as the name implies, that is a fine imposed without financial limit. That approach carries serious potential consequences and provides a significant deterrent effect to those planning to advertise contract cheating services.
The Government do not believe that setting a minimum amount is appropriate, where maximum fines are unlimited. Setting a minimum fine of £5,000 risks that level of fine being seen by essay mill providers as a likely fine, rather than a minimum. Sentencing and the precise size of a fine should be matters for the independent judiciary, in accordance with Sentencing Council guidelines, based on the full facts of the case. I would draw hon. Members attention to the fact that Ireland, which has a similar legal system and a similar offence, imposes a fine of up to €100,000 per offence and/or a prison sentence. That is the sort of thing that might go through the minds in our justice system. We do not therefore think that the amendment is necessary.
Mr Perkins
I accept what the Minister says. I do not accept that introducing a minimum fine of £5,000 would necessarily lead to essay mill services thinking that that would be the likely level, but I take his point. The amendment was a probing amendment to try to reach some understanding of the Government’s position. If there have been fines of the level that he outlined, that will be heartening for all those who want to see the issue addressed. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 31 makes it an offence to advertise essay mills. Marketing and advertising are the lifeblood of any successful industry, and we do not want this industry to be successful or to have lifeblood. Many essay mill companies use marketing techniques that seem to indicate that they offer legitimate academic writing support for students, when in fact they are providing cheating services. Students who use essay mills risk their academic education and future employment prospects if they are caught cheating. Anecdotal reports indicate that some essay mills are even seeking to blackmail students who have used the services, as the hon. Member for Warwick and Leamington mentioned. The clause will put beyond doubt that advertising cheating services in England and Wales is not just unethical but illegal, and will provide the means to prosecute those who fail to comply with the law in England and Wales.
Mr Perkins
I have already outlined our support for this move. We believe that this is a serious offence. It is important that any perceived legitimacy of essay mill services is aggressively challenged. On that basis, we will support the clause.
Question put and agreed to.
Clause 31 accordingly ordered to stand part of the Bill.
Clause 32
Offences: bodies corporate and unincorporated associations
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 32 relates to which bodies can be prosecuted under the essay mill provisions in the Bill. Cheating service providers can range from UK-based organisations registered at Companies House with offices and permanent staff to lone individuals operating with minimal infrastructure. Where offences are committed by companies, unincorporated bodies and partnerships, the clause enables certain individuals, such as the directors of companies, to also be prosecuted in particular circumstances. It also sets out some relevant procedural rules. For example, it clarifies that proceedings for offences committed by an unincorporated body should be brought in the name of the body and not its members, and any fine imposed on conviction of an unincorporated body should be paid out of the funds of the body. The clause will enable the legislation to function with legal certainty. Clause 33 sets out the definitions of certain terms in this chapter, allowing for absolute clarity on the intended purpose of the clause.
Mr Perkins
We welcome clause 32. It is important that where offences are committed by bodies of this sort there are consequences for their officers. The clause ensures that directors, managers, secretaries or other similar officers of the body corporate are guilty of an offence, if an offence under this chapter is committed by their body corporate and either they are known to have consented and been in connivance, or it is attributable to neglect of their duties under the organisation. We will therefore support clause 32. Clause 33 is simply an interpretation clause that makes sense of the terms in clause 32.
Question put and agreed to.
Clause 32 accordingly ordered to stand part of the Bill.
Clause 33 ordered to stand part of the Bill.
Clause 34
16 to 19 Academy: designation as having a religious character
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 34 provides the Secretary of State with an order-making power to enable the designation of 16-to-19 academies as having a religious character. It also provides for the Secretary of State to make regulations about the procedures relating to the designation. In addition, it sets out the freedoms and protections relating to religious education, collective worship and governance that the designation provides. The clause will ensure that when existing sixth form colleges designated with a religious character convert to academies they retain their religious character and associated freedoms and protections. It will also enable new and existing 16-to-19 academies to be designated with a religious character in the future. The Government are committed to supporting existing sixth-form colleges to convert to academy status. I am pleased that a significant proportion of them have already taken that step, and are making a strong contribution to strengthening the academy sector.
Clause 35 improves the efficiency of administration of the further education sector. It is thankfully rare for a further education body to enter into insolvency proceedings. However, where a designation order can form part of a rescue procedure, we need to ensure that it can take place swiftly, minimising disruption to learners and costs to the taxpayers. For some FE bodies in financial difficulty, it may be desirable to transfer the college institution from the insolvent FE body to a new solvent company as part of the process of exiting insolvency proceedings. To ensure that the institution remains within the statutory further education sector in order to keep it appropriately regulated, it would then need to be immediately designated accordingly. Existing legislation requires the Secretary of State to make a statutory instrument when he seeks to carry out such a designation. That process can take several months, and needs a completion date to be specified significantly in advance, which could complicate and delay the exit from insolvency proceedings. Delays impose a longer period of disruption on learners and could generate extra costs to the taxpayer. As such, clause 35 allows the Secretary of State to use an administrative order, which can be enacted relatively quickly, to designate an institution as being within the statutory further education sector.
Clause 36 relates to the high-level quality rating for higher education providers without an approved access and participation plan, which is currently an award under the teaching excellence and student outcomes framework. Higher education providers with a TEF award currently benefit from an uplift to their fee limit, meaning that they are able to charge a higher level than HE providers without such an award. There is currently an error in the legislation that could prevent a timely link between TEF awards and a provider’s fee limit. To take an example, let us consider a provider that does not have an approved access and participation plan. If that provider is entitled to the TEF fee uplift in any academic year, it is dependent on whether it had an award on 1 January in the calendar year before the relevant academic year. That means that a provider seeking to charge the TEF fee uplift in academic year 2022-23 could only do so based on an award that was in force in January 2021, rather than January 2022, which was the original intent. Clause 36 will correct that error and ensure a more timely link between fee limits and the TEF award, helping to further incentivise excellence in higher education.
Mr Perkins
Sorry, I have got all tangled up here; give me a moment, Mrs Miller. For the sake of those listening on the radio, my hearing aid has got stuck in my mask.
Mr Perkins
Sorry, what did you say? [Laughter.]
We do not intend to divide the Committee on clauses 34 to 36. We think it is important that the law does not discriminate against academies or institutions for having a religious character designation, should they wish to do so. Clause 34 would change the rules so that when the Department next seeks to create 16-to-19 academies, it will be possible for organisations to apply to set up one with a religious character. Ministers intend to change the law to ensure equality for technical education in school careers advice, and to allow religious sixth forms to academise. A group of 14 sixth-form colleges that are Catholic run have so far been prevented from doing so due to their religious character; this clause would overturn that obstacle.
We recognise that there are many excellent academies out there, just as there were many excellent state-maintained schools. We think it is regrettable that the Government have decided to prioritise academies over schools run by local authorities. I have a very personal reason for saying that: my children went to an outstanding school that was run under the local council. Unfortunately, due to its finances, it was forced into a position where it took on academy status, and ultimately, that academy was described as a failing school. The desire to drive that school into academy status caused really significant problems. It is my view that the academies that the Labour Government created were a positive thing, and that there are many excellent academies out there. However, we think that the Government should remain neutral on this issue, rather than trying to force schools down one route or the other.
Notwithstanding that, we support the changes in clause 34. Sixth-form colleges should not be discriminated against if they have a religious designation and wish to become academies.
Clause 35 assigns a designation to terms in the Further and Higher Education Act 1992. We can support the clause given that is sets out the designations of institutions in the FE sector relating to the 1992 Act. Clause 36 is a technical change that clarifies the relevant date, for purposes of fee limit, for certain higher education courses, as set out by the Minister. We are happy to support the clause, which sets out the determination of the fee limit.
Question put and agreed to.
Clause 34 accordingly ordered to stand part of the Bill.
Clauses 35 and 36 ordered to stand part of the Bill.
Clause 37
Extent
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 37 sets out the territorial extent of the provisions. Obviously, Westminster does not normally legislate on devolved matters without the consent of the relevant devolved Administration. However, we have sought the support of the Welsh Government to lay a legislative consent motion where there is an impact on the competence of Senedd Cymru. We have agreed with the Scottish Government and with the Northern Ireland Executive that legislative consent motions are not required.
Clause 38 sets out when provisions in the Bill come into force. General provisions on extent commencement and short title come into force on the day of Royal Assent. Subsection (2) sets out the provisions that will come into force two months after the Act is passed. All other provisions will come into force on a day, or days, appointed by the Secretary of State through regulations made by statutory instrument.
Mr Perkins
Clause 37 sets out the extent of the Bill. I heard what the Minister had to say about the Welsh Assembly; can he just confirm that he has consulted the Welsh Assembly on the extent to which this Act applies to Wales and, given that there are differences between what is offered in England and in Wales, that there is nothing in the Bill that has led to problems in that relationship? Notwithstanding that point, we agree with the extent to which the clause applies to England and Wales, and also the specific provisions that extend to Scotland and Northern Ireland. We agree with clause 38 on commencement and understand what it is saying.
Alex Burghart
I reassure the hon. Gentleman that we have consulted Welsh Ministers, and we are of one mind with our counterparts in Wales.
Question put and agreed to.
Clause 37 accordingly ordered to stand part of the Bill.
Clause 38 ordered to stand part of the Bill.
Clause 39
Short title
Alex Burghart
I beg to move Government amendment 26, in clause 39, page 42, line 13, leave out subsection (2).
This amendment removes the privilege amendment inserted in the Lords.
For Bills starting in the House of Lords, a privilege amendment is included to recognise the right of this place to control any charges on the people and on public funds. It is standard practice to remove such amendments at this stage of the Bill’s passage through the House of Commons.
Mr Perkins
The Labour party is always enthusiastic for powers to be centred in the hands of those with democratic accountability, so we are very keen on clause 39. The Government have not yet had an opportunity to explain why they thought it was sensible to start the passage of the Bill in the other place, notwithstanding the excellent job that their lordships have done, which the Minister has sought to wreck over the course of the past week and a half. It would be interesting to hear from the Government why they made the decision to start the Bill in the other place. Notwithstanding that, we have no reason to oppose the amendment.
Alex Burghart
I have been a Minister for only a short time, and I have to say I am unaware why the Bill started in the Lords, but I have nothing but admiration for their lordships, who did a wonderful job. Obviously, we have had to amend some of their amendments in order to make the Bill as good as it can be, but I am sure that everyone can see that the parliamentary process is being done to the full, even if it is being done this way round.
Amendment agreed to.
Clause 39, as amended, accordingly ordered to stand part of the Bill.
New Clause 1
Information about technical education and training: access to English schools
“(1) Section 42B of the Education Act 1997 (information about technical education: access to English schools) is amended as follows.
(2) In subsection (1), for “is an opportunity” substitute “are opportunities”.
(3) After subsection (1) insert—
“(1A) In complying with subsection (1), the proprietor must give access to registered pupils on at least one occasion during each of the first, second and third key phase of their education.”
(4) After subsection (2) insert—
“(2A) The proprietor of a school in England within subsection (2) must—
(a) ensure that each registered pupil meets, during each of the first and second key phases of their education, at least one provider to whom access is given (or any other number of such providers that may be specified for the purposes of that key phase by regulations under subsection (8)), and
(b) ask providers to whom access is given to provide information that includes the following—
(i) information about the provider and the approved technical education qualifications or apprenticeships that the provider offers,
(ii) information about the careers to which those technical education qualifications or apprenticeships might lead,
(iii) a description of what learning or training with the provider is like, and
(iv) responses to questions from the pupils about the provider or approved technical education qualifications and apprenticeships.
(2B) Access given under subsection (1) must be for a reasonable period of time during the standard school day.”
(5) In subsection (5)—
(a) in paragraph (c), at the end insert “and the times at which the access is to be given;”;
(b) after paragraph (c) insert—
“(d) an explanation of how the proprietor proposes to comply with the obligations imposed under subsection (2A).”
(6) In subsection (8), after “subsection (1)” insert “or (2A)”.
(7) After subsection (9) insert—
“(9A) For the purposes of this section—
(a) the first key phase of a pupil’s education is the period—
(i) beginning at the same time as the school year in which the majority of pupils in the pupil’s class attain the age of 13, and
(ii) ending with 28 February in the following school year;
(b) the second key phase of a pupil’s education is the period—
(i) beginning at the same time as the school year in which the majority of pupils in the pupil’s class attain the age of 15, and
(ii) ending with 28 February in the following school year;
(c) the third key phase of a pupil’s education is the period—
(i) beginning at the same time as the school year in which the majority of pupils in the pupil’s class attain the age of 17, and
(ii) ending with 28 February in the following school year.””—(Alex Burghart.)
This new clause replaces clause 14. It removes requirements about university technical college access to pupils, requires access to pupils to be given in each key phase once (rather than three times), requires proprietors to ensure pupils meet at least one provider (or a prescribed number), and makes technical changes.
Brought up, and read the First time.
Alex Burghart
I beg to move, That the clause be read a Second time.
I will now discuss new clause 1, which seeks to replace clause 14. We all agree that we need to strengthen provider access legislation. The Government introduced provider access legislation in 2018 to ensure that all young people get information about technical options when planning their careers, but too many schools have disregarded the law and are reluctant to promote alternatives to A-levels and university. We announced our three-point plan to improve compliance with that legislation in the “Skills for Jobs” White Paper back in January, and that included plans to strengthen the duty.
As it stands, clause 14 would require schools to deliver nine provider encounters per pupil—three during each of the first, second and third phases of their education. We are concerned that nine encounters would place unnecessary pressure on schools and risk taking up too much curriculum time. The clause would also name university technical colleges on the face of the Bill as one of the providers that every pupil must meet where practicable. That would give more weight to one provider than the rest, and we want to act in the interests of all providers, not just university technical colleges. The new clause strengthens existing provider access legislation by requiring schools to provide a minimum of three meetings with providers of technical education or apprenticeships for pupils in school years 8 to 13.
Mr Perkins
We understand the reasons for the new clause, but what is the Government’s view about why the existing Baker clause has not been as successful as they might have liked? Has it taught the Minister anything with regard to the limitations of the statutory guidance, on which he may have chosen to reflect, and to why having things on the face of the Bill often carries greater weight than purely putting things into statutory guidance or secondary legislation?
Alex Burghart
The hon. Gentleman knows full well that Governments often keep things in statutory guidance in order to retain flexibility. The last Labour Government did that time and again. As a mere parliamentary researcher, I remember consideration of what is now the Apprenticeships, Skills, Children and Learning Act 2009, in which there were many examples of powers introduced through statutory guidance and secondary legislation. It is a time-honoured custom that is there for good reason.
In this case, we believe that there is a need to strengthen practice. In particular, I want to mention the need to strengthen quality. The other day, I was talking to a friend who has a 16-year-old daughter and who is herself in education. Her daughter had come home saying, “There is absolutely no way I’m going to do an apprenticeship.” My friend asked why and her daughter replied, “Because the man who came to talk to us today was so boring it has put me off.”
We need to ensure that we have interventions of quality. That is very much where our position is centred. The new clause includes the power for the Secretary of State to set out further details about the number and type of providers that pupils should meet under the terms of this duty. Putting the detail in secondary legislation will give us flexibility.
The new clause strikes the correct balance between widening pupil access to information on technical options in apprenticeships, without placing undue pressure on schools. It will set out in primary legislation that every state school must provide the three encounters of which I have spoken. Of course, we must ensure that those provider encounters are of high quality. That is why, for the first time, we are setting parameters for the content of the encounters in primary legislation.
We want to ensure that every encounter is meaningful and gives pupils the opportunity to explore what the provider offers, what career routes those options could lead to and what it might be to learn or train with that provider. We intend to consult school and provider representatives on the underpinning statutory guidance to ensure that we have provider access legislation that works for them and, most importantly, for young people.
With the Government’s large-scale reforms to technical education, it has never been more important for every young person to understand the full range of options that are available to them. The new clause will be crucial in ensuring that every pupil, whatever their ambitions, can explore apprenticeships, T-levels and other technical education qualifications. We want to send a clear message that schools must open their doors to other providers, so that pupils get broad and balanced information about all their options.
Mr Perkins
The Minister outlines why he believes the new clause is necessary. Given his remarks at the end there, I have to say that he would have better achieved what he set out to achieve had his party not voted against clause 14. All new clause 1 does is weaken the clause 14 that was in the Bill and that the Committee voted against this morning.
Notwithstanding that, we recognise that the new clause will be better than not having it at all. It removes requirements for university technical college access for pupils. The Minister suggested that that would be prioritising UTCs above other organisations, but I did not see it like that. I thought that they were simply referred to as another provider, and no doubt ones that Lord Baker is particularly enthusiastic to see given access.
The points that Lord Baker made in his contribution in the House of Lords are important, however, and they need to be considered. The noble Lord suggested that many schools—through either lack of time or a deliberate attempt to ensure that their students looked only at the school’s own sixth form, for financial or other reasons—were not implementing the original Baker clause and were indeed subverting the opportunities that were placed in front of children. I would be interested in hearing whether the Minister agrees with Lord Baker about that, or whether he believes that there are other reasons why alternative providers are not getting access to young people at each of those three crucial stages.
The Committee will be aware that, as part of the Labour party’s offer at the next general election, my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) has brought forward a plan for the equivalent of two weeks’ compulsory work experience for every pupil, and for face-to-face professional careers advice to be something that every student can rely on. We think it vital that children and young people have access to professional and appropriate careers advice. Work experience can be genuinely life-changing for many young people, particularly those from more deprived backgrounds. It is crucial that work experience is seen as a mark of an excellent school provision, rather than an additional thing that is nice to do.
It has very much been my experience that many schools leave the responsibility for work experience to the child and their parents to sort out. Effectively, the only commitment that schools require is that the child does not die or get injured while they are there. There is no real assessment of the quality of that work experience, so the milkman’s son ends up doing a milk round, while the MP’s son spends a week in an MP’s office—everyone just does the stuff that they already know. Worst of all, some children do work experience in a school, which is the one environment that they have been in for their entire lives, and that is considered acceptable.
Alternative opportunities for young people to look at different environments and learn about different opportunities are absolutely crucial. As clause 14 was rejected, we will support the new clause, but we believe it less ambitious than what their noble lordships had already introduced. Much of what the Minister said about the importance of the sector is undermined by his tabling of a clause that is weaker than the one that came from the Lords.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Lifelong learning: special educational needs
“When exercising functions under this Act, the Secretary of State must ensure that providers of further education are required to include special educational needs awareness training to all teaching staff to ensure that all staff are able to identify and adequately support those students who have special educational needs.”—(Mr Perkins.)
This new clause would place a duty on the Secretary of State to ensure that there is adequate special educational needs training for teachers of students in further education.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mr Perkins
I beg to move, That the clause be read a Second time.
The new clause, tabled by my right hon. Friend the Member for East Ham (Stephen Timms), relates to access to sharia-compliant lifelong learning loans. It is important that students do not feel excluded from applying for lifelong learning loans because they are not sharia-compliant. There are many different aspects to loans under sharia law. Though their effect may be similar to that of other loans, the way in which they are set up and implemented is different, and the funds are also utilised in different ways.
It is incredibly important—and I think this is recognised by Members of both main parties—that action is taken on sharia-compliant lifelong learning loans. It is regrettable, however, that thus far nothing has been done. We have been given to believe that the Augar review may result in sharia-compliant lifelong learning loans, but we have not yet seen anything to that effect. My right hon. Friend’s new clause therefore encourages the Secretary of State to
“make provision by regulations for Sharia-compliant student finance to be made available as part of the lifelong learning entitlement.”
Alex Burghart
I am grateful for the opportunity to discuss sharia-compliant student finance. The Government have been considering an alternative student finance product, compatible with Islamic finance principles, alongside their other priorities as they conclude the post-18 review of educational funding.
New powers were taken in section 86 of the Higher Education and Research Act 2017 to enable the Secretary of State to make alternative payments, in addition to grants and loans, to enable the implementation of ASF. Clause 15 already makes provision for such alternative payments to be made as part of the lifetime loan entitlement. As such, when coupled with the existing provisions in HERA, the new clause would not give the Secretary of State any additional powers. The clause 15 provisions for alternative payments would come into force should the Government decide to commence the provisions in HERA that enable alternative payments to be provided to students. The Government will reach a decision on the availability of a sharia-compliant student finance product as part of the full and final conclusion of the post-18 review, and will provide an update on ASF at that time.
In relation to the second part of the new clause, the Secretary of State may already lay student support regulations using the affirmative procedure contained in section 42 of the Teaching and Higher Education 1998, should he choose to do so. The new clause would not add any powers beyond those already under the Bill or existing legislation, and so should not be added to the Bill.
Rachel Hopkins
I rise to support new clause 4, tabled by my right hon. Friend the Member for East Ham. The Minister says we will see the outcome of the post-18 review with regards to HERA. However, the reason why it is so important that the new clause is added to the Bill relates to further education. Because no finance or loans fit with the principles of Islam, many people end up saving up until they have sufficient funds to be able to afford their degree. The whole point of the Bill is the emphasis on ensuring that people can up their skills at level 3. If they are not able to access a loan that is compliant with the principles of Islam, and if they are on a low income, they really have no chance of being able to save up to afford to fund up front from their savings. The proposal of a lifelong learning entitlement through a loan therefore becomes a vicious circle, and they will not be able to access the training and gain the skills that they need.
For many people, this really is a matter of urgency if we are genuinely going to help people to reskill or upskill, particularly for many constituents of mine in Luton South. It is important to push the Government on this, particularly because HERA was published in 2017, and because of the commitment from the former Prime Minister, Mr Cameron, in 2013 when this first started to be talked about. This long-term delay and lack of action is not good enough. I support new clause 4.
Question put, That the clause be read a Second time.
Mr Perkins
I beg to move, That the clause be read a Second time.
The new clause was tabled by my hon. Friend the Member for Rotherham (Sarah Champion). It would introduce a national review and plan for addressing the attainment gap and intends to ensure that everybody is supported to obtain the level of English and/or maths skills they need by requiring the Department for Education to have a plan to close the attainment gap based on a review of current policies and barriers to attainment in English and/or maths. Our attainment levels as a nation, particularly in maths, are noticeably behind many of our competitor nations, and particularly the major nations in Europe. It is crucial that there are both local and national strategies to raise attainment for English and maths at grade 4.
I think there is widespread agreement on that across the House. The Government’s approach has often been to say, “Well, until you have achieved this, you cannot do that.” The Labour party’s approach has always been much more of a carrot. We recognise that there needs to be greater investment, specifically in picking out those students who, for a variety of different reasons—whether as a result of learning disabilities or of social disadvantages—are less likely to attain grade 4 level in English and maths. We think it is crucial that we have a strategic approach to attaining that.
A large amount of the recent catch-up funding that was identified by the Government was never actually provided, and there has been a discrepancy between the amount of the catch-up funding that was directed to those in the most deprived communities and the amount that was provided overall. Catch-up funding, more than anything else as a result of the lockdown, particularly needed to be focused on those in the most deprived communities, who saw that attainment gap grow over the course of the covid pandemic. That the Government have a strategic plan and are operating a national review of the attainment gap—particularly setting out to achieve the reduction in their cap within six months of the passing of the Bill—is an important amendment. We therefore support the new clause.
Alex Burghart
New clause 5, tabled by the hon. Member for Rotherham, seeks to require the Secretary of State to undertake a national review and have a plan for addressing the attainment gap within six months of the Act passing in relation to those who have not achieved grade 4 or above in GCSE English or maths. The Government are clear that supporting people who are yet to achieve GCSE grade 4 or above in English or maths—the equivalent of level 2—is of the utmost importance, given that good levels of English and maths are linked to better economic and social outcomes. We want young people and adults to have the literacy and numeracy skills to thrive in work, education and life. That is why we already have a clear plan and are taking significant steps to support those who have not achieved grade 4 or above in English and maths.
All learners aged 16 to 19 are required to continue studying English and maths if they do not have a level 2 qualification in these subjects already, including, for example, those studying T-levels. Additionally, apprenticeships in particular have an exit requirement in English and maths in order to complete the programme. We also support adults by fully funding GCSE and functional skills qualifications in English and maths up to level 2 through the adult education budget. In addition, as of next year, we are rolling out Multiply, a new £559 million programme for adult numeracy, announced by my right hon. Friend the Chancellor at the spending review. This will significantly increase the provision and opportunities for adults to improve their maths skills.
More broadly, we have reformed functional skills qualifications, which are a widely acceptable alternative to GCSEs, improving their rigour and relevance. The Government have also established 21 centres for excellence in mathematics, designing new and improved teaching resources, building teacher skills and spreading best practice across the country through their wider networks. In response to disruption to education during the pandemic, a further £222 million has been provided to continue the 16-to-19 tuition fund for an addition two years from the 2022-23 academic year, allowing students to access one-to-one and small group catch-up tuition in subjects that will benefit the most, including English and maths.
Improving English and maths attainment is already a key part of the Government’s plans across higher, further and technical education. In 2020, 68% of 19-year-olds held grade 4 or above in both English and maths GCSE, which is an increase of 6 percentage points since 2013-14, the year before we required students to continue studying English and maths. This is a major step forward. The OECD’s 10-yearly survey of adult skills showed that in England people aged 16 to 65 currently perform significantly above the OECD average for literacy and around the OECD average for numeracy. The Government continually review the impact of policy, so a formal review at this time is not necessary.
Andrew Gwynne
I am heartened by what the Minister highlighted in his response to my hon. Friend the Member for Chesterfield about some of the Government’s attempts to close the attainment gap, but the reality is that it still exists and we should redouble our efforts to close it. I feel passionately about that because failing to get a good GCSE in English and maths can hold a young person back and deprive them of real opportunities later in life.
I know that from experience, because as I mentioned last Tuesday, in 1990 I left high school with a clutch of good GCSEs, but they did not include maths. I really struggled with maths at high school, much to the frustration of my dad, who was a maths teacher. It turned out that I had dyscalculia, so I struggled with numbers.
Mr Perkins
Those of us who have been on the Committee in the last week or so may well have been wondering what the next episode in the life story of my hon. Friend the Member for Denton and Reddish was, and we were not disappointed. [Laughter.] Joking aside, he makes an incredibly important point.
Too often in this place, there is a suggestion or an implication that if only the teaching was a bit better or there was a bit more application, everyone would have those GCSEs in maths and English. Actually, as my hon. Friend has laid out and as many others will know, students who are brilliant in many regards can have barriers that prevent them attaining those grades. It is a crucial issue for us. Thousands of other people out there have had their dreams similarly dashed by being unable to achieve those qualifications, so I appreciate what he has just said, which adds weight to the debate on new clause 5.
Question put, That the clause be read a Second time.
Alex Burghart
On a point of order, Mrs Miller. I hope you will indulge me for a few moments so that I can thank you and Mr Efford for the way in which you have shepherded us through these six sittings. It has been an honour and a pleasure to serve under your chairmanship, particularly as this is my first Bill Committee on the Front Bench—
The Lord Commissioner of Her Majesty's Treasury (Michael Tomlinson)
Hear, hear.
Alex Burghart
Who knows? Perhaps it will be the last. It has been a pleasure to hear a debate of this quality, to enjoy Opposition Members’ paeans to the heady days of Thatcherism when there were great opportunities in the Manchester region, and to hear their fulsome praise for former Conservative Secretaries of State for Education. It is has been a privilege to listen to the sometimes philosophical debates about whether BTECs are brands. I feel that for the sake of future historians, we should put in Hansard how cold it has been in Committee Room 14. On one occasion, an hon. Lady had to bring in a blanket and wrap herself in it. Mrs Miller, thanks to you and Mr Efford, we have survived, and we look forward to taking the Bill forward.
Mr Perkins
On a point of order, Mrs Miller. On behalf of all my colleagues here, I add my thanks to you and Mr Efford for the work that you have both done and for your support through this debate, which has been very good natured and constructive, even if it was not, ultimately, as successful as we might have desired. I also place on record our thanks to the Clerks, who have been tremendously helpful in the enormous amount of work that we asked them to do. As always, we all very much appreciate the quality and timeliness of their work, and their diligence. I thank everyone who served on the Committee for their varying contributions, whether they were here for all of it or not.
The Chair
I thank the Opposition Front-Bench spokesman for those kind words. I thank you all for your constructive debate throughout the Committee, and I thank the Clerks and Hansard.
Question put and agreed to.
Bill, as amended, accordingly to be reported.