Grand Committee
National Insurance Contributions (Secondary Class 1 Contributions) Bill
(1 day, 2 hours ago)
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The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung, and resume after 10 minutes.
Clause 2: Secondary threshold for secondary Class 1 contributions
Amendment 18
Baroness Noakes
Member’s explanatory statement
This forms part of a package of amendments in the name of Baroness Noakes to allow for a phased introduction of the reductions to the secondary threshold.
Baroness Noakes (Con)
My Lords, I rise to move Amendment 18 and to speak to Amendments 21, 24 and 25 in this group. These amendments are designed to make the national insurance increases in the Bill more manageable by businesses, as they are going to be picking up the lion’s share of the costs of national insurance in the first instance. The amendments do not change the overall approach of raising the rate and lowering the secondary earnings threshold; instead, they seek to phase in the secondary threshold reduction over two years, rather than taking the “big bang” approach taken in the Bill. The reduction in the secondary threshold is the larger of the two main changes in the Bill, raising roughly one and a half times the amount raised by raising the national insurance rate of contributions.
I should declare my financial interests in a wide range of listed companies, many of which operate in the UK and are therefore affected by the Bill. These include shareholdings in Next plc—which gives me a neat segue into the fact that I was prompted to table these amendments after listening to a “Today” programme interview with my noble friend Lord Wolfson of Aspley Guise, in his capacity as chief executive of Next, who argued for delayed implementation. I was delighted when my noble friend then added his name to my amendment, along with my noble friend Lady Neville-Rolfe. I very much look forward to his contribution to the debate.
I was particularly struck when listening to the “Today” interview by my noble friend’s analysis of the financial impact of the changes on part-time jobs and those that pay at or around the minimum wage. I think he said that it will add roughly 2% to the cost of employing higher-paid workers, but for part-time and lower-paid workers the figure is 6.5%. This, of course, is before you factor in the minimum wage hike, which will be coming in at the same time and will more than double the impact on certain kinds of employees, particularly younger ones.
I spoke about the regressive effect of the Bill at Second Reading and I was frankly astonished that the Minister’s Back-Benchers were not jumping up and down about the impact of the national insurance changes on the employment prospects of key groups such as female part-timers and young people. His Back-Benchers seem to have bought the disingenuous line, which has been run by the Chancellor and, indeed, the Minister, that these extra national insurance costs will be borne by businesses. The plain truth is that employers will not simply absorb the cost increases, as the Office for Budget Responsibility made abundantly clear: employees will pay, in the form of reduced hours, reduced pay increases or job losses. We will all pay in higher prices and, if that keeps interest rates higher for longer, home owners will pay too.
Part of the problem from the business perspective is the sheer scale of the increase in employers’ national insurance contributions, hitting them in just a few months’ time, at exactly the same time as the minimum wage hike. I expect that the Minister will say that the minimum wage increase is not in this Bill, but the plain fact is that businesses are facing a double whammy. Very few businesses can shrug off an increase of well over 10% in their payroll costs. The likelihood is that businesses will take rapid action to try to curtail the financial impact, but that action may well be suboptimal when looked at over a longer timeframe.
Recruitment freezes are the quickest way to put a lid on costs and they are already a feature of today’s uncertain business environment. The recruitment sector is therefore struggling and will doubtless have to reduce its own headcount in due course. If hours are reduced for part-time staff, that will have a particularly hard impact on women and their families, who are often dependent on the additional income that such jobs bring. Pay increases, other than for those on the minimum wage, will probably be held down, and most families are already struggling with inflation and will be hard hit if wages go down in real terms. We can also expect employers to reduce headcount. This is already happening, as a glance at the business pages of the media will confirm.
The noble Lord, Lord Eatwell, who is not here today, may well run his argument that this is entirely healthy, because it will encourage businesses to invest to reduce their reliance on labour and thereby increase productivity and release workers to be redeployed elsewhere in the economy. As I have said before, that is a nice theory, but it fails at a practical level. Businesses need confidence in the country’s economic prospects before they invest, and most business confidence surveys are well into negative territory. Many investment decisions are already on hold or being cancelled. In addition, we have high employment at present, thanks to the previous Government, but job vacancies are relatively low and falling. A more realistic outcome, at least in the short term, is that there will be fewer people in employment. The OBR calculated the impact of the national insurance changes as a loss of 50,000 jobs, but it could easily be higher than that.
My amendment is about ameliorating the short-term impact of the Government’s national insurance changes on businesses, so that they have more time to plan how they will absorb the increases alongside the additional minimum wage costs. If businesses have more time to work out the best way to cope, the impact on jobs and pay could well be softened. My amendment merely delays the full impact of the national insurance changes for an extra year, by phasing in the reduction in the secondary threshold over two years rather than make businesses face the whole impact at once next April. I am quite sure that the business community would prefer an even longer phasing in and would prefer it to apply to the increased rate of contributions as well as to the reduction in the threshold. My amendments are an attempt at a reasonable compromise. I beg to move.
Lord Wolfson of Aspley Guise (Con)
My Lords, I declare my interests as set out in the register, particularly my role as chief executive of Next plc, a company that employs over 40,000 people, of whom 22,000 are part-time. It is a job that I have had for 22 years, which I think makes me the longest-serving chief executive in the FTSE 100. I hope that I am able to bring that experience to inform the debate, which is why I rise to speak to all the amendments in this group tabled by my noble friend Lady Noakes, to which I have added my name.
I hope that the Minister will take this amendment in the spirit in which it is intended. To that end, I recognise the Government’s need to balance their books, the importance of their doing that, and that the parlous state of public finances cannot be wholly laid at the door of the current Administration. Nor can I see, in principle, why the employer national insurance threshold should disproportionately benefit lower-paid jobs, as it does at the moment. In principle, I can see no reason for that; it is the speed at which the change is happening that concerns me.
The problems caused by that speed are particularly acute because the axe falls hardest and disproportionately on entry-level part-time work, as my noble friend Lady Noakes pointed out. The way in which the change in the threshold works is something of a poll tax on jobs. Poll taxes do not have a great history of success, but the cost of around £600 is the same whether you earn £9,000 or £900,000. So, the combined effect of this increase on a job paying £60,000 would be 2%; on a part-time job paying £12,000, it would be 6.5%.
That change needs to be taken in the context of the rise in the national living wage. My noble friend Lady Noakes is absolutely right that, together, they mean that the figure for entry-level part-time working—jobs in hospitality, retail and care homes—will go up by 13% in April this year. It is impossible to see how this can result in anything other than a reduction in opportunities to join the workforce; indeed, it will result in some people having to leave the workforce. I hope that, going forward, these types of changes and the work of the Low Pay Commission are considered in conjunction with each other. It seems to me that these two changes have come in at the same time without co-ordination.
Unfortunately, this change comes at a time when the employment market is at something of a tipping point. Again, it is no one in particular’s fault—it is the employment cycle—but every economic indicator that I can see, through both the ONS and my own work, suggests that the labour market is hardening. In every single discipline in the business that I work for, whether it is computer programming or product development for stores, the applicant to vacancy ratio is rising.
Let me give a flavour of that. Last year, when we took on temporary staff in the run-up to Christmas, the ratio of applicants to vacancies was up by 50% on the previous year. In the previous year, we had nine applicants for every shop job; last year, it was more than 13. In this environment, the speed of change will dramatically affect the national insurance threshold change’s impact on both people and inflation.
Starting with the social impact, it is inevitable that businesses will have to accelerate their plans to increase productivity. There are plenty of opportunities to increase productivity, mechanisation and artificial intelligence both being at the forefront of those opportunities; but one way or another, that increase in productivity means fewer jobs. The time we have to implement those changes will directly affect the social impact of those efforts to increase productivity. The faster the change occurs, the less time businesses and individuals will have to manage down employee numbers through the natural turnover of staff, which is the normal way we would try to implement any improvement in productivity, particularly in part-time work. Natural turnover of staff is quite high; if you can manage such changes through natural turnover, it dramatically reduces the impact on human beings.
It is a shame that the noble Lord, Lord Eatwell, is not here, because I have heard him say that labour becoming more productive—that is, going out into the workforce and finding other, more productive things to do—can be a good thing. It can, but it will take people time to find those additional jobs, and time is what these amendments ask for.
Last Wednesday, my noble friend Lady Lawlor highlighted the acute pressure that the threshold change will put on retailers. She was right. On that day, Morrisons said that, in the light of the Budget, it would have to go harder and deeper in its drive to reduce costs. It joined Sainsbury’s, which has already announced 3,000 job losses.
The second reason for phasing in this change is its effect on inflation. Again, it might be helpful if I give the perspective of the company I work for. It is in the fortunate position whereby the growth we are able to enjoy, the margins we have and the productivity gains we think we will be able to achieve, collectively mean that we will need to pass on an increase in prices of only 1% this year, as a result of the Budget changes. Had we not had those margins to absorb the changes, and had we not had those productivity gains, that figure would have been just over 4%.
In other industries, in particular the food industry, margins are much narrower than those enjoyed in fashion retail. My concern is that everything I am hearing from that industry means that we will see price rises in the order of 4%. Were the threshold change to be phased in over two years, that inflationary spike would reduce price rises to closer to the Bank of England’s 2% target. That in turn would pave the way for a faster reduction in interest rates, which is in everyone’s interest—including the country’s biggest borrower, the Government. Phasing in the change would reduce the social and inflationary costs of this increase.
Lord Swire (Con)
I draw attention to my entry in the register of interests. I want to speak briefly in support of this series of amendments in the name of my noble friend Lady Noakes and others. It is very important to listen to what somebody such as my noble friend Lord Wolfson, who is involved in the retail industry, has just said.
I know, given my experience of dealing with the Treasury as a Minister, that it takes an absolutist position on most things. The Treasury does not like to cede any point at all; it regards that as some sort of weakness. I suspect that the Minister has been told that this is what the Treasury has decided and that he is not to resile from any of the arguments or rescind any of the inherent parts of the Bill. However, this proposal would not really change anything.
We on this side of the House are not arguing against these increases. However, the Chancellor of the Exchequer spoke in Davos about reinvigorating the economy and instilling confidence in it, at the same time as the Government are going to kick in the solar plexus a lot of those entering the market—people leaving university, for instance, and trying to get into the job market for the first time. They have an astonishing combination of challenges ahead of them, not least because of student loan repayments and the cost of housing.
If these changes are instigated so quickly now, where are the companies’ savings going to come from? They can come only from freezing employment and shedding jobs, from passing on the costs to the consumer and from totally stopping their R&D budgets. All these things are not, I would argue, in the long-term interests of the British economy.
By all means let these changes come, but let the market be prepared—the market being the employers, who can look at these changes and spend more time trying to accommodate them. Otherwise the Government are going to achieve what they think they are going to achieve on the one hand with an increase in income from these increases, but at the same time there must be a decrease because there will be fewer people in employment and more people needing some kind of financial support, which will have the precise inverse effect of what we are told the Government are seeking to achieve.
I hope that the Minister will realise that we are not trying to attack the principle of what the Government are trying to do. We recognise the fact that the Government need to raise revenue from somewhere, but we are asking the Government to think more holistically about the knock-on effects on those very people who they maintain they are also trying to help.
Lord Leigh of Hurley (Con)
My Lords, I rise to support these amendments. It occurs to me—I would be interested to know whether it is true—that this must be the first series of amendments where the three signatories have all been directors of FTSE 100 companies. That must tell us something. I think it is the first time, but I will be happy to be proven wrong.
It is a great pleasure to speak after one of my role models—she does not know it, but it is true—my noble friend Lady Noakes, as well as my noble friend Lady Neville-Rolfe and, particularly, my noble friend Lord Wolfson of Apsley Guise, who is widely regarded as one of the leading businessmen of his generation. I say that because he is from a younger generation than me, perhaps. He has an outstanding business career that has created thousands of jobs and tremendous value for shareholders. Thankfully, he still has time to contribute to your Lordships’ House and other communal activities, so when he speaks I think we should listen carefully. He is right to say that there is some truth that more expensive labour leads to greater productivity, mainly because productivity is measured as output per hour so, by definition, productivity improves, but it is not necessarily a good thing in and of itself. He mentioned the food sector. Certainly, in the hospitality sector I know of companies that are just closing down. This increase has led them to say that they are going to give it up, which cannot be what the Government want.
On 6 January, Next reported anaemic growth as the result of the tax measures. On the very same day, S&P Global’s Purchasing Managers’ Index came out and said that nearly 25% of British businesses reduced their workforce following the Budget specifically. The index indicated that the private sector has experienced its weakest growth in 14 months, with firms shedding jobs at the fastest pace in more than 15 years, other than during the pandemic. HMRC released its payroll data on 21 January. Employees in the UK declined by 47,000 to 30.3 million in December alone, the biggest drop since November 2020, which again was pandemic-related. As my noble friend Lord Wolfson mentioned, Sainsbury’s came out on 23 January with cuts to head office of 3,000 and an ambition to reduce senior management roles by 20%. Recently, on 27 January, the Confederation of British Industry reported that private sector firms expect a significant decline in activity over the next three months with a weighted balance of 22% negative. It said that this pessimism is widespread across sectors including services, distribution and manufacturing. The downturn was mainly due to the Budget.
With the assistance of someone who is much smarter than me on spreadsheets, I have tried to calculate the effect of all this. Although I am an economist by background, this is not a specialist area for me, so I would be extremely grateful if the Minister would ask the Treasury to comment on the numbers that I am going to give him. I think that they are right, but I would be more than happy to be challenged if they are not.
My premise is that the average UK earnings per full-time employee is £33,280. The number of full-time equivalents in the UK is bang on 30 million. If you increase the existing employers’ NI rate of 13.8% to 15% and reduce the existing NI threshold of £9,100 to £5,000, you get an increase in total NI take from £100 billion to £127.2 billion, giving you a total employers’ NI increase of £27.2 billion—or, to be precise, £27.154 billion—which is the sum that the Chancellor seeks. Fair enough. But, given all that we have heard today, what happens if employment reduces? You can put in any variable you like. I have taken what I regard to be a most reasonable suggestion of 3%. Let us say that, as a result of this, there is a 3% reduction in employment. Personally, I think it would be much more, but let us say 3%. At that point, the number of UK full-time equivalents becomes 29.1 million. The employers’ NI take goes to £123 billion, which is a reduction of £3.8 billion. But, at the same time, there is universal credit for those redundant full-time equivalents of £20,000 a head, which costs the Treasury £18 billion. If you add the loss of that universal credit to the reduction in NI take that I have just mentioned, you get a net loss of—guess what—bang on £27.05 billion. So, the 3% reduction in employment that I reckon will happen leads to absolutely no gain to the Treasury whatever.
I present those figures because I would like to be challenged on them and proven wrong, but I do not think that I am. Along with the signatories to the amendment, I hope that the Government will take this opportunity to reflect carefully, in the spirit of co-operation, as to whether it is wise to bring this measure in so harshly, so quickly.
Baroness Fraser of Craigmaddie (Con)
My Lords, I apologise to the Committee that this is my first intervention on the Bill. I am not a FTSE 100 director, nor am I the chief executive of a great company like Next. I am the chief executive of a small charity in Scotland and the reason why I have not been able to participate on this Bill is that we are going through a consultation process to reduce our employee numbers at this very moment as a direct result of the cliff edge and shock to us of the increases in national insurance.
I rise merely to say that everything that my noble friends Lady Noakes, Lord Wolfson and Lord Leigh have just said is my daily life at the moment. While businesses can potentially put up their prices, charities cannot. What also concerns me is that because this cliff edge, which is what these amendments are trying to smooth out, is happening at the same time as the rise in national minimum wage, we are facing a double whammy in trying to make our books balance.
What finally concerns me is that this will lead not only to a reduction in the number of those in employment but to a reduction of skills in these organisations. These things cannot easily be built up again, should the situation change. Give us time to implement and do the things that we need to do. I urge the Minister to listen to my colleagues and do all that he can to soften this terrible blow.
Baroness Kramer (LD)
My Lords, we on these Benches are not in the same place as those on the Conservative Benches in taking the position outlined by the noble Lord, Lord Swire, to seek a delay before these measures are introduced. We are opposed to their introduction. We supported a regret Motion at Second Reading and those on the Committee who were present in the first two days will know that we moved a series of amendments essentially to halt the increase in employers’ NICs, and the related changes, in its tracks. In the case of part-timers, we went beyond that and sought to have employers’ NICs halved from their current level because of the importance of dealing with disadvantaged people, the hospitality industry and other reasons. In the first two days of Committee, I and my colleagues talked extensively and made our substantive and detailed arguments. I know that the Committee will not want to hear me repeat all those, so I merely say that we stand our ground.
Baroness Neville-Rolfe (Con)
My Lords, I rise to support Amendments 18, 21 and 25 in the name of my noble friend Lady Noakes. I am particularly pleased to see my noble friend Lord Wolfson of Aspley Guise, who brings his unique knowledge of the difficulties that businesses are facing, especially in the retail sector. He runs one of Britain’s most admired companies—and has done so for 22 years, he tells us. I agree with everything that my noble friend Lord Leigh, and others, said about him and his business.
As always, my noble friend Lady Noakes stated the arguments very clearly and persuasively. My noble friend Lord Wolfson used a new phrase, for this Committee: he talked about a poll tax, rather than the “jobs tax” term that we have used before—that is always a warning. He said that the changes in national insurance could affect as many as 20 million jobs, which explains to some extent the huge reaction there has been to this measure right across business and, indeed, from many in work.
As he said, for relatively little cost, we could reduce the social and economic impacts of the changes. His spirit was very constructive. He acknowledged the productivity improvement that is needed, some of which is already in the pipeline, as he said, but also the difficulty of what I would call the shock tactic of the double whammy of the April changes. My noble friends Lord Swire and Lord Leigh gave us first-hand evidence of the loss of jobs which is taking place already, and which we have talked about before. My noble friend Lady Fraser evidenced the impact of that double whammy and brought out the point about the loss of skills: if people lose their jobs, we lose the skills in the industry. We had further estimates from my noble friend Lord Leigh, to add to those we had last week from the noble Lord, Lord Londesborough, which merit attention.
The amendment seeks to allow for a more gradual transition in the reduction of the secondary threshold. That would allow businesses time to adjust to the increase of a substantial new tax burden. It aims to be a small but important step in alleviating some of the burden on employers. The Government have to accept that they have placed considerable strain on business with their fiscal policies, and a phased introduction would provide a more manageable path forward.
Businesses are the backbone of the economy: they provide jobs, drive innovation and contribute to the prosperity of our communities right across the country. However, given the current pressures they are under, it is critical that we do not introduce changes that exacerbate their struggles. The sudden and sharp reduction in the secondary threshold will represent a huge burden, particularly for smaller employers, as we discussed last time, and for those grappling with rising costs and reduced cash flow. A gradual approach would ensure that the reduction was not a sudden shock to businesses and allow them to adjust their payroll and budgeting systems. It would be more predictable and manageable, and employers could plan and absorb the changes over time.
The IFS has found that the lowest salaries will be affected the most, with the lowest earners facing a larger than 4.5% increase in contribution, compared with less than 1.5% for the highest earners. It is partly because of the perverse effects and the adjustment issues that we are looking at today that the IFS has suggested that the Budget measure will—quite quickly—raise only £16 billion a year. My noble friend Lord Leigh has also modelled the impact of a 3% jobs cut, which he estimates would wipe out the revenue from the proposed changes.
We need to think again. My noble friends Lady Noakes and Lord Wolfson talked about the 10% to 13% increases coming in April, if you take NICs and the national minimum wage together; some delay or a reduction in the threshold would avoid the disaster, particularly on the high street, that I am so worried about.
I was talking to an excellent member of staff in the closing shop in Salisbury which I mentioned last week. She still does not have a job to go to. That has not been my experience of retail closures in the past; usually, the best employees are quickly snapped up by the competition. We have a bit of a problem here, and I would like to work with the Government to see whether anything can be done to alleviate the difficulties.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, I am grateful to all noble Lords for their contributions to this debate. I will address the amendments tabled by the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, which would phase in the introduction of the secondary threshold cut to £6,760 in the next tax year and £5,000 from 2026-27.
I absolutely appreciate the concerns raised by noble Lords during this debate, and by businesses, about the impacts of the Bill. It was a privilege to hear the insights and expertise of the noble Lord, Lord Wolfson, and I greatly appreciate the constructive spirit of his contribution. However, as I have set out previously in this Committee, the Bill is necessary to repair the public finances, to protect working people and to invest in Britain’s future, including by providing more than £20 billion extra for the NHS over this year and next. This funding will reduce waiting times by supporting the NHS to deliver 40,000 extra elective appointments a week and will make progress towards the commitment that patients should expect to wait no longer than 18 weeks from referral to treatment. Reducing the threshold by less than that set out in the Bill would reduce the revenue generated by it and would therefore introduce new pressures, which would have to be met by more borrowing, lower spending or alternative revenue-raising measures.
Given these points, I respectfully ask the noble Baroness not to press her amendments.
Lord Wolfson of Aspley Guise (Con)
Before the Minister sits down, can he say how much this amendment and the resulting delay would cost the Government? That would help those of us on this side of the Committee to understand why this is not possible.
Lord Livermore (Lab)
The Government tend to cost the Government’s policies. It is not usual practice for the Government to cost Opposition policies.
Lord Leigh of Hurley (Con)
Before the Minister sits down, will he commit to having the Treasury look at the numbers I mooted? I will happily send him the spreadsheet if it helps to verify whether they are accurate.
Lord Livermore (Lab)
The noble Lord set out some figures that are based on his assumptions, not the Government’s assumptions. I have no reason to dispute his maths or the computing power of Microsoft Excel, but I do not think I can commit Treasury resources to checking the figures in his own spreadsheet.
Baroness Noakes (Con)
My Lords, first, I thank all my noble friends for taking part in this debate and supporting these amendments. They were put forward as a constructive way to deal with what could be some very damaging impacts caused by the Government’s legislation.
I was confused by the noble Baroness, Lady Kramer, saying that she is against the Bill, so she does not want to engage in ways of making things better. As His Majesty’s loyal Opposition, we believe that what we are here to do is try to make policies better, even though we disagree with virtually all the Bills the Government are putting forward at the moment. Our job is to engage constructively and, certainly, to try to avoid damaging aspects.
My noble friend Lord Wolfson spoke about being able to pass on price increases of 1%; he has an amazing luxury, because not all retailers can do that. At the weekend, I got talking to a local businessman who owns a number of shops. Most of his workforce are part-time staff. He employs quite a lot of people in and around our villages, and in the neighbouring villages, where he has other shops. He said that he does not know what to do. He cannot increase prices because the goods he sells do not lend themselves to significant price increases. The only thing he can do is to reduce hours or numbers. These measures means that our local economies—things that are really important to people—will be damaged by less income for local families. They are having really significant impacts, whether at the large end of business or the very smallest end.
I regret the Minister just saying again and again that he has to repair the finances and put more money into public services because he wants to protect working people. The one thing he is not doing with these changes is protecting working people. I sincerely hope that, between Committee and Report, the Government will think about whether they can find ways of making this Bill less damaging. We are not arguing that the Bill should not exist—we do not believe that that is our role, and we did not vote against it at Second Reading and certainly would not have done so—but there are many ways of softening its edges. I hope the Government will consider that between now and Report.
With that, I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
Member's explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for early years provision.
Baroness Neville-Rolfe (Con)
My Lords, in moving this amendment, I will speak also to my Amendment 40; both concern early years provision. I am afraid that this measure is another example of not protecting working people. The Budget will have a disastrous impact on the early years sector, and we need to consider this fully.
My Amendment 28 asks the Government to produce an appropriate impact assessment on the effect of this jobs tax on the early years sector. There have been calls from across the sector for the Government to acknowledge the impact this measure will have. The Early Years Alliance has estimated that this harsh tax will cost each nursery an additional £18,600 per year. Yet, despite these calls, the Government have not acknowledged the especially harsh impact this tax will have on the early years sector.
The chief executive of the National Day Nurseries Association has told us that, on average, 75% of a nursery’s expenditure is spent on staffing costs, and that, as a result of this tax raid, nurseries will have to find an additional 11% on top of the usual amount they spend on staff. Her view was that, following this Budget, the only realistic options facing nurseries are to pass the extra burden on to parents and/or to reduce the number of places they offer, in order to prevent them going out of business. Although I welcome the additional funding for early years introduced in the Budget, this sector is already under financial pressure, and this additional burden on a sector that provides such an integral service seems incredibly short-sighted.
In December, the Government published their funding rates for 2025-26, but they failed to include an uplift for this damaging tax, which they themselves are introducing. My Amendment 40 seeks to reduce the impact on early years by increasing the employment allowance in this labour-intensive sector. This is often made up of part-time workers whose employers are hit worst by the reduction in the threshold for NICs, as we just heard from my noble friend Lord Wolfson. I would like to understand the cost to the Exchequer. The Minister helpfully gave us a figure for the overall cost of the increase in the employment allowance last time. Can he give an estimate of how much will go to early years providers, so that we can understand the impact of doubling it?
Baroness Kramer (LD)
My Lords, we consider these areas so important that employers’ national insurance contributions should not be changed from the current formula. Our position remains unchanged. We discussed it extensively in both substance and detail on the first two days in Committee, and I would not try the Committee’s patience by repeating all the arguments that were made from these Benches.
Baroness Lawlor (Con)
My Lords, I support these important amendments. Today, all three and four year-olds in England are entitled to free education before they start school full time at the age of five. In the year 2023-24, there were almost 23 children for every teacher—the highest ratio thus far. If we continue with this measure without amendment, we will see an even higher ratio, with the number of adults declining because of the costs, as we heard previously in Committee and again today. We have 3,100 nursery schools and 11,700 day nurseries, and they play an integral part in the induction of little people into the world of education. They are vital to the well-being of the child and, indeed, to parents being able to pay their way with confidence that their children are receiving an early years education. I urge the Minister to provide an exemption, or to ensure in one way or another that early years education and care providers, whether in a nursery school, a day nursery or another system—voluntary and independent, as well as public sector—are prevented from losing teachers due to the additional costs.
I echo what my noble friend Lady Neville-Rolfe said. I would be very happy with an increased employment allowance. We need an impact assessment, given the large number of people employed in this sector and the impact this measure will have on children’s education later in life. We are now paying the price of the Covid lockdown, with the children who passed through schooling at that age. Let us stop making things difficult for early years provision and try to improve it, not disimprove it by such a measure.
Lord Livermore (Lab)
My Lords, I will address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, which seeks to prevent commencement of this Bill until an impact assessment is published for the early years sector.
Delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, including the changes to employer national insurance. As I have stated previously in Committee, an assessment of the policy has been published by HMRC in its tax information and impact note, including impacts on the Exchequer, the economy, individuals, households and families, equalities and businesses, including civil society organisations, with details on monitoring and evaluation.
Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation, and the Government do not intend to provide further impact assessments.
Amendment 40, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for early years providers. This would introduce new pressures which would have to be met by either more borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on what sector a business is in would introduce distortion and additional complexity into the tax system.
The noble Baroness, Lady Neville-Rolfe, asked for some specific figures. The figures are not broken down in the way that she asks for.
Early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why, in our manifesto, the Government committed to delivering the expansion of government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector.
Despite the very challenging fiscal circumstances the Government inherited, at the Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver government-funded childcare places. This means that total funding will rise to more than £8 billion in 2025-26.
In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.
Baroness Neville-Rolfe (Con)
I thank the Minister for his response. I hope that in the light of what has been said today and on previous days, the Government will look at the impact of these NICs changes on our early years sector.
When we were in government, we took steps to support the early years sector, and we know that the national insurance increase is going to be a significant setback. My noble friend Lady Lawlor talked about the numbers of providers spread across the country, which play a huge part in the induction to the world of education and in helping young people to get the right kind of start in life. The very least the Government can do is to look at the impact note again and produce an assessment of the impact of the policy on the early years sector in particular, not just the overall economic impact. We have heard from the Minister on several occasions that they have produced a note, but it is a macroeconomic—an overall—note, while what we have here are very big changes in the economy affecting individual sectors, some of them very badly. There does not seem to be any readiness to look at the impact in those sectors and to find solutions, whether through national insurance changes or some other way. I suggested the employment allowance as another route.
The noble Lord will also recall that when in government we took steps to increase the supply of early years provision by expanding the childminding sector and encouraging the establishment of new nurseries alongside our expansion of the 30-hours free childcare policy. Without an assessment of the impact of these changes, how can the Government be sure that they will be able to deliver on the ambitious plans that the Minister set out to expand free childcare hours for hard-working families? I think there is a measure of agreement on objectives, but we need to find a way to get there.
These are important questions, and Ministers need to answer them before we get to Report. It is intolerable that we are pressing ahead with a jobs tax without a full assessment of the policy. We have had some macro figures, now broken down into three chunks, but it is very difficult for us to know what the individual effect is on different sectors. This is a serious matter. Working families across the country are very concerned. My worry is that the noise of concerns on something such as early years will increase as April comes and early years providers discover just what sort of hole they are in, but in the interests of time, I beg leave to withdraw my amendment.
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for hospices.
Baroness Monckton of Dallington Forest (Con)
My Lords, Amendment 29 is in my name and would prevent commencement of the Act until a full impact assessment is published for hospices. The NI announcement was a big blow for hospices already struggling with their budgets. There is also understandable frustration in hospices being told that this was for the benefit of an NHS that is already chronically underfunding most children’s and adult hospice services.
Sam Royston said:
“We project that over the coming 25 years the need for palliative care is going to rise by 25%, with around 150,000 more people needing”
end-of-life services. He said:
“We have no plan, no plan at all to address the scale of that challenge”.—[Official Report, Commons, Terminally Ill Adults (End of Life) Bill Committee, 29/1/25; col. 189.]
Hospices are particularly impacted as most have significant retail operations employing many people close to the minimum wage and many on part-time contracts. These are the employees where, typically, the impact of this tax is proportionally highest.
Many hospices already struggling with deficit budgets modelled the financial costs at between £150,000 and £450,000 in proportion to their turnover. For example, St Christopher’s Hospice in south London said that it will face increased costs of around £450,000 a year, which is equivalent to the cost of nine specialist nurses. Nationally, the hospice movement estimates that the cost to the sector will be £34 million for England and just under £40 million for the whole of the United Kingdom. Only this week, the Kirkwood hospice announced that it would be reducing its costs by £1.7 million a year, which will involve placing 33 roles at risk of redundancy.
We all know how important hospices are and the difference that they make. I got in touch with Rachel Street, who is the CEO of Heart of Kent Hospice. This is a hospice I know well: my mother was a founding patron, and I have seen the dedication of the frontline staff, their professionalism and their compassion. They make—and I use this phrase deliberately—a life-changing difference. I visit it every year to present colleague awards in my mother’s name, and I am always moved by their stories and by the kindness and tenderness that they show to those at the end of life’s journey.
As a charity, Heart of Kent Hospice has been hit with the double whammy that my noble friends Lady Noakes and Lady Fraser discussed earlier: increases to the national living wage and employers’ national insurance. Plus, as a charity employing doctors and nurses, it anticipates being impacted by any increases to the NHS Agenda for Change pay scales. It has more than 60 staff whose salaries will need to be uplifted to the national living wage, which is more than a third of its workforce. It now needs to look to reinstate differentials between roles, otherwise shop assistants and shop managers in its retail operation will be on the same salary. The ripple effects up through the organisation are huge, squeezing pay differentials throughout.
The retail teams are where hospices are seeing the cost pressure the most, drastically reducing the surplus made by their charity shops, which is an important part of their income for the delivery of palliative care services. For all hospices, the main costs of delivering vital services are wages and salaries, and, like other charities, they employ many colleagues on the national living wage, often in part-time roles, so they are all significantly impacted. For the Heart of Kent hospice alone, this change will cost it over £200,000 a year, on top of the £6.5 million it needs to raise, of which only 20% is funded by the integrated care board.
Baroness Sater (Con)
I rise in support of my noble friend, who made an excellent and passionate speech about hospices and the dire need for support they will have if the NICs changes go through. They will affect, as we have heard already, redundancies and the level of staffing. The burden that will be put on hospices will be extraordinary and the figures are unbelievable if we consider how much they will have to raise if they have to find that money in the future. As I have said previously, it is imperative that we have an impact assessment whereby we can understand these individual sectors and the absolute devastation that will happen if we do not know what will happen, going forward. So I plead with and urge the Minister to reconsider and support my noble friend on this important sector. It is important that we know a little more about what will happen if these insurance rises take place.
Lord Leigh of Hurley (Con)
My Lords, I support my noble friend Lady Monckton of Dallington Forest in much the same way. If all goes to plan, I will speak on Thursday in respect of social care homes, particularly adult social care homes, where many of the same issues arise. I cannot imagine the response if a Conservative Government had decided to put national insurance rises on such institutions; can noble Lords begin to see the headlines that would be against us?
This House is a revising Chamber; it allows the Government the opportunity to pause, rethink and consider, and if ever there was a case to do so, this is it. Before the Government have the acute embarrassment of urging Peers to go through the Division Lobby to penalise care homes and hospices in such a way, I very much hope that they will take advantage of the gap between Committee and Report to reflect on the arguments.
Lord Swire (Con)
My Lords, I too support my noble friend Lady Monckton of Dallington Forest and thank her for her very moving and informed speech. It triggered a memory for me. I was approached by the Children’s Hospice South West for a fundraiser —my goodness, I think it was 15 years ago—and managed to raise a record amount by putting on an event for it. I saw for myself the astonishing job that hospices do. They provide a level of care and places that many of these people—children, in particular—could not find elsewhere, so the question for the Minister is this: if some of them are to shed staff and therefore be less able to take these very needy children and their relations, where will the Government step in? How will they take up the slack and what, ultimately, will be the cost to the Government?
I have some sympathy with the Minister. He has come here today to hold the Treasury line, of course, but we are wasting our time if, to each and every group of amendments we table, the stock reply is, “The Government need to raise the money. They don’t recognise the figures that the Opposition are presenting”, and we move on to another set of amendments. That does not suggest to me much dialogue or debate. But I congratulate the Minister on one thing: so far in our deliberations this afternoon he has not alluded once to the fictitious £22 billion black hole.
Lord Scriven (LD)
My Lords, listening to noble Lords present the case for Amendment 29, I agreed with every single word that was said. However, the noble Baroness, Lady Monckton, said that an exemption was required. Amendment 29 does not ask for that exemption; it asks for an assessment to be done, and therefore it does not mean that an exemption would come, which is why, on day one in Committee, we on these Benches tabled an amendment to say that an exemption for hospices should apply. If we bring that back on Report, I hope that the noble Baroness will support us as we hold our ground.
I want to talk briefly to the other amendment in this group: Amendment 41, tabled by the noble Baroness, Lady Neville-Rolfe, regarding the increase in the employer allowance to £20,000 for hospices. Just as a matter of fact, the average number of staff per hospice is 81 full-time equivalent employees, and the average salary is £23,626. Therefore, the average total salary bill for a hospice is £1.863 million, so a £20,000 employment allowance will be absolutely useless because hospitals will still be clobbered by the national insurance contribution increase. That is why we put them down for an exemption, and we hold our ground on that.
Baroness Neville-Rolfe (Con)
My Lords, I will speak to my Amendment 41. I support Amendment 29 in the name of my noble friend Lady Monckton of Dallington Forest, who gave an extremely moving speech. She has made such a huge contribution to the charitable sector, as a supporter and a fundraiser. We must listen to her and the evidence that she has gathered in her work in the run-up to this discussion, which shows how important it is to find a way to match the compensation that NHS bodies are getting under the arrangements made for increasing national insurance and reducing the threshold.
That is the purpose of our series of amendments, some of which are probing, some of which we will pursue, because this is an important sector. Hospices are an essential part of our healthcare system, and the Bill will leave many unable to provide the services that they are currently offering. I was glad to have the support of my noble friend Lady Sater for both amendments, and that my noble friend Lord Swire was able to mention the fundraising for hospices which many have taken part in across this House. Indeed, hospices were one of my favourite charities of the year at Tesco, and one of the most moving with staff. We were talking about up to 300,000 people who were engaged in raising money for hospices. That taught us a lot about the difficulties and the wondrous jobs that they do.
My Amendment 41 seeks to increase the employment allowance for hospices, which would ease some of the financial pressures that they are facing at the hands of this Government. The noble Lord, Lord Scriven, intervened, and it was helpful, to say that an exemption would cost—£1.83 million or was it billion?
Lord Scriven (LD)
I was pointing out that the average salary bill of a hospice is £1.8 million.
Baroness Neville-Rolfe (Con)
That is the average salary bill, so the noble Lord is right that an increase in the employment allowance would not absorb all the extra costs.
Baroness Neville-Rolfe (Con)
Obviously, for smaller bodies, the employment allowance is, as the Minister has said on several occasions, helpful because it alleviates the cost of the changes. Therefore, looking at the employment allowance is another way of coming at the issue, which is one of the reasons why we have put it forward for discussion.
Despite the fact that many hospices provide functions that would otherwise need to be provided by the NHS or social care, the Government have failed to recognise their importance and are instead taxing the hospices that the country relies on. Although hospices do not charge for their services, they receive only one-third of their funding from the Government and rely on charitable donations for the remainder of their income. This will place unnecessary and costly additional pressures on their finances at a time when demand for hospice care is growing. The Government seem to be unaware of the great help hospices provide and the fact that they reduce pressure on the NHS by providing services in a more efficient and effective way. There is a saving there to offset any cost.
While I am aware that the Minister claims that the already published impact note is enough, I have not heard another noble Lord agree with that. Although I am sure he will respond in a similar manner, the current note is simply not sufficient and does not include any impact assessment on the very businesses it is being imposed on. That is very concerning for hospices which do so much work to support the NHS and could well be bankrupted by this Government’s decision to introduce the jobs charge. The charity for children’s hospices, Together for Short Lives, has estimated that this tax rate will cost an additional £133,966 for every children’s hospice. That is an extraordinarily high number for a sector that is not profit-orientated, and I am concerned about that impact. Although I welcome the £100 million in funding that the Government have announced for hospice improvements, that money will not help with the staffing costs that these hospices will now face.
As my noble friend Lady Monckton said, hospices are life affirming and give wide support beyond the patients in the hospices to the families in their grief. They are a vital part of the palliative care system, as I hope the Minister will agree. I think that the Government will be blamed if hospices go into a downward spiral as a result of these extra costs in April. They should look again at some way of helping them, whether it is an exemption, a delay, a change to the employment allowance or some form of compensation. It is an important matter that we should address in this Committee.
Lord Livermore (Lab)
My Lords, I will address Amendments 29 and 41. I am grateful to all noble Lords for their contributions. I acknowledge the powerful contribution from the noble Baroness, Lady Monckton of Dallington Forest; I listened very carefully to all the points that she and other noble Lords made.
As I noted in a previous sitting of this Committee, it is important to recognise that all charities, including hospices, can benefit from the employment allowance, which this Bill more than doubles, from £5,000 to £10,500. This will benefit charities of all sizes, particularly the smallest ones. The Government also provide wider support for charities, including hospices, via the tax regime. This tax regime is among the most generous in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.
On the specific point made by the noble Lord, Lord Leigh of Hurley, the situation whereby independent contractors, including primary care providers, social care providers, charities and nurseries, will not be supported with the costs arising from these changes is exactly the same as with the changes to employer national insurance rates under the previous Government’s plan for the health and social care levy.
This Government have provided a real-terms increase of 3.5% in core local government spending power for 2025-26, including £880 million of new grant funding provided to social care. This funding can be used to address the range of pressures facing the adult social care sector. We are also supporting the hospice sector with an increase in funding of £100 million for adult and children’s hospices to ensure that they have the best physical environment for care—
Lord Scriven (LD)
Can the Minister confirm that the £100 million is capital and cannot be used for revenue?
Lord Livermore (Lab)
We are also providing an additional £26 million of revenue to support children and young people’s hospices.
As I have said previously, delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, of course, including the changes to employer national insurance. As I have also said previously, an assessment of the policy has already been published by HMRC in its tax information and impact note.
Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes. The Government and the OBR have therefore already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and to taxation. The Government do not intend to provide further impact assessments.
In the light of the points I have made, I respectfully ask the noble Baroness to withdraw her amendment.
Baroness Monckton of Dallington Forest (Con)
My Lords, I am grateful for the thoughtful contributions to this debate from my noble friends Lady Sater, Lord Leigh and Lord Swire. I note the contribution on Amendment 41 in the name of my noble friend Lady Neville-Rolfe. All I can say is that I urge the Minister to consider carefully the amendments we have been debating and to acknowledge the essential services provided by the hospice sector. However, for the moment, I beg leave to withdraw the amendment.
Lord Altrincham
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for retail.
Lord Altrincham (Con)
My Lords, I rise to move Amendment 30 on behalf of my noble friend Lady Monckton of Dallington Forest and to support Amendment 51 in the name of my noble friend Lady Neville-Rolfe.
Amendment 30 would delay the commencement of Clause 2 until an impact assessment had been published fully to assess the impact this tax will have on the retail sector, and Amendment 51 increases the employment allowance to £20,000 for that sector.
Retail is important because so many people work in it, not people on average or in aggregate in a Treasury forecast, but hundreds of thousands of individuals, some young, some in their first job, some working part time—as well as their families, their neighbourhoods and their customers—where they bring joy to themselves and to others every day. We know that this Bill will lead to job losses.
When the national insurance increase was first announced, there was an expectation, perhaps a hope, that the cost would be met by price rises or other changes rather than by job losses, but as the weeks have gone by, we know that the increase is being funded by job losses. That is why this impact assessment question is important because part of the impact is happening already. From the initial announcement to today, we already know that the policy is being funded by job losses, so the Bill is creating policy-driven unemployment. All of us in this Room share a little in the responsibility for this, but we should at least be very careful in our actions when we know that the cost will be unemployment.
As the noble Lord, Lord Eatwell, and others have said, we might hope that jobs will be created elsewhere. We must surely, on all sides of this debate, hope for job creation, but that does not change the short-term impact of job losses. Equally, we might hope for productivity improvements—say, the automation of retail—which is important anyway, as the noble Lord, Lord Wolfson, mentioned, but not, alas, if we can help it, at the cost of job losses.
To go back to what my noble friend Lord Leigh was talking about, to where the estimates at best are for those of us who are not in the Treasury, very roughly, it looks as if in retail the national insurance hike could easily lead to a 5% reduction in headcount, and if retail is of the order of 2 million or 3 million people, we could quite quickly get unemployment just from retail of 200,000. If you add a couple of hundred thousand from other areas, we are on the way to half a million job losses that could come from this policy. There was an expression earlier on about what is in scope in taxation and in the tax take. What is in scope here are individuals who will lose their jobs—unemployment is in scope. There are direct impacts on job losses.
The value of our retail sector cannot be understated. In 2024, retail sales in Great Britain were worth £500 billion, and 2.87 million people were employed in the sector: nearly 10% of all jobs in the British economy. That is therefore nearly 3 million people whose jobs will be put at risk due to this tax increase.
One of the great benefits of employment in the retail sector is that there is extraordinary element of flexibility, which allows a great number of young people to work in the sector. As has already been discussed in Committee, those who are paid the least will be affected the most. The noble Lord, Lord Wolfson, mentioned earlier that the cost impact on part-time and often very young workers is a 13% increase. This paints a bleak picture for our young people in the sector. Young people are already a more vulnerable group of people, and I am highly concerned that this tax increase will only paint a bleaker picture for young people trying to enter the job market.
The reduction of the threshold at which employers begin to pay employer’s national insurance to £5,000 will hit part-time employees the most. Given that half of all retail employees are part time, the fact that this jobs tax will bring 1.45 million part-time retail employees into the bracket is a devastating result for a sector that often employs young people.
The retail sector has responded with outcries at this tax that will be imposed upon it, with 81 major retailers writing to the Chancellor expressing concern over the impact the tax will have on the sector that typically operates with a 3% to 5% profit margin. In a survey done by the British Retail Consortium, 56% of chief financial officers said they would reduce the number of hours and overtime they offered their employees. This is why this is a jobs tax because businesses will be forced to cut costs in order to continue, and as such, it will hit workers the most.
I am concerned not only about the impact this tax raid will have on workers but about the impact consumers will face given the survey I mentioned above, where 67% of retailers responded that they would be forced to raise prices.
We in this Room are all aware of the impact that this tax increase will have and of the inevitable factor of creating unemployment. I look forward to hearing from other noble Lords on this issue, and I beg to move.
Baroness Lawlor (Con)
My Lords, I support my noble friend and his amendment, which is important. If the Minister will forgive me, we hear the same reply all the time. I do not think that HMRC’s figures, the Budget assessment or the OBR figures that we were given in November or December provide adequate information to sectors facing huge job losses. They need to plan ahead, and these assessments may spur the Government if it is written down in black and white that these jobs will go.
The economist Liam Halligan pointed out in his weekly column in the Sunday Telegraph at the weekend that, according to S&P’s bellwether PMI index of business leaders, firms are cutting jobs at the fastest rate since the financial crisis. He writes that there was a 47,000 drop in payroll employees in December, the biggest monthly fall since lockdown. Those figures were tallied after Sainsbury’s announced 3,000 job losses. At the same time, he wrote that personal insolvencies in England and Wales were up by 14% in 2024, with a huge spike after the Budget. UK company liquidations surged. In 2024, 3,230 companies were shut down under the courts.
Last week, I mentioned the impact on the retail sector. I will not go through it, but it is estimated that as a result of the Budget entirely, which includes the NIC costs, £7 billion will go out of the retail sector. Those figures are staggering. I cannot accept the Government’s blithe assessment. I know that the Minister is sticking to the Treasury line with the statement that the impact assessments published so far are in line with what has been published in the past. We are dealing with a different sort of measure in this NIC Bill. I have been in the House of Lords only since November 2022, but it is the first time in my experience here that we have faced a measure where it is clear to all concerned that there will be job losses on a significant scale. Surely, that should spur the Government to want to provide some kind of impact breakdown for the different sectors, whether they are the charitable, voluntary or caring sectors or in the only area where we will see growth, the private sector. If the Chancellor is so convinced and she and the Government are keen and will produce growth, they should recognise that this will come from the private sector. It does not come from growing the public sector. I hope the Minister will support or think again, as my noble friend proposes, on retail.
Baroness Kramer (LD)
My Lords, again, we discussed this area extensively over the first two days in Committee. I particularly recommend to the Committee the amendment tabled by the noble Lord, Lord Londesborough. The Government have put in place protection for microbusinesses. I think the calculation by the noble Lord was right, basically, that it is up to about seven employees. His proposals would put in significant protection for small businesses, those just up from micro and those potentially at the beginning of scale-up, which we need so much in this area. The noble Lord is now in his place, and I am delighted to make those comments in his presence.
Baroness Neville-Rolfe (Con)
My Lords, I shall speak to Amendment 51 and I support Amendment 30 in the name of my noble friend Lady Monckton, presented by my noble friend Lord Altrincham, who started by drawing attention to the very substantial number of people we are talking about in retail—hundreds of thousands of people—and the problems they are facing. As my noble friend Lady Lawlor said, jobs are being cut at the fastest rate since the financial crisis. This is a grim situation.
My Amendment 51 probes whether the Government would be willing to increase the employment allowance from £10,500 to £20,000 to offer support to the smallest businesses in the retail sector at a modest cost to the Exchequer. As my noble friend Lord Altrincham noted, our retail sector is invaluable in terms of the value it creates for our economy. In 2023, retail accounted for 4.7% of the UK’s total economic output, worth more than £110 billion. Much of this value added was in small shops, from barbers and hairdressers to farm shops. For every £1 spent in 2024, 30p was spent in food shops and 11p in clothing shops. Retail accounts for at least 50% of spending in Britain, but despite that, this Government—unlike the previous Labour Government, I have to say—appear not to understand the value that this sector provides to our economy and the jobs that it provides, particularly, as the noble Baroness, Lady Kramer, said, for part-time workers on low pay.
There have been warnings from a range of sources about the devastating impact of this tax raid on workers, who will face fewer pay rises or fewer working hours, and on businesses, which will be forced to raise prices in order to maintain their business. The British Chambers of Commerce warned that more than half of firms intended to raise prices in response to these tax hikes, and we have had a detailed analysis from the noble Lord, Lord Wolfson, a non-food retailer. He acknowledged that price rises or job losses in the food sector and food stores might be worse because of the lower margins in that part of the industry. I am glad that the noble Baroness, Lady Kramer, referenced the noble Lord, Lord Londesborough. It is good to see him back. He also tabled an amendment in a previous sitting which I very much supported.
There is further evidence that the Government have to think again, and there is an array of ways of doing so. I hope that, before Report, the Government will sit down, think about the devastating effects of these changes and consider whether there are ways, small or large, of alleviating their impact on many sectors of the economy and of social enterprise, which we will come on to discuss again.
Lord Livermore (Lab)
My Lords, Amendment 30, tabled by the noble Baroness, Lady Monckton of Dallington Forest, and moved by the noble Lord, Lord Altrincham, seeks to prevent commencement of the Bill until an impact assessment is published for the retail sector. Delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, including the changes to employer national insurance.
As I have said previously, an impact assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and to taxation, and the Government do not intend to provide further impact assessments.
Amendment 51, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for those employed in the retail sectors. The Government are taking action as part of the Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no national insurance at all, and more than half of employers will see no change or will gain overall from this package. This means that employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.
The Budget also set out further steps that the Government are taking to strengthen small businesses’ ability to invest and grow, including in the retail sector. This includes freezing the small business multiplier, permanently reducing business tax rates for retail, hospitality and leisure properties from 2026-27, and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.
Increasing the employment allowance for specific sectors would add additional complexity to the tax system and, by adding further spending pressures, would require higher borrowing, lower spending or alternative revenue-raising measures. In light of the points I have made, I respectfully ask the noble Lord to withdraw his amendment and other noble Lords not to press their amendments.
Lord Leigh of Hurley (Con)
The Minister helpfully said in his opening remarks that not doing this would mean that the Government would have to increase borrowing, reduce spending or increase taxes. Yesterday—I think—I tried to be helpful by suggesting to him that there is a way of raising further revenue by amending the digital services tax to make it effective and looking at VAT on imported goods below £135. Since then, the American Government have announced that they are looking to put import taxes on goods below £135 imported from China, and the Times reported that the digital services tax was being looked at again.
In this context, will my noble friend, or rather the Minister—I beg his pardon; as he knows, I already regard him as a noble friend—reconsider what other options there might be to replace the areas of taxation which noble Peers on this side of the Committee have expressed concerns about?
Lord Livermore (Lab)
I am grateful to the noble Lord for his comments and very happy to be his noble friend once again. As he knows, the Government keep all taxation under review, and I will take his submissions as representations on that matter.
Lord Altrincham (Con)
Perhaps we should not offer the Minister any more taxation ideas because we are trying to rein him in at the moment and, obviously, VAT is very much in scope and is coming next, so perhaps we should just hold back. But I thank him for his response and beg leave to withdraw my amendment.
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for hospitality.
Baroness Monckton of Dallington Forest (Con)
My Lords, Amendment 31, in my name, would prevent commencement of this section until a full impact assessment is published for hospitality. I have spoken to several organisations in this sector and the message is clear: His Majesty’s Government have differentiated between larger and smaller businesses, making smaller businesses exempt, but larger businesses could have their profitability wiped out. As I said in the debate, the Government should have considered the mix of the labour bill on a company’s P&L and tiered the increase to relieve the pressure on high-labour, low-margin businesses, such as hospitality.
Companies are proposing to increase tariffs and pass on increases to their clients. This will bring its own problems. Bearing in mind that we have just managed to stabilise inflation, this will bring a cycle of increased prices. Companies are already getting signals from their supply chains that prices will increase due to the NI changes, so the spiral will continue. Meanwhile, growth plans are being reduced, new job opportunities are being cut and restructuring and redundancies are already under way. The people I spoke to saw no opportunity to grow their business and therefore the economy, and this is creating huge risk and pressure for businesses. They say that they are going to be so busy negotiating price increases and restructuring that they will have no time to address their strategic priorities. One business told me that it would significantly reduce the amount of capital it would have been spending in the year ahead, as it is unable now to justify the level of return. It is also reviewing labour costs to find efficiency savings to offset the cost increase. Prices for customers will increase, which will probably result in customers spending less, which will increase the pressure on businesses to reduce hours further to offset the volume decline. Entry level jobs, as we have heard already today, will simply disappear.
I had an email from someone who owns three hotels, and she gave me three examples of the effect that this will have. An over-21 year-old full-time kitchen porter having an increase of 50p per hour would mean that his salary would increase by £1,040 to £26,520 and the employer’s NI will increase by £818. A 21 year-old gardener with an increase of £1 an hour would increase his salary by £2,080 to £27,000, and his national insurance will also increase by £818. A part-time waitress over 21 with an increase of 50p an hour will have a total pay increase of £416 and the employer’s national insurance will increase by £690. So, across just three staff members, the extra salary is £3,536 and the extra national insurance is £2,477. When you consider that she employs 198 staff members across three hotels, the increase is huge. As she put it to me, “This is absolutely terrifying for us, as we simply cannot increase our prices to the same extent”.
I then spoke to James Chiavarini, who runs a long-established family restaurant in London, Il Portico. He said, “It is difficult to overstate how much hospitality helps our country by providing skills, training and employment to thousands of people, many of them neurodiverse, who want to work, want to contribute, but are not a natural fit for a 9 to 5 office job”. This is what we do at Team Domenica. We train people with a wide range of learning disabilities who want to work in this sector. With this new threshold, we know already that it will be so much harder to place them. James also said, “All the proposed increases will do is drive more businesses to close, create more unemployment and an even bigger benefit burden on the creaking state”. I will edit, for the sake of propriety and decency, his final sentence. “It’s a policy dreamt up by public servants who have never once in their lives taken on a risk to open a business, employ a struggling or vulnerable teen, or even work over a weekend”. Amendment 31 is important because jobs in the hospitality sector will disappear and restaurants, cafes and even hotels will be forced to close. I beg to move.
Baroness Fleet (Con)
My Lords, I support my noble friend Lady Monckton of Dallington Forest’s Amendment 31. My noble friend is a tireless and brave campaigner in the charity sector, and she has spoken so movingly today about this Bill.
I declare my interests as listed in the register. I am a council member of Arts Council England and the chair and co-founder of the London Music Fund, a charity that provides music scholarships for talented children from low-income, disadvantaged backgrounds.
I have not previously spoken on this Bill but, as a passionate supporter of the arts and creative industries, I speak today for one very good reason: the national insurance increase will be devastating for the arts, which are, of course, great contributors to the hospitality and tourism sectors. Even Sir Nicholas Hytner, probably the greatest director of his generation, has said that this Government are doing more harm than good. Artistic enterprises will fold. Theatres, arts venues, museums, orchestras, music charities, conservatoires and dance and opera companies are all reeling as they work out exactly what the impact will be. The National Theatre, for example, reckons that it faces an annual bill of £1.1 million in addition to the minimum wage rise.
A report in The Stage newsletter recently calculated the overall impact on theatres. The cost averages out at about £100,000 per theatre, with the double whammy of NI and minimum wage. The Theatre Trust estimates that there are more than 1,100 theatres across the UK. Thus, a conservative estimate is a cut of £100 million to UK theatre, spread across the subsidised and commercial sectors. As Alistair Smith writes in The Stage, if the Government had instead announced a cut of £100 million to theatre funding at the Budget,
“the entire sector would be up in arms”.
Indeed, every budget is being revised and the reality is hitting home: smaller casts, fewer risks to be taken, redundancies and lower employment levels.
The Society of London Theatre estimates that 40% of theatres and performing arts venues are at risk of closure over the next five years. The larger arts venues will be clobbered by national insurance bills: £750,000 for the Southbank Centre; more than £1.5 million for the Royal Opera House; and £280,000 for the Opera North company. Two-thirds of museums are concerned about funding shortfalls. Think of the tourists who go to our great museums every year. So much for growth, levelling up and supporting the arts. Music services central to the delivery of music education to primary and secondary schools will, according to Music Mark, be hit by a bill of around £7.5 million.
This Government once trumpeted their support for the arts—how that was welcomed—but now we know that those soothing words were empty and meaningless. All arts charities slog away at raising funds from generous donors, and now some of that hard-won cash will just go into the Treasury’s coffers. This is money that was raised in the expectation of supporting creativity, access for low-income audiences and children, and so much more. This Government are no friend of the arts. It is a shameful betrayal.
Baroness Kramer (LD)
My Lords, again, in the first two days we had an extensive discussion of the hospitality, leisure and tourism sectors. Once again, we stress the importance of tackling part-time work as a mechanism to keep these sectors from suffering the full impact of the Government’s changes, so I will not repeat that for about the fourth time today. We continue to be of the view that simply talking about impact assessments and employment allowances do not get us where we need to be. I am afraid that this is an issue of exemption, and the noble Lord knows that on part-time work, I feel very much that we should be reducing employers’ national insurance contributions.
Lord Londesborough (CB)
My Lords, I rise to briefly support Amendments 31 and 49 in relation to the hospitality sector. As we have already learned in the two previous days of Committee, there is great resistance to having the full impact assessments we are calling for, specifically in relation to these national insurance contribution increases. Perhaps that is not surprising when you look at the impact on the hospitality sector.
I will simply share one anecdote on the experience of one independent publican, who is employing 20 part-time workers. They typically work 20 hours of shifts at £15 per hour, therefore earning £300 per week on average. This publican’s bill for national insurance contributions will increase by 73%. As we know, the real problem here is dropping the threshold so severely as to create not just a punishing but an excessively regressive tax, hitting hospitality and SMEs at the margin during their delicate stages of growth or survival.
In this case, how is the publican going to respond? These are his choices: reduce the headcount; reduce the number of hours worked by the part-time workers; reduce the number of hours that his pub can remain open; and, where possible, increase prices. All of those are very damaging to the Government’s No.1 economic mission of growth, and potentially damaging for inflation, but particularly damaging to jobs and part-time workers who rely on those jobs. Typically, we are talking about the young and the old. I again support others in saying that this is a reckless act. To push these measures through without conducting a proper assessment strikes me as economically ruinous.
Baroness Neville-Rolfe (Con)
My Lords, I shall speak to my Amendment 49, and I support Amendment 31 in the name of my noble friend Lady Monckton of Dallington Forest. The fact is that, as we have also heard from the noble Lord, Lord Londesborough, we need an impact assessment here as well so that we can assess where to make changes and what impact this jobs tax is having.
My Amendment 49, along with others that I have tabled, would increase the employment allowance from £10,500 to £20,000. This sector, which is so important to our day-to-day life and to our tourist industry, is full of part-time workers and the lowest paid will suffer a tsunami from the NICs changes. We need to find a way of alleviating the pain, and my amendment is one such proposal.
It is a particular pleasure to welcome the noble Baroness, Lady Fleet, to the Committee and to hear her evidence of the impact on the arts. She is right that the creative industries and hospitality are integrally linked, but I was equally concerned to hear about the impact on museums, theatres and other aspects of the creative arts. She is also right that, on this evidence, the Government are no friend of the arts; that should be of concern to the Committee.
My noble friend Lady Monckton was right to talk of the spiral of price increases, the diversionary pressure on management, the impact on capital investment and the effect on jobs, especially the lowest level jobs. They are particularly hit by the double whammy, as I have said already today, of the changes in NICs and the national minimum wage, which will particularly bite younger people. For good reasons, the national minimum wage for younger people has been increased, but that is making a particular difficulty in terms of hiring them, which I fear we shall see in the results in the coming months.
I have further evidence about hospitality, which I think some local papers may be interested in, so I will run through it because it is important. There have been calls from across the sector about how damaging the tax will be. Restaurateur Tom Kerridge, despite backing Labour at the election, has expressed concern that this tax raid will have “a catastrophic effect”. He said that it would cost,
“£850 extra per member of staff per year”
and have a reaction into a negative process in terms of employment. He also said:
“This is a very difficult time for hospitality, because the next few weeks are particularly busy. They give a false sense of feeling that everything is okay … it’s going to have a catastrophic effect, moving into the new year”.
He said that just before Christmas, and things have got worse.
On top of that, UKHospitality said that the national insurance increase at the Budget will lead to business closures and job losses within a year. It said that
“the changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely on. Unquestionably, they will lead to business closures and to job losses within a year”.
I was particularly pleased to hear from the noble Lord, Lord Londesborough, about his new evidence on pubs. The British Institute of Innkeeping, which has warned that the Budget will see 75% of pubs cut hours, thinks that 40% will reduce opening times and that one in three will make staff redundant. It said:
“The Budget, billed to support working people, will pull the rug out from under these already fragile small businesses and significantly reduce the employment opportunities they can provide. 75% will cut staff hours, 40% will reduce opening hours and 1-in-3 will make staff redundant”.
This will have an extraordinarily damaging impact on the sector and the economy.
More than 200 leading restaurant, pub and hotel companies including Stonegate, Greene King, Wetherspoons and Young’s wrote to the Chancellor warning that the Budget will cost the industry £3.4 billion a year. They said:
“As leaders of hospitality businesses, we are compelled to highlight our grave fears about the impact of the Budget, particularly relating to the Employer NICs threshold. Alongside the changes to the national minimum wage levels this will cost hospitality—at a conservative estimate—£3.4 billion a year”.
I would be grateful if the Minister would provide an actual number.
Finally, Simon Emeny, chief executive of Fuller’s, which owns about 400 pubs and hotels and employs almost 5,000 people, said he was “just utterly disappointed” by the Chancellor’s choices. He claimed they “disproportionately” impacted hospitality, which is a big employer of young people and part-time workers.
These are real impacts and the Government’s changes are disproportionately affecting mainly small and vibrant businesses such as these. The biggest hit is from the decrease in the threshold, which could be phased in. Alternatively, the Government could help smaller businesses by increasing the employment allowance, as I have also suggested. I simply urge the Government to act.
Lord Livermore (Lab)
My Lords, I will address the amendment tabled by the noble Baroness, Lady Monckton of Dallington Forest, which seeks to prevent commencement of this Bill until an impact assessment is published for the hospitality sector. Delaying commencement of this Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government, of course, carefully consider the impacts of all policies, including the changes to employer national insurance.
As I have said before, an assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and to taxation, and the Government do not intend to provide further impact assessments.
I turn to the amendment tabled by the noble Lady, Baroness Neville-Rolfe, and the noble Lord, Lord Altrincham, which seeks to increase the employment allowance for those employed in the hospitality sectors. The Government are taking action as part of this Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no employer national insurance at all; more than half of employers see no change, or gain overall, from this package. The specific data the noble Baroness requested is not broken down in the way she asks for.
Increasing the employment allowance for specific sectors would add additional complexity to the tax system, and adding further spending pressures would require higher borrowing, lower spending or alternative revenue-raising measures. In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.
Baroness Monckton of Dallington Forest (Con)
I am grateful for all the thoughtful contributions to this debate and, in particular, to my noble friend Lady Fleet for her impassioned defence of the arts sector, and to the noble Lord, Lord Londesborough, for standing up for pubs. In particular, I note the contribution on Amendment 49 in the name of my noble friend Lady Neville-Rolfe.
I urge the Minister to consider the amendments we have been debating and to understand the impact on the livelihoods provided by those in the hospitality industry. However, for the moment, I beg leave to withdraw the amendment.
Baroness Neville-Rolfe (Con)
I simply want to ask the Minister whether he had changed his view. The impact note came out in November. It was probably drafted based on data relating to before then, when it was far from clear what changes these national insurance measures would precipitate. What we have seen—we have heard from a working retailer today—is that this is having a depressing effect on confidence and jobs across the country. I hope that, before Report, the Minister will reflect on that and give us some assurance as to how the negative effects, which will affect his prime mission of growth, can be dealt with and alleviated.
Member's explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for community pharmacies.
Lord Jackson of Peterborough (Con)
My Lords, it is a pleasure to contribute to this, the third day of Committee on this very important Bill. I say at the outset to the Minister and noble Lords that, again, this is a commencement amendment and does not seek in any meaningful way a permanent exemption to this jobs tax. It is merely an opportunity for the Government to think again, based on up-to-date and more contemporary empirical evidence, so that they can study properly a full impact assessment, as the Bill has an impact on a very important part of the healthcare sector: community pharmacies.
The Minister will know that there is significant concern across the whole NHS and the wider healthcare sector about the implications of these fiscal changes for community pharmacies. The figures produced by Community Pharmacy England suggest that these changes alone will generate an extra burden, an extra encumbrance, on community pharmacies of approximately £50 million, even with the changes in the employment allowance. If you strip out the employment allowance, the figure is approximately £74 million. If you add the two other cumulative factors to these fiscal changes, the encumbrance for community pharmacies is going to be very heavy.
Of course, on its own, we welcome the rise in the national minimum wage—we believe that low-paid people should be paid more and have a decent standard of living—but, remember, these burdens are falling on a particular part of the community. This will mean an extra cost of anything between £115 million and £152 million per annum, according to Community Pharmacy England. If you also add in the reduction in the business rates relief as it impacts on operating costs, the overall, universal impact on community pharmacies will be in the region of £200 million—that is, one-fifth of £1 billion.
Let us remember what community pharmacies are: an adjunct to the NHS, in that they are a neighbourhood health service. I accept that Governments have to make tough decisions; in fact, my own party, when it was in government, was not able to support community pharmacies to the level that we would have liked. There has been a real-terms reduction in pharmacy funding from central government since 2015. The lowest number of pharmacies are now open to the public at any time since 2009, which is 16 years ago: 1,250 pharmacies have closed since 2017. What we are talking about today is a policy decision that has at its heart the very viability of this sector.
As noble Lords will know, doctors and dentists are able to defray the costs of their non-domestic rates by direct reimbursement from the National Health Service. That is not the case with pharmacies; in fact, 90% of pharmacies’ work contracts are for NHS reasons and projects, such as dispensing advice and consultancy—principally dispensing.
Let us think about what community pharmacies do for their local communities. They are a lifeline. Flu immunisation, smoking cessation, sexual health services, alcohol misuse interventions, substance misuse services, healthy lifestyles, diet and nutrition, and generic health education—these are all vital functions that community pharmacies carry out. They take a sizeable burden off NHS acute hospital trusts—clinical commissioning groups as was—and, of course, primary care facilities.
They cannot put their prices up. Because they are locked into contractual arrangements, which are fixed, they cannot pass the costs on to the consumer. Often, they cannot make cuts in staffing or the services offered, or make redundancies, without in effect closing the facility—or at least hugely reducing the service that they deliver. They have, over the past 10 or so years, increased service delivery massively. They will put most public services to shame in terms of delivery of productivity in that period; indeed, they are the safety valve for the NHS.
We on this side of the Room are asking not for special favours or for the policy to be junked but for an opportunity for the Government to think again about the special circumstances of community pharmacies. My noble friend Lady Neville-Rolfe made an important point: the impact note that the Minister prayed in aid is out of date. I do not think that it has the up-to-date, topical data that it should have for the Government to properly consider, with the evidence available, the policy.
Incidentally, I should tell your Lordships that, naturally, I support the other amendments in this group: the employment allowance variation amendments, in respect of dentists and doctors, and, of course, Amendment 46 on pharmacies especially.
To conclude, this is about using an evidence-based analysis to create an impact assessment; to review the policy, at least; to inform the fairest and most sensible policy formulation; and to protect the interests of a vital part of our healthcare sector. If we do not do that, it will have a major impact on very vulnerable people who are NHS patients and who use the important services of community pharmacies. For that reason, I ask your Lordships to support this amendment and beg to move.
Baroness Lawlor (Con)
My Lords, I support my noble friend’s amendment on pharmacies. We must think of the impact. I have spoken to those who have been impacted already and worry that there is an impact not just on community pharmacies, which employ more pharmacists, but on small providers. When we look at what happens in towns and villages across the country, we see that, when a pharmacy closes down, elderly people, families and people looking for their prescriptions have to take a bus and go somewhere else. The impact on town centres of this sort of change can be quite significant. We have 3,560 independent pharmacies today.
In all of our debates today, we have spoken about the impact on each sector and how it might be alleviated, with amendment after amendment proposed from these Benches and from the Liberal Democrats, who spoke earlier in Committee. Barring retail and hospitality, today’s groups of amendments cover what are usually called public services. They are provided by independent providers. Some, such as the early years and hospice sectors, are charitable as well as independent. If they do not provide these services, there will be greater costs to the taxpayer, and they will do so in a much more bureaucratic and less person-sensitive way. The quality will go down and the cover will be broader; in fact, it will not meet the kind of person-to-person approach that we see offered by many independent providers.
I support my noble friend Lord Jackson because we are talking about people and their jobs: 80,000 pharmacists were employed in 2023-24. As well as them, we are thinking of pharmaceutical technicians, of which there are 34,300. These are real people and real jobs, and they are on top of the jobs that we have spoken about day in and day out in this Committee. I implore the Government and the Minister to think about what happens when people’s jobs go: not only do we as communities lose the services that are vital and which we have spoken about; we see an impact on our streets and our communities, and we increase the cost to the taxpayer—that will go further, in addition to the high hike in borrowing and the tax rises that the Government intend. We will see the further damage that will be caused to the economy. I implore the Government to think again.
Lord Scriven (LD)
My Lords, I wish to speak to the amendments in this group; I thank the noble Lord, Lord Jackson of Peterborough, for introducing it. I draw the Committee’s attention to the fact that I am the vice-chair of the All-Party Parliamentary Group on Pharmacy, so this issue is close to my heart.
The noble Lord, Lord Jackson, aptly outlined the pressure that community pharmacists are under at the moment and the issues that they face. He also mentioned a lot of facts and figures from Community Pharmacy England and the National Pharmacy Association, which have outlined the impact that these national insurance contributions will have on community pharmacy. The reason an impact assessment will not work is that the data is already out there, in terms of data from the industry itself. On average, every week, 10 community pharmacists are closing. There is a crisis in community pharmacy, which means that pharmacy after pharmacy in communities up and down this country can no longer survive and is falling by the wayside. An impact assessment would be useful only to reiterate the information that is already out there from the industry; it will not stop organisations falling by the wayside every single week.
Baroness Neville-Rolfe (Con)
My Lords, I will speak to my Amendments 44, 45 and 46 and to Amendment 34 in the name of my noble friend Lord Jackson of Peterborough. I agree with everything that he said.
Primary care facilities have been hung out to dry. The Government have already acknowledged that the NHS should be exempted from the jobs tax. It is unfortunate that they have made the bizarre decision not to include other healthcare providers, such as GPs, pharmacies and dentists, which serve the same purpose as NHS providers.
We need to get to the bottom of two issues: first, why GPs, pharmacies and dental practices have not been included, as the NHS has, in the exemptions from the increase in employer national insurance contributions; and, secondly, why GPs, pharmacies and dentists will not benefit from any increase in the employment allowance.
The Chief Secretary to the Treasury told BBC “Question Time” in November:
“GP surgeries are privately-owned partnerships, they’re not part of the public sector”,
and
“they will therefore have to pay”.
However, GPs are recognised as public authorities in existing law, such as the Freedom of Information Act 2000. They may be privately owned partnerships, but that does not reflect how they operate. Not only that but because they are legally classed as public authorities, they will not be eligible for the increased employment allowance, so they will have to pay the full national insurance increase.
Section 2(1) of the National Insurance Contributions Act 2014 states:
“A person cannot qualify for an employment allowance for a tax year if, at any time in the tax year, the person is a public authority which is not a charity”.
Section 2(2) defines a public authority as
“any person whose activities involve, wholly or mainly, the performance of functions (whether or not in the United Kingdom) which are of a public nature”.
GP surgeries, whether they are privately owned partnerships or not, exclusively provide NHS services: their activities wholly involve the performance of public functions. The Minister confirmed last week that the employment allowance does not apply to charities, which my research confirms. Does he agree that the allowance should apply to these other vital services—pharmacies, dentists and GPs? That would be a simple change. Previous Conservative Governments recognised this. We fully funded and offset any increases in employment costs for GPs; this is acknowledged by the British Medical Association.
Given that the Institute of General Practice Management, which represents GP practice managers, estimates that the jobs tax will cost the average GP practice around £20,000 a year, it is all the more vital that we offset these costs by allowing GPs to receive the employment allowance, preferably at an increased rate of £20,000, as my amendment suggested. It may not be much but it might help with non-GP staff in surgeries, in pharmacies and in dentists. I am looking all the time at changes and concessions that might not cost the Government too much, but I do not get the feeling that the Government understand the difficulties that some of these sectors are in.
It is not just GPs that will suffer. Community Pharmacy England estimates the cost, as I think we already heard, at £50 million in total. That is part of the treble whammy that we heard about from my noble friend Lord Jackson. I am especially concerned about this because of the impact of these changes across the private-sector end of healthcare, because its work makes life easier for NHS services, reducing pressure on A&E and on other public health services.
I spoke to a local pharmacist yesterday. He is a worried man. He believes that when the new NICs charges come through, he will have too little left at the end of the period to invest in his shop and his vaccine services. So, he will be lacking the crucial application of capital to keep the business up to date and serviceable. He will also look to reduce hours. At present, he is open early and late, providing a superb service to the local community—indefatigable, as he was through Covid. I have to say that the pharmacy in my local Wiltshire village is already closing on Saturday, and it is a half-hour drive to another or to the local A&E. Multiply these types of decision by the hundreds of thousands of pharmacies, dentists and GP surgeries across the country, and you can see that the Government’s failure to compensate for the NICs increases is an act of self-harm. Can the Minister therefore confirm that, as a minimum, the Government will include GPs, pharmacies and dentists, who provide NHS services for the public benefit, in the employment allowance?
Lord Scriven (LD)
Just for absolute clarity, community pharmacists can claim the employment allowance. Of the other two services the noble Baroness mentioned, GPs cannot but dentists can if their NHS work is below 50%. It is important that we get that absolutely correct for the record.
Baroness Neville-Rolfe (Con)
I was actually asking the question about this, as we did on charities. The Minister confirmed the position very helpfully last time, and I am asking him to clarify the position and look positively at trying to extend this. I am delighted that some community pharmacies get the employment allowance and would like to see it increased to alleviate difficulties in the sorts of small chemists I was talking about. If we can find another way, I would be delighted as well, but this 50% rule seems a bit odd, and I wonder whether the Minister could clarify or have a look at it. Frankly, it was very good to hear from the noble Lord, Lord Scriven, in view of his role in community pharmacies, and, more worryingly, to learn from him just how many pharmacies are closing. When I was in retail and we had pharmacies, there was actually a battle to buy extra licences so that more pharmacies could be opened. If it is going in the other direction, that is not good news for our healthcare services, which we all care so much about.
I look forward to a positive response from the Minister on this important area, which is complicated.
Lord Livermore (Lab)
My Lords, I will address the amendment tabled by the noble Lord, Lord Jackson of Peterborough, which seeks to prevent commencement of the Bill until an impact assessment is published for community pharmacies. Delaying its commencement would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures.
The Government carefully consider the impacts of all policies, including the changes to employer national insurance. As I have said before, an assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation and the Government do not intend to provide further impact assessments.
I turn to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to increase the employment allowance for those employed in primary care, including in GP surgeries, dentist surgeries and pharmacies. The distinction between those in the public sector who will be compensated and those who will not follows existing practice and is the same as the distinction that the previous Government used for their health and social care levy.
The noble Baroness, Lady Neville-Rolfe, asked specifically about eligibility for the employment allowance. Eligibility is not determined by sector but depends on the make-up of an individual business’s work. HMRC guidance explains that this is based on whether an organisation is doing 50% or more of its work in the public sector. It is therefore down to individual organisations to determine their eligibility for any given year. The employment allowance was introduced in 2014 by the previous Government. This Government have not changed the eligibility rules on the employment allowance in any way, beyond removing the £100,000 threshold.
The revenue raised from the measures in the Bill will play a critical role in restoring economic stability and funding the NHS. As a result of measures in the Bill and the wider Budget measures, the NHS will receive over £20 billion extra over two years to deliver 40,000 extra elective appointments a week. Primary care providers—in general practice, dentistry, pharmacy and eyecare—are important independent contractors which provide nearly £20 billion-worth of NHS services. Every year, the Government consult each sector about what services it provides, and what money it is entitled to in return under its contract. As in previous years, this will be dealt with as part of that process.
The Government have announced a proposed £889 million uplift for general practice in 2025-26 and have set out the proposed areas of reform which will help us to deliver on our manifesto commitments. This is the largest uplift to GP funding since the beginning of the five-year framework and means that we are reversing the recent trend, with a rising share of total NHS resources going to general practice. We have started consulting with the General Practitioners Committee England of the British Medical Association on the 2025-26 GP contract and will consider a range of proposed policy changes. These will be announced in the usual way, following the close of the consultation later this year.
The Department of Health has entered into consultation with Community Pharmacy England regarding the 2024-25 and 2025-26 funding contractual framework. The final funding settlement will be announced in the usual way following this consultation. The NHS in England invests around £3 billion on dentistry every year. NHS pharmaceutical, ophthalmic and dental allocations for integrated care systems for 2025-26 have been published alongside NHS planning guidance.
In light of these points, I respectfully ask noble Lords not to press their amendments.
Lord Scriven (LD)
Again, for the clarity of the record, the Minister has just said about GPs something which completely contradicts what it says on WWW.GOV.UK. It is about whether a GP practice can claim employment allowance. It says:
“There is no entitlement to the Employment Allowance, because the majority of the work done, is wholly or mainly of a public nature”.
Since it says on GOV.UK that GPs cannot claim the employment allowance, can the Minister write to the Committee to clarify the contradictions between the website and what he has just said in his answer?
Lord Livermore (Lab)
I will happily write, because it is an important point and deserves clarification. Listening to what the noble Lord read out, I do not think the statements are contradictory, because the website is absolutely referring to the 50% or more point. I think it is drawing a conclusion from that, given that most of them are doing more than 50%, but I do not think they are contradictory.
Lord Scriven (LD)
I quote again exactly what it says, which is that
“there is no entitlement to the Employment Allowance”
for GPs. That is from “Eligibility for Employment Allowance: further employer guidance” on GOV.UK. It makes it clear that there is no entitlement to the employment allowance for GPs.
Lord Livermore (Lab)
As I said, I am more than happy to write to clarify that. What it goes on to say suggests it is consistent with that. Perhaps that first sentence is incorrect but I will write to the Committee to clarify.
Baroness Neville-Rolfe (Con)
It would be helpful if the Minister clarified that. I am concerned about this backward-lookingness that tends to be a feature of our discussions, because we are trying to look forward and make sure that growth stops flatlining, so that this economy grows in the coming months and years. Saying that a particular rule on employment was laid down in the past and therefore that the Government are not going to change it is a mistake.
In this area, there is a lot of evidence of a problem. The NHS has been compensated for these steep increases. The private sector part of the health services sector, which I know the Minister’s Secretary of State and his advisers think can play an important part in the future, is being sold down the river. That seems to be a pity; we should take this opportunity to try and do something to improve things.
I withdraw my amendment—no, I have not moved it. Forgive me.
Lord Jackson of Peterborough (Con)
People are withdrawing their amendments before even moving them.
If I could beg the indulgence of the Committee briefly, I wonder what the Liberal Democrats’ view on this policy is because I have a Liberal Democrat press release dated 16 December, entitled, “Liberal Democrats table amendment to exempt health and care providers from NICs hike”. Many Liberal Democrat MPs in the other place are quoted. I was not able to discern it in his remarks but is the noble Lord, Lord Scriven, against the whole policy with regard to community pharmacies and NICs, or just against the concept of doing a proper, thorough and robust empirical analysis and impact assessment?
Lord Scriven (LD)
I understand that the noble Lord may have had other appointments on day one in Committee, but if he had been here then he would have seen that we are totally against it. We gave explanations of how extra taxes could have been done.
While I am on my feet, just to clarify for the Minister, I have looked a bit further at the website and what he said is absolutely correct. The 90% that I was referring to was a specific example of a number of people employed.
Lord Livermore (Lab)
I thank the noble Lord for that point. I am of course still happy to write, so that we have absolutely clarified the point.
Lord Jackson of Peterborough (Con)
We have established that an epistle will be oncoming from the Minister to the noble Lord, Lord Scriven. I am glad he has clarified that. I just think—
Baroness Kramer (LD)
Perhaps I may interrupt. I really think it was appropriate that we did not remake the speeches that we made extensively on days one and two. I am sorry if people were unable to attend or contribute on those days, but it is not sensible for us to continuously repeat the same statements that we have made over and over again. We have tried to observe that, out of respect for the Committee, and an assumption that those who are interested in what we had to say would have looked at Hansard.
Lord Jackson of Peterborough (Con)
I think the noble Baroness, Lady Kramer, is rather tetchy about that. I am seeking clarification of the Liberal Democrat policy, and the noble Lord, Lord Scriven, has given me a very clear explanation, for which I am inordinately grateful. Perhaps I can now move on to speak to my Amendment 34.
I heard the Minister and, notwithstanding what colleagues on the Liberal Democrat Benches have said, I still think that he did not adequately address the issue of the data and the response since the Budget on this particular policy with this particular healthcare sector. My noble friend Lady Neville-Rolfe made a very cogent and valid point that it is not good enough to just keep saying, “We have no intention of publishing an impact assessment; that is the end of the debate”. That is not discharging the proper fiduciary duty of Ministers to make sure that they are pursuing the correct financial policies and know the impact they will have on individuals in the NHS and wider healthcare sector. That needs to be looked at again; perhaps it will be.
While I am on my feet, for the avoidance of doubt, I did attend on previous days in Committee. I was there, and I moved an amendment on day one, I think, should noble Lords want to read Hansard. With that caveat made, I feel duty bound to beg leave to withdraw my amendment, subject to further discussion on Report.
House of Lords
Introduction: Lord Brennan of Canton
Introduction: Lord Raval
Pension Fund Reliefs
(1 day, 2 hours ago)
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Baroness Altmann
To ask His Majesty’s Government what plans they have to ensure the taxpayer spending on pension fund reliefs has a beneficial long-term impact on the United Kingdom’s economy and financial markets.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the Government published the interim report of the pensions investment review on 14 November. This report put forward a series of ambitious proposals to reform the UK pensions system. Together, these proposals could unlock around £80 billion of productive investment in infrastructure and fast-growing companies. The full report will be published in the spring ahead of legislation being introduced in the pension schemes Bill.
Baroness Altmann (Non-Afl)
I thank the noble Lord for his Answer. Can I press him a little on the £70 billion of taxpayers’ money that is going into people’s pensions every year, with absolutely no requirement for any of it to be placed into the UK or to revive the UK economy? We have a growth agenda, and a desperate need for long-term investment in assets that are very suitable for UK pension funds. Will the noble Lord agree to meet me to discuss ways in which we can encourage or incentivise more pension assets, and more of the taxpayer contribution, to boost our economy rather than all the others? All other major countries’ pension schemes have significant overweighting in their domestic markets, whereas ours have maybe 3% in UK equities.
Lord Livermore (Lab)
I am very grateful to the noble Baroness for her question. I take this opportunity to recognise her career-long commitment to improving outcomes for savers and investors. The announcements the Chancellor made at the Mansion House on the pensions review could unlock billions of pounds of additional investment, but of course, as the noble Baroness rightly said, it is not in any way guaranteed that this investment will take place in the domestic market. The Government share her concerns that UK pension funds are investing less in the domestic economy than overseas counterparts. There is also clear evidence of a sustained pattern of withdrawal by DC pension schemes from UK-listed equities for at least the last decade. That is why the pensions review is considering whether further interventions may be needed to ensure our reforms benefit UK growth. We will continue to work with the pensions industry to increase investment in UK markets. I look forward to continuing to work with the noble Baroness on these issues and of course I am very happy to meet her.
Baroness Drake (Lab)
My Lords, the Government’s recent announcement on measures to spur growth will increase the supply of infrastructure and productive investment for pension funds to invest in, but the fragmented nature of UK pension provision can hamper its ability to invest in such assets—in many instances, it cannot deal with the scale of investment required. Do the Government remain committed to addressing this capability problem as part of their strategy for growth?
Lord Livermore (Lab)
I am grateful to my noble friend for her question. I absolutely agree; there is international and industry consensus that scale and consolidation are beneficial to pension funds, driving economies of scale and efficiencies that can be passed back to savers and unlocking productive investment. That is what the Mansion House reforms seek to do. My noble friend talked about the ability of pension funds to invest in productive assets. That is what the infrastructure strategy and the industrial strategy are designed to do. I hope we will see more announcements along those lines at the time of the spending review.
Lord Palmer of Childs Hill (LD)
My Lords, I hear what the Minister says, but what steps are the Government taking to increase the supply of domestic infrastructure projects and other long-term investments in the UK economy that would meet the needs of pension funds’ trustees and investors? I hear from trustees that they would quite like to do some of this stuff but sometimes struggle to find suitable projects in which to invest. Are we not going backwards, with listed investment companies being killed off?
Lord Livermore (Lab)
The answer to the last part of the noble Lord’s question is no. However, I very much agree with the analysis he set out in the rest of his question. Ensuring that there are investment opportunities for these assets to be invested in is a key part of our strategy, which is why we are producing the infrastructure strategy at the time of the spending review. I hope it will answer a lot of the noble Lord’s questions when it comes out.
Lord Leigh of Hurley (Con)
Following the excellent question from the noble Baroness, Lady Altmann, on pensions, I am not asking my noble friend the Minister to meet me, but I am asking him to have a look at the British ISA idea, whereby tax-free savings could be focused on British companies. I know that the Labour Party is keen on investment in British companies, as we all are. Will he look again and promote the idea of a British ISA?
Lord Livermore (Lab)
I am flattered to be referred to as the noble Lord’s noble friend, and I consider him to be a friend as well. I am more than happy to look at his ideas.
Lord Davies of Brixton (Lab)
I thank the noble Lord—my noble friend—the Minister for his replies. Will he agree that the best thing that pension funds, both defined benefit and defined contribution, could do to support the British economy is pay adequate and secure pensions? What plans do the Government have to ensure that that is the case?
Lord Livermore (Lab)
I am grateful to my noble friend for his question. I of course agree that adequacy is an absolutely essential part of the pensions landscape. That is what phase 2 of the pensions review is designed to look at. The scope and terms of reference for phase 2 will be published in due course, once we have made fuller progress with phase 1.
Baroness Bowles of Berkhamsted (LD)
Is the Minister aware that the resumption of investment flows into investment trusts requires investor confidence, including from pension funds, that the future regime will not repeat the mistakes of the past? How can that happen when the FCA consultation suggests reinstating aggregation of costs for investment trusts, which do not have consumer costs, and then not aggregating costs for ETFs, which do have such costs? Are the Government prepared to lose billions more over the next 18 months or more until the regulator gets it technically correct?
Lord Livermore (Lab)
I am aware of the issue that the noble Baroness raises, mainly because of her campaigning on it. I pay tribute to her and to the noble Baroness, Lady Altmann, for their campaigning on this issue and for their Private Members’ Bills when we were in opposition, which I found extremely persuasive. I think we have made some progress since we have been in government. I regret that we are not able to go as far as the noble Baroness set out in her recent Private Member’s Bill right now, but we continue to review these issues and I thank her again for her campaigning.
Baroness Neville-Rolfe (Con)
My Lords, it is all very well to talk and review, but we face problems now. Do the Government intend to introduce extra incentives to encourage pension funds to invest in UK-listed shares and in domestic infrastructure?
Lord Livermore (Lab)
The noble Baroness talks of a sense of urgency, but, of course, she had 14 years to do something about this and did not. The previous Government never legislated for the reforms they brought forward. We are legislating for them. As I said, we are absolutely concerned that UK pension funds are investing less in the domestic economy, which is exactly why the pensions review is looking at the issue.
Lord Hamilton of Epsom (Con)
My Lords, one of the obligations on the trustees of pension funds is to get the best return for pensioners. Is the Minister resigned to the fact that, if we invest in British infrastructure, pensioners will be worse off as a result?
Lord Livermore (Lab)
I am not sure that the noble Lord should talk down the British economy in quite that way.
Lord Sikka (Lab)
My Lords, for 2023, the cost of tax relief on pension contributions was £46.8 billion, and another £23.8 billion of relief was given on related national insurance contributions. Some 63% of the total tax relief went to 6 million higher and additional rate taxpayers, and only 37% went to 28.1 million basic rate taxpayers. By fixing the tax relief at 20% for everybody, the Government can not only reduce inequalities but have £14.5 billion a year surplus. Will the Minister consider this reform?
Lord Livermore (Lab)
I am grateful to my noble friend for his question. He is correct that the Government spend around £70 billion annually on pension tax reliefs, because we want to encourage pension savings. That is why, for the vast majority of savers, pension contributions made from income during working life are tax free, and it is why, like many other countries, the UK exempts from tax the returns pension funds receive on the investments they make. Tax is not within the scope of the pensions review.
Lord Howell of Guildford (Con)
My Lords, one way of making pension funds better able to support British industry would be to amalgamate many of the smaller ones and increase their efficiency. I think this idea has already been mooted and discussed. Is there not a further thought that the large area of public service pensions, which are unfunded—not local government, which is funded—should be considered being made into funded pensions? Would that not also help to reinforce pensions’ contribution to our nation?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. He is absolutely right that consolidation and scale are key to the strategy behind the pensions review. I will certainly pass his ideas back to my honourable friend, the Pensions Minister.
UK–China Economic and Financial Strategy Dialogue
(1 day, 2 hours ago)
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Lord Davidson of Glen Clova
To ask His Majesty’s Government what were the outcomes of the UK–China Economic and Financial Strategy Dialogue held in Beijing in January.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the 2025 UK-China Economic and Financial Dialogue was the first since 2019. The Chancellor was joined by the Governor of the Bank of England, the chief executive of the Financial Conduct Authority, and representatives from Britain’s financial services firms. The dialogue unlocked agreements worth £600 million over the next five years, and secured new agreements on vaccine approvals, fertiliser, whisky labelling, legal services, automotives, and accountancy. In financial services, co-operation was agreed in areas such as capital markets, pensions and sustainable finance. The Chancellor also raised areas of concern to the UK, including trade imbalances, economic security, Russia’s illegal war in Ukraine, and human rights.
Lord Davidson of Glen Clova (Lab)
My Lords, I thank my noble friend the Minister for his response. I congratulate the Government on breaking the hiatus in the dialogue, which lasted for a long period of five years. Does my noble friend agree with me that the UK indisputably has a world-class financial services industry, which has delivered one-third of the service exports to China? Will he outline what is proposed by the Government to strengthen the relationship between China and the UK in financial services?
Lord Livermore (Lab)
I am grateful to my noble and learned friend for his question. He is right: this was the first economic and financial dialogue since 2019. The Chancellor was absolutely clear that we cannot ignore the fact that China is the second-largest economy worldwide, and our fourth-largest trading partner. He is right that financial services are the jewel in the crown of our relationship with China. That is why our financial services were the key focus of the Chancellor’s visit, which secured significant outcomes in terms of a new green bond, new commercial licences and quota allocations, the UK-China wealth connect, and capital markets and financial regulatory co-operation. That co-operation will continue and be strengthened.
Baroness Kramer (LD)
My Lords, could the Minister tell us whether the dialogue included a discussion of BRICS Pay? This is the alternate payment system that the BRICS countries have created in order to be able to move away from SWIFT. Obviously, it assists sanctions- busting, and it potentially destabilises the global financial system. What discussions were held on BRICS Pay?
Lord Livermore (Lab)
I am aware of the issue raised by the noble Baroness, but I do not believe that discussions took place on that. The Government consider that it is up to each individual country to decide what international agreements it wants to be part of.
Baroness D’Souza (CB)
My Lords, does the Minister believe that there are any risks at all involved in importing large numbers of electronic vehicles manufactured in China, which would plug the gap in the falling number of Tesla vehicles that are being purchased in the UK?
Lord Livermore (Lab)
The Government are committed to attracting investment into the UK to support our world-leading energy ambitions. Investment in the energy sector is subject to the highest levels of national security scrutiny, and we will not hesitate to use our powers to protect national security wherever we identify concerns.
Baroness Neville-Rolfe (Con)
My Lords, did His Majesty’s Government discuss with the Chinese authorities the imposition of 10% tariffs on Chinese exports by the United States?
Lord Livermore (Lab)
It is not for the UK to comment on US-China relations.
Baroness Eaton (Con)
My Lords, what assessment have the Government made of the potential risks associated with increased economic engagement with China? What strategies are in place to safeguard against such vulnerabilities?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. We must, and will, continue to engage with our international partners on trade and investment to grow our economy, while ensuring that our security and values are not compromised. That means finding the right way to build a stable and balanced relationship with China, one that recognises the importance of co-operation and addressing the global issues that we face, competing where interests differ and challenging robustly where we must.
Baroness Blackwood of North Oxford (Con)
Given the global financial and AI sector impacts of DeepSeek, what discussions were had about IP exfiltration as part of the national security discussions that the Minister has mentioned?
Lord Livermore (Lab)
I am afraid that I am not aware of any such discussions.
Lord Sassoon (Con)
I note my interest as president of the China-Britain Business Council and as having other China interests. Does the Minister agree with me that in total there are some £40 billion of UK exports going to China each year, including to Hong Kong, and those support 400,000 UK jobs? While the EFD marks a very important re-engagement with China, will he confirm that there will be other ministerial engagements at the top level, including Trade Ministers, to support British business growth?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. I agree with the point that he sets out in terms of the number of jobs that are supported by trade between our two countries. Yes, I think that further such ministerial engagements are planned. The Secretary of State for Business and Trade and the Secretary of State for Energy Security and Net Zero are both, I think, due to attend similar discussions.
Lord Mackinlay of Richborough (Con)
My Lords, does the Minister have any discomfiture at all about his Government going to China and begging for investment and trade while many parliamentarians in this Palace remain sanctioned by the Chinese regime?
Lord Livermore (Lab)
I completely disagree with the noble Lord’s characterisation of the Chancellor’s visit to China. As I said, we must and will continue to engage with our international partners in trade and investment, and that includes engaging with China. We cannot ignore the fact that China is the second-largest economy worldwide and our fourth-largest trading partner, with exports supporting close to half a million jobs in the UK. We need to help British businesses export around the world, and that includes to China. On human rights and the parliamentary sanctions that the noble Lord talks about, the Chancellor did raise those—absolutely—but she believes that, unless we open that dialogue, we will be unable to raise the concerns that we have.
Lord West of Spithead (Lab)
Were there any discussions at all about the Chinese merchant fleet and the use of certain ships by the Russians as the shadow fleet—and also the £7 trillion worth of trade that goes through the South China Sea and is threatened by Chinese actions?
Lord Livermore (Lab)
Of course, I was not in the room, so I cannot entirely judge exactly whether those issues were raised—but certainly the Chancellor raised important issues of national security. She raised the concerns that the UK Government have about China, and Russia’s illegal war in Ukraine, so the issues that my noble friend raises would have been very much at the forefront of their discussions.
Lord Forsyth of Drumlean (Con)
Does the Minister understand that the impact of fining our car companies huge sums for making vehicles that people want to buy, because they are not making sufficient electric cars, has the effect of handing our car industry to the Chinese, who are flooding the market with cheap electric cars—leading to the destruction of jobs throughout the Midlands and elsewhere?
Lord Livermore (Lab)
I absolutely understand the point that the noble Lord raises. There are different priorities that we need to balance as we make policy and move forward. As he says, there is the industrial strategy priority of making sure that we have a competitive and thriving car industry in the UK, and there is also the objective of making sure that we achieve our net-zero objectives. Transport is a major component of that, so electric vehicles will play a very important part as we move towards our net-zero targets. Absolutely, we have to balance those objectives, and I am very aware of the issues that the noble Lord raises.
Baroness O’Loan (CB)
My Lords, the Minister told us that the Chancellor spoke about the sanctioning of Members of your Lordships’ House and the human rights implications of that appalling situation. Can he tell us whether there were any other discussions in the human rights context in the light of China’s appalling record on human rights?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. Yes, I reassure her that there absolutely were. The UK Government will stand firm on human rights in China and will continue to raise concerns at the highest level of the Chinese Government. In all our engagements with the Chinese Government, we continue to challenge them robustly on human rights violations and continue to raise our concerns at the highest level of the Government. The Prime Minister did so at his meeting at the G20 with President Xi and the Chancellor also raised concerns in a number of areas, including the case of British national Jimmy Lai, the restrictions on rights and freedoms in Hong Kong, human rights abuses and forced labour.
Lord Brooke of Alverthorpe (Lab)
Given that climate change knows no boundaries and that there is a change of policy taking place in the USA in that regard, does the Minister see the possibility of us having more dialogue with China in this context as a way forward?
Lord Livermore (Lab)
I am grateful to my noble friend for his question. Our journey towards net zero will remain vital for our energy security in this country, as well as our economic growth, so that will absolutely continue to play an important part in our economic policy. China will of course be part of that in how we move forward together, both in terms of its own journey towards net zero and in how it can help our journey towards net zero.
Primary Schools: Mental Health Problems
(1 day, 2 hours ago)
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Lord Storey
To ask His Majesty’s Government what steps they are taking to deal with mental health problems in primary schools.
The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)
My Lords, this is a particularly pertinent Question as it is Children’s Mental Health Week. The Government are committed to setting every child up for the best start in life and, as part of our ambition for high and rising standards in schools, helping every child to achieve and thrive. We will provide access to specialist mental health professionals in every school, so that every young person has access to early support to address problems before they escalate.
Lord Storey (LD)
I am grateful for the Minister’s reply. It is important that children and young people have access to mental health support, but of course the reasons that cause mental health and well-being problems need to be carefully considered, whether it is bullying or online problems. Every school needs to know how well children are doing, but I would suggest to the Minister that maybe the pressures that key stage SATs put on 10 and 11 year-olds can at times be very harmful indeed. Would the Minister consider looking at how we might alleviate those pressures, by perhaps considering having standardised teacher assessments or ways that make it much more enjoyable rather than a frightening experience for them?
Baroness Smith of Malvern (Lab)
I am afraid that I think it is important that we maintain both the check on students’ progress and the accountability for our schools that key stage tests enable us to have. So, no, I will not be taking the noble Lord up on his suggestion of fundamentally changing those any time in the near future.
Lord Farmer (Con)
My Lords, for children and adults, feeling sad and unhappy is a normal human experience. Recent polling found that 84% of GPs think society’s approach to mental health has led to the normal ups and downs of life being seen as medical problems. However, family breakdown—one of the causes that the noble Lord, Lord Storey, did not mention—is an underrecognised driver of children’s poor mental health. How are the Government guarding against overdiagnosis of mental illness in children and also helping parents understand that parental splits profoundly affect their children?
Baroness Smith of Malvern (Lab)
The noble Lord makes some important points, based of course on his long experience of supporting families to support their children. I am clear that clinical support should be sought for children only where it is appropriate. Schools need to seek the right source of support at the right time for social and emotional needs, and that is where mental health support teams and other professionals can assist in making those decisions. On the important point he makes about family breakdowns, I completely share his view that it can be enormously difficult for children when their parents split. I am sure he will be pleased to hear that the Ministry of Justice provides support to help individuals to make child arrangements and find emotional support, for example. Resources are also available for that on the Cafcass website.
Baroness Watkins of Tavistock (CB)
My Lords, the recent health visiting survey suggests that there is an inadequate service in the majority of England compared to the other three countries. It also shows that there are exemplars of good practice, such as in Manchester, but that families are sending children to primary school having had no health-visiting support prior to going to school because of the paucity. How is the Minister’s department working with the Department of Health and Social Care to look at the provision of health visitors?
Baroness Smith of Malvern (Lab)
The noble Baroness makes an important point about the support available to children at the very earliest age. This and developing the healthiest generation of children are key objectives for my colleagues in the Department of Health and Social Care. We have set a clear objective in our Plan for Change to ensure that we increase the proportion of children who arrive at school with the development to enable them to then learn and make a success of the rest of their lives. I am sure that this will play an important part in achieving that.
The Lord Bishop of Lincoln
My Lords, the Rural Mental Health report produced in the other place highlighted that
“NHS mental health services are often not fairly accessible for rural communities”,
with services largely centred in towns and cities,
“creating barriers to access, compounded by the limitations and weaknesses of rural public transport and digital connectivity”.
I declare an interest because 65% of small, rural primary schools across England are Church schools. When developing plans to improve mental health provision in primary schools, how does the Minister intend to ensure equity of access and quality for students in small, rural settings?
Baroness Smith of Malvern (Lab)
The right reverend Prelate makes an important point about the challenges for schools in rural areas to access the mental health support that we will make available. He identified the considerable difficulties for young people who really need child and adolescent mental health services in accessing them. That is why this Government will fund an additional 8,500 mental health workers to support both children and adults. As we continue to develop the policy to ensure that there is access to a mental health professional in every school, we will certainly bear in mind the important points that he made about the particular needs of rural schools.
Baroness McIntosh of Hudnall (Lab)
My Lords, does my noble friend agree with me—going back to a point that the noble Lord, Lord Storey, raised about bullying—that children with observable mental health problems, or who are on the autism spectrum, are very often vulnerable to bullying in schools, and sometimes that will exacerbate the challenges that they already have? In what way are the Government supporting schools to ensure that children who have those difficulties are supported, particularly in the playground?
Baroness Smith of Malvern (Lab)
That is an appropriately wide-ranging question from my noble friend. First, on the topic of bullying, it is enormously important that every school has a strong policy and strong action to tackle bullying and to support children. She raised the issue of children with autism and other needs, and we are making progress there with the national framework for autism assessment services. We are also very clear that no child should need to wait for an assessment to receive the necessary support from schools. That will include support with learning and, as she rightly said, support for them to play a full and safe part in the life of the school.
Baroness Barran (Con)
My Lords, the Minister will be aware of the increasing evidence of the correlation between smartphone and social media use and an increase in children’s mental health problems. According to a recent survey done by Teacher Tapp, just over 75% of teachers surveyed who worked in primary schools reported that mobile phones had to be handed in at the beginning of the school day, but that fell to 48% in secondary schools. Given the mounting concerns that we are hearing, particularly from health professionals, about the impact of smartphones on children’s mental health, will the Government think again and follow a precautionary principle in banning mobile phones in schools until we have the evidence that they are safe?
Baroness Smith of Malvern (Lab)
As the noble Baroness knows, there is strong guidance to schools to develop appropriate policies with respect to smartphones —in my view, ensuring that children do not have access to smartphones during the period of time that they are in school—but there is a whole range of ways of ensuring that that happens, and I think it is appropriate to leave it to head teachers to follow that guidance and ensure that their children are protected from any impacts of smartphones and enabled to achieve and thrive in their schools.
Lord Addington (LD)
My Lords, does the Minister agree that the first thing we need to do is to make sure teachers know when they should start to access extra help and support, even if it is available, because without that guidance, you really are going to waste a lot of time and money?
Baroness Smith of Malvern (Lab)
The noble Lord is right that a key part of our special educational needs and disabilities programme needs to be to ensure that teachers have the continuing professional development and initial teacher training to be able to identify at an early stage those children who are in mental distress and need support. That needs to happen even earlier, which is why children’s mental health and well-being is also an important part of the early years curriculum, and why we have provided support to early years practitioners to be able to identify that early as well.
Car Parking Companies
(1 day, 2 hours ago)
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Lord Spellar
To ask His Majesty’s Government what plans they have to regulate car parking companies with regard to the charges that they can impose on motorists.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, we understand the frustrations and complexities that motorists face in dealing with private parking, so we are exploring all possible ways to give motorists the best protection and support. We want to strike a balance between ensuring that parking charges and debt recovery fees are at a reasonable level and allowing parking operators to manage car parks effectively. We are planning to launch a consultation—I am not going to say “in due course”—during this year, which will include options for capping charges and debt recovery fees.
Lord Spellar (Lab)
I thank the Minister for that reply. She will be aware that the legislation to regulate the behaviour of parking companies was passed by Parliament in 2019, yet because of obstruction by the industry it is still not in force and motorists are still being hit with excessive and unfair charges. Does she accept that the industry’s business model depends on access to the Government’s DVLA database? Unless companies are prepared to co-operate, should they not be cut off from access to that system? That may rather get their attention and co-operation.
Baroness Taylor of Stevenage (Lab)
I am grateful to my noble friend for the non-controversial Question of the day and for all the campaigning he has done on this issue; I know it is a great frustration to so many people. The problem was that, when the code was laid in 2022 as a result of the 2019 Act, there was a legal challenge and it had to be withdrawn. We are going out to consultation again, to make sure that we do the consultation properly and thoroughly. We will bring forward a further code of practice in due course, once that consultation has been done properly. I understand the point my noble friend is making. If he wants to put in a submission to the consultation, we would be very pleased to hear it.
Lord Kirkhope of Harrogate (Con)
My Lords, I declare my interest as introducing and taking through the House in 1889—
Lord Kirkhope of Harrogate (Con)
In 1989, not 1889—I was a little young then. I took through the House the Parking Bill, which introduced cashless parking into this country for the first time. I am sure noble Lords will be very pleased about that. Subsequently, as has been referred to by the noble Lord, Lord Spellar, in his excellent question, my right honourable friend Sir Gregory Knight, who was the MP in Yorkshire, introduced this further parking Act, which had clear instructions for a code of practice to be introduced. The Minister mentioned that that was put on hold in 2022. Surely we can now make some progress, because we all know of the many abuses which take place, particularly in the private parking industry.
Baroness Taylor of Stevenage (Lab)
My Lords, I have not been in this ministerial post since 2022. I will now take action on this as quickly as I can. I thank the noble Lord for his work on this and agree that it is very important that we get it resolved as quickly as possible. The industry did step up and produce its own code of practice, covering the whole private parking industry. That was a step forward, but we need to do what it says in the Act and introduce a government code of practice. We will get on with that as quickly as possible.
Baroness Pidgeon (LD)
My Lords, the code of conduct has been discussed today. It was withdrawn after only four months. In the policy document and consultation that the Government plan, will they be looking at the issue of motorists who have been charged nearly £2,000 for taking more than five minutes to pay for their parking?
Baroness Taylor of Stevenage (Lab)
That was some of the worst practice that we have seen, and there has been a lot of media interest in this. I see, as probably we all do, people wrestling to download apps when there is no wifi, so that they can pay their parking charges. Both private parking trade associations have recognised this as an issue. They have worked collaboratively to take immediate steps to ensure that motorists no longer receive parking charges in that kind of scenario. This came into effect at the start of February. We welcome those steps taken by the industry, but there is still more to do.
Lord Wigley (PC)
My Lords, in her consultation, will the Minister ensure that she links up with the devolved Government in Cardiff? Many of these companies operate in England and in Wales. In Wales, some of the regulations may vary and they take no notice of them. Can she include that in any consultation?
Baroness Taylor of Stevenage (Lab)
I hope that anybody in Wales who is interested in this will contribute to the consultation. We want much better practice in these arrangements, across the United Kingdom. Any contributions to the consultation will be welcome.
Baroness Winterton of Doncaster (Lab)
My Lords, when I was campaigning to ban cowboy wheel-clampers, otherwise known as modern-day highway robbers—a campaign in which the noble Lord, Lord Spellar, was very helpful—I was very aware of the need for the Security Industry Authority to have adequate powers to deal with rogue parking companies that come up with more and more ingenious ways to persecute motorists. Can my noble friend liaise with Ministers in the Home Office to ensure that the Security Industry Authority, perhaps during the consultation that she has talked about, has adequate powers to punish those rogue companies that persecute motorists?
Baroness Taylor of Stevenage (Lab)
I very much understand the issues that my noble friend has outlined. We will do our best to work across government. That is a Home Office issue, but I would be happy to meet her and the noble Lord, Lord Spellar, to discuss this further.
Lord Leigh of Hurley (Con)
Is the Minister aware that, following the judicial review that she mentioned of the code of conduct, the department promised to publish an impact assessment? It did publish draft impact assessments but has not yet published the full impact assessments. Is the reason for that that the impact assessments show that the £100 dropping to £40 does work and that the problem is that councils, which can charge only £50, dropping to £25, are not able to enforce parking restrictions because it simply is not economic?
Baroness Taylor of Stevenage (Lab)
I am not sure why the full impact assessment was not published. The accredited trade association’s voluntary cap on private parking charges is £100, as the noble Lord will be aware. I will look into the issue around local authority caps on parking charges and get back to him.
Lord Watts (Lab)
My Lords, is it the case that many government departments use consultations as a reason not to do something? Is it not about time that we put timescales on these things and make sure that departments act on behalf of the public?
Baroness Taylor of Stevenage (Lab)
I understand my noble friend’s frustration, but the previous code of practice failed because things had been put into it that were not subject to consultation. It is very important that the consultation does take place this time, otherwise the next code of practice will fail as well.
Baroness Wheatcroft (CB)
My Lords, does the Minister agree that, if more towns provided free car parking, many more town centres might be thriving instead of dying?
Baroness Taylor of Stevenage (Lab)
I think many local authorities would say that the fees and charges that they charge for parking help with the enormous gap in funding that they have faced in the last 14 years, and that is one of the reasons why they do it. It is for the voters of the local areas to decide whether or not the parking policies in their area are sound; local people can challenge parking policies if they wish to.
Baroness McIntosh of Pickering (Con)
Does the Minister share my concern about the level of hospital parking charges, which seem to be completely unregulated? Will she look at this at the earliest opportunity?
Baroness Taylor of Stevenage (Lab)
I am sorry: I missed the start of the noble Baroness’s question.
Baroness McIntosh of Pickering (Con)
Will the noble Baroness look at the astronomically high level of hospital parking charges, which seem to go completely unregulated?
Baroness Taylor of Stevenage (Lab)
Once again, I understand the frustrations about this. It is for hospital trusts to decide how they manage their own parking arrangements, and people can challenge that. However, I appreciate that there are significant issues in that respect. I am sorry to keep repeating it, but if the noble Baroness wishes to put in a submission to the consultation, I would be grateful to hear from her.
Lord Evans of Rainow (Con)
My Lords, is the Minister, whom we all have very high respect for, aware that certain local authorities discriminate against four-wheel drive vehicles parking in town centres? I can hear the Liberal Democrats saying, “Quite right, too”, but for those of us who live in rural areas, having a four-wheel drive is not unusual, and in many cases it is a necessity. Four-wheel drive vehicles are part and parcel of the countryside, and sometimes we wish to visit town centres. Can the Minister look into this matter?
Baroness Taylor of Stevenage (Lab)
I can remember the letters. Local authorities are best placed to determine the nature and scope of parking policies in their own areas, including whether parking should be provided free, balancing the needs of residents, emergency services and local businesses that work in and visit those areas. There is a right to challenge now, which was published in 2015, which advises how residents can challenge and cause a formal review of parking policies in their local area. If the noble Lord is worried about four-wheel drive parking, he can always challenge that with his local authority.
Women’s Health Strategy
(1 day, 2 hours ago)
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Baroness Stedman-Scott (Con)
My Lords, nearly 600,000 women are waiting for treatment on a gynaecological waiting list in England. Labour’s 2024 general election manifesto made a commitment that:
“Never again will women’s health be neglected. Labour will prioritise women’s health as we reform the NHS”.
Why, then, are the Government removing the requirement on integrated care boards to implement women’s health hubs? The Answer given to this Urgent Question by the Minister in the other place stated that at least 90% of ICBs already have women’s health hubs, which is terrific. If they have been rolled out so effectively, why not complete the job and follow through to reach 100%? Perhaps the Minister could tell us what exciting plans she has to do this.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
I would be glad to give information to the noble Baroness, whom I thank for reminding your Lordships’ House of the situation that we inherited—600,000 women on gynaecological waiting lists—and the challenge before us. My honourable friend in the other place was quite right about the planning guidance, but I commend the effort of the noble Baroness’s Government for pump-priming the introduction of women’s health hubs to the point where there are some 80 across the country—in nine out of 10 areas, there is at least one. It was never a long-term planning situation. The noble Baroness will also be aware of the informed observation from the noble Lord, Lord Darzi, that planning guidance has too many specifics. We therefore needed a new approach, which is what we have done. The planning guidance is not the catalogue of all the levers, nor of all that happens, in the NHS.
Baroness Barker (LD)
My Lords, women’s health hubs have proved enormously popular with practitioners, who are able to give multiple treatments in one session, and with women, who no longer have to take time off on different days to go to different clinics for different procedures. Given this, why are the Government not backing this cost-effective strategy, not least because it prevents women showing up at A&E, which is far more expensive?
Baroness Merron (Lab)
We are not closing women’s health hubs—it is important to put that on record. I have already said how successful the pilot has been; it therefore does not require a further target. I hope that noble Lords have seen that the changes to the planning guidance move away from the old centralised operating model to give more control and direction locally. As I said, the decision not to mandate women’s health hubs reflects a new approach to the guidance: fewer national directives and more empowerment of local leaders. Women’s health hubs are also described in the elective reform plan, which is one example of another area where their importance is recognised and boosted.
Baroness Sugg (Con)
My Lords, the Minister will know that women’s health hubs are vital in reducing gynaecological waiting lists. We have seen that through their success in areas such as Birmingham, Tower Hamlets and Liverpool. I hear what the Minister has been saying, but there is strong concern from the sector that many of the existing hubs are in their infancy or are not yet operational. They will not progress unless there is operational guidance for the NHS or formal commitment to them from the Government. With their removal from the planning guidance, what actions is the Minister taking to ensure that every ICB has a women’s hub? Given what she said about local decision-making, what steps are being taken to make sure that we learn from the success of the highest-performing hubs and share it with others?
Baroness Merron (Lab)
We continue to learn from the best. I am committed to speaking with the leadership of ICBs about the importance of women’s health hubs, not least because it is about improving women’s healthcare. Having visited a women’s health hub myself, I can testify to the points that the noble Baronesses have made. However, I gently repeat that we need to look not just in the planning guidance but in the elective reform plan, which states about the NHS that:
“In gynaecology we will support … innovative models offering patients care closer to home”.
That is exemplified by the women’s health hub. The Neighbourhood Health Guidelines, published just last week, include women’s health hubs as an example of a neighbourhood health model.
Baroness Blackwood of North Oxford (Con)
My Lords, the history of health policy through successive Governments has been one of too many priorities and targets which are not delivered, so I support the Government in this analysis. It has also been one of poorer outcomes for women and minorities. Given the shift in leadership from the Department of Health and others, how will the Government ensure better outcomes for women and minorities? How will those be monitored? Will they intervene early if they do not see that direction of travel?
Baroness Merron (Lab)
I thank the noble Baroness for her welcome for the new approach in the planning guidance. As she commented, and as noble Lords opposite will know, just because something is in the guidance does not mean that it will happen. For example, despite targets for A&E performance or ambulance response times being written into planning, they were not delivered. This is not where we want to be. We will continue to work with NHS England; for example, to ensure that women’s health is key. I should also emphasise that, as we move towards the 10-year health plan, women’s health will feature not as an adjunct but run throughout.
Baroness Hussein-Ece (LD)
My Lords, I welcome the Minister’s comments. We know that black women are three to four times more likely to die during childbirth and that the rate of maternal deaths in the UK has risen during the past 10 years, which I am sure she will agree is a national disgrace. Does she therefore accept that women—and especially women of colour—have been ill served for many years? How will the Government reverse this trend?
Baroness Merron (Lab)
I agree with the noble Baroness. It is a disgrace that there is such a huge inequality in maternity care. Maternal mortality rates are some 2.3 times higher for black women and 1.4 times higher for Asian women, while those living in the most deprived areas have a maternal mortality rate nearly twice as high as that for those who live in the least deprived areas. That cannot be acceptable in 2025. I am glad that we have taken a number of actions to ensure that trusts who fail on maternity care are robustly supported. We will set an explicit target to close black and Asian maternal mortality gaps. Trusts are also required to publish a suitable plan to tackle this and to put it into action. It is a challenge, but not one that we shy away from.
Baroness Blackstone (Lab)
My Lords, I declare my interest as set out in the register. What is the Government’s timetable for a revised or updated version of the women’s health strategy? Can the Minister also assure the House that there will be adequate funding for its implementation when it is brought in?
Baroness Merron (Lab)
Let me assure my noble friend and other noble Lords that there are no plans to cancel the women’s health strategy. I know my noble friend did not say that, but it is very important to put that on record. We continue to implement it; for example, since I have been in post, through measures such as supporting pregnancy loss through a full rollout of baby loss certificates, introducing menopause support in the workplace, and boosting women’s participation in research and clinical trials. As I said, our priorities for delivering the strategy will be through the 10-year plan. Funding decisions will be announced in due course.
Baroness Hodgson of Abinger (Con)
My Lords, given that one-third of all new breast cancer cases occur in women over the age of 70, will the Minister consider extending automatic screening for those women? At the moment, it stops at that age.
Baroness Merron (Lab)
Women over 70 can request an assessment if they feel it is appropriate for them. We act on and apply the scientific advice and evidence that we are given. On World Cancer Day, perhaps it would be appropriate to say to the noble Baroness that some 700,000 women across the country will take part in a world-leading trial to test our cutting-edge AI tools, which will be used to catch breast cancer cases earlier. This morning, I was at the Royal Marsden Hospital in Sutton with Minister Vallance to see the incredible contribution that AI is making to improved cancer services, including for women.
Avian Influenza
(1 day, 2 hours ago)
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Lord Blencathra (Con)
My Lords, as the shadow Secretary of State said in the other place on Thursday, this is a very difficult time for bird-keepers and farmers, particularly those whose birds have died or been culled, and all those who have had to upend their flocks and move them inside, given the impact that doing so can have on the mental and economic resilience of individuals. Will the Government commit to looking to remove the restrictions as soon as it is safe to do so and also consider the possibility of vaccinations?
While avian flu has been financially devastating for farmers, the last outbreak was devastating and disastrous for wild bird flocks. Will the Government therefore continue monitoring seabirds, including using citizen science, which delivers much of the monitoring, and commit to funding for research to secure best practice and understand the transfer of avian influenza and other diseases between wild and captive birds, including sub-lethal effects?
Baroness Hayman of Ullock (Lab)
My Lords, we are clearly very concerned about avian influenza. The noble Lord asked about the removal of restrictions. Of course, we want to lift restrictions as soon as we can, but only when we are absolutely certain that it is safe from a biosecurity perspective. He also asked specifically about seabirds, which is important because we know that there was a huge impact on seabirds in the last, very serious, outbreak. We are committed to continuing our work to monitor the impact of avian influenza on wild birds, together with other threats to their populations. This work is progressing through the English seabird conservation and recovery pathway through Natural England. The noble Lord may be interested to know that we have recently held a workshop with stakeholders to discuss how we can work together to take the key actions from the report forward. I also reiterate that members of the public are encouraged to report any findings of dead wild birds.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, avian flu is becoming a yearly occurrence. In the run-up to Christmas 2022, special measures had to be taken to ensure that the supply of turkeys was secured. Currently, free range chickens are kept in barns. What reassurances can the Minister provide that, following her department’s call for free range birds to be required to be kept indoors, their welfare will be protected in these confined conditions? What plans do the Government have to support farmers to train staff to prepare for future outbreaks?
Baroness Hayman of Ullock (Lab)
I am sure that the noble Baroness is aware that we recently brought in a statutory instrument in order that owners of poultry that are free range do not lose that designation while there is an outbreak going forward. Clearly, it is really important that farmers and poultry and egg producers have support during influenza outbreaks. We have compensation in, and we are looking at labelling changes; we do not want to put extra costs on to farmers and egg producers during an outbreak, and we are working very hard to ensure that that does not happen.
Lord Lennie (Lab)
My Lords, with apologies to the Liberal Democrats, following on from the Minister’s opening remarks, could she say what assessment has been made about the effects on the north-east tourism industry following the avian flu outbreak, which closed visits to the Farne Islands and other islands off the north-east coast? Could she say whether she thinks that Newcastle United’s success in the Carabao Cup against Arsenal can provide some compensation towards this loss?
Baroness Hayman of Ullock (Lab)
Well, in Defra, we work actively with all areas that are affected by avian influenza, including the areas that my noble friend refers to. All I can say is that Newcastle United appear to be having a better season than Leicester City.
Baroness McIntosh of Pickering (Con)
My Lords, will the noble Baroness share sympathy with producers of poultry and eggs, who are deeply worried at this time? My noble friend asked from the Front Bench about the status of vaccination. Is she able to say what that status is, at this time, for domestic production?
Baroness Hayman of Ullock (Lab)
Yes. The vaccination of poultry and captive birds—clearly, we are not talking about wild birds—is not currently permitted. Avian influenza vaccination is not considered to be a viable option for this season. We have a cross-government and industry task force exploring the potential for vaccination to be used as a preventive measure in the future. In spring this year, we expect the task force to publish its initial report and there will be a statement on that. We realise this is something we need to work on.
The Lord Bishop of St Albans
My Lords, research is absolutely fundamental at this point as we monitor what is going on and its very worrying effects. What are His Majesty’s Government doing to support centres such as the Animal and Plant Health Agency in New Haw, which is trying to work on this and desperately needs to redevelop its facilities?
Baroness Hayman of Ullock (Lab)
We work very closely with APHA—the Animal and Plant Health Agency—and are very pleased that we have secured funding for the continued upgrading at Weybridge. We also work with the other sites in order to ensure that we have the best research possible to deal with our ongoing biosecurity and disease risks, of which there are, unfortunately, so many these days.
Lord Bellingham (Con)
My Lords, I pay tribute to various poultry farmers across Norfolk and, in particular, in my former constituency of North West Norfolk, who set the highest possible standards of biosecurity and animal welfare. Can the Minister say something about what HMG are doing to co-ordinate action across the devolved Administrations? Can she confirm to the House that her department is firmly in control and that there is one unified policy?
Baroness Hayman of Ullock (Lab)
I can absolutely reassure the noble Lord on that. I speak very regularly with my devolved Administration counterparts and, obviously, we discuss issues such as avian influenza. My officials work constantly with the devolved Administration officials as well when we have an outbreak such as this.
Lord Elliott of Ballinamallard (UUP)
My Lords, noble Lords will be aware that Northern Ireland comes under the European regulations for organic egg production, not the UK ones. Because of the impact of avian influenza on free range eggs, which is an impact on organic egg production in the UK, would the Minister consider a lobby to bring Northern Ireland under UK organic egg regulations, as opposed to EU regulations?
Baroness Hayman of Ullock (Lab)
The noble Lord is absolutely right and, again, this is why I regularly meet with both the Permanent Secretary and the Minister at DAERA to discuss exactly these sorts of issues. We do not want any part of the UK to be at an unnecessary disadvantage. It is really important that we support egg producers and poultry producers in whichever part of the UK they are. I am certainly happy to discuss his suggestion with officials.
Baroness Bennett of Manor Castle (GP)
My Lords, I am sure the Minister is aware of the disturbing outbreak of H5N9 in the US where, for the first time, this variant of avian influenza has proved to be highly pathogenic. As a result, some 119,000 ducks have been killed on one farm. Given that H5N1 is also circulating extremely widely in the US—clearly out of control in animals, and with some human cases—are the Government working with and speaking to the US Government? No one is safe until everyone is safe, and the current situation with highly pathogenic avian flu in the US is deeply concerning.
Baroness Hayman of Ullock (Lab)
Yes, we of course work internationally on issues such as this and we are currently monitoring the situation in the USA. It is important to point out that the influenza of avian origin in the USA is a single genotype—B3.13—of highly pathogenic avian influenza. It has been identified in lactating cattle, as the noble Baroness pointed out, and we are trying to understand the virus strain associated with those cases. We have published a case definition to allow us to monitor, triage and, if necessary, test any reported cases so that we can focus any resources appropriately. But it is important to stress that this does not change the risk level for mammalian livestock in the UK, which is currently very low. We have no reason to suspect that the virus is circulating in our cattle, and nor is the virus strain circulating in Europe.
Lord Lansley (Con)
My Lords, while I entirely agree with the Minister that the risk to humans is very low, none the less, more than once in the past we have used H5N1 as a basis for potential pandemic preparedness. Would this not be a wise moment to re-enter the question of pandemic preparedness, with a training exercise looking at the risks associated with the mutation of this virus, so that it is transmissible between humans?
Baroness Hayman of Ullock (Lab)
Of course, it is critical that we are on top of the issues that the noble Lord raises, because I think we all agree that there is likely to be another pandemic on the horizon at some point in the future. We need to ensure that we look at all areas where we could potentially have problems. We are looking closely at what has happened where there has been transmission from birds to humans. At the moment, it is clear that this happens only when poultry owners spend a lot of time handling infected birds, so it is not a general concern for human contamination— but we absolutely have to be prepared for the next pandemic.
Renters’ Rights Bill
(1 day, 2 hours ago)
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Baroness Taylor of Stevenage
That the Bill be now read a second time.
Scottish and Welsh Legislative Consent sought.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, I extend my thanks to the many noble Lords with whom I have spoken about this Bill, and to Members of this House and people outside it who have worked so hard to improve the private rented sector over many years. I am looking forward to the maiden speeches of my noble friends Lady Brown and Lord Wilson.
The private rental system needs to change. It currently provides the least affordable, poorest quality and most insecure housing of all tenures. The insecurity it engenders creates uncertainty in the lives of tenants and allows good landlords to be undercut by the minority of rogues and chancers. In short, the 11 million private renters and the 2.3 million landlords across England are being failed.
The Renters’ Rights Bill brings forward the most significant changes to the sector for nearly 40 years. The Bill will strengthen the security of tenure for tenants; ensure that they are paying a fair rent; guarantee a minimum standard that they can expect from a property; provide new robust avenues to redress; and more. The Government have worked closely with those across the sector to ensure that the Bill’s measures strike the right balance. I will set out some of these key measures.
As many noble Lords will be aware, the Bill will deliver the Government’s manifesto commitment to abolish Section 21 no-fault evictions as soon as possible, removing the threat of arbitrary eviction and granting renters the security and stability they deserve. Section 21 evictions can wreak havoc with tenants’ employment, schooling and lives in general. As leader of Stevenage Council, I saw at first hand the knock-on effects that arbitrary evictions can have on families’ physical and mental health, with more people pushed into inadequate temporary accommodation. The case that always sticks with me is that of the parents of a child with special educational needs, who fought and fought to get their child into a school near where they lived but were then evicted from the very property that was near to that school.
It is unacceptable that over 123,000 households in England are currently living in temporary accommodation. This includes 159,380 children—the highest number of children in temporary accommodation on record. Removing this threat will immediately improve the lives of millions.
The Government also recognise that the vast majority of landlords provide an excellent service, and it is vital to ensure landlords can reclaim their properties when they need to. To this end, new, clear and expanded possession grounds will be introduced. We will ensure these are as watertight as possible, so that they cannot be abused by landlords seeking possession for the wrong reasons. These robust grounds will ensure that there is no room for loopholes in the system, and tenants will benefit from longer notice and protected periods.
The new tenancy system will operate on the basis of periodic tenancies. This will support tenants who want to leave poor-quality homes or face circumstances such as domestic abuse. Tenants will be able to give two months’ notice at any point.
I know several noble Lords have raised concerns about the removal of fixed-term tenancies. To be clear, it is a core principle of this Bill, and this Government’s firm belief, that there is no place for fixed terms in the future assured tenancy system. Both landlords and tenants will benefit from a simpler system, with a single set of rights and responsibilities. Neither group should be locked into a fixed term if their circumstances change.
In designing the grounds, the Government took time to ensure the Bill works for everyone, including students. To meet this goal, a new possession ground has been created to allow landlords renting to students in HMOs to seek possession ahead of each new academic year, facilitating the yearly cycle of short-term student tenancies. To further protect the student market, private purpose-built student accommodation will be removed from the assured tenancy system in recognition of the limited market such accommodation focuses on, and the differences between purpose-built accommodation and “off-street” private housing rented to students. Providers must sign up to government-approved codes of practice, which will ensure homes are safe and good quality, to be removed from the assured tenancy system.
The Bill also makes changes to the system by which rent can be increased, preventing unscrupulous landlords from using unfair rent increases to evict tenants by the back door. Landlords will now be able to increase rents only once per year and they must do so through the Section 13 process. Tenants will be empowered to challenge egregious increases at the First-tier Tribunal, without fear of receiving a higher rent than the landlord initially intended.
To further support tenants trying to do the right thing, a mandatory repeated rent arrears ground will not be included in the Bill. We will also increase the mandatory threshold for eviction under the mandatory rent arrears ground from two to three months.
The Bill proposes new laws to end the cruel practice of rental bidding wars by landlords and letting agents. For too many tenants, rental bidding restricts their ability to make an informed choice about one of the most financially significant decisions they face. They are led to think they have found a property they can afford to rent, only to discover they would need to pay way over the asking price to secure it. Our reforms will end this practice for good. Landlords and letting agents will be required to publish an asking rent for their property and will then be prohibited from asking for, encouraging or accepting a higher offer.
Following amendment on Report in the Commons, the Bill will also limit the amount of rent in advance that a landlord can require after the tenancy has been signed but before the tenant has taken possession to a maximum of one month. That aside, landlords will no longer be able to include any terms in the tenancy agreement that have the effect of requiring rent to be paid prior to the rent due date. Tenants will retain the flexibility to make payments of rent in advance during the tenancy should they wish to do so. Taken together, these measures will prevent the small number of unscrupulous landlords setting tenants against each other or excluding altogether renters who are perfectly able to afford the monthly rent on a property.
Everyone in the private rented sector is entitled to a safe and decent home. This Bill will make it illegal for landlords and letting agents in England, Scotland and Wales to discriminate against tenants in receipt of benefits or because they have children. Local councils will have strong enforcement powers to tackle unlawful practices related to rental discrimination. Mortgage lenders and insurers will also no longer be able to impose restrictive discriminatory terms.
Pets can bring a huge amount of joy to people’s lives, and this cannot be restricted to those lucky enough to own their own home. We are committed to supporting responsible pet ownership in the private rented sector. The Bill will ensure that landlords do not unreasonably withhold consent when a tenant requests to have a pet in their home, with the tenant able to challenge unfair decisions. We know that some landlords are concerned about potential damage caused by pets. That is why the Bill will allow landlords to require insurance covering pet damage. I thank the noble Earl, Lord Kinnoull, and the noble Lords, Lord Trees and Lord de Clifford, for their fantastic expertise, which they have shared with us to ensure that these reforms will work as intended. We continue to work with them.
The decent homes standard, which applies only to the social rented sector, will apply to the private rented sector and be enforceable for the first time. This will ensure that privately rented homes are safe, secure and hazard free, tackling the blight of poor-quality homes. The Bill will also extend the application of Awaab’s law to the private rented sector, enabling the setting of clear legal expectations about the timeframes within which landlords must make homes safe when they contain serious hazards. We will launch a consultation on the content of the decent homes standard for social and privately rented homes in the coming months. We will also set out further information about the timescales for implementation in due course.
The Bill provides for the introduction of a new PRS landlord ombudsman service that will deliver quick, fair, impartial and binding resolutions for tenants whose landlords fail to resolve legitimate complaints. The ombudsman will support a number of the new measures the Bill introduces—for example, giving tenants further opportunity to escalate issues where a landlord has encouraged a bidding war or unreasonably refused a pet.
The Housing Ombudsman Service has extensive experience in tenant-landlord services and redress and is well placed to deliver streamlined redress for both private and social tenants. We said in opposition that we agreed with this approach, and we are still of that view. However, this is not a final decision. We will continue working to design the best possible service for users and, following a full value-for-money assessment, we will determine who is best placed to deliver a high- quality service.
This Bill also introduces a private rented sector database, through which tenants will be able to access information to inform choices when entering new tenancies. Landlords will be able to understand their obligations and demonstrate compliance, and local authorities will be able to use the database to target enforcement activity. We will continue to consider what information is necessary to collect to support more informed rental experiences for tenants, and to provide local authorities with a dataset which will support the enforcement of health and safety standards in the private rented sector.
The changes I have just mentioned have the potential to transform the experience of renting in England, but their success is contingent on effective enforcement. The Bill will strengthen local councils’ enforcement powers and introduce a new requirement for councils to report on enforcement activity. The Bill includes a staged enforcement framework for local authority enforcement. New maximum penalties of £7,000 and £40,000 will be introduced for initial or minor compliance and for serious, repeat or persistent non-compliance respectively.
The Bill will also significantly strengthen rent repayment orders. This will provide a stronger deterrent against non-compliance and further empower tenants to take action against landlords when they commit offences. More offences will be brought into the scope of rent repayment orders. Further changes include making sure superior landlords and company directors can be held liable, and doubling the maximum amount a landlord can be ordered to pay from one to two years’ rent. We are also doubling the period in which tenants and local authorities can apply for a rent repayment order and requiring repeat offenders to pay the maximum amount.
New investigatory powers will make it easier for councils to identify and fine unscrupulous landlords. Local authorities will be able to request information from third parties and enter business premises and—in much more limited circumstances—residential premises to gather evidence where required. The new powers contain safeguards to ensure that they are used appropriately and proportionately.
It is imperative that the reforms in the Bill can be handled by the courts and tribunals system; many noble Lords have expressed concerns about this and have raised them with me. I want to reassure noble Lords that we are working closely with the Ministry of Justice to ensure that the justice system is prepared for the implementation of this Bill. Most tenancies end without court proceedings being required, and the digitisation of the court possession process will make the process easier to navigate for landlords and tenants in those cases where they are. I will be meeting very soon with a number of noble Lords who have expressed interest in this digitisation process, and I look forward to that further engagement.
I know we all share a wish to see fairness and proportionality in any regulatory framework. We believe we have achieved that in our reforms, and I very much look forward to your Lordships’ scrutiny of the Bill. The Bill ensures that tenants can put down roots in their communities. They deserve to enjoy that stability, just as home owners do, and we should reward landlords who provide the excellent service that so many of them do. This will be the biggest change to the experience of renting in this country for generations. I believe the measures in the Renters’ Rights Bill are sufficiently comprehensive, robust and balanced to achieve that change, and give all tenants a better place to call home. I beg to move.
Baroness Scott of Bybrook (Con)
My Lords, I declare my interest as set out in the register as vice-president of the Local Government Association. I very much look forward to the maiden speeches of the noble Baroness, Lady Brown of Silvertown, and the noble Lord, Lord Wilson of Sedgefield, and welcome them to the House.
The Renters’ Rights Bill is counterproductive. While the Government may have good intentions, they will drive landlords from the market—reducing choice and putting up rent for the tenants they seek to protect. While we discuss this Bill, it is important to remind ourselves who landlords are: around 45% own one rental property, with another 40% owning two to four. In many, if not most, cases these are not professional landlords; they may have gained an extra property when a family member has died or through marriage later in life, or perhaps they invested in a property or two to use as a pension. To expect them to be able to cope with all the costs and burdens placed on them by this Bill is at best naive. Many decent landlords and safe, quality homes will leave the rental market as a result.
We must absolutely deal with bad landlords, but in most circumstances there is no reason a good landlord would want to lose a good tenant. It is in their interest to keep a steady income from a reliable tenant who respects their property. Having an empty property is expensive, and there are significant fees and paperwork involved with finding a new tenant. While trying to protect and improve living conditions for renters, the Government should be very careful not to do the opposite and make it worse for them.
The last Conservative Government introduced our own version of this Bill, the Renters (Reform) Bill. It was first introduced to the House of Commons in May 2023 and eventually had its Second Reading in your Lordships’ House in May 2024, but was not taken any further before the general election. The Bill did not make quick progress because we wanted to take our time to get this right. We listened to representations from the sector and carefully considered the impact of our policies. We made changes during the Bill’s passage through the House of Commons, most notably on the readiness of the courts, and further changes were planned for the House of Lords, most notably to carve out student lets.
We recognise that some reform to our rental market was necessary to protect tenants from the abuse at the hands of rogue landlords, but it was always important to us that we balance the rights of tenants to live safely and peacefully in the homes they were renting with the rights of landlords, particularly with respect to their property rights.
The Government were trying to balance the see-saw, and I know we did not get everything right. Many felt that the measures introduced by the Bill went too far in favour of tenants and too far against the landlords in a way that would work to the detriment of the rental market, and I have sympathy with that. However, we listened to the concerns that were raised and we were making changes to the Bill as it progressed.
If the Renters (Reform) Bill did not quite balance the see-saw, the Renters Rights’ Bill tips it over. This is not the same Bill that the last Conservative Government introduced, and the Government are rushing it through without any care for the repercussions that will reverberate throughout the sector. Labour has abandoned our commitment to improvements in His Majesty’s Courts & Tribunals Service before abolishing Section 21 for existing tenancies, as well as our six-month implementation period before abolishing Section 21 for new tenancies. This means that our courts will not be resourced as they need to be. Labour has also abandoned our requirement for the Lord Chancellor to assess the courts’ possession processes before abolishing Section 21 for existing tenancies, which would have ensured that they were ready for the changes first.
Labour has abandoned our plans that would have stopped tenants being able to give notice during the first six months, to give landlords some predictability and protect them against tenants seeking to exploit these new arrangements for rolling tenancies such as holiday lets. Labour has abandoned our plans to make it easier to remove anti-social tenants, which we were changing from “likely” to cause a nuisance or annoyance to “capable” of doing so, making it much harder to evict those who deserve to be evicted. Labour has also abandoned our commitment to sufficiently carve out student accommodation, where it is essential that both landlords and tenants have the certainty of fixed-term contracts to plan for subsequent years.
Not only have the Government removed many of the safeguards and improvements for landlords that we put in the Bill but they have added many concerning measures of their own. They are increasing the mandatory eviction threshold for rent arrears from two months to three months, significantly increasing the loss incurred by landlords when a tenant is not paying for the property they are occupying. They are shortening the time limit for landlords to consider a pet, which we know to be a significant issue. They are rushing, in our opinion, the implementation for the private sector of Awaab’s law—a law that was designed for the social housing sector and that could have significant implications for smaller landlords if not implemented very carefully.
If that was not enough, Labour took the Bill even further, through the amendments it made in the House of Commons. It introduced amendments to include restricting the payment of rent in advance, which will hit most severely self-employed renters and those with bad credit ratings, where a landlord is now even less likely to want to take the risk on them. It introduced amendments requiring landlords to pay compensation to tenants when they possess their properties, burdening landlords with even more unfair costs, even if they have no choice but to take their property back and may have already spent a lot of money to do so.
Much has changed since the original Bill was introduced, and we must acknowledge the broader context that the Bill and the sector find themselves in. Landlords are leaving the rental sector at a higher rate than ever, with many citing rental reforms as their reason for leaving. Rightmove has estimated that 18% of homes up for sale were previously rented, compared with 8% in 2010. In London, where we know the problem in the rental market can be most acute, the situation is even worse: 29% of homes for sale in our capital city were previously rented out.
On top of this inflated package of rental reforms, landlords now have the minimum energy-efficiency standards to contend with. Ed Miliband, the Secretary of State for Energy Security and Net Zero, is requiring all private and social rented homes to meet EPC C by 2030. The industry estimates that this could cost the sector £25 billion—an average of £5,400 per home. This is a cost that many landlords, particularly those with only one or two properties, just cannot take.
Of course, this is set against a backdrop of ever-increasing taxation from a Government who do not understand how our economy works. All these issues compound to make our country an unattractive, burdensome and expensive place to be a landlord, however fair and decent one might be to their tenants.
There is always a balance to be found with legislation, and in this case respect for property rights is essential for investment and stability. I would expect the risk of legal challenge on this Bill to be very high. There will certainly be a few interested parties queuing up to challenge the Government over the rights to their own property. If the Government are not careful, and continue with such an aggressive pursuit of landlords, there is a good chance that their Bill will get stuck in the courts and not be able to benefit anyone.
In Scotland, similar legislation has resulted in the highest rent increases in the United Kingdom because of demand far outstripping supply. The Nationwide Foundation found that 70% of landlords and letting agents lack confidence in the future of the sector. This has led to a significant reduction in rental stock, which has made it much more difficult and expensive for tenants, especially those on low incomes, to find a home. We must learn from Scotland’s mistakes.
There will always be people who want, or need, to rent rather than buy their home. We must ensure that there is a stable rental market for them, and we will do all we can to convince the Government to think carefully about how they proceed. We intend to table amendments to address some of the most pressing concerns, including: the capacity and operation of the courts; student landlords, who need certainty of length of tenure and other mutually agreeable fixed-term contracts; some exemptions for smaller landlords, who are less able to weather these changes; the availability of insurance for damage caused by pets; consideration of the property rights of landlords; and the impact on the housing market. We will pursue these amendments for the benefit of landlords and tenants alike, because we know what will happen if we do not.
The Government’s own impact assessment acknowledges that tenants will see increased costs as a result of their policies, saying
“it is likely that landlords will pass through some costs of new policies to tenants in the form of higher rents—to offset those costs and maintain a degree of profit”.
Surely the Government cannot want this, and I hope that they will listen to the concerns being raised by the sector and by many noble Lords across this House before it is too late.
Baroness Grender (LD)
My Lords, the Liberal Democrats welcome the Bill and support the fundamental principles in it of rebalancing the relationship between landlord and tenant. We thank the Minister for the meetings so far and look forward to working with her to make progress. We also look forward to hearing the maiden speeches of the noble Lord, Lord Wilson, and the noble Baroness, Lady Brown.
We are particularly supportive of the measures to immediately ban Section 21 eviction notices. Frankly, this change cannot come soon enough for so many, and we owe it to the almost 1 million renters who have been on the receiving end of a no-fault eviction since the change was promised in the 2019 Conservative manifesto. They are only a small fraction of the vast numbers who have lived with the insecurities of the now most common form of tenure—assured shorthold tenancies—since they were first introduced in 1988. Given all the similarities to the previous Renters (Reform) Bill—in particular, on scrapping no-fault evictions—it was so disappointing to see the Conservatives in the other place attempting to block the Bill altogether. They need to deliver on their original promise. This much- heralded but delayed change by the previous Government remains nothing short of a scandal and has left a legacy for tenants that we should have uppermost in our minds during the progress of the Bill.
The promise to ban no-fault evictions followed by dither and delay made, if possible, the market even worse for tenants, prompting a 30% growth in Airbnb short-term lets and taking away even more security of tenure from other tenants. There is one small silver lining: the sector itself has had significant notice of this change and therefore time to prepare for no-fault evictions bans.
Tenants are aptly described as the
“People on the Frontline of Britain’s Housing Emergency”
in Vicky Spratt’s excellent book, Tenants, in which she outlines the ever-widening gaps between those who own and those who rent. All issues, from inequality to fuel poverty, mental and physical ill health, the cost of living and lack of social mobility, are impacted by insecurity of tenure—or a home that you simply cannot rely on. The direct link between being evicted as a tenant and homeless is well documented by, among others, the Local Government Association.
At the heart of this issue is lack of supply of suitable homes. We strongly support the Government’s ambitions to end homelessness, but that needs to be matched with greater ambition to build social and council homes for rent—150,000 per year, which was in our manifesto, along with a programme of insulation for all housing, a planning use change to control second homes and new powers for councils to halt right to buy based on local needs.
Of course, the elephant in the room with the private rented sector is rents, and we on these Benches regret the lack of progress on this issue. Although we welcome the ban on bidding wars, which in turn drive up rent, this Bill still does not deal with the chronic levels of rent increases. Private rent inflation may have slowed down, but it is still rising faster than the CPI. The Renters’ Reform Coalition, which I thank for its briefing, rightly highlights that this will continue to leave open significant increases in rent as a means to evict. As the Renters’ Reform Coalition makes clear, England’s rents as a share of disposable income are some of the highest in Europe, with two-thirds of in-work private renters struggling to pay. This Government’s housebuilding plans will not change the supply crisis for years and will not fix this rent problem. Amendments by our Liberal Democrat colleague Gideon Amos MP linked rent rises to the Bank of England base rate, and we will look at options, such as the CPI or national wage growth, in Committee.
Given the poor condition of so many private lets, with the 2023-24 English Housing Survey highlighting that the private rented sector has the highest proportion of non-decent dwellings at 21%, we welcome the extension of the decent homes standard and the introduction of Awaab’s law across the PRS. However, we have significant concerns about enforcement, which other colleagues will elaborate on. Likewise, we welcome the protections for renters who are on benefits and those with children.
Instability in this area cannot be overstated, given that a quarter of all private renters have lived in three or more homes in the past five years. Therefore, we welcome the 12-month protected period at the start of new tenancies, and we will continue to explore the possibility of another extended period of tenancy guaranteed as an incentive to landlords to build to rent.
We will look to improve the Bill—for example, by supporting those who serve the whole nation in our military and give the ultimate service. In the previous Parliament, our colleague Helen Morgan MP campaigned to ensure that MoD housing was included under decent homes. The Kerslake commission report, Homes Unfit for Heroes, commissioned by John Healey MP, lays bare how poor the standards are. I ask the Minister to let us know the possibility of including service accommodation in this Bill. We live in an uncertain world, and putting our Armed Forces and their families into shoddy and inadequate housing, which impacts health and morale, is a failure of our duty to them.
Finally, my noble friend Lady Thornhill will lead us in our attempts to improve and expand the database. The majority of landlords that we know about—the ones that will participate in this debate or have briefed us—are the ones we can see and who will immediately join the database and ombudsman scheme. They, like the majority of tenants, are responsible landlords—but we know so little. It is the landlords we cannot see about whom we have limited knowledge, information and transparency. A database can be either a tick-box exercise or a significant game-changer on this. I hope the Bill progresses and that it will be the latter.
Tonight, as we speak, a primary school child will be in their third rental in a year and will know the insecurity no child should have to bear: health-defining, future-defining and life-defining. We owe it to that future generation to get this right, but to do it soon.
Lord Best (CB)
My Lords, I thank the Minister for her introduction and for many helpful meetings on the Bill. I look forward to the maiden speeches of the noble Lord, Lord Wilson, and the noble Baroness, Lady Brown. I declare my housing and property interests as on the register, including that I have family members who own rented property.
The Bill introduces much-needed reforms to the private rented sector—the PRS—which I greatly welcome. However, I want to address a big question that I know is in the minds of a number of your Lordships: however necessary the reforms to the PRS, will the Bill lead to large numbers of landlords exiting the market? If a lot of landlords decide this kind of investment is no longer for them, what will happen to the rental market?
A mass exodus of landlords seems very unlikely. Property remains an attractive long-term investment in uncertain times. However, analysis by the consultancy Savills shows that a gradual reduction in private rental properties has already been under way in London. Despite the arrival of the new providers of Build to Rent apartments, it seems entirely possible that the Bill will lead to more landlords selling up.
Keeping up with the new legislative requirements not only necessitates use of proper, professional lettings agents but will mean substantial investment for properties in need of modernisation. Meeting the decent homes standard comes alongside a forthcoming duty to upgrade properties to higher energy efficiency standards. Many landlords, particularly those who have borrowed heavily in the hope of making capital gains, simply lack the resources to comply with important new demands.
I conclude that the PRS will get smaller, but this is not necessarily a negative outcome. The private rented sector doubled in size in the early 2000s and, despite a tougher tax regime, there are still some 2.3 million private landlords. Meanwhile, the expansion of private renting has led the sector to take on a role for which it is not well equipped. With the steep decline in social housing—the council and housing association sector is now barely half its former size—the PRS’s expansion has had to fill the gap. Yet, private renting is seldom the best option for those needing low rents, good quality and long-term security. Nor does the enlarged PRS suit the taxpayer: the sector’s higher market rents have propelled more renters into housing benefit at escalating cost to the Exchequer. The PRS has found itself performing a role in place of councils and housing associations, which suits neither the tenants nor the public purse. The Bill could help achieve some rebalancing between the private sector and the social sector.
Of course, an expansion of provision by councils and housing associations through the building of new homes is an essential part of the Government’s plans for constructing 1.5 million homes during the course of this Parliament, but as well as a substantial new-build social housing programme, this seems an important moment to promote the purchase and modernisation of previously privately rented property to house those on lower incomes. If there are more sales of privately rented properties, and if strong enforcement of the Bill’s new measures deters purchase by less scrupulous landlords, then the opportunity—indeed, the necessity—to switch property to restock the much-diminished provision by social landlords will emerge.
Some local authorities are already active in bringing PRS rentals, including former right-to-buy private rentals, into the social housing sector, not least to provide temporary accommodation for homeless families. Buying privately rented property can achieve a speedy solution to urgent, immediate housing problems, while also being there in perpetuity as genuinely affordable, secure accommodation. This is where the housing associations of the 1960s and 1970s came in, buying and modernising the properties of Mr Rachman and his like.
It is important to note that, sometimes, owner-occupiers will step in and do up the property. No doubt some sales will transfer the homes to larger landlords, who can achieve some economies of scale and introduce professional management. However, high interest rates and the less favourable tax arrangements now in place may inhibit these buyers. For sure, local authorities will need to be on their guard to prevent property acquisitions by rogue landlords who do not intend to comply with the new environment introduced by the Bill.
How can transfers to social lettings be achieved when this legislation is enacted? I suggest that the Government look at an exemption from capital gains tax for the sales of properties from private landlords to social landlords. Such support would pay for itself in reducing the need for ever-rising housing benefit payments. Such an incentive could propel the rebalancing between sectors after so many years of decline for social housing. If the PRS were to continue to shrink by about 2% annually, the outcome could be positive, with both an additional 500,000 home owners and 500,000 more social tenancies.
In conclusion, I look forward to raising some specific issues in Committee, including the regulation of lettings agents, the constraints on switching long-term lets to short-term letting, the content of the new property register and the basis for in-tenancy rent increases. For now, I welcome the positive contribution that the Bill will make.
The Lord Bishop of Lincoln
My Lords, I welcome this Bill and the commitment that the Government have made to tackling the pervasive insecurity and unaffordability of the private rented sector. I will be delighted to listen to the maiden speeches of the noble Lord, Lord Wilson, and the noble Baroness, Lady Brown.
Last week, my right reverend friend the Bishop of Chelmsford, the lead Bishop on housing, chaired a round table with a number of noble Lords and members of the Renters’ Reform Coalition. Although she is unable to be here today, I know that she is looking forward to contributing to the Bill as it progresses.
The Bill is an opportunity to strike a fairer, long-term deal that will benefit both landlords and tenants. We must heed the voices not only of tenants themselves but of landlords’ groups, which have expressed legitimate concerns about any potential negative consequences, however unintended, of the changes introduced by the Bill.
There are many things that the Bill gets right, including, to name just a few: the introduction of a private rented sector landlord ombudsman service; the expansion of provisions supporting tenants with pets—my cats and I are grateful; and the extension of Awaab’s law to the private rented sector. These are in line with the vision of the Archbishops’ Commission on Housing, Church and Community, which argued that good housing should meet the following standard and be
“sustainable, safe, stable, sociable and satisfying”.
However, I have some concerns about the Bill as it stands. First, it ought to extend the decent homes standard to all temporary and asylum accommodation. While I celebrate the Government’s decision to introduce a clause extending its scope to temporary accommodation following a consultation, I note that this change will be at the discretion of the courts on a case-by-case basis. This extension should apply to dispersed accommodation for asylum seekers, which is currently managed by accommodation providers on behalf of the Home Office. In a debate last week, my right reverend friend the Bishop of Sheffield correctly identified the need to move from the use of hotels to accommodate asylum seekers to dispersed accommodation sites in communities. This will require local government to be properly funded to provide support services for asylum seekers, especially children, to enable integration into local schools and communities.
I am also concerned about discretionary grounds for eviction, which could affect, for instance, tenants who are terminally ill. I welcome the opportunity the Bill provides to explore what are the remaining grounds for possession, where they need not be mandatory.
Finally, I turn to the topic of tied accommodation. I thank the Minister for her engagement with these Benches regarding the Bill’s implications for those in occupational tied accommodation, a concept which is well-defined in law. As the Bill progresses, I anticipate that there will be need for further conversations to ensure that charitable retirement housing schemes for those who spend their working life in tied accommodation are not inadvertently prejudiced.
Lord Wilson of Sedgefield (Lab) (Maiden Speech)
My Lords, I refer noble Lords to my entry in the register of interests. I thank all sides of this House for the welcome they have given me to the Lords. It has been a warm and gracious welcome, so thank you very much. I thank the offices of the Lord Speaker, Black Rod and the Clerk of the Parliaments, who worked with great professionalism to ensure that my introduction to this House went according to plan. I have discovered that the House of Lords is, like the House of Commons, a rabbit warren, only with red carpets. I therefore thank the doorkeepers for pointing me in the right direction.
I thank my noble friends Lady Smith of Basildon and Lord Kennedy of Southwark for their leadership. I pay tribute to my noble friends Lady Armstrong of Hill Top and Lord Hanson of Flint for sponsoring me. I have known my noble friend Lady Armstrong for almost 40 years. As MP for North West Durham, she introduced me to the House of Commons when I won the Sedgefield by-election. My noble friend Lord Hanson and I shadowed the Home Office between 2010 and 2015; my noble friend was the shadow Minister and I the shadow Whip. I remember us winning a couple of votes in Committee on one occasion—I emphasise that it was on only one occasion.
This year, 2025, is turning out to be an eventful one for the Wilson family. On 14 January, I became a grandfather for the third time, this time to a beautiful baby girl. On 20 January, I was introduced to this House, and, next month, my mother will celebrate her 100th birthday. Obviously a little tired after 100 years, mam is still as sharp as a pin and loves to reminisce. I will never forget how her face lit up when I told her I was to be a Member of the House of Lords. She leant forward in her chair, reached out for my hand and said: “And your dad was a miner”. Mam was born in 1925, in the colliery village of Fishburn, in County Durham. In 1925, this House was home to 26 Dukes, 29 Marquesses, 130 Earls and 73 Viscounts—none of them, as far as I am aware, the son or daughter of a coal miner.
My dad was brought up in Trimdon, another colliery village, just to the north of Fishburn, and my parents left school on the eve of the Second World War. Ambition and aspiration were restricted primarily to three occupations for men in those villages at that time: work on a farm, go down the pit, or join the Army. Dad’s first job was on a farm. Since he was in a reserved occupation, he joined the Home Guard, and would pick up his rifle and three rounds of ammunition from the vicarage to fend off any potential Nazi invasion. On 30 August 1939, his elder brother joined the Royal Artillery. Evacuated from Dunkirk, he would eventually see service behind the beaches of Normandy with the second battalion of the SAS. He was our rogue hero.
Careers for women in those villages at that time were also rare. Mam worked during the war in a fish shop in Billingham, on Teesside, and she still regales the family with how it was in old money: 1p for a bag of chips and threepence for a fish. Every night, the blitz came to Billingham. Every night, she took to the bomb shelter or hid under her neighbour’s reinforced kitchen table as the Nazis tried to destroy the town. By the time my parents married, dad was working down the pit, and he did so for the best part of 40 years. I grew up one of two sons on a council estate in Trimdon. It was a close-knit community.
I joined the Labour Party many years ago because I believe in ambition and aspiration. There is plenty of talent around, but opportunity for all is scarce. Equality of opportunity is central to a just society: an education that takes you as far as you want to go, a job which enriches your life and that of society, a society in which you are looked after when you are ill and where you live in a home not just a house, and where we all understand that the first duty of government is to defend the nation.
I had the privilege of representing Sedgefield for 12 years. The constituency had moved on from being a mining constituency. The area that was once the Sedgefield constituency boasts, at Newton Aycliffe, one of the largest business parks in the north-east. I am proud of the part that I played in ensuring that Hitachi Rail built its train manufacturing plant in the constituency, situated just a few hundred yards from where George Stephenson assembled Locomotion No. 1 some 200 years ago this September. I wanted to make sure that the opportunities that were not there for my parents were there for my constituents.
The 2019 election was a defeat for me and a defeat for Labour. That election was dire for the country. The electorate was confronted with a choice of Prime Minister which was not a choice between the lesser of two evils, as many thought, but was in fact, I am afraid, a choice between the evil of two lessers. It was a torrid time, but I am pleased and proud that Keir Starmer has turned Labour into a party that is once again serious about government—so serious in fact that we have formed a Government only five years after a massive defeat.
Of course, Tony Blair was my predecessor, and his leadership galvanised Labour to victory. I first met him in the bar of the Trimdon Community College at the time of his selection as Sedgefield’s Labour candidate in 1983, and I went on to work for him for many years. Tony had a big smile, big charisma and big ideas. However, so dreadful were Labour’s prospects in 1983 that, if you had said to me back then that Tony Blair would go on to form a Government that would keep the Conservatives out of power for 13 years and win three consecutive general elections, I would have replied, “Go away, pick up a pen and write a novel. You’ve a great imagination”. If you had said to me back then that I would be relaying this story in my maiden speech in the House of Lords, I would have replied, “I think that you have being drinking one too many pints down the Labour club”.
I want to end by returning to my granddaughter. Because of medical advancements, she will probably reach her centenary in 2125. What kind of world will it be? Will my granddaughter be able to afford to buy her own house, or will she only be able to afford to rent? Will she live in a society where we understand that we can go faster alone but only go further together? Will she live in a society where free speech is not just opinion but based in fact and founded on truth? Will our generation prevent another world war, so that my grandchildren can live to become grandparents themselves? Will the worst effects of climate change be stopped, or will it not even be safe for her to venture outside? In 2125, will there still be hereditary Peers in the House of Lords?
The task for us all, especially this Government, is to face the challenges that are moulding the 21st century, with all its contradictions, tragedies and opportunities, and to do so with belief, imagination and fortitude. Our responsibility is huge: to protect all that we believe in—human rights, democracy, the rule of law, equality of opportunity and our way of life. This Government need to be successful for the country and for the sake of all our grandchildren. It is my ambition and aspiration to ensure that I play my part in that.
Baroness Warwick of Undercliffe (Lab)
My Lords, I warmly congratulate my noble friend on a powerful and very moving maiden speech.
My noble friend is known for being one of the “famous five”, a group of local Labour Party members who helped Tony Blair to be selected as a Labour candidate in 1983, as he indicated; the rest is history. My noble friend stepped into those very big shoes when he won the Sedgefield constituency, but he clearly showed that he could fill them. He was immensely proud, as he said, that he had been instrumental in bringing a Hitachi Rail factory to Newton Aycliffe.
The House will have realised how equally proud he is of his northern industrial heritage. A Sedgefield lad born and bred, he still lives in his constituency and he showed us the love that he has for it, for that heritage and for County Durham. However, he was too modest to say that he is working on a PhD on its culture and class issues. My noble friend’s background and solid life experiences will ensure that he makes a formidable contribution to this House. I know that he will be given a warm welcome.
I supported the previous Government when they sought to reform the private rented sector to the benefit of tenants, and I support my Government now in ensuring that reform happens. I was really disappointed that the Conservative Party has refused to support the legislation, when both pieces of legislation have the same aim. The Government have developed comprehensive protections for tenants and, at the same time, recognise the contribution made by responsible landlords who provide quality homes. It is clear that great care has been taken in the drafting of this Bill to avoid unintended consequences. Of course, there are ways in which the Bill can be improved, and we have been briefed by Citizens Advice and Shelter, as well as by several organisations representing different interests in the PRS and those involved in student housing, but all expressed general support for the Bill and its aims.
I believe this legislation has the power to transform the private rented sector into a place where tenants can access safe and decent properties at a fair price in the knowledge that, unless their landlord has good reason, it is a place they can call home for as long as they like. It also presents an opportunity for the vast majority of good landlords to establish longer-term tenancies and to show that the minority of bad ones have no place in the sector.
In the Bill, there are issues about the Courts & Tribunal Service, the removal of fixed-term tenancies and enforcement capacity—to name only some aspects. In the time we have, I will focus on a few: first, the impact on social landlords; secondly, the new ombudsman and the role of agents in helping to get that right; and, thirdly, student accommodation. If we are truly to solve the housing emergency, we need to deliver the complementary goals of increased supply and stronger regulation that will ensure that homes are built and maintained at a high standard. This Bill is key to the second half of that equation.
In the social housing sector, it is clear that much has been done by the Government already to allow social landlords to gain access to properties in need of essential redevelopment and improvement works. Regeneration can restore pride in communities and in places that have been left behind, so I am pleased that changes in this legislation will not impede housing-led regeneration and redevelopment.
I know there are concerns that some of the proposed changes to rent increases might impact on social landlords’ ability to increase rents in a harmonised way and affect their ability to deliver repairs and maintenance. There are also concerns about accessing the First-tier Tribunal. I hope the Minister will be willing to meet the National Housing Federation to discuss these.
I turn now to the very welcome proposal for a new ombudsman for the private rented sector, and I declare an interest as the chair of the Property Ombudsman scheme—TPO. It is right that all renters, whether in social or private rented housing, can access quick, fair, impartial and binding resolutions for complaints about their landlord. Can the Minister clarify whether a PRS ombudsman would apply to social landlords’ market rent tenancies?
In the private rented sector, TPO has been dealing with complaints against letting and managing agents for over 20 years. It dealt with 70,000 inquiries last year. That has taught us that tenants’ complaints often include not just the agents but the decisions and actions of their landlords as well. For example, where there is a cost to repair a property, landlords need to authorise payments and instruct agents to carry out the work. From a tenant’s point of view, the agent and the landlord are one and the same, so letting agents will have an important role in delivering the objectives of the legislation.
Whether the decision be that there is one combined ombudsman for the PRS and social housing sector or two separate ombudsmen, it needs to be clear that the purpose of the ombudsman is to provide clarity to tenants on where to go for redress. This will be a new concept for the 50% of PRS landlords who do not employ agents. Can the Minister provide some clarity on how they will be engaged with the process?
I welcome the proposed landlord database. Agents will be required to use the database to check whether the properties that landlords ask them to market are registered as well as that the landlord is registered with the new PRS ombudsman. Can the Minister please clarify whether the database is intended to be a one-stop shop that agents and tenants can use to check the property is registered and compliant and that the landlord is registered for redress?
It is a complex area, with the potential for tenants to find themselves lost and frustrated. A lettings dispute can involve on average five different unresolved issues. Will the Minister consider how the database could be developed to help tenants triage multiple issues to ensure that serious hazards are referred to local authorities, landlord issues are directed to the new ombudsman, agent issues are referred to the Property Ombudsman and rent issues are appointed to the First-tier Tribunal?
Joint investigations will be required and both ombudsmen will need to be able to refer cases to local authorities for enforcement, especially when homes fall short of the decent homes standard and Awaab’s law. Just as the Property Ombudsman now works with redress providers and trading standards, a joined-up approach will be required to ensure that the new system works for both tenants and landlords.
I raise a final issue: the impact of the Bill on student housing. The Government have said that they will exempt purpose-built student accommodation from the decision to end fixed-term tenancy agreements. They subsequently included off-street accommodation, where most students live in their second and third years. Unfortunately, as far as I understand it—although it was not clear from the Minister’s introduction—this will not apply to one- and two-bedroom apartments, yet these account for a third of all student housing. The university sector believes that this is likely to cause confusion and disruption for students and could lead to landlords exiting this market because of the uncertainties. If that is the case, will the Minister agree to look at this again?
This is a complex Bill that will have an interesting Committee stage, but I assure the Minister that the organisation that I chair—the Property Ombudsman—is ready to offer its substantial experience of the PRS to help ensure that the Bill works for tenants, landlords and agents.
Lord Willetts (Con)
My Lords, I congratulate the noble Lord, Lord Wilson of Sedgefield, on his excellent maiden speech, its eloquence and his extraordinary personal story. This afternoon, behind the Bench of Bishops, we may have seen another constitutional function emerge in this House: the Bench of Blairites. I welcome the noble Lord and appreciate what he said about his predecessor as Member of Parliament. He also spoke eloquently about opportunity, and that is a test against which the measures in the Bill should be assessed.
I thank the Minister for her willingness to engage in discussions with all of us across the House. In her opening speech, she referred to genuine problems with the private rented sector, the difficulties for people in employment if they lose their accommodation and the incredible difficulties for parents with a child at school if they face the uncertainty of losing the place where they live. She ended by saying that she hoped this legislation would help tenants put down deeper roots in the community.
That was all very eloquent, but it revealed a way of thinking that simply does not reflect the reality of student accommodation, for which these concerns do not apply. There are over 1 million students in the private rented sector and a long-standing problem, preceding this Government, is that, although access to private rented accommodation has been crucial to the growth of higher education in this country, the housing department has never really understood higher education and the education department has never understood the importance of private housing. I fear that this legislation is an example of that phenomenon.
For example, students receive maintenance loans in three separate payments during the year. Many rents historically have been structured around the payment of maintenance loans. There is now an assumption of a monthly rental payment model and no scope for landlords to offer tenancies structured around maintenance loans. Have there been any conversations with the education department about changing arrangements for the payment of maintenance loans so that they match the envisaged new payments of rents? Those are the kinds of practical issues that matter and are acute if there is no understanding of the problems facing students.
Students have genuine grievances. At the All-Party Group for Students last week, all of us from both Houses were left in no doubt about their unhappiness, which was sometimes about the quality of student accommodation and sometimes about the role of guarantors, for example. But few believe that the Government’s proposals, as they stand, will make these problems significantly better. Indeed, there is a danger of landlords exiting the system.
The Government have already made some welcome concessions. First, there is the exemption for purpose-built student accommodation. This is estimated to cover about half a million students out of the 1.2 million in private rented accommodation. It is the most expensive and is heavily regulated—quite rightly. There are significant constraints on its supply and on its further provision.
We have recently had the famous ground 4A exemption, which means that landlords can repossess a rented property in advance of the new academic year. This applies to landlords of HMOs with three or more bedrooms. As the noble Baroness, Lady Warwick, said, this does not cover the many smaller landlords of smaller student accommodation with one or two bedrooms.
It is estimated that, of the 1.2 million students in the private rented sector, half a million or so are in purpose-built accommodation. There may be another 300,000 or 400,000 in the larger HMOs, and there could well be 200,000 to 300,000 in the smaller private landlord arrangements for which there is currently no special recognition. Will the Minister consider, for example, extending this exemption beyond large HMOs to all private landlords?
More radically, will the Minister consider the case for continuing to allow 12-month academic year tenancies —a system which has worked well overall? Does she recognise that there are other risks with some of the provisions in the Bill? For example, upfront payments may now be much harder to require. However, there will be the increased use of guarantors. Requiring a guarantor for a student from a low-income background is very tough, as is requiring a UK guarantor for an overseas student.
Perhaps the housing department is fed up with special pleading on behalf of students, but I think the crucial criterion is one of opportunity, as we heard in that excellent maiden speech. In the purpose-built accommodation—PBA—the rents for students average about £190 a week, in contrast with about £130 a week charged by small private landlords. We could end up with a system where the more expensive accommodation sector grows and is exempt. By and large, this is more expensive and occupied by the affluent students. In future, low-income students might find it harder to access the diminishing amount of lower-rent accommodation. Maybe they are supposed to stay at home and become commuter students. Some people want to see that. A very good social rule of thumb is that the more affluent someone’s family and the higher their social class, the greater the distance they go away to university. The low-income students will be staying at home and commuting, while the students from affluent backgrounds will pay high rents in high-quality, purpose-built accommodation a long way from home. If we end up with this, it will not be meeting the opportunity challenge. I very much hope the Minister will accept that her proposals need to be assessed as to whether or not they promote educational opportunity in our country.
Lord Etherton (CB)
My Lords, I too congratulate the noble Lord, Lord Wilson of Sedgefield, on his impressive and, in many respects, quite moving speech. Before I turn to the two matters of substance on which I wish to address the House, I should draw attention to the fact that my husband has a small portfolio of rental properties.
First, I will briefly address the matter of court process. We all know that there will be many more contested possession proceedings by landlords following the enactment of the Bill and the abolition of Section 21 no-fault evictions. It would not be right to abolish no-fault evictions without adequate speed and resources for dealing with the increase in contested proceedings.
As the noble Baroness, Lady Scott of Bybrook, said, that might lead to such discontent on the part of small investors that they would be induced to leave the private rental sector. Any significant reduction in PRS accommodation would, as we all know, be disastrous at the present time. The Government need to demonstrate that measures have been or will be put in place which will help to secure that court claims by landlords for possession of residential properties will be disposed of in a timely and efficient way. I appreciate that the Government are well aware of this imperative and are thinking of how to address it. As the judge who had responsibility for the introduction of small money claims online, I would be very happy to give any assistance on this aspect that might be thought to be useful.
I turn now to the principal matter on which I wish to address the House, which is the issue of financial penalties. There are several respects in which the financial penalty provisions in the Bill are, I would say, wholly unsatisfactory. The penalties that can be imposed by a local housing authority for breaches of the requirements of the Bill fall into two categories: up to £7,000 and, in some cases, up to £40,000 where the local housing authority is satisfied that the landlord has committed a specified crime.
The first problem is the mishmash of the standard of proof where the penalty is £7,000 or less. The new Sections 16I, 16J, 16K and 16L, introduced into the Housing Act 1988 by Clause 17, which include prohibitions relating to the misuse of possession grounds and not giving a written statement of tenancy terms, enable the local housing authority to impose a penalty of £7,000 or less if satisfied “beyond reasonable doubt”—that is the criminal standard—that the landlord or other relevant person has contravened the prohibitions.
By contrast, Clause 42 provides that the local housing authority may impose a fine not exceeding £7,000 if, “on the balance of probabilities”—the civil standard—it is satisfied that there has been a breach of a rental discrimination measure relating to children and benefit status in Chapter 3 of Part 2 of the Bill. There is no explanation in the Explanatory Notes as to why this is a different standard of proof from that introduced in Clause 17.
Again, Clause 59 allows a local authority to impose a financial penalty on a person if satisfied “on the balance of probabilities”—the civil standard—that the person has breached the requirement in Clause 58 that an advertisement or offer must include a specific amount of rent payable under the letting and impose a prohibition against inviting, encouraging or accepting an offer of rent which exceeds the proposed rent. Again, in contrast, a local housing authority may impose a financial penalty of £7,000 or less only if satisfied “beyond reasonable doubt”—the criminal standard—that the person has breached an obligation under regulations for landlord redress schemes.
These are sufficient examples, although there are others, of the Bill specifying different standards of proof for the same level of financial penalty, £7,000 or less, without explanation either in the legislation or in the Explanatory Notes of the reason for this. One has to question whether the employees of a local housing authority, who have no legal training and no criminal trial experience, can properly and accurately swing from one standard of proof to another.
The Bill will provide for local housing authorities to impose a higher fine of £40,000 if satisfied that a relevant offence has been committed. This is the case, for example, in relation to the new provisions introduced by Clause 17 of the Bill, which I have just mentioned, and the provisions concerning financial redress schemes, which I also mentioned.
It is not right for the employees of a local housing authority who have no legal training and no criminal trial experience to be free to impose a financial penalty of larger sums—up to £40,000—on their assessment of whether the ingredients of a criminal offence had been committed. A good example of the dangers of this is the ability of a local housing authority to impose a financial penalty of up to £40,000 where it is satisfied beyond reasonable doubt that an offence has been committed under Section 16 of the 1988 Act, where the landlord relies on a ground in Schedule 2, knowing that they would not be able to obtain an order for possession on that ground or being reckless as to whether they would be able to do so.
Another example is the power of a local housing authority under Clause 92 to
“impose a financial penalty on a person if satisfied beyond reasonable doubt that the person has … committed an offence under section 93 … of knowingly or recklessly providing information to the database operator which is false or misleading in a material respect in purported compliance with a requirement imposed by regulations under Chapter 3 of Part 2”.
The mental state of “recklessness” in criminal law is an extremely difficult one and has given rise to case law. It is something less than intention but more blameworthy than carelessness. Recklessness will arise if the accused consciously—that is, looking at the matter subjectively—takes an unjustified risk. Such difficult concepts should play no part in this legislation, which will mostly affect landlords who own one or, at most, very few properties for rent.
It should certainly not be left to local authority employees to reach their own conclusion on the application of “recklessness” in criminal law. The only state of mind that should be capable of giving rise to an offence under the Bill is “intention”—that is to say, actual knowledge or actual intention of the landlord to do the matters comprising the ingredients of the offence. That is clear, easy to understand and fair. It is what good legislation should be.
Lord Shipley (LD)
My Lords, I, like my noble friend Lady Grender, welcome the Bill. I thank the Minister and her colleagues for getting the Bill to this stage after several years of waiting. I agree with her that the Bill brings forward the most significant changes in the sector for 40 years.
I congratulate the noble Lord, Lord Wilson of Sedgefield, on his outstanding maiden speech and I look forward to hearing the maiden speech of the noble Baroness, Lady Brown of Silvertown.
A key difference of this Bill when compared with the Renters (Reform) Bill of a few years ago is that Section 21 is to be abolished before court reforms are delivered. Anything further that the Minister can tell us about how processes in the courts can be speeded up would be helpful. There will I think be significant discussion of that in Committee.
That said, the Bill takes us in the right direction. My party conference a few years ago debated Section 21, and two conclusions emerged. Conference wanted repeal of Section 21 and it wanted to protect good tenants from bad landlords. But it also wanted to protect good landlords from bad tenants. So, as the Bill progresses, I hope we can assess it against those criteria.
I suggest that there needs to be a third test. There are lots of solutions proposed in the Bill, but we must beware of just solving one problem when, in so doing, we create another. One example is restrictions on taking rent in advance: should it be one month or two months? On the face of it, one month in advance plus a deposit would seem to be sufficient. Yet some prospective tenants might find it easier to pay more rent up front, particularly those from overseas who have difficulty providing traditional affordability checks. So Committee will be important in assessing the policy of one month’s rent up front, which I understand was a late decision by the Government.
Another example of unintended consequences would be in relation to student housing. The noble Lord, Lord Willetts, has amply covered that issue, and I think there are problems there. Purpose-built student accommodation is rightly exempt from the Bill, and ground 4A allows student houses—that is, houses in multiple occupation—to be reclaimed to prepare for the next yearly intake of students. That exemption is the right approach, but what about the wish of many landlords to extend ground 4A to one-bedroom and two-bedroom houses and flats? They are not HMOs, but the removal of fixed-term tenancy agreements may worsen things for landlords renting out such accommodation because two months’ notice given midway through the academic year could lead to a loss of student accommodation, as landlords might then decide to leave the student housing market altogether and release those one-bedroom and two-bedroom accommodation units on to the wider private rented market. We must use Committee to examine that issue further.
Clause 98 and Schedule 4 refer to the decent homes standard. The Government are introducing a decent homes standard into the private rented sector for the first time, and I fully support their wish to do so. However, timeframes for improvements and more information on who will be responsible for resourcing them are needed, because one-fifth of homes in the private rented sector do not meet the decent homes standard. The Government will need to be clearer about the minimum standards that will be shown on the private rented sector database, which I strongly welcome because it will bring key information together in one place and can be used to assist with enforcement and rent repayment orders.
I remind the House that I am a vice-president of the Local Government Association because I want to say that, for the decent homes standard to be met, it would help if licensing schemes could provide a way for local authorities to inspect privately rented housing without the need for a tenant to have complained. As we know, many tenants are discouraged from complaining. In the Housing Act 2004, local authorities can create selective licensing schemes to improve poor standards, but they cannot require the physical state of a property to be improved as part of that licence. That is an issue for us to examine further in Committee, which I hope to be involved in doing.
Another question that I have is about market rents. Market rents have to be defined, and there may well be problems in doing so because the market is different across the country. Rental increases will be limited to once a year, but tenants would benefit from clarity on what level of rent increases would be appropriate. I suggest that uprating in line with CPI would be an appropriate method. Again, I look forward to examining that further.
There have been a number of claims at Second Reading today that restrictive regulation will reduce the supply of rental homes. I am not sure that is true. At the moment, there may be some signs of it, but we will have to wait a while until we see exactly what the circumstances are. I accept that we have to be careful about assessing whether the prohibition of fixed-term contracts increases the number of landlords choosing to offer short-term lets outside the private rented sector.
At its heart, this Bill is about standards in the private rented sector. It is not about pursuing good landlords but about pursuing bad ones and improving standards. For that reason, I strongly support the Bill in its overall intentions.
Baroness Fookes (Con)
My Lords, I realise that this is a wide-ranging Bill, but I want only to deal with one small aspect of it, which the Minister kindly referred to in her opening remarks: the value of allowing tenants to keep pets as the general standard. She was kind enough to mention the noble Earl, Lord Kinnoull, and the noble Lord, Lord Trees, as having given her valuable advice on this topic, so I shall be interested to hear what they have to say later in this debate and interested too to see whether any of my comments chime with what they say.
My first interest in this was when I was an MP—heaven alone knows how many years ago now—but I remember feeling saddened and indeed angered by the blanket refusal of many landlords to allow someone to keep a beloved pet. I can remember one constituent who refused to go into suitable accommodation without their pet. Others would succumb to this because they were desperate and had to give up their pet. There has been, over these many years, a lot of hidden unhappiness, needless unhappiness, for people who so value the companionship of animals. I think we now realise more clearly than ever before the mental and physical health which can accrue from having a pet. I hope that this is a good moment in which to set the matter straight.
Sadly, it seems that there are still many landlords who, without this Bill, will not allow pets to be kept. I was startled by Battersea Dogs & Cats Home saying that the second-most common reason for people giving pets back to it related to housing. It added that only a very small percentage of landlords ever indicated that they were happy about pets being kept. There remains a great deal of work to be done on this score.
I understand that there are those who worry about the possible unhappy implications of very noisy dogs, damage to furniture and perhaps aggressive dogs, but these can be exaggerated. In any case, the idea of insurance being required, if the landlord so wishes, is a very sensible approach. I hope that that will help towards sensible pet ownership.
On the other hand, I have some reservations about the adequacy of the two clauses which deal with this—Clauses 12 and 13. For a start, it is obviously proper that landlords should not withhold their consent unreasonably, but there is no indication whatever about what unreasonable behaviour might constitute. I know full well that it is impossible to list every eventuality in the Bill, or even in delegated legislation, but I am concerned that there seems to be no way of dealing with this. The Minister may have something in mind: perhaps some official guidance which is outside the law but which gives clear indications. I would not expect to deal with anything so detailed tonight, but I would be very happy if we could have correspondence on this matter and these other matters at a later stage or, indeed, have that unusual and valued thing, an actual meeting.
In addition, I am concerned that we are creating another unfairness because social housing is not included. I can understand why if we are not dealing with social housing, but it is going to look rather odd if we have a right in one sector that is not available in another, very comparable sector which, for the average person, will seem to be exactly the same. I wonder whether there is any way in which we can deal with that issue.
I have some reservations on these matters, but, overall, I am delighted that we have at last got where I would like to have got—what?—50 years ago. Anyway, better late than never.
The Earl of Kinnoull (CB)
What a genuine pleasure it is to follow the noble Baroness, Lady Fookes. Oddly, in my decade here, I think it is the first time that I have followed her. I say those words warmly and very much hope that I will not disappoint her with what I am about to say, but I am directionally with her.
I congratulate the noble Lord, Lord Wilson of Sedgefield, on a very compelling, moving—I am going to borrow that word again—and thoroughly eloquent maiden speech. I am very grateful to him for sharing all those memories with us; it was a wonderful thing. I look forward to the speech of the noble Baroness, Lady Brown, which is coming up next—she should not worry, as there are about five minutes between me and her.
I remind the House of my entries in the register of interests, in particular as a trustee of various Scottish entities which are engaged in letting rural properties. I have, in a much smaller way, three rural properties that I let. Noble Lords should remember that, in Scotland, Section 21 has already been abolished, so I have some experience of life beyond this Bill, which may be helpful to the House later.
I will cover two brief subjects now. The first is the great importance of smooth judicial and administrative processes, both to the landlord and the tenant. Secondly, I will cover the topic of pets and pet insurance.
On the first area, I am very grateful to the noble and learned Lord, Lord Etherton, who has done all the heavy lifting for me. I do not want to repeat things that he has said, but he underlined the challenges and the crucial importance of having clarity, efficiency and speed within the administrative and court processes. I note that almost everything contained in the Bill is a new process in some way.
When the Minister kindly came to the Cross-Bench meeting, I think she had more questions from us than almost any other Minister recently. She would have felt the interest in this particular area within that meeting. I am grateful in advance for her help in getting going a meeting with interested Cross-Benchers to discuss the detail of the court processes and the IT system that will support these, which I believe is in progress of booking at the moment.
The construction of the new processes for courts and the ombudsman, which will, I hope, provide clarity, efficiency and speed, is something that I do not feel will be particularly easy or can be done particularly quickly if, that is, we are to start in the new era smoothly. This inevitably means that the commencement provisions of the Bill will need to take account of this if Parliament is to be confident that it has done its part in making sure the new system is fully operational as it becomes live.
I turn to my second and final area: the provisions about pets and pet insurance. Here I am grateful again to the Minister for arranging a discussion with interested officials on the Bill team. I have also had the benefit of discussions with former colleagues and others within the insurance industry. The rural letting market in Scotland is one where you would expect a pet. The Scottish market, at least in my experience, copes with the problem of pet damage in a very simple way. Pets are discussed with the landlord, who therefore understands what pets are involved. Assuming that all are agreeable— I do not remember any instance where things were not agreeable—market standards are for deposits of up to two months’ rent. On leaving the property, the deposit is then used to deal with any pet damage. No insurance is involved, and the system has the benefit of being very simple. I think there may be lessons there, which I will come back to.
Insurance, generally, is against things that are unlikely; it is never against things which are inevitable. The puppy has not been born that does not chew, and it is inevitable that dogs will cause some damage to a home. Other pets will cause damage to homes—for instance, to fitted carpets. It is not surprising, therefore, that, to date, no comprehensive pet damage insurance policy exists in the UK market. I was responsible for many years for underwriting operations in continental European countries and I never came across any similar insurance there either.
Various UK insurance brokers, no doubt in response to the provisions of this Bill and spotting a potential opportunity, are attempting to interest insurers in providing some element of cover. The insurance risk carriers to date—that is, not the insurance broker intermediaries—have shown no interest. I spoke to the head of personal lines of a UK FTSE 250 insurance group, and they indicated to me that they would have no appetite to develop such a product. I was not surprised, having had a similar role in the past.
The one insurance product that is currently on the market is not available to tenants and covers only accidental damage. It gives an example of a covered event: a dog might tear down the curtains in a house, and that action might damage the wall in some way, and it is the wall which is then repaired. This is, as a percentage of the actual loss cost likely from pet damage, very small. The language of the Bill suggests that insurance will be available both to tenants and to property owners, and that the coverage of the products will extend to all risks of physical loss or damage to the property. However, this is not wholly clear, nor are the insurance limits that might be needed clear, in any of the Bill documentation.
Within the Bill, the landlord has the right to require the tenant to go and find such insurance before the tenant would be allowed to have the pet on their premises. Currently, neither the landlord nor the tenant would know exactly what to set out to buy, and there is no product available. I am all for the presumption that pets can be inside a rented home, for all the reasons contained in the Explanatory Memorandum and which were given again in the Minister’s excellent opening speech.
As things stand, I regret, the insurance provisions of the Bill do not work. I hope to continue working with the Bill team to explore the insurance options, remembering that risk transfer into the insurance markets is complex and expensive. I strongly think that we should take a look at the Scottish solution. Where people have asked for a pet, the landlord should have the ability to ask for the comfort of perhaps two additional weeks of rent deposit. I hope the Minister might agree to meet to talk through this potential option in the future.
Baroness Brown of Silvertown (Lab) (Maiden Speech)
My Lords, I draw attention to my interests in the register. It is an absolute pleasure to be part of this very well-informed debate this afternoon, and to follow on from the noble Earl, Lord Kinnoull. I am not sure that we are going to agree on the clauses within the Bill about pets, but I can inform the House that Cara the dog is going to be delighted by the contribution of the noble Baroness, Lady Fookes, and I intend to tell her all about it when I get home tonight.
I am very grateful to my sponsors, my noble friends Lady Smith of Basildon and Lord Kennedy, for their enormous support. I thank the House staff most sincerely for their help in getting me around the place; they have all been so massively kind.
I grew up in Silvertown in east London. My parents both worked on factory floors and my home was a council flat overlooking the dying docks. All the opportunities I had as a child were founded on that security of tenure, the affordable rent, the stable school and the local library, from which I borrowed and read incessantly. These resources were just vital. They shaped my life and they have informed my career.
After being the first in my family to go to university, I worked as a residential social worker, which gave me some invaluable insights into the vulnerabilities of young people. I then went on to work for the London Borough of Waltham Forest in a number of social policy roles.
I became a councillor in the London Borough of Newham in 1988 and held that role until my election to Parliament in 2005. During that time, I focused on culture. I saw it as a way of providing opportunities for young people that might not be available to them at home. I fought for the Olympics to come to Stratford, which at that time was blighted by swathes of disused industrial land. I cannot say that all the changes have been positive—there has been a severe lack of affordable homes—but there are also genuine opportunities to combat social exclusion that have been created too, particularly by the cultural offer.
Following my election to the other place, I argued constantly for social homes and action against child poverty. Since 2017, I have been highlighting the appalling exploitation of children by organised criminals, particularly in county-lines drug dealing. We simply must recognise that the same child can be both a perpetrator of appalling violence and a victim of grooming and exploitation. It was therefore music to my ears to hear our new Government committing to take strong action on this with the forthcoming crime and policing Bill.
As we know, Parliament is not only about representing but also about governing. My career on the Labour Front Bench began as a Whip. I was in fact the Whip in charge of the landmark Equality Act 2010. I remained a Whip in opposition and joined the Home Office team, working on fire and then policing but also on topics I knew embarrassingly little about, such as recreational drugs. I recall one very memorable occasion when our now Prime Minister sat alongside me chortling as I was enlightened about the various uses of poppers. He suggested I went away and watch “Breaking Bad” as homework.
It is hard to speak about this period without reflecting on Brexit and the threats that assail us from Putin’s far-right Russia and the rise of divisive authoritarian nationalism, around the world and here at home. My only notable rebellion was to vote against the triggering of Article 50, but, as we know, it passed and plunged us into a maelstrom of chaos, insecurity and vulnerability. I simply could not bring myself to vote to make the people I represented poorer. Now I intend to do all I can to mitigate the damage Brexit has caused and to get us working again on shared challenges alongside our European partners.
After 2019, I took the prisons and probation brief, focusing on issues affecting women that are now being ably taken forward by my noble friend Lord Timpson. My next reshuffle was the luckiest because it brought me to the role of shadow Minister for Africa. My focus was twofold: to address the serious problems of Africa’s present, including the brutal generals’ war in Sudan, the Horn of Africa drought and the conflicts in the Sahel and the Great Lakes. But I also wanted to ensure that we were not distracted from the resourcefulness and leadership of Africa’s people and from the massive opportunities for progress. I want to pay tribute to my dear friend the Foreign Secretary and to my noble friend Lord Collins for their passionate commitment to this very agenda.
I believe that Africa is rising, despite all the challenges of insecurity, despite climate heating and despite unfair treatment by the global financial system. I genuinely believe that historians will look back on this century and say that it was Africa’s. I believe that we as a country will be stronger, fairer and more prosperous if we act as a valued partner to our African friends and not behave like a blinkered patriarch who thinks themselves noble for offering crumbs from the table.
I intend to continue to work on the causes that have defined my career and life, a flavour of which I hope I have given today. I hope you will agree that it is utterly fitting for me to make my maiden speech on this Bill, which promises to deliver a sea change in the balance between renters and landlords.
Sadly, the housing crisis has deepened in Newham, even as our borough has grown massively. Much of that blame lies with policies that encouraged a poorly regulated and unaffordable private rented sector to expand without limit. The damage done by housing insecurity and disrepair is life-shaping. It disrupts education, employment and both bodily and mental health. It is why ending child poverty remains more of a rallying cry than a reality. Families cannot access good work and contribute fully as equals in our society without a decent, secure home like the one that we had in Silvertown. That base was essential for me getting here today, and I support the rapid progress of this Bill into law so that many young people have these very same opportunities in future.
Baroness Lister of Burtersett (Lab)
My Lords, it is a pleasure and a privilege to follow my noble friend Lady Brown of Silvertown, both to welcome her to your Lordships’ House and to applaud her warm, passionate, insightful and compelling maiden speech—not at all dry, as she told me she feared it would be.
My noble friend says that she intends to continue working on the causes that have defined her career. That is good news because, as we have heard, these causes have been wide-ranging and important. They include culture, Africa, women in the criminal justice system, and children, including child poverty. I look forward to working with her on child poverty in particular, as the Government’s child poverty strategy takes shape. She rightly made the link between child poverty and housing insecurity and disrepair, thereby underlining the importance of the Bill, to which I now turn.
When we debated the Bill’s predecessor, I was able to give it only a very lukewarm welcome, as it contained so many flaws and holes. It is good to be able to welcome this Bill unequivocally, especially as it was approved in the Commons as a result of the Minister listening to and acting on some of the suggestions made. But there is still, of course, room for further improvement. I am grateful to the Renters’ Reform Coalition and others who have briefed us on the further changes needed
“if the legislation is to deliver on the government’s ambitions to address the ‘insecurity and injustice that too many renters experience’ and ‘decisively level the playing field between landlords and tenants’”.
Before turning to some of these changes, I will say a word about context. I do not pretend to have expertise in housing law, but I came to the issue from my long-standing concern about poverty and the insecurity it creates. As the Joseph Rowntree Foundation report published last week made clear, high housing costs are
“a major driver of poverty … leading to a risk of compromised living standards, insecurity and at worst, homelessness and rough sleeping”.
It explains that private renters in particular are pulled into poverty by high housing costs. Shockingly, around half of private renters are in poverty only after their housing costs are factored in. On average, private renters in poverty spend around 60% more on housing costs than social renters in poverty. The situation is made worse by the continued freezing of the local housing allowance and the impact of the benefit cap, which I hope the Government will eventually address.
It is thus not surprising that the latest Bristol University financial fairness tracker survey found that parents of children living in rented accommodation were especially likely to face serious financial difficulties or to be struggling. As well as having issues with damp, mould and condensation, around half had needed to borrow money just to meet their daily living expenses.
Given the poverty that results from high housing costs in the private rented sector, I am very sympathetic to the calls from the Renters’ Reform Coalition for more decisive action on affordability. As Shelter underlines, there is a real risk that the security that the welcome immediate abolition of Section 21 aims to provide will be undermined by unfair rent hikes designed to force tenants out. I believe that the coalition makes a good case for a cap on in-tenancy rent increases. I do not really understand why the Government are opposed to this. It is not the same as rent controls, although I admit that I think there is a case for them. Ministers suggest that the answer to an unreasonable rent hike is for the tenant to challenge it at a tribunal, but how realistic is this? After all, the Minister in the Commons himself described this as an “onerous process”. I hope this can be looked at again, together with the coalition’s suggestion of a national rental affordability commission to investigate effective methods to make renting more affordable.
The other main concern of the coalition that I want to take up is the need to strengthen the very welcome anti-discrimination provisions in the Bill that would outlaw any ban on renting to families with children and those in receipt of social security. There are two main issues here. The first concerns landlords’ right to demand a guarantor. The fear is that this could be used to circumvent the Bill’s anti-discrimination provisions. Although it is welcome that the Bill was changed in the Commons to prevent landlords demanding multiple months of rent up front, as a Shelter housing champion and long-standing private renter pointed out at a briefing last week, rent in advance and guarantors are two sides of the same coin. Some of those in the most vulnerable circumstances are least likely to be able to find a guarantor, so the coalition suggests limits on the situations in which a landlord can demand a guarantor, which seems reasonable to me.
Barnardo’s and others recommend that all English local authorities should be required to offer guarantor and rent deposit schemes to care leavers, and that care leavers should be added to the groups that are specifically protected from discrimination by landlords. I hope the Government might also be open to the addition of other groups to the list of those who must not be discriminated against, particularly disabled people, prison leavers, and refugees and other non-UK passport holders—this points to the abolition of right to rent, which can lead to racial discrimination. I ask my noble friend: will those with no recourse to public funds receive the same protection as social security recipients?
Although I welcome that the Bill does not include the change to the definition of anti-social behaviour contained in the previous Bill, it does make eviction on grounds of ASB easier. This would be to the detriment particularly of survivors of domestic abuse and disabled people, who are vulnerable to ASB complaints. Justice encourages us instead to press for better training and resources for the police and local authorities to investigate and fully respond to ASB complaints.
I will raise the question of Home Office accommodation, mentioned by the right reverend Prelate and raised with me by London Councils. It argues that the Bill should include such accommodation so as to ensure that asylum seekers and refugees benefit from the decent homes standard, also called for by Hibiscus on behalf of black and minoritised women; otherwise, London Councils argues, the Bill could give rise to a two-tier system in which a small minority of rogue landlords might be incentivised to procure poor-quality accommodation for use as asylum accommodation.
On the basis of the extensive evidence it received from London authorities about the poor standards of asylum accommodation, London Councils contests the Minister’s assertion in Committee in the Commons that extending the Bill’s provisions to asylum accommodation is unnecessary. This is an issue I hope to pursue in Committee, and I wonder whether my noble friend the Minister would be willing to meet London Councils’ parliamentary officer to discuss what is involved.
In conclusion, as I said earlier, the Minister in the Commons did act on some of the concerns raised there. I know that my noble friend the Minister is a good listener, so I hope we might be able to make further improvements to the Bill in this House. In this way, we can turn what is a good Bill into a potentially ground-breaking one that achieves the Government’s aims of decisively levelling the playing field between tenants and landlords, and providing much greater genuine security to tenants.
The Earl of Leicester (Con)
My Lords, I refer your Lordships to my property interests as set out in the register, specifically a large and historic portfolio of houses in Norfolk, 93% of which are leased to local people and key workers, all living in and contributing to the local community year-round. I say this because it is really important—due to its popularity as a holiday destination, North Norfolk District Council lies third in the rankings, behind Westminster and Kensington and Chelsea, for second home ownership. I could increase my income, like many of my neighbours do, by renting these out as holiday cottages, but I do not because I am acutely aware of how crucial they are to maintaining the social fabric in a rural community where property prices and demand are sky high and where there is very little public provision.
The Labour Government intend to transform the experience of private renting through introducing reforms that level the playing field between landlords and tenants. For them, abolishing Section 21 and restricting the use of Section 13 notices, while increasing many other safeguards for tenants, will allow for the growth of communities and reduce the risk of homelessness. Clearly, from what I have just said, I too am pro-community and anti-homelessness, which is where the Government and I are aligned. Where we differ, however, is in our understanding of the true effects that these reforms will have on the private renting market, particularly in rural communities.
In the rural private housing sector, this Bill will lead to a decrease in the number of properties available in an already struggling market. The Country Land and Business Association has surveyed its membership and found that 44% of rural private landlords are planning to sell or change the use class of their properties in the next two years. During that same period, only 21% are planning to build new properties. I am no economist, but I understand supply and demand. A diminished supply of properties will inevitably lead to a price increase for consumers. In fact, that has already been occurring. Since April 2018, there has been a net loss of properties in the rural private rented sector. In a poll, nearly 90% of rural private landlords gave changes to PRS tenancies as a cause for their decision to change use class. More specifically, 57% of CLA members cited the removal of Section 21 as the reason for the net loss, as did a greater number in Scotland, where it has already happened.
Despite my talking predominantly about rural areas, these same issues will also develop in urban regions. Not only will these changes lead to supply issues and thus price rises but the lack of supply will ultimately add strain to housing associations and municipal housing.
The rural economy differs from that of other sectors. Rural business owners commonly offer accommodation within their employment packages. It is a vital part of their ability to attract staff in—let us say—the tourism or hospitality industries. Following the passing of this Bill, especially with the absence of Section 21, I fear for the crucial ability of landlords to remain flexible and adaptable to their ever-changing business needs. Specifically, I am adamant that the new grounds for possession that refer strictly to “agricultural” landlords and workers must be broadened to include the 85% of rural businesses which are not involved with farming or forestry. If accommodation cannot be recovered quickly from previous employees, this economic system will break, but I wonder whether this Government care or even understand this. They have not shown a great understanding of the rural economy thus far.
I want to mention the provision to allow tenants rights to keep a pet. I wholly understand the benefits a pet can bring to family life, enhancing the mental health of those who are lonely, for example. Indeed, we benefit from having three family dogs and, I joke not, a recently deceased parrot. He died three weeks ago and, coincidentally, was called Basil.
I should mention, as set out in the register of interests, that I am a trustee of SongBird Survival, a charity that funds scientific research identifying the reasons for declines in the number of songbirds. The charity has funded work with Reading University’s Dr Hugh Hanmer showing that cats can travel long distances and can affect the natural environment beyond their home range. It also funded work with Exeter University’s Professor Robbie McDonald and Dr Sarah Crowley in 2019 and 2020 studying the drivers and facilitators of hunting behaviour and options for management of said cats. Conservative estimates ascribe 90 million deaths of songbirds to cats per annum. As a result of this real threat to biodiversity, landlords should be allowed to ban cats from some of their properties which are in particularly sensitive rural areas; for example, near SSSIs or NNRs.
There are also very serious issues with the Bill related to student accommodation, but I will let others speak more eloquently on that.
Present, chronic court backlogs, along with the generally underresourced judicial system, will cause a crisis in people’s access to justice. Dispute resolution firm Excello Law said that in this Bill:
“The risk to both tenants and landlords is the existing backlogs in the court system. Trying to obtain possession orders will be protracted, causing uncertainty and delays for both landlords and tenants”.
More than 4.5 million households will need tenancy agreements updating; letting agent staff and landlords will need to undertake training, and insurance and mortgage providers will need to adjust policies and rates. I hope the Government pay attention to that and allow time for it to happen before the Bill becomes law.
Overall, rural or not, I stand by the fact that landlords want to keep tenants. They do not want voids, which are very expensive. I balk at the sentiment brought by this Bill, which assumes that private landlords in this country are, on the whole, bad. They provide a very valuable service which often—through mere geography —housing associations or councils are unable to provide; indeed, they complement them. The vast majority of landlords are excellent people, who are human and want to develop a relationship with their tenants. I have concerns that provisions in the Bill pertaining to challenging rents at tribunal where there is no downside for the tenant could put pressure on those trying to foster positive relations as more vexatious claims are pursued.
This Bill will penalise the whole sector, and the ramifications will be felt across the country for years, putting extra pressure on already-struggling housing associations and the diminishing number of municipally owned council houses. It is not difficult to imagine a world in which, through this Bill, the Government exacerbate the problems of 11 million private renters, 2.3 million landlords and, ultimately, themselves.
Lord Thurlow (CB)
My Lords, I congratulate the two maiden speakers on their inspiring, eloquent and very interesting speeches. I want to inform the noble Lord, Lord Wilson, that he and I share something in common—I am sorry to see that he is not in his place. My grandfather was the vicar of Sedgefield more than 100 years ago. Furthermore, he also sat in this Chamber, so we have two special causes to celebrate together.
The Bill is big and ambitious, with far-reaching implications not only for occupiers and landlords but for the surveying profession—I should declare that I am, and was for decades, a chartered surveyor, working in this space to some extent. I also have two buy-to-let flats and advise a property development company that develops entry-level housing in England. The surveying profession will be involved; the Courts & Tribunals Service, as we have heard, and the ombudsman services will be dramatically affected. Social services will also be involved, as will, most of all in my opinion, local authorities. That said, I support most of the clauses in the Bill; it is a very welcome addition to the statute book.
Turning to those concerns, this Bill is going to frighten landlords. The noble Earl, Lord Kinnoull, informed us of what has happened in Scotland. That is an excellent market test of what is going to happen here in England and Wales. I too live in Scotland. A nationwide firm of estate agents which specialises in letting property closed its office nearest to where I live after Section 21 was abolished in Scotland. I spoke to them about this, and they said that they did it simply because the market dried up for landlords or they withdrew. They closed their department. All those landlords either sold their properties—most of which would have become second homes—or turned them into holiday accommodation and Airbnb-type alternatives. The only losers were the tenant community, and they have nowhere else to turn—there is a terrible shortage of housing. Do not let us fall into that trap and let that happen here.
Ending fixed-term leases is a mistake. They do not have to be long leases, but there are a lot of enterprising individuals who want to criss-cross the country: they are on secondment; they are on a consultancy project; they might be digital nomads, moving between centres of excellence in their field. They know they are going to be somewhere for three or four years. There is no reason why they should not have a fixed-term contract. The landlord would appreciate it and benefit, and, of course, they would, too—they could call it “home”.
I am concerned about, as we have heard from the noble and learned Lord, Lord Etherton, the courts and tribunal services and the delays likely to result from the logjam of huge increases in the numbers of referrals and complaints. We underestimate the pressure on the ombudsman’s services as these new rules come into play; there will be an awful lot of call on their services.
The impact on local authorities is principally one of resourcing. They have a big role to play in this Bill; there are going to be legions of surveyors having to be trained up in the decent homes standard and the implications of the ability to operate Awaab’s law. There is going to be a significant increase in the need for computers, IT and digital recording, which will include ongoing maintenance. We are a country of some 50 million people—we are not a country like the Nordics, New Zealand or others, where they are dealing with 10% of the size of our population—and these recording systems are immensely expensive to maintain. We are asking local authorities to become policemen, and that is not their role. They will have to enforce the new rules and regulations, which is going to be culturally difficult and will require a lot more employment, training and resourcing. Who is going to pay for it? We know that the local authority system is basically bust financially.
Finally, I do not think that it will work to prohibit rental bidding. Unless I have misread the Bill—I apologise if that is the case—I think that all a landlord has to do to prevent being caught out on rental bidding is to quote an unreasonably high rent, way above estimated rental value, and let the market do its work through a Dutch auction and gazumping, or whatever else it might be. But perhaps I have missed something in the Bill.
In conclusion, I support most of the clauses of the Bill. I am concerned that some will not work, and I am certain that others need review, but I look forward to Committee very much indeed and to discussing all these matters.
Lord Truscott (Non-Afl)
My Lords, I congratulate the noble Lord, Lord Wilson of Sedgefield, and the noble Baroness, Lady Brown of Silvertown, on their excellent and passionate maiden speeches. As other noble Lords have said, they were an inspiring couple of maiden speeches.
I declare an interest as a landlord of over two decades and a former renter in the private rented sector for some 16 years. The Bill before your Lordships’ House has much to commend it. I support ending arbitrary evictions under Section 21, and the imposition of a decent homes standard and Awaab’s law in the PRS. Of course, as ever, with these and other elements of the Bill, the devil is in the details and how they are implemented.
On Section 21, as has been noted, the courts will have to be ready to deal with the expected increase in workload. I welcome HMG’s commitment to the digitisation of the court process, but this must be made an urgent priority.
However, my main concern with the Bill is the impact of moving to periodic tenancies only, with a ban on longer terms and upfront payments. Both those measures, as we have heard, will have a significant unintended impact, which will reduce the availability of homes, increase rents and affect the financial viability of the PRS as a whole.
The inability to negotiate upfront payments, as we have heard, will hit the self-employed, foreign students, those with a poor credit history and vulnerable people. It also risks a legal challenge under common contract law. No one has yet satisfactorily explained to me the benefits of moving to periodic tenancies and scrapping assured shorthold tenancies; it seems a solution in search of a problem.
Two reasons have been given by Ministers—and I thank the Minister for her engagement on this Bill: first, to enable those suffering domestic abuse to be able to leave; and, secondly, to enable tenants to leave unsatisfactory properties and give them additional flexibility to perhaps move to a new job or area, both while giving two months’ notice. In the first case, someone suffering domestic abuse is unlikely to give two months’ notice. In fact, charities dealing with abuse have told me that it is the abuser who stays in the home as the victim flees. In the second case, most ASTs, in my experience, have a six-month break clause, allowing enough flexibility for most tenants.
As for unsatisfactory homes in the PRS, that is exactly the reason for the decent homes standard, Awaab’s law, the ombudsman, the database and rent repayment orders. Any bad landlord providing sub-standard accommodation will find themselves subject to up to £40,000 in fines and swingeing rent repayment orders, payable to the local authority or the tenants themselves.
I found the Government’s impact assessment of the PRS very negative. It is, in fact, the most popular form of rental tenure, compared to council or other social housing. I recall being a councillor in Essex, where I represented what was once the largest council estate in Europe, and, believe me, the tenants were not very enamoured of the local council or the housing provided. Later, when I was a renter in the PRS, I moved 10 times in 16 years, but only one of those was a forced move, when my landlords discovered that they could make more money renting to Americans in the summer than to me all year round. In any event, most tenants do not intend to stay in the PRS for life, and many stay in a tenancy for just one year—and that is particularly applicable to students.
I understand the need for security. For five years I worked for a national charity and housing association providing housing for young homeless people and people with mental health issues. The idea was to provide homes and stability for vulnerable people, but two-month periodic tenancies are not the answer. Tenants will have less security, not more, as instead of a one or two-year tenancy, if mutually agreed, landlords will be able to give notice at any time, up to four months if reoccupying or selling their property. Why cannot reasonable people agree a fixed term, with a break clause if required? Incidentally, the majority of tenants want fixed-term tenancies.
Another unintended consequence is that landlords will increase rents, because tenants will be able to move out at short notice and many costs for the landlord are front-loaded, such as cleaning and referencing each time. The risk of voids or vacancies will increase, and landlords will increase rents to cover the added risk.
There may or may not be a mass exodus of landlords from the PRS; some will wait and see, but up to 70% are considering selling up—that is a fact. It is also true that the PRS has doubled in size since 2002. That was an era when buy-to-let mortgages were introduced, money was relatively cheap and baby boomers invested their pensions in the PRS—but those days are over. The issue is not whether there is a mass exodus from the PRS; it is that supply is not keeping up with demand, which will continue to be the case for the foreseeable future.
Even if the Government’s housebuilding target of 1.5 million homes is met, it does not mean that affordable homes will be built where people need them. What is needed is a commitment to build more affordable and social housing in the right places. Build to rent is expanding, but at nowhere near the scale to take up the slack. More regulation of the PRS is welcome, but if the costs associated with it spirals, including the cost of new EPC regulations, investing in the PRS will simply no longer be viable.
Costs have already spiralled for existing landlords, with around 40% of landlords paying double or even up to quadruple for their mortgages. For those new PRS investors that there are, they are increasingly chasing yields of 8% to 9%—impossible in the south but available in the north. That will create a regional imbalance. Some argue that if landlords leave the PRS that will be a good thing, as more property is opened up for first-time buyers. That will happen in many instances, but in many others, landlords will gravitate to ultra-short lets, as we have heard from other noble Lords. They are far more profitable and virtually unregulated; a register will not make a blind bit of difference.
Once purely periodic tenancies are introduced, the line between ultra-short lets and long-term lets will become blurred. In many cities and coastal resorts, long-let availability for local residents will simply disappear. In many apartment blocks, the sense of community will be lost. It is already happening. In some apartment blocks in London, 90% of flats are Airbnb. Even in Camden in London, for example, short lets can be four times more expensive than a long let, and hence much more profitable. Airbnb will try to say that its accommodation is being rented out by old grannies. The fact is that Airbnb and other ultra-short-let platforms are being increasingly dominated by professional landlords, who often avoid tax, as, unlike with estate agents, their rental income is not registered with HMRC. Local communities and all of us suffer as a result.
Baroness Janke (LD)
My Lords, I declare my interest as a vice-president of the LGA. I congratulate the noble Lord, Lord Wilson, and the noble Baroness, Lady Brown, on their eloquent maiden speeches. I am sure from these speeches that the breadth and depth of their experience will add greatly to the work of this House, and I look forward to working with them.
We support the objectives of the Bill and see it as a major step towards a safe, secure and affordable private rented sector. Having a home is something many of us take for granted—a place of refuge, security, comfort, safety and reassurance—yet for so many people, including large numbers of children, this is a far-off dream. In my own city of Bristol, 54% of people in the misery of temporary accommodation have dependent children. What kind of start in life is this for them?
The severe shortage of social rented dwellings means that more and more renters are now dependent on private rentals. Shelter reports that there has been a net loss of 24,000 social homes per year since 1991 through the right to buy and demolition. New build has replaced less than half of them. In the meantime, the private rented market has more than doubled since 1980, with unaffordable rents leaving renters struggling to make ends meet, with many ending up in debt and homelessness. As others have said, there is a desperate shortage of, and need for, social homes at affordable rents.
Most landlords fulfil their responsibilities and treat tenants with respect and consideration, but where exploitative and irresponsible landlords fail to comply with standards and conditions required, it is right that early enforcement powers to fine and sanction are provided in addition to legal redress, which may take much longer.
Many of the proposals in the Bill will be welcome to renters, but what is missing is any form of rent stabilisation. As we have heard from other noble Lords, the high rents in the private sector place a huge burden on renters—one-third of renters spend half or more of their income on rent. They are often intimidated from challenging increases by fear of eviction and being made homeless. Even with the banning of Section 21 evictions, landlords can still force eviction through rent hikes that tenants cannot afford. Without some form of rent control, tenants will still not be protected from summary eviction and the threat of homelessness.
Various ways of pegging rents have been mooted, such as to inflation, wage growth or the Bank of England base rate. There needs to be a framework which allows reasonable predictability for rent so that tenants can budget and not be priced out by rent hikes. Rent controls are well-established in European and other OECD countries. This is by a combination of local and national measures, and I hope that the Government will perhaps look at some of these as we progress with the Bill.
The Bill gives tenants the right to challenge unreasonable rent increases, but many tenants will feel unconfident or intimidated in challenging their landlord at a tribunal. So I hope that, through the process of the Bill, the Government will give some thought to measures for the stabilisation of rents.
The CAB tells us that one in four of the complaints it receives is about disrepair, damp, mould and excessive cold. Making the decent homes standard a legal requirement is essential. Renters often experience horrific conditions of disrepair, damp and even infestation with vermin, and they survive on a knife edge of insecurity with the constant fear of being forced into homelessness. I am sure that those of us who have been councillors who have already spoken in this debate are well aware of some of the dreadful conditions that people live in, with landlords who repeatedly fail to carry out effective repairs and maintenance work. The online database publishing information on private rented sector dwellings and landlords could be a very powerful enforcement tool, depending on what information is to be included about landlords’ records and the condition of dwellings.
However, bringing unfit properties up to standard may be costly, and effective enforcement will pose very serious challenges for cash-starved local authorities. Local authorities’ budgets have been cut to the bone and, if they are to enforce compliance, they will need the resources to do so. Tenants must be confident that the law will be enforced promptly and not be buried in lengthy bureaucracy. This will be essential for the success of this legislation, and the Government must give assurances that enforcement will be fully funded.
The banning of discrimination against benefit recipients will help people with disabilities who are on benefit. Evidence shows that people of colour are more likely to be in substandard accommodation and that black and Asian people are more likely to be denied the right to a safe and secure home. It will be essential for anti-discrimination measures to be rigorously enforced.
However, problems of accessibility remain. Private rented dwellings are often too small to allow a wheelchair or accessible bathrooms and kitchens. People are having to remain in hospital as the needs caused by injury or illness cannot be accommodated in their private rental property. Renters have had adaptations refused by landlords. Access rights are human rights for tenants, and they must be guaranteed in law, so I hope we will make some progress on this in Committee.
As my colleagues have said, Liberal Democrats also believe that accommodation for service personnel should comply with the same decent homes standard and that the accommodation of refugees and asylum seekers should be on the same principle, as in an amendment tabled by Liberal Democrat colleagues in the Commons.
We welcome the first steps that the Bill is taking to provide a fairer private rented sector, with clear rights and responsibilities, and with sanctions and redress for non-compliance. The private rented sector is the second-largest tenure in the UK, yet privately rented homes are the most insecure, most expensive and the lowest quality of any tenure. Reform is long overdue.
Baroness Jones of Moulsecoomb (GP)
My Lords, I, too, declare my interest as a vice-president of the Local Government Association. I offer a very warm welcome to the noble Baroness, Lady Brown of Silvertown, and the noble Lord, Lord Wilson of wherever it was—
Baroness Jones of Moulsecoomb (GP)
Sedgefield—unforgettable, obviously.
I want to point out to the noble Earl, Lord Leicester, that he is not going to beat me in a competition between who has more in common with the noble Lord, Lord Wilson, because my grandfather was a miner in south Wales. In fact, he was killed in a mining disaster, the largest there has ever been in Britain. I also grew up on a council estate until I was 18 years of age and left home for college.
I love so much about this Bill. It ends no fault evictions, it helps to protect tenants from damp and mould and it makes it easier for renters to keep pets. I support those things 100%. Of course, the Government have responded well to suggested amendments, such as stopping excessive demands for rent up front. I am even hopeful that the Minister might give me a positive response to an amendment which I will table later, tabled by my colleague Carla Denyer MP in the other place, which talks about the needs of people with disabilities, both visible and invisible. It would be absolutely wonderful to get something in the Bill to improve the situation for disabled renters in the private rented sector, and to send a message to those landlords who lock them out of the sector that it is not acceptable that so many people struggle to get permission for the most basic of adaptations, or face discrimination in renting in the first place.
The Bill is not perfect, but it is the kind of legislation I was hoping this Government might put forward, and I would like to suggest some big ideas about what the Government should do next. The big things that are missing, and the main reasons why many young people are choosing to vote Green instead of red these days are rent controls and an end to the right to buy. We need a living rent to match the living wage. This would be similar to the living wage scheme that we Greens proposed and got the Mayor of London, Ken Livingstone, to agree to 24 years ago.
There would be a national commission to decide the living rent with input from local authorities and mayors. It would examine factors like local income in different areas, the size of properties and local market conditions, plus the condition of the properties themselves. We should not have a situation where an estimated one in 10 tenants is spending 60% of their income on rent.
With rents going up rapidly year by year, this is not just an issue of a few hotspots; rents went up by over three times the rate of inflation last year. The question is: why? How does that happen? I have heard all the arguments about it being due to population growth and shortage of supply, but, when you look at the actual figures for the last few decades, you find that housing supply is not just keeping pace with but increasingly outstripping household formation. The houses have been built, but they have ended up in fewer hands; that is the root of the problem with our housing market.
Rents have gone from being 10% of income to an average of around one-third of income. One clear reason why the brakes have come off rents in the private sector is right to buy and the decline in social housing. Rents have risen rapidly, along with the country’s benefits bill. If the Government want to increase the supply of housing, why do Ministers not take up the challenge: invest in social housing and “build, baby, build”. Why do Ministers not invest in a future of good-quality social housing that cannot be sold off, thereby creating decent homes for the younger generations, who are increasingly worried that they may never have the security and quality of life that their parents’ generation had?
The long-term solutions to rising rents are: ending the chokehold on supply from greedy developers who are land-banking, and dealing with the property speculators who buy ghost flats in London and leave them empty all year. While the Government are thinking through what steps they can take to deal with these rich property developers, who restrict the housing market to get even richer, Ministers can and should act to reform the rental market with sensible and locally sensitive limits on what people can charge.
The inequality of housing has become a huge generation divide, as other noble Lords have said. Some 11 million people are renting. We have one generation—going on two generations—who, unless decisive action is taken by this Government, will never be able to earn enough to have a mortgage and are straining to afford their rent. That is not to mention the sharp rise in the number of families with children staying in temporary accommodation for more than five years.
This Bill will definitely help—there is no doubt about that—but, equally, it does not touch the roots of the problem. I would like to hear from the Minister whether social housing is a high priority. I have asked questions on the issue of housing, and in response Ministers talk about affordable housing. I am not talking about just affordable housing; I care very much about social housing. That is where I grew up for my first 18 years and I think other people deserve that as well. So I urge Ministers to consider the steps needed to fix our housing crisis, just as we would all expect from a concerned Labour Government.
Lord Tunnicliffe (Lab)
My Lords, I find myself in an unusual situation, almost feeling that I am making a maiden speech. After 16 years on the Front Bench, being a freed-up Back-Bencher is a bit of a shock: you are free to think, but there is nothing you have to do. Reflecting on advice I received from a Conservative Peer when I first came into the House, it was put to me that the role is one of scrutiny, and the advice I received was to do that thoroughly. He said that the way to do it thoroughly was to choose a Bill and see it through from beginning to end—and I have chosen this Bill.
To equip myself to participate, I have read around the Bill, particularly the Library briefing, but I do recognise that I have much more to learn. Nevertheless, it seems that this area has three problems: price, quality and security. Over recent years, rent increases exceeding wage increases has made people poorer: in particular, it has made poor people poorer. The Bill would seem to make a modest impact, at best, on that.
On quality, the Bill would seem to make a more significant input. Clearly, from the news stories that one hears from time to time, the issue of quality is important to the minority of tenants who find themselves with rogue landlords who ignore their obligations.
It is security that seems to be the problem that is most comprehensively covered by this Bill, and I am very pleased by that. Insecurity must be very difficult to live with. I cannot really understand it. My experience of renting goes way back to when I was a child in the late 1940s, the 1950s and the early 1960s. I lived in a council house; it was not a wonderful palace but it was perfectly adequate. In those days, rents were controlled and there was security of tenure. The day-to-day thinking about it was not in any way significantly different from owning your own house.
Since 1968, I have been privileged to live in a house that I have owned—or, at least, have owned in some sort of relationship with a building society—so to feel what it is like to be an insecure tenant today is very difficult. I cannot find a better word than “horrible”; I guess that is how it must be. There is the anxiety of not knowing where you are going to sleep next week or next month, the depression it must bring and the mental health problems that come with it. This leads to things beyond the problem of renting, such as homelessness and rough sleeping—and one has to recognise that rough sleeping leads to early death.
It has even changed the pattern of our behaviours in society. Nowadays, two-wage families are starting either not to have children or to have them very late, which is exacerbating the growing demographic crisis in this country. I am sure that, by the end of this process and after scrutiny, I will be convinced to support the Bill, but we must hit the price problem: we must build the 1.5 million houses we have promised and we must build the right sort of houses.
Baroness Eaton (Con)
My Lords, I offer my thanks to both the noble Baroness, Lady Brown, and the noble Lord, Lord Wilson of Sedgefield, for their enthusiastic and energy-driven speeches, which were very infectious. They will help to drive me along and give me the energy to do all the things that will come along to all of us. They are both very welcome.
I must declare my interests as a vice-president of the Local Government Association and as a part-owner of rented property in Bingley, west Yorkshire.
The renters Bill aims to ensure that those renting homes from landlords across the nation have a safe, secure place to live, managed by a landlord who is reasonable, responsive and reactive when problems in their rented home occur—something I am sure that we all wish to see. However, I do not believe that this Bill will necessarily achieve that. I have spoken with a range of stakeholders in the rental market prior to the debate, including those in the built-to-rent sector, which has the potential to deliver up to 10% of this Government’s overall housing targets. The built-to-rent sector—if it is given the policy environment to deliver new, net, additional, high-quality, long-term rent homes—would do a great deal to achieve the housing targets that we need.
It appears to me that the built-to-rent sector is particularly susceptible to the clauses in the Bill, in its current form, that pertain to open-ended tenancies with two-month notice periods, where renters can serve notice to leave their home on day one. This is because built-to-rent homes can be moved into quickly, as they benefit from shared amenities such as wifi and concierge services, among others, that make them very attractive places to live. Renters can move in with just their suitcase and some groceries, and without the need to set up the water meter and internet provider, or deal with the utility providers.
The Government have put on record their support for bringing more institutional investor landlords into the rental market and driving up standards across the market, both of which are laudable goals, alongside the building of new homes. However, allowing renters to immediately serve notice to leave their rented home on day one of their tenancy will have a detrimental impact, particularly on the build-to-rent sector’s ability to secure investment, both domestic and foreign, to deliver the homes that this Government want to see built.
To reiterate, this measure increases the risk of short-term renting by those looking to take advantage of the legislative issues that the Bill creates, and prevents those who truly want to put down roots in the area where they rent their home doing so, while also having an impact on future housing supply. That is not what this Government intend, I am sure, and is certainly not supportive of the Government’s growth agenda or housebuilding targets.
I want the Bill to put in place the ability for renters to serve their two months’ notice only after they have rented their home for a minimum of four months, thereby discouraging those who would use the Bill in its current form to take advantage of the facilities and high-quality homes that build-to-rent landlords provide. I am well aware of the need to ensure that renters are not trapped in unsafe, mis-sold, damp or mould-ridden rented homes, and such exemptions should of course be included in any amendments made to the relevant clauses in Committee.
An additional potential consequence of the Bill that has been raised with me and that warrants consideration in this place is the impact on housing supply due to the incentive the Bill presents to renters to challenge their landlords’ rent increase when served a Section 13 notice. I add at this point that the fact that Section 13 notices have not yet been digitised is an issue that, in this day and age, needs urgent attention. Section 13 notices being challenged by any and all renters simply to delay a rent increase will serve to achieve only one goal: discouraging landlords looking to provide rental homes and investors looking to create new rental homes. These delays in landlords being able to achieve reasonable increases in their rent from renters will mean that less investment is available for these landlords to build the new homes we need.
The Government cannot expect institutional landlords and investors to deliver new high-quality, sustainable homes if they face so much uncertainty and delay about the rent they might reasonably receive. I strongly support an amendment to the Section 13 clause of the Bill to ensure that legitimate rent challenges from renters are progressed through the courts at speed—we have heard a lot of attention being drawn to the difficulties of the court process at the moment—while rent challenges that have no legitimacy and are being lodged simply to delay fair and reasonable rent increases are deterred.
Some opinions that landlords should focus on are the ability for a failed rent challenge in the court to bring the date of the original rent increase back into effect with a payment plan put in place that is achievable for the renter to pay off over a reasonable period, or giving the courts the ability to increase rents past the point proposed on the Section 13 notice if the increase is below market rate and is subsequently challenged by the renter.
The Government have some laudable ambitions, and improving the lives of renters while delivering new homes are clearly two that many in this and the other place will rightly support. However, the Bill as it stands leaves too many loopholes open for some to exploit, at the expense of those who the legislation is being put in place to protect.
Lord Carter of Haslemere (CB)
My Lords, what wonderful maiden speeches we have heard today. I heartily endorse the congratulations given to our new Peers.
Having read the debates in the other place describing the horror stories of damp dripping down walls, mould, infestations, faulty electrics and landlords who just do not care, I welcome the principles behind this Bill. As recorded in the register, I have dabbled with being a landlord myself, and know that nothing is more important than the safety and well-being of tenants. The majority of landlords take their responsibilities seriously, but for far too long a minority of rogue landlords have been able to exploit loopholes in legislation to treat tenants in, frankly, a horrific and wholly unacceptable way. The Bill must put an end to that and provide tenants with the security and certainty they deserve.
Our overall objective must be providing enough safe rented accommodation for all, thereby helping to end homelessness. However, homelessness, in our context, can arise in two very different ways: first, by unscrupulous landlords evicting tenants who have the courage to point out problems in their rented properties; but, secondly, by imposing excessive blanket regulation which causes conscientious landlords to sell up. Both must be prevented if we are to reduce, and perhaps one day eliminate, homelessness.
A delicate balance therefore has to be struck here. There clearly needs to be tighter regulation, but the last thing we want is good landlords being deterred by this Bill from staying in the sector. This would drive up rents and empower those bad landlords who simply ignore the rules. We need to be honest about this reality and not allow well-meaning ideology to trump what is in the public interest.
Therefore, it is alarming to hear the leader of the Opposition in the other place say that 47% of landlords either attempted to sell a property in 2023 or were thinking of doing so, with the biggest reason being their fear of new laws. Good landlords provide a vital service. The private rented sector is essential for those who cannot yet afford a mortgage, young people and those who need to move for work purposes. Landlords giving up rental properties will not help the people who need to rent, and there are an awful lot of them.
What is the answer to getting the balance right? For me, the way to do it is by targeting the new regulatory regime at the unscrupulous landlords, not by using the blunt instrument of blanket regulatory burdens, which will deter good landlords from continuing and risk increasing homelessness. We heard in the other place that four-fifths of landlords are conscientious and want to look after the well-being of their tenants—and, of course, their properties. Yes, there needs to be tighter regulation to target the minority of landlords who give that label a bad name, and many of the measures in the Bill seem entirely appropriate. The question is, rather, how are they to be enforced, by whom and against whom?
Ideally, where there is a dispute, we should be maximising the powers of a judge, arbitrator or ombudsman to adjudicate on the specific circumstances of each case to determine how the regulatory regime should fairly apply in that case. Although I suspect it will not happen, I would drop some of the provisions which may otherwise drive good landlords out, while applying a tighter regulatory framework than currently, so as to ensure greater fairness for tenants. It is a question of getting the balance right.
On the good landlords side of the balance, allowing rent arrears to accumulate over three months before enforcement action can be taken risks intimidating those landlords into leaving the sector, with all the undesirable consequences which will ensue. A landlord is not a charity, and some depend entirely on the rent to pay mortgages or for their daily living costs. The relationship between tenant and landlord has to be a two-way street. Similarly, banning landlords from obtaining rent in advance will create greater risk for landlords and make them risk-averse in selecting tenants. This can only be detrimental to the latter. I also think that any current objections to fixed-term penalties and existing periods of notice are mitigated if there is a mechanism for ensuring that the ombudsman has the power to decide, where a tenant has a complaint, whether a landlord is giving notice for the right reasons.
On the tenant’s side of the balance, the Bill is spot on as to what the reasons for eviction—horrid word—must be. Similarly, I see nothing wrong with being able to challenge rent increases if those increases are being used as a disguised way of forcing the tenant to leave, beyond the reasons permitted in the Bill. Nor do I think that the reference to open market rents being imposed on landlords is unreasonable, provided that there is a detailed explanation of how this will be assessed. I also welcome the extension of Awaab’s law to the private rental sector, to force landlords to address conditions such as faulty electrics, mould and damp.
Finally, I welcome the provisions dealing with landlord redress schemes, registration and the ombudsman, provided there is clarity about how overlap with enforcement by local authorities and the courts will be avoided. The ombudsman scheme is where the focus should be, since consideration will then be given quickly and cost-effectively to the specific circumstances of the case, provided of course that the ombudsman’s office is resourced well enough.
There is lots of promise in the Bill, but it needs to be honest and laser-focused on what is in the all-round public interest: the interests of good landlords as well as of tenants. The effect of the Bill on the housing market and its effect on homelessness then need to be monitored closely. A commitment by the Government to report to Parliament annually to that effect, even if not enshrined in the Bill, would be welcome.
Lord Marlesford (Con)
My Lords, I declare my interest, as in the register, as a Suffolk farmer with rented residential properties. I have been running our rural business for over 50 years. I have also been particularly concerned to protect and, where possible, enhance the beauty of rural England. I served three terms as a countryside commissioner for England and Wales, five years as chair of the Council for the Preservation of Rural England and 20 years as president of the Suffolk Preservation Society. I therefore look at this Bill mainly through rural eyes.
I am afraid that I see this Bill as fundamentally flawed. Allow me to explain. Last year, I welcomed the new Government and wished them well, in the national interest. Since then, they have got into choppy waters, mainly by pursuing policies that were internally contradictory to their main objectives, particularly economic growth. We are seeing this again with this Bill. The drafting suggests a dislike, or at least a distrust, of the private rented sector. Yet this sector accounts for some 18% of the whole rented sector.
To increase the number of houses is one of the Government’s objectives. We all recognise that there are some very bad, even evil, landlords. I fully support all parts of the Bill dealing with this, including the abolition of Section 21. However, the central point in the Bill is the abolition of the assured shorthold tenancy. Of course, Mr Gove’s Renters (Reform) Bill also did this. This policy and the deporting of migrants to Rwanda were two of the most stupid things that the last Government did.
From the 1960s right the way through to the 1980s, rural housing was subject to severe constraints on both tenancies and rents. Rents set by the rent officer were extremely low, often providing zero return on capital and cash flow that was not enough even to keep the houses properly maintained. As mechanisation of farming continued, more and more houses became available to farmers. The big leap forward came in 1988 with the introduction of the assured shorthold tenancy. John MacGregor was the Secretary of State for Agriculture and Nick Ridley was at Environment—two fine Tory Ministers. The AST gave security of tenure through mutual agreement to both tenant and landlord for an initial period of six, 12 or 24 months, with annual rent reviews and the option of renewal on a rolling two-monthly basis. The AST has worked very well for 36 years. It seems batty to abolish it now; surely this is a case of “If it works, don’t fix it”.
The Conservatives changed the lease term to six months, in Committee in the Commons. This Government are jealous of that and have brought it back to just two months, virtually a non-term. As the courts in England are overwhelmed, it is extremely difficult to see how this can be policed. I very much took the point made by the noble and learned Lord, Lord Etherton, about how the judicial review of these very high penalties of up to £40,000 can be done. It is not really for local authorities to impose such things. Sums of that size are a judicial matter. The proposed tribunals to adjudicate on rents will be as restrictive to, and much more costly than, the rent officer. Traditionally, the private rented sector has used the RPI rather than the CPI for annual rent reviews. Meanwhile the Unite union is agitating for the CPI, as others have mentioned today, and wage increase rents if they are lower.
Finally, I urge the Government to recognise that the private rented sector in housing is part of the capitalist system. Landlords are a form of entrepreneur. While their profession must certainly be monitored and called to account, with appropriate penalties for abuse, it must be allowed to attract investment. The rents at the moment are barely adequate to provide a return on capital, low as it may be. There are few properties which produce a taxable rent of 3%. Most of them are 2% or less.
I recognise that there are those, some of them in the Government, who dislike private landlords. However, I suspect that even the Chancellor would recognise that there are no economic resources available to replace the system. The Government have housing targets to reach. These are imperilled by the present Bill. Let us hope that the experience and expertise of your Lordships’ House will allow it to be improved.
Lord Cashman (Non-Afl)
My Lords, as a non-affiliated Member of your Lordships’ House I congratulate the Government on the Bill before us. Having listened to the contributions thus far, wiser counsel will come from other noble Lords on improving and revising the legislation. I can only offer a narrow but, I believe, important perspective on an overlooked sector.
I particularly wish to associate myself with the comments and contributions of the noble Baroness, Lady Lister of Burtersett. I also heartily congratulate my friend, the noble Lord, Lord Wilson of Sedgefield, on a deeply moving and important maiden speech, along with the noble Baroness, Lady Brown of Silvertown. She reminded me of Silvertown, where my mother used to buy second-hand clothes for us as children from Rathbone Street market. Their contributions gave us memories that empower us, especially when dealing with legislation that is to effect positive social change.
As I have said, I am no expert in this field, but as the Minister will know, I have taken a keen interest in the paucity of rights for people who live in houseboats. I declare a personal interest in that friends of mine are currently moored at Chelsea and are deeply affected by developments there. I am grateful to the Library for the extensive research that it undertook on my behalf in relation to the rights, or rather lack of rights, of houseboat dwellers. My focus is residential houseboats moored on the Thames and other inland waterways in England and Wales, and not canal boats, which are currently part of a review being undertaken.
I have been informed by colleagues in the other place and the Minister, for whom I have the highest regard, that a simple amendment which would extend the rights enjoyed by mobile homes under the Mobile Homes Act 2013, which amended previous legislation, would fall outside of the scope of the Bill before us. I am grateful to the clerks for their initial advice, but I take this opportunity to inform the Minister and others that I will return to this subject and, I hope, with an amendment that achieves the necessary protections and falls within the scope of the Bill.
I believe that the rights and protections afforded by this Bill and other Acts of Parliament apply to residents of houseboats because such houseboats have tenancies. Their licences are precisely that: a means of renting mooring fixed either to a pier or to the riverbank. Yet those living on houseboats have absolutely no security of tenure. Although they pay council tax, energy bills, water bills and insurance bills, they do not have the same statutory rights as other tenants. This must be addressed. They have no protections when the owners of moorings propose to increase fees or, more worryingly, as we have seen at Chelsea, little redress when the owners of moorings propose not only to increase fees or develop the sites but to refuse to renew their licences or, indeed, review their tenancies. The situation faced by houseboat owners and residents is not dissimilar to that faced by mobile home residents, but while there is now legislation designed to provide some protections to mobile home residents, there is nothing designed to apply to residential houseboats.
That is the sad reality facing houseboat owners at Chelsea Reach, a historic community that dates back to the 1930s, and other sites that have faced or are about to face development or disappearance. This scenario is played out on moorings the length and breadth of the country as people fight to retain their homes and, if and when they are evicted or are unable to remain because of excessive increases in charges and licence fees, have to physically remove their homes and often dispose of them.
Previous Governments have declared that the issue is not “big enough” to legislate for and that it is not widespread. However, the problem is spreading as developers circle sites; the problem will grow, and evictions and homelessness will grow with it. From Vauxhall to Chelsea, to the Isle of Wight and beyond, people have had to face the choice of battling through the courts, with all the costs that go with it, for basic protections or quitting their moorings and taking their homes with them—or, in some instances, taking a sledgehammer to the interior of their houseboat to prevent the bailiffs taking the property.
There is a moral imperative for the Government to take action. I will not go on at length, but it is enough to say that it is often necessary to take preventive action to stop a small wrongdoing from becoming widespread. I urge the Government to work with me and others—and I ask the Minister for that assurance—to see how we can amend the Bill to afford the same rights to those houseboat owners and residents as afforded to those covered by the Mobile Homes Act 2013.
In conclusion, let us extend those basic rights, with the accompanying criteria, so that people can enjoy permanent and ongoing tenancies; security of tenure; protection from harassment; written agreements; conditions of residence; and pitch fee protection. I contend that what I am asking for on behalf of others is reasonable and moderate. I ask the Government to commit to delivering these basic rights to these forgotten and often overlooked residents.
Lord Black of Brentwood (Con)
My Lords, like my noble friend Lady Fookes, I want to address the issue of pet ownership. It is one that I have raised a number of times in this House, and I am delighted that the Government are now tackling it.
We are a nation of pet lovers. There are around 13.5 million homes with dogs as pets in the UK and around 12.5 million homes are graced by a cat—mine included. My husband and I have been blessed with the company of several cats—Destino is the incumbent—for 30 years and understand only too well the old adage that a cat is what makes a flat or a house a home. We have always been lucky to own our own home, but the companionship offered by pets should not be a privilege limited only to those who can do so, as the Minister quite rightly said in her opening remarks.
That is becoming a pressing issue as we increasingly become a nation of renters, many of whom want to own a pet cat or dog yet, at the moment, simply cannot. The second most common reason that animals are relinquished to the wonderful Battersea Dogs & Cats Home is housing, with only 8% of private landlords currently listing their property as pet-friendly, while an unacceptable 33% of private landlords who do not currently allow pets in any of their properties say that nothing would persuade them to do so.
Cats Protection’s Cats and Their Stats report in 2024 found that over half a million households who would like to have a cat do not have one because their rental agreements forbid it. As a result, Cats Protection took in the equivalent of three cats each day last year where owners had to make the gut-wrenching decision to give them up. These are not just dry statistics; wanting a pet and being told you cannot have one impacts people’s health and well-being, not least older, often lonely, people for whom a pet is a lifeline.
There are thousands of heartbreaking stories of people taking that most difficult of decisions to give up their beloved pet to a shelter when they cannot find somewhere pet-friendly to live. That includes cats like Zeke, who arrived at Battersea just 24 hours before his first birthday after his owners were faced with that unenviable decision whether to find an alternative rental property that would allow pets or to give up their beloved animal altogether. Take Anna and her husband who, after selling their home, had to find a short-term rental with their newborn son and two cats. That young family found it so difficult to find a landlord who would allow cats that they ended up living in a tiny converted garage.
Pets truly are members of the family. It is hard to overestimate the health benefits that pet ownership brings. Research by Mars Petcare has found that pet ownership saves the NHS around £2.5 billion each year in the UK, with pet owners making 15% fewer visits to a doctor for health reasons. That is partly the result of the physical health benefits of owning a dog but also the result of the significant mental health support that all pets provide.
As the Bill progressed in the other place, we heard arguments opposing the inclusion of the pet provisions due to concerns that pets cause damage to properties, but evidence suggests that these fears are exaggerated. Research commissioned by Battersea with the universities of Huddersfield, Sheffield Hallam and Brunel found that renting to tenants with pets is in fact commercially beneficial for landlords.
I welcome strongly the pet provisions in this Bill which seek to prevent landlords being able unreasonably to refuse a pet request from a tenant. I also recognise that improvements have already been baked into the Bill, including reducing the amount of time that landlords have to respond to a pet request. This change will make a meaningful difference for both tenants and shelter organisations dedicated to rehoming animals.
However, there is room further to strengthen the Bill’s pet provisions to create a fairer balance between the needs and rights of both tenants and landlords. I aim to bring forward proposals to do so in Committee. As has happened in countries such as France and Canada, where similar legislation has been passed, providing guiding principles on what constitutes unreasonable grounds for a landlord’s refusal to a pet request would be a positive step. While no piece of legislation can feasibly detail all scenarios, as my noble friend Lady Fookes outlined earlier, without such guiding principles I am concerned that the legislation will leave loopholes open for landlords, giving too much leeway to deny the majority of pet requests, in turn placing an unnecessary burden on tenants, the ombudsman and ultimately the courts.
I also believe that, once permission for a pet has been granted, it should remain in place for the duration of the tenancy; otherwise, there is a risk of landlords revoking consent later down the line, undermining the stability and security for renters and their pets.
Additionally, while I have no doubt that this legislation will make a real difference for those tenants in situ who wish to acquire a new pet, it will not act as enough of a sea-change for those with existing pets who are looking for a new place to rent, with landlords simply shuffling prospective tenants to the bottom of the list.
I strongly support the pet provision aspects of the Bill because they mark the start of a long-overdue culture shift which will mean that more tenants can own a pet in rented homes, with incalculable benefits not just for their own health and for the pets, but for society as a whole. With more people renting than ever, and more wanting to own a pet, this legislation is a tremendous opportunity to unlock thousands of homes for pet owners. I hope we can make the small necessary amendments to it in Committee to ensure that we deliver for all those who want and deserve that most precious gift in life—the unconditional love of a pet.
Lord Cromwell (CB)
My Lords, I add my thanks to the Minister for the way she introduced the Bill. I also congratulate our two maiden speakers on their highly relevant, interesting and insightful maiden speeches. Finally, I declare that some of my family members let three residential properties, although I do not.
There are many elements to the Bill, and perhaps the most referenced tonight is the removal of Section 21 notices and the objective of providing tenants with greater security of tenure. These notices certainly encouraged supply of rental accommodation but have been abused by some landlords in so-called no-fault evictions of tenants. The pendulum of legal rights is now swinging towards tenants. Some landlords may not like it, but it is the Government’s policy and, with their substantial House of Commons majority, it will become law. I believe that most have now accepted that inevitability.
That said, there is evidence that this impending change is already leading to a reduction in the supply of property to rent while, at the same time, demand remains high and increasing. I will not delay the House further with figures today, but even the most enthusiastic advocates of ending Section 21 can claim that, at best, the supply of rented accommodation is flat. I therefore ask the Minister to clarify specifically whether the Government’s view is that ending Section 21 notices is expected to increase the supply of rented accommodation.
A related area of concern is the reversion to landlords having henceforth to go via the courts in Section 8 processes to regain possession of their property. Logically, this means that courts will have more cases than currently, as was confirmed by the noble and learned Lord, Lord Etherton, along with his other concerns, and was also raised by the noble Earls, Lord Kinnoull and Lord Leicester, and the noble Lord, Lord Thurlow.
While new tenant rights will take almost immediate effect, there is very little confidence that the already clogged court and tribunal systems will somehow be simultaneously transformed, apparently by using the magic of digital and AI, into swift and effective delivery mechanisms. I therefore ask the Minister to bear down, in the interests of both landlords and tenants, on the specifics and, in particular, the timetable for this seemingly miraculous transformation.
On a more positive note, and contrary to the tone around the Bill, there are many occasions when landlords and tenants have positive relationships. Consequently, both want to establish longer-term arrangements. This runs immediately into the difficulty that fixed-term tenancies have sometimes been used to trap tenants, but it does not have to be that way, as the noble Lord, Lord Truscott, touched on.
I plan to table a positive amendment that would enable tenants and landlords, if requested by the tenant after four months of occupancy—when they should have been able to size up their landlord and the property; of course, the reverse also applies—to go forward to mutual benefit on a longer-term basis, crucially without removing the tenant’s ability to depart on two months’ notice. This, like other aspects of the Bill, will apply only to some landlord-tenant circumstances, but the Bill needs to make such agreements at least possible. If it does not, informal or verbal agreements will develop outside the legislation, and these tend to end in tears. Tenant groups with which I have discussed the draft amendment have written to me to confirm that they think it has the potential to help tenants have greater security in the context that I have described.
I may also table amendments in two other areas that we might consider in order to maintain a better balance between landlords and tenants. The first is the case of rent arrears: the Bill requires three months’ arrears, plus four weeks’ notice, plus—according to the Ministry of Justice—some seven months for court processes. This will make rental properties unrentable and unavailable for almost 12 months, which is too long.
Secondly, where the landlord seeks to sell a property under the new ground 1A, the evidence shows that the period of 12 months to prove the property has been marketed is twice the length necessary. With suitable evidential safeguards—again, crucial—the property should be made available to rent after just six months. Both these amendments address the need to sustain rather than contract the supply of suitable rental accommodation.
I have two final points. First, as we seek to make these adjustments to the landlord-tenant relationship, the fundamental—on which many have touched—is a mismatch between supply and demand. As long as the housing stock available to rent is so out of kilter with demand, systemic problems of non-availability and methods of rationing—overt or unspoken—will remain. In particular, landlords will be even more selective than they are now about who they choose to rent to—and they still have a choice.
Secondly—and I have raised this before—while the Government assure us, in exactly the same way as the last Government did, that most landlords are good, the real target for improvements in standards of accommodation and tenant rights should be, as we were reminded by the noble Lords, Lord Shipley, Lord Thurlow and Lord Carter, the minority of bad ones. These individuals, and in some cases gangs, do not care for written agreements, the decent homes standard or legal niceties; their activities are based on force, extortion and neglect.
The Bill risks—do I dare say this?—helping mainly middle-class renters to gain and assert their rights. Unless we get much more serious about enforcement, which means properly resourcing it against truly exploitative landlords, life for those at the bottom of the housing ladder, where the direst needs and worst poverty coexist, will remain untouched despite this well-intentioned Bill—as it presently stands.
Lord Tope (LD)
My Lords, I am another vice-president of the Local Government Association. More particularly, because of what I want to say tonight, I am co-president of London Councils, the body which represents all 32 London boroughs and the City of London. I was also a London borough councillor for 40 years and leader of that council for 13 years. Not surprisingly, therefore, I am going to speak about the situation in London, although I recognise that many of the points I raise apply in most, if not all, cities and towns throughout the country.
London is home to an estimated 2.7 million private renters. Rented properties now account for 31% of homes in the capital. I am told that the closest regional average is just over 19%. Home ownership, therefore, is unaffordable for many London residents, and there are extremely long waiting lists for social housing. As a result, having access to safe, secure and affordable private rental property is vital for very many people living in London. London Councils welcomes many of the measures in the Bill and supports the Government’s aim to deliver a fairer, more secure and better quality private rented sector. In particular, it strongly supports the abolition of Section 21 no-fault evictions, which really cannot come soon enough.
The Bill proposes a range of significant new regulatory and enforcement responsibilities for local authorities. These include responsibility for enforcing the decent homes standard in the private rented sector and a duty on local housing authorities to enforce landlord legislation in their area, which, of course, means every one of the 32 London borough councils.
According to the English Housing Survey for 2022-23, London had 134,000 non-decent private homes, accounting for 12% of the market. Raising these to the decent homes standard will need significant investment, and will be costly and resource-intensive for boroughs to enforce. London boroughs forecast a funding shortfall in 2025-26 of £500 million. I am not going to ask the Minister to commit to the full funding, because I have been doing that for the last 40 years and I know the answer I will get, but will she commit to working with local authorities to produce a full new burdens assessment in relation to the Bill so that we have a real and realistic idea of the actual resource needs to implement it?
I want to turn to Home Office accommodation for refugees and asylum seekers. In the other place, the Government argued that it was not necessary to bring that within the scope of the Bill because such accommodation is already regulated to what they describe as a “high standard” by the asylum and support contracts, enforced by the Home Office. Evidence from London borough local authorities—I am sure that local authorities in other parts of the country would bear this out too—consistently demonstrates that the view expressed by the Government in the other place is simply not the reality. Extensive feedback from London authorities provides widespread evidence of poor standards across asylum accommodation. Enforcement action is often slow when contract breaches and other issues are identified, and I am told that a number of barriers remain in implementing effective enforcement action. The sub-contracting model of the Home Office providers results in a lack of accountability and misalignment between Home Office and local authority standards. London local authorities report that responses are slow, and that residents spend hours at a time waiting to get through via the helpline. In some instances, there is evidence that complaints are not properly recorded.
The exclusion of Home Office accommodation from the provisions of this Bill will inevitably result in a two-tier system, which will be particularly serious in London. Extending the provisions of the Bill would assist in creating uniform standards and give statutory bodies greater powers to take effective enforcement action. London Councils is therefore seeking to extend the provisions under Awaab’s law and the decent homes standard to include Home Office-contracted accommodation, including initial, contingency and dispersal accommodation. It asks that the powers of the proposed ombudsman be extended to include asylum seekers. Having an independent ombudsman would give people seeking asylum greater agency and trust in the asylum system.
London Councils is raising very important issues, drawn not from expectation but from actual experience, and no doubt the same is true in many other towns and cities in the country. I ask the Minister not simply to dismiss them as unnecessary but rather to take them away and give careful consideration to how best they can be met within the provisions of this Bill.
Lord Davies of Brixton (Lab)
My Lords, I congratulate my noble friends Lord Wilson of Sedgefield and Lady Brown of Silvertown on their excellent maiden speeches. I am sure that the House will benefit from their membership.
It is a pleasure to follow the noble Lord, Lord Tope; he has covered a number of the points that were going to be included in my speech and I agree with everything he has said. My views on housing are very much governed and guided by my experience as an inner-London borough councillor. However, I am not just going to talk about London; I also want to talk about older renters.
A Venn diagram shows that there is considerable overlap, with a higher proportion of older renters in London than anywhere else in the country. This is a particularly difficult issue which needs to be addressed. There is a crisis in London’s housing, driven by a combination of soaring rents, the lack of affordable housing and growing insecurity for tenants. With 2.7 million private renters, making up 31% of the capital’s housing market, many Londoners are struggling with rising costs, poor housing conditions and the threat of eviction.
Older renters in London are particularly vulnerable in this crisis. Many are long-term tenants on fixed incomes, facing significant rent hikes, leaving them at risk of eviction and potential homelessness. Unlike younger renters, older tenants often struggle to relocate due to mobility issues, limited financial means and a shortage of suitable age-friendly housing. Additionally, age discrimination and strong competition in the private rental sector make it harder for older people to secure new tenancies. This is a growing issue. Research from the charity Independent Age estimates that, over the coming 25 years, there will be a fourfold increase in the number of older renters.
Urgent action is needed, including rent controls, greater legal protections and stronger enforcement against rogue landlords. Without intervention, London’s rental market will continue to push vulnerable groups, especially older people, into precarious and unstable living conditions. Given the extent of the crisis in London, I make no apology for highlighting the views of London Councils, emphasising the points made by the noble Lord, Lord Tope, and by the Mayor of London on what is needed in addition to what is in the Bill.
The mayor and London Councils have broadly welcomed the Renters’ Rights Bill as a crucial step towards improving the private rented sector in the capital. However, they have highlighted key areas where further government action is needed to address the capital’s severe housing pressures, growing homelessness and stretched local authority resources. We will need to address the issues they have raised during the Committee stage.
The mayor and London Councils support the abolition of Section 21 no-fault evictions, which have been a major driver of homelessness in London: 5,000 Londoners faced homelessness due to Section 21 evictions in the last fiscal year, which is an 18% increase on the previous year. Greater protection for tenants is set out in the Bill, but the mayor, for example, has also called for rent control powers to be devolved to London, while London Councils, as we have heard, supports strengthened tenant protections against sudden rent increases through a fairer tribunal process and an extended notice period of two months.
Both bodies have expressed concerns about the new regulatory and enforcement responsibilities being placed on local authorities. Councils will be responsible for enforcing the decent homes standard in a private rental sector where 134,000 properties failed to meet this standard. With London boroughs already facing a £500 million funding shortfall for the forthcoming year, additional enforcement duties will be unsustainable without government funding. London Councils has urged the Government to undertake a full new burdens assessment to ensure councils can implement the reforms effectively.
We also need stronger protections against rental discrimination. They call for the regulation of guarantor requirements, which discriminate against older people, who find it more difficult to obtain such guarantees, in addition to migrants and low-income renters. The Bill should also ensure better access to compensation for renters who have faced discrimination, with a lower burden of proof for claims.
I am running out of time, so I will just emphasise the point made by the noble Lord, Lord Tope, and my noble friend, about extending protection to asylum accommodation. The mayor and London Councils have highlighted the substandard conditions in Home Office-provided asylum accommodation. We need an extension of the decent homes standard to cover asylum accommodation, the application of Awaab’s law and the new renters’ ombudsman to cover asylum housing, ensuring that asylum seekers and refugees receive the same legal protections as other renters.
Lord de Clifford (CB)
My Lords, I congratulate the noble Lord, Lord Wilson of Sedgefield, and the noble Baroness, Lady Brown of Silvertown, for their passionate and moving maiden speeches. This Bill will be welcomed by tenants, not only to improve security of tenure of their homes and the quality of properties being rented to them.
The Bill encourages tenants to seek redress against poor landlords for issues they have with their properties, such as repairs, unfair rents and unfair evictions. It increases the reliance on courts, local authorities and ombudsmen to decide on these issues, as has been covered by many Peers. Currently, all these are under pressure, and I look forward to hearing from the Minister what plans are in place to deal with this increased workload.
Also, with the increase in reliance on these bodies, is there a risk that the complexities for tenants on who to contact increases? There are currently 10 organisations that they could contact about these issues. Some clarification for tenants in future would be useful.
Change always creates uncertainty, and this Bill certainly does for landlords, who are already making decisions based on this Bill and its many unintended consequences, some of which I will address.
I welcome the need and reason to give notice to protected tenants, but I ask the Minister for clarification on an issue that came forward to me: if a landlord has a rented property under a shorthold tenancy and has the need to employ a carer for themselves or for a carer to live in that property, could they give notice under ground 5E with only four weeks’ notice? This issue was raised with me—I do not expect an answer tonight.
I am sure that the tenants’ rights and protections to challenge punitive practices such as rental bidding will be circumvented by landlords and letting agents by increasing the asking price of the rented property, especially when the demand is in certain areas, therefore again putting tenants off from putting in offers, as was already mentioned by the noble Lord, Lord Thurlow. The principle of being allowed to take rents in advance is welcome, but one simple rule does not work for a sufficient number of tenants—mainly those who do not have credit history. For example, overseas individuals and families coming to this country to work or study, individuals starting new businesses with less than three years’ worth of accounts, and students with no guarantor may all have the funds to pay rent in advance, but they cannot due to this Bill and will be overlooked in preference of those tenants with regular incomes. I ask the Minister: has any amendment been considered on how we can help these types of prospective tenants?
The reduction of the effective minimum term of three months for tenancies means more uncertainty for landlords. Landlords and letting agents will incur most of the costs of letting a property at the beginning of the tenancy and will therefore be out of pocket on a regular basis. Why do the Government feel the need for such a short starting period to tenancies? Do not landlords deserve some protection for the cost of moving a tenant into a property?
Pet ownership has increased in the past five years, and the importance of pets to individual families has also increased, so the right to request a pet is helpful and welcomed. Would it not be wise to first define a pet in the Bill? Could I suggest that a term such as “companion animal” is used? In the veterinary profession, this category typically includes dogs, cats, birds, rabbits and other small mammals. I think that this would help within the Bill. I thank the Minister for noting my interest in this area as well.
It is acknowledged that pets bring additional dirt and increased wear and tear to properties and, on occasion, cause damage and infestation of fleas. That is why holiday letting markets charge extra amounts when pets are allowed. The Bill has tried to address this concern by asking tenants to pay for pet insurance; as pointed out by the noble Earl, Lord Kinnoull, this product does not exist. I look forward to further discussions on this point with the Minister and in Committee.
There is a shortage of supply of rental properties, and there has been for many years, especially in rural areas, as covered by the noble Earl, Lord Leicester. With the changes in the Bill, rural landlords in areas with good communication to major cities and holiday destinations are changing the use of properties to holiday lets or renting to city weekenders on a common law tenancy basis, which gives the landlord a lot more flexibility. This further reduces the availability of affordable supply of property to local individuals, workers and families, and this is an area we need to address. I look forward to contributing further to the Bill in Committee .
Lord Howard of Rising (Con)
My Lords, I declare an interest as an owner of rented property. The last Government introduced a Bill to reform the rental market; it was a rotten idea then, and it is a rotten idea today. Although I believe it is extremely well intentioned, it will undoubtedly do more harm than good. I am constantly amazed by the belief of Governments, in the face of evidence and common sense, that they can improve things by intervening in a market that works. Last week, I quoted the late Milton Friedman:
“If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand”.
If this Bill is enacted, then, in five years, there will be an even greater shortage of rented accommodation than there is at present—that is, if anything more than a token market remains.
Landlords are already creaking under the weight of tax and bureaucracy, and the rental market is shrinking. Rented accommodation will always be needed, as a number of noble Lords have pointed out, but the policies the Government are proposing will result in a further reduction of the amount of rented property available. Decreasing supply coupled with the increasing demand will serve only to push up costs for new tenants.
The Government’s tortuous manoeuvring around rent controls will not work. Under the Bill, any tenant who disagrees with a rent increase can go to a tribunal. At that tribunal, rent can only be reduced: it can never be increased beyond the landlord’s proposal, however modest that proposal may have been. It is a win-only bet for the tenant. Even if a proposed rent increase is ruled acceptable, the tenant does not have to start paying it until the tribunal has concluded. Who knows how long that could take? At best, the tenant gets a rent reduction, at worst a delayed rent increase. Why would every tenant not appeal on every possible occasion? The tribunals will be swamped and the delays will become unreasonable.
There is another problem with rent tribunals. The tribunals’ job is to determine what the market rent should be and to ensure that rent increases do not exceed it. If rents never go above an existing market rate, the market rate will not change; it will stay exactly the same. To state the obvious, landlords let their premises in return for rent. To create a situation where the return on investment is static because the rent never goes up, but costs go up, can result only in a reduced supply of rental accommodation.
In Berlin, in 2020, they introduced a law to maintain rents at 2019 levels for five years. Because of that law, the number of new rental properties coming on to the market fell by almost half and the scheme ended after less than two years. Similar legislation in Scotland has resulted in a significant reduction in rental stock and the highest rent increases in the United Kingdom. In Ireland, because of the shortage of rental accommodation, foreign students ended up sleeping in tents. The evidence of the harm that can be done by Governments trying to interfere in the market stares us in the face.
There are many problems in the Bill and I have commented on only one of them so far. To burden landlords with some of the other suggestions in the Bill will only accelerate the landlords’ exodus from the market. As my noble friend Lady Scott said, around 90% of landlords are individuals, of whom nearly half own only one property. Many of them will not have the resources to cope with the Government’s new demands. I remind the Government that landlords already have considerable overheads to maintain their properties: gas safety test certificates are needed every year; electrical installation condition reports are required for each new letting, or every five years; energy performance certificates are obligatory; and the demands of what they must achieve increase every year. Landlords are legally required to vet their tenants, and tenants can complain to their local authority if rules are not complied with.
Those are some of the costs of bureaucracy that landlords face already. The Bill makes the burdens worse. Demands will include limiting deposits to one month’s rent. The existing five weeks in no way covers the damage caused by a bad tenant. Landlords will not be able to refuse pets, despite the almost inevitable damage. I would say to the noble Lord, Lord Black, that I have never refused a pet, and they have invariably cost me money way over and beyond any deposit. I will never refuse one either, by the way.
Fixed-term tenancies are to be abolished, even where they are in the interest of both parties, such as the majority of student accommodation. The threshold needed to be breached for eviction for anti-social behaviour or rental arrears is being raised. Up to now, the ability to use Section 21 ensured that tenants behaved in a neighbourly manner.
There will be much to deal with in Committee. I will spare your Lordships any more today.
Lord Desai (CB)
My Lords, let me first say congratulations to the two maiden speakers. Let us hope that they enjoy being in your Lordships’ House.
I start by saying that we have a very distorted housing market. Among all the countries of Europe, we have the highest amount of home ownership—two-thirds of houses are home-owned. If you look at home ownership, social housing and private rental, you see that private rental is the stepchild of the country. When I first arrived in this country 60 years ago, there was a very healthy rental market. Indeed, until I arrived here, I had lived only in rental houses, in two different countries, in four different cities. The idea of owning a house was never there. After my first two attempts at renting flats, which I was very lucky with, everybody screamed at me, “Why are you renting?” They said I must buy, because mortgage payments were tax deductible so I really should stop all this tenancy business and buy.
We have subsidised home ownership outrageously. The only asset I know of on which you can make a profit and pay no capital gains tax is an owned house. If you have a housing market like that, it is no wonder that anybody who can at all afford to have a mortgage, even at the age of 12 or 13 or whenever, will get a mortgage from the bank of mum and dad. They will take a loan and buy a house.
We are, basically, leaving the rest of the population in two different categories. Those who are local, and qualify under the terms of the local council, get social housing. New Labour, unfortunately, did not build any social housing, so we do not have as much social housing as we used to. The people who are left, who cannot have social housing and do not have the money to buy a house, are in the category of private rental tenants. They are either transients, such as students who will be there for only two or three years and who do not really mind about the rent, or new arrivals in this country—immigrants—or people who are very poor but unable to get any social housing.
You have to look at the category of people trapped in the private rental category, who are, relatively speaking, in the worst-off section of society. We do not have what we used to when I first arrived here: comfortable three-bedroom houses for rent. We used to have unfurnished rentals.
The noble Lord, Lord Best, who is not in his place, mentioned Rachman and Rachmanism. He was an exploitative landlord, and the whole scandal about Rachman basically made people very hostile to this. Steadily since then, since 1965 to now, we have expanded one part of housing with subsidies but starved the private rented sector.
I do not want to talk about the details of the Bill because a lot of people have already done so, but we have to do something about the generous tax treatment of owned houses. In my view, this discourages people from investing in stocks and shares, as stocks and shares are taxed for capital gains but you are not taxed for capital gains in housing. We invest far too much in bricks and mortar and not enough in productive capital because our tax system is totally distorted. Anyway, that is not what the Bill is about. It is about the one- fifth of the population who are trapped in private rentals.
Importantly, if you are going to index rents, you should not index them to the consumer prices index. I urge the Government to ask the Office for National Statistics to construct a housing costs index. Landlords may have to pay for repairs and so on, which are different kinds of costs from the consumer prices that go into the consumer prices index. Landlords may find that it costs much more to repair a property or keep it in good shape than buying bread or sausages. We ought to do at least that little thing in favour of the universally disliked landlords. That might improve the performance of the Bill.
Lord Inglewood (Non-Afl)
My Lords, like a number of other speakers, I begin by referring to my entry in the register of interests. I declare that I am a landlord of some rented properties on my own account, and I am a landlord in a capacity as trustee for quite a lot more.
At the risk of stating the obvious, but I think this is rather important, houses are wasting assets. They always need refreshing and maintaining, and that is a predicament that affects everyone in this country in one way or another. They are also, and I think this is also significant, a crucial part of our national infra- structure. While we have heard a lot recently about the failures to properly maintain our national infrastructure —the railways, roads and water systems—we do not really think about housing in that context, but of course it should be thought of that way. If you want to look at an example of what happens if you do not carry out proper maintenance on buildings, you need go no further than the building where we are this evening, which is an absolute scandal.
Although we sometimes might have thought to the contrary today, the private rental sector is not homogenous, and there clearly has been abuse, which the Government are right to address. Nevertheless, as is also clear, the private landlord/tenant process is an essential element of our housing scene in this country and, as the previous speaker has just said, quite distinct from owner-occupation. Getting it right as much as we can in the real world—I say that because I want to contrast it with the kinds of desktop studies that sometimes accompany debates of this sort—is crucial for individual families’ well-being and the wider provision of housing in the country taken as a whole. We must not throw out the metaphorical baby with the bathwater.
However, we cannot do that unless we start from the presumption, which has to be based on realism about the real world, that both landlords and tenants are not scheming crooks. Still, there must be usable mechanisms that can cut in quickly and unequivocally against tenants and landlords if roguery is suspected. It is a question of balance. Some of the changes in the Bill seem desirable and move in the direction of improving that balance, while others perhaps go in the opposite direction. As we shall be discussing those in more detail at later stages, I will not go into them now. All I will say as a landlord is that if the rent is not paid, it has the same effect as opening a wallet and taking cash out of it, and trashing a house or flat is the same as trashing someone’s car. They are not victimless activities —on the contrary.
From the tenant’s point of view, security of tenure is clearly an important aspect, and I have considerable sympathy with the proposals to end no-fault eviction. However, market rent is a very slippery concept, as the noble Lord, Lord Desai, touched on. Where I live, in the north of England, rent levels in Cleator Moor are very different from those in Chelsea. That has a considerable bearing because, where landlords are being expected to improve houses at the behest of the Government, you find that building costs have recently been increasing, as far as I can see, way ahead of inflation, so the whole thing gets into a muddle if we are not careful. There is an important question for the long run: if the code by which private landlords are expected to operate turns—de facto, not necessarily de jure—into some kind of housing benefit, what are the consequences and implications of that?
It is one of the mysteries of the world we live in that the land and housing market does not appear necessarily to follow the rules that are generally thought to apply under the wider laws of economics; we have to look only at the Government’s recent experience with calculating profitability in agriculture to see that. When there is a conflict in this sort of context between experience and theory, the experience of the real marketplace must always be right.
Simply repeating historic mantras is not very helpful in this context. What is needed is a complete rethink from first principles about a whole range of both the subject matter of the Bill and the inexorably connected flanking measures. The noble Lord, Lord Desai, has been doing a bit of that, as did the noble Lord, Lord Best, earlier in the debate. If we do not do that, we will end up simply going down a cul de sac.
As I have said already, the whole housing sector, just like other infrastructure, is a wasting asset. That has to be at the centre of our thinking and has to be understood by Governments—not only this Government, but Governments of all political persuasions—and the private rental sector is an integral component of that. My belief is that the only way it can function in the national interest is if it works for both landlords and tenants. That depends as much on the balance within the legislation as it does on the specificity of each and every element of it. If the arrangements—taken together with the Government’s involvement outside but having a bearing on this market—do not achieve that, the Bill will simply become an Act that fails.
The Earl of Lytton (CB)
My Lords, I have to declare a personal and professional interest with the private rented sector since 1968. Members of my family are also private rented sector landlords. I thank the Minister for introducing the Bill so cogently, and I add my tribute to our two excellent maiden speakers.
My professional training, which started in 1969 or thereabouts, involved an understanding of the Protection from Eviction Act, the Rent Acts, the rent officer service, rent assessment committees and fair rents. That regime, I know for certain, created a severe attrition of the private rented sector. The statistics show that it fell from 31% of homes in 1961 to under 10% in 1991, with substantial value write-downs in the process. The 1988 Act brought some relief and brought in shortholds. The emphasis was on the “short” bit; that was what it was intended to do, and you could not let for more than five years in the early stages. It has continued pretty much uninterrupted, under several subsequent Administrations. Even so, the proportion stood at 9.7% of homes in 2000.
The Government have been strident in their insistence that under the Bill no rent controls are planned, but I see the ability to challenge above-market rents, and the allied pressure for CPI pegging of rents and the whole question of affordability, to amount to the same principle of fair rents under the 1965 Act, give or take a bit, and likely to have very similar outcomes. At any rate, I believe that it is a distinction without a real difference, and could be adjusted and altered at the stroke of a pen.
The market will take note of this, looking at the headwinds and the new obligations under this Bill. My take is that the private rented sector is now destined for material decline. Halving it to the sub-10% of homes it was in 2000 seems a least a possible medium-term prospect. There will be no rush to the exit, just a steady attrition, with probably the 45% of the PRS in the buy-to-let component leading the way.
Does it matter, in what is actually a highly interconnected and joined-up housing sector, where people can move from one to the other? If the noble Lord, Lord Best, is right—I am glad to see him in his place —the surplus would be hoovered up by social landlords and new companies to be let at affordable rents— I assume this means an absolute maximum of 80% of market rent. However, having bought the property, which may need work and improvement, at market levels, to then let at a 20% discount, with rising costs and current interest projections, and the added duties, risks and so on, strikes me as improbable. I would like to know where the model for this is. Maybe he is right and giving incentives to sell to the sitting renter—those of them who have the cash—would be a way forward.
If these properties are released in dribs and drabs on to the general housing market, they cannot fail to have a dampening effect, likely over an extended timeframe, on the growth in housing values and the viability of new-build rollout because of the interconnected nature of the sector. I remind your Lordships that the CBRE suggests that there are at least 1 million consented residential plots that have not been built out and are sitting there waiting to go.
If I am right here, and we are moving to a higher proportion altogether of social rented property, then, again, the pressure on homes to purchase might, by that token, reduce. Good, I hear noble Lords say, but be careful what you wish for. Year-on-year increases in house prices are, in large part, what underpins our economy. From the Treasury at one end, with the tax revenues in sight, through developers and constructors, and local authorities to first-time buyers at the other end hoping to build equity in their home, this is all about money supply, banking, consumer spending and so on.
I am no fan of a model based on inventory rather than productivity—a point that the noble Lord, Lord Inglewood, almost touched on. I consider, in any event, that it will only end in tears, eventually. But it is such an important driver in our post-industrial, service industry-based economy, where we in the UK have about the fifth or sixth highest exposure to property-related debt in the world, that it cannot be ignored.
So, what about the inventory valuation that sits behind this? Has anybody done the calculations? I see this Bill as having the potential to trigger much larger events in a system of very many moving parts. I hope it is not an adverse trigger. I would hate things to get back to the stage we were at in 2008. This is why I would prefer a less iconoclastic reform, despite all the ills and abuses in the existing private rented sector, which I readily acknowledge. I would like to see choice, flexibility, freedom to transact, ease of entry and exit and all the mobility that this implies. That also implies a fair balance. It is a world of complementary needs. We should remember, too, that after 2008 the expansion of the private rented sector was able to absorb a lot of the pain that would have otherwise resulted from that debacle. But I am afraid that I see a bulky document, inherently encapsulating more cost, risk and delay and a transactional drag while it all beds in.
We have to stop conflating the problems within the private rented sector with other matters such as social inequality, lack of affordability, housing costs, high and inward migration, employment problems, income distribution and so on. We have to remove it from that—
Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Wheeler) (Lab)
Excuse me. Will the noble Earl please wind up? The advisory time is seven minutes.
The Earl of Lytton (CB)
I am actually finished. If I am right, there is little that can be done with this Bill. None the less, I will engage in order to try to improve it. Like my noble ancestor Lord Byron, I deny nothing but I doubt everything.
Lord Northbrook (Con)
My Lords, I first declare my interest as a rental property owner. I support certain aspects of this Bill but have major reservations on other parts of it. On some issues the Bill strikes the right balance. This is agreed by the National Residential Landlords Association and the Large Agents Representation Group. These issues include provisions to establish a decent homes standard, applying Awaab’s law sensibly, tackling discriminatory practices faced by benefit claimants and families with children, protecting guarantors when a tenant dies while renting a property, and efforts to end bidding wars. These parts of the Bill are welcome.
Before I look at the Bill’s problems, I would like to take a step back and examine the background to the English residential letting market. First, there are not enough private rented properties to meet demand. The noble Baroness, Lady Taylor of Stevenage, has acknowledged that demand is currently outstripping the supply of properties available to let. According to the latest English Private Landlord Survey, the number of landlords looking to sell properties is increasing: 31% of landlords plan to cut the number of properties they rent out. Landlords selling properties is not good news for tenants. This is a leading reason that tenancies end, according to the Government’s homelessness data.
The leading countryside organisation, the CLA, states that that the rural private housing sector is shrinking, with 44% of countryside landlords planning to sell or change use class in the next two years. This compares with only 21% planning to build in the same period. Some 90% of those planning to leave the sector gave changes in private rented sector tenancies as the first cause. The second cause was the proposal to increase minimum energy efficiency standards to energy performance certificate C. The third cause was the abolition of Section 21, which I shall now move on to.
The courts are already facing huge backlogs. Ending Section 21 will put an even greater strain on them. They will need to consider and process possession cases where landlords have good cause, under the Section 8 process. The other place’s Housing Select Committee has previously warned that the courts will be overwhelmed without reform. Government data suggests that it takes a court an average of just over seven months to process Section 8 possession cases. This is from a case being accepted to the property being repossessed and includes cases related to anti-social behaviour and serious rent arrears.
As far back as September, the Housing Minister in the other place said that the Government are working
“to ensure that the court system is ready at the point that the new system comes into effect”.
However, since then, no clarity has been provided by the Government about what the courts being ready means in practice. This is especially concerning given that the Minister told the Public Bill Committee in the other place that the court system is “on its knees”. A clear resource plan must be put in place before reforms take effect. The Law Society has rightly warned that
“without investment for housing legal aid and the courts, the bill will not achieve its aims”.
Despite representing the most significant reforms to the private rented sector in over 30 years, no clear implementation plan has been developed or published. Such a plan is vital to ensure that the sector understands what is expected of it and when. Sufficient time needs to be allowed to prepare for changes. I therefore ask the Minister: which parts of the Bill will be implemented at what stage?
I now move to the problems of the legislation regarding the tribunal system. The Bill is set to allow tenants to challenge above-market rent increases at the property tribunal. The ruling cannot decide that a proposed rent increase should be higher than what was proposed by a landlord, and tenants can take rent determinations to a tribunal free of charge. Based on the measures in the Bill, there is no clear reason as to why a tenant would not take an increase to the tribunal. This is irrespective of whether their challenge would be successful, not least because the only way to test if a rent increase was at market rates or not would be to go to the tribunal.
At the Second Reading of the Bill in the other place, the Housing Minister told MPs that the Government
“do not want the tribunal overwhelmed”.—[Official Report, Commons, 9/10/24; col. 413.]
However, it is not clear how this will be achieved. I suggest that, to prevent the property tribunal being overwhelmed with rental appeal cases, tenants should first be able to establish from the Valuation Office Agency whether a proposed rent increase is within market rates or not. This would make use of the VOA’s experience on local market rents and reduce waiting times for cases that need to be decided by the tribunal.
The next problem is Clause 9. The effect of this could see a number of otherwise suitable applicants shut out from the private rented sector. The clause prohibits any form of rent in advance other than the first month’s rent, which is only payable after the tenancy agreement has been entered into. While the Government’s intentions behind seeking to prevent large amounts of rent being paid in advance are understandable, limiting this ability may close off the private rental market to certain groups who most struggle to prove their ability to sustain a tenancy, including covering their rents. Those most likely to be affected are international students and overseas workers who have no credit history in the UK, as well as those employed on a short-term or variable basis with income that fluctuates. Those from overseas are also most likely to struggle to secure a UK-based guarantor for their rent.
In addition, I ask the Minister how guarantors will work under the new legislation. Given the end of the fixed-term tenancies, it is unlikely that a guarantor would be willing to guarantee a tenant’s rent indefinitely. The Bill’s potential to close off the market from those overseas is in direct contrast with the Chancellor’s ambition to encourage more high-skilled workers to UK and the Education Secretary’s recent message welcoming international students to the country.
I have two other issues. The first is ensuring that the database of private housing works. Chris Norris of the NRLA, which represents 100,000 landlords, said:
“It makes no sense that whilst planning to create a national database of private landlords, the Government now wants to make it easier for councils to license landlords as well”.
How do the Government plan to prevent the two schemes duplicating each other? A failure to do so risks them becoming nothing more than cash cows at the expense of landlords. The database must make it easier for responsible landlords to demonstrate compliance with all their obligations.
My second and final issue is the uncertainty for landlords over gaining repossession of one or two-bedroom properties let out to students. Can I ask the Minister why the new possession ground 4A will not apply to these?
Lord Trees (CB)
My Lords, I congratulate the noble Baroness, Lady Brown, and the noble Lord, Lord Wilson, on their excellent maiden speeches and welcome them to the House. I declare an interest as a part-owner of two rental properties—although without beneficial interest—as a veterinary surgeon and as co-chair of the All-Party Parliamentary Group for Animal Welfare.
I want to concentrate in this debate on the issue of keeping pets. I thank the Bill team for the useful discussions we have had. Currently, the Bill has limited descriptions of three important areas. First, what is a pet? They are described in the Bill as
“an animal kept by a person mainly for … personal interest, … companionship, … ornamental purposes”,
which, basically, could be any animal. Secondly, what is damage? I will say a bit more about that later. Thirdly, there is what is reasonable or unreasonable, as referred to by the noble Baroness, Lady Fookes, earlier.
With respect to the definition of pets, clearly there are different considerations of welfare, public health, damage, hazards and consequences to others between keeping one budgerigar or five Alsatians. Most species of pet are likely to cause no problems, the most popular pets, dogs and cats, are unfortunately those in respect of which the greatest problems might occur. There is a balance to be struck between three variables: the welfare of the pet, the well-being of pet owners and the possible negative impact on others.
In considering the trade-offs, the first point I want to make is the difference between assistance dogs and other dogs. Assistance dogs are protected by the Equality Act 2010 and are known as auxiliary aids to disabled people. They are not legally regarded as pets, but Assistance Dogs UK still receives reports of obstacles to people with assistance dogs being able to access private rental accommodation. Given the high degree of training of the dogs and of the owners, and the benefit to the owners of such dogs, I suggest there is a clear argument in favour of a tenant’s right to have an assistance dog in private rental accommodation. However, there is an issue, as there is no official recognition of assistance dogs. There is a need for some central registration of such animals and owners to unequivocally identify them—perhaps analogous to the provision of blue badges for preferential parking for people with certain disabilities.
With regard to the welfare of pets in private rental accommodation, such pets are covered by the same animal welfare protections provided under the Animal Welfare Act 2006 and other legislation for animals in any other accommodation, so there is no issue regarding the welfare of the animals.
From the pet owner’s perspective, there is much evidence of the value of pets to human well-being. A 2016 report, Companion Animal Economics, estimates that owning a pet reduces costs to the NHS by £2.5 billion per year through reduced numbers of doctor visits. Furthermore, there are well-known health benefits, including improved mental and physical well-being by reducing feelings of anxiety and depression and increased physical activity on the part of owners.
With respect to damage, this is not fully defined in the Bill, but it clearly applies to physical damage of furniture and fittings. Certain pets—notably dogs—can do considerable damage to furniture or fittings, especially when confined in accommodation without supervision. I suggest that the figures for costs quoted in the impact assessment of £12 per year for landlords and £7 per year for pet-owning tenants are far too low.
However, the negative effects of dogs and cats potentially go beyond physical damage. Of considerable consequence, and unconsidered by the Bill, is the contamination of housing with other allergens of pet origin and infestations, particularly of fleas. These may have considerable consequences for follow-on tenants and landlords. Flea infestation of dogs and cats is common, and it is a considerable problem in accommodation. There are now very effective products for dogs and cats to prevent and control fleas, but of course it is up to the owners to administer them appropriately.
Fitted carpets and central heating provide ideal habitats for fleas. Most of the flea life cycle is in the environment where the eggs, larvae and adults are. The adults can survive for some considerable time without feeding. In a property that is infested but has been left empty for some time, when a person goes in there, the fleas will pounce on them for a feed as well as any animal. Only this weekend, I was in the butchers in my village in Perthshire and I mentioned what we were doing today. He told me about his girlfriend’s experience with a cottage she rented in the village. The previous tenants had dogs and cats. She went into the empty cottage, turned on the central heating, and the place was hoaching—as we would say in Scotland—with fleas. They had to get rid of all the carpets, sand the wooden floors and varnish them.
Another direct witness experience came, while we were preparing this, from my researcher, who has friends who rent out a property in Canterbury. The tenants had done a runner and not paid, and when they went into the property it was highly infested. It took five fumigation attempts over four months by professional pest controllers to get rid of that infestation and cost the landlord nearly £1,000.
If insurance or a deposit arrangement can cover that, that is one thing. But my understanding is that insurance may be difficult to secure, particularly for insect infestation. I will leave this issue to noble Lords who are much more expert in this area than I am, including my noble friend Lord Kinnoull, but I suggest that this is an important issue to resolve. Surveys show that 40% of landlords are unwilling to accept tenants who own a pet. Problems such as this, unless resolved, may encourage more and more landlords to abandon the rented sector.
Finally, I ask the Minister: what assessment have His Majesty’s Government made of the likelihood of insurance provision or alternatives? Assistance dogs should be given special regard in the provisions of the Bill, so will His Majesty’s Government consider establishing a register of assistance dogs and keepers to enable them to be identifiable by landlords?
Baroness Thornhill (LD)
My Lords, I too congratulate the noble Lord, Lord Wilson, and the noble Baroness, Lady Brown, on their entry to the House. I really enjoyed both their speeches. I felt they were delivered with passion and with that which is always welcome in this House—humour. I thank the Minister, who has been very generous with her time in answering our many and varied queries.
This has been a very lengthy and informed debate, and at times somewhat heated. I was reminded—if I needed to be—that we are indeed a nation of pet lovers. Coming at this stage in the batting order and knowing that we all now really just want to hear the Minister’s responses to our very wide-ranging concerns, I have ruled out a lot of facts and details that noble Lords have diligently provided. I am aiming to be succinct, I hope, and not too repetitive.
First, I thank from our Benches the very many who have sent us briefings, particularly the Renters’ Reform Coalition—especially Generation Rent and Shelter. For the landlords—and let us be honest, the majority are good landlords—I thank the National Residential Landlords Association, Propertymark and LARG. They all welcome the Bill in different ways but see unintended consequences. We must explore these, and seek to remedy them and strengthen the Bill, which will be our task over the coming months.
As many have said, we too are pleased to receive the Bill. On the whole, there is much to be welcomed, such as the abolition of Section 21, which has been trailed so much and for so long that it is very much taken for granted. We do not accept the plea from landlords that we should wait until the courts are ready; they should be by now as they too have had ample notice. My question to the Minister is: are they ready?
That said, we do think there are other legitimate concerns from the landlords’ side, as was very well expressed by the noble Baroness, Lady Scott, in her detailed contribution. We will join that ride on the see-saw. In particular, we ask the Government for a timeline of the many and various aspects of the Bill to provide certainty, because that is what has been missed in all this. The sector—tenants and landlords—need certainty for all parties, so that we do not jeopardise the Bill’s key objectives in haste or unpreparedness.
It must be said, and has been said by several noble Lords, that a lack of supply of homes for social rent over decades has brought us to this crisis point. The noble Lord, Lord Best, outlined this particularly well. This has created an entire cohort of renters who would have previously been housed in social housing but are now struggling in the private rented sector. They can often be the most vulnerable and financially challenged, and in need of additional support. Our real concern is that despite the Bill they may well still be at the sharp end of renting, unable to access the rights enabled in the Bill and vulnerable to being threatened by the least scrupulous landlords—as was passionately and forcefully expressed by the noble Lord, Lord Cromwell. We also have concerns for these residents around eligibility checks and guarantors. We need the issues raised by landlords to be fully answered to protect these renters.
The Bill relies on tenants to challenge their landlord across a range of issues, not just regarding rent rises but on unfit properties and repairs, as we have heard. Of course, the Bill gives tenants more rights. We applaud that but doubt whether the residents about whom we are most concerned will have the means or the motivation to take advantage of the new rights. Can the Minister outline any changes that will be brought in, possibly in other ways, to support tenant advocacy, as is the case in the social rented sector? The noble Baroness, Lady Warwick, pointed out just how complex the current system is. It will deter even the hardiest tenant.
The Bill is clear that a database could be a great aid to tenants in this regard. We believe that it has the potential to be a game-changer, as outlined by my noble friend Lady Grender. We regret that the detail of its contents is to be left to secondary legislation. We seek for some clear criteria to be enshrined in the Bill to ensure that it really is fit for purpose. In particular, we would support failure to register on the database becoming a breach of duty which would count towards a rent repayment order. That would provide a real incentive to register, in addition to the heavy fines indicated in the Bill.
On renters repayment orders, we are pleased that the Bill introduces six more offences that constitute a breach, but we feel that this is somewhat neutered by the First-tier Tribunal’s powers. It appears that it must be satisfied beyond reasonable doubt that one of these offences has been committed, as this is the criminal standard of proof—it is a very high bar. I listened intently to the nuanced and detailed response of the noble and learned Lord, Lord Etherton, on this.
It is clear that every one of us is concerned about whether the measures in the Bill would lead to a drop in supply. It is strongly claimed by the landlord sector— I believe that evidence from Scotland has actually been mixed—but is contested by others, as there may be different reasons why some of the baby boomer owners have decided that they have had enough and want to sell up.
What is in no doubt is that there are legitimate concerns about the flight of landlords to more lucrative short-term lets, such as Airbnb. This concern is heightened in the Bill by the measure to abolish fixed-term tenancy, which, while a welcome measure for many, could have unintended consequences. Therefore, we feel that some provision for a review should be built into the Bill, no matter what it ends up being, because the rhetoric on both sides of this argument needs to be tested against reality. As the supply side is the crucial issue, can the Minister tell us when there will be a level playing field between both rental sectors, as the Airbnb side is far less regulated at present and there are no incentives to encourage landlords back? Several noble Lords will say that the Bill actually does the opposite.
The Liberal Democrats support build to rent. Supply of this and social homes is vital to climb slowly out of our housing crisis. We can no longer rely solely on the landlord owning between one and five properties, which has been the main market for decades, thus we will explore means to incentivise more build to rent. We also want to keep the smaller landlords in the game, and we should acknowledge that repossession of one’s property is a legitimate concern. They should be reassured that the grounds for repossession have been strengthened, but grounds 1A and 1B still remain a cause for concern. We believe that the threshold for sale and moving in a family member should be higher than at present, as this could still be a fig leaf for an illegal eviction—for once the tenant has moved out, who will in fact check that the house is sold or the family have moved in?
This leads us to the legitimate questions that have been raised by several noble Lords about the capacity and resource readiness of local councils and other agencies to deal with the Bill. Enforcement and the capability of enforcement are big issues; without effective enforcement, the Bill fails.
We were very pleased that the Government have been bold enough to extend the decent homes standard and Awaab’s law to the private rented sector. Many noble Lords supported this measure, but let us not underestimate it; it is not easy, having spoken to both landlords and tenants, to judge who is at fault. I feel that there is more debate to be had there, but we know in our hearts that the consequences can be fatal.
We are in no doubt that it will be a leap for many landlords who genuinely want to improve their properties, but it is a mountain to climb, as too many of our properties are non-decent—or is it indecent?—which is quite shocking for such a wealthy country. What we are concerned about is the reality shown to us by numerous case studies, including from Citizens Advice, that any property improvements resulting from public money have been shown to result in the landlord immediately asking for higher rent from the very tenant whose financial situation gave rise to the eligibility of the landlord to receive the grant and add value to their property in the first place. This cannot be right. We will look to explore this unfairness further in Committee.
We have heard from several noble Lords, and we were shocked to learn, that Ministry of Defence properties are exempt from the Bill. The argument has been put forcibly by others, but I will just say that our service families deserve, at the very least, the same as everyone else.
A key issue mentioned by several noble Lords—especially memorable was the contribution of the noble Baroness, Lady Lister—is the whole notion of affordability. We know that, in many parts of the country, rent is simply not affordable. My noble friend Lord Tope outlined the incredibly difficult situation in our capital city, but elsewhere too people are paying a far higher percentage of their income on simply putting a roof over their heads. This is not sustainable. The evidence and detail of this is irrefutable. We support the measures in the Bill to try to give some stability to rent increases, as many people are stretching themselves to the maximum to pay rent and the year-on-year increases implicit in the Bill—which do not keep up with wage increases and the cost of living—are simply unsustainable.
We are sceptical about how the First-tier Tribunal will work and the amount of work it may or may not end up with. We do not agree that its criteria to agree on a fair rent should be market rent, precisely because of the dearth of supply. We would like to work with the Minister to find a way forward on rent increases that is fair to both landlords and tenants.
Although we are not as pessimistic as some, we are not without a degree of scepticism about the unintended consequences of the Bill and whether the see-saw is balanced or broken. But we will work constructively to get it over the line.
Lord Jamieson (Con)
My Lords, I declare my interest as set out in the register, particularly being a councillor in Central Bedfordshire. As a fellow north-easterner, I congratulate the noble Lord, Lord Wilson of Sedgefield, on his excellent maiden speech, and also on his mother’s impending 100th birthday. I also congratulate the noble Baroness, Lady Brown of Silvertown, on her passionate maiden speech. I share her concerns for children. I also thank the Minister for the time that she has given noble Lords to explain the Bill. I thank the many groups and people who have written to us and sent us submissions on the Bill.
We all want everyone to have a safe, secure and affordable home. The question is whether this Bill will deliver this or whether it risks undermining a key housing sector to the detriment of landlords and tenants alike. The Minister has argued that the Government have no choice but to introduce this Bill to reform the private rented sector. However, this assertion does not hold up under scrutiny.
While the Renters (Reform) Bill was originally conceived by the previous Conservative Government to address long-standing issues in the private rented sector, in its current form the Bill risks doing more harm than good. Comparing this Bill with its predecessor, the Renters (Reform) Bill in 2023-24, we see some striking differences. The changes proposed by the current Government threaten to destabilise the private rented sector. This is a sector that has seen remarkable growth in recent years, now housing nearly 19% of all households —some 4.6 million people.
Rather than providing the stability renters need, this Bill risks exacerbating the very problems it seeks to resolve. According to Scotland's Housing Network, 16% of landlords are scaling back their supply, and 12% are considering leaving the sector altogether. Scotland shows that the overregulation proposed here has pushed landlords out of the market, reducing housing supply and leaving renters in a worse position, with the highest rent increases in the UK. While these reforms are meant to protect tenants, they threaten to leave them with fewer choices and higher costs.
The Renters’ Rights Bill has been said by many in this Chamber—including the noble Lords, Lord Best, Lord Thurlow and Lord Truscott—to risk introducing a series of provisions that are set to significantly disrupt the private rented sector. It is a well-established fact that private landlords, when faced with increased regulation, often choose to exit the market. This is not just speculation: research from the National Residential Landlords Association in 2023 revealed that one in four landlords were considering selling at least one of their properties due to increased regulation, with many citing the Renters (Reform) Bill as a major factor. According to the English Private Landlord Survey 2024, 31% of landlords planned to decrease the number of properties or sell them altogether, compared to 16% in 2018.
Get Living, a significant player in the build-to-rent sector, has expressed serious concerns about how these changes could undermine long-term investment in rental homes. Savills, Hamptons, Zoopla and others warn that the provisions in the Bill could exacerbate the housing crisis. This is a concerning trend that will directly impact housing availability. As more landlords leave the market, there will be fewer rental homes, and it will be tenants who feel the effects of this most acutely. Moreover, by reducing investment in the rental sector, these reforms could also undermine the Government’s targets for housebuilding.
The previous Conservative Government worked hard to increase housing stock, delivering 2.5 million homes between 2010 and 2024, with 1 million of these delivered during the last Parliament. If the proposed changes in this Bill push landlords out of the market, it will risk reversing the progress on housing delivery.
Further data from Oxford Economics paints a grim picture: only one in eight renters can afford to purchase a home in their area. For many, the private rented sector is the only viable option, but these new regulations are forcing landlords to sell their properties, tightening an already overstretched market. Will the Minister explain why this Bill seems to accelerate the exodus of landlords from the market? What steps do the Government intend to take to reverse this damaging trend?
An issue that has been raised by many noble Lords is Section 21 and its impact on the courts system. I was particularly struck by the words of the noble and learned Lord, Lord Etherton, and the noble Earl, Lord Kinnoull. The previous Conservative Government were clear in their approach: any abolition of Section 21 would come only after significant reform of HM Courts & Tribunals Service. This would have ensured that the court system was ready and able to process cases efficiently and fairly. Unfortunately, the Bill abandons that commitment, rushing forward with the abolition of Section 21 without first addressing the ongoing strain in our courts.
Our court system is already under immense strain. Landlords are facing significant delays when seeking possession of a property, and these delays would only worsen with the proposed changes to Section 21. The First-tier Tribunal is already overwhelmed with challenges related to rent increases; currently, it can take up to 10 weeks for the tribunal to make a decision. Introducing additional cases to this already overburdened system risks further delays, which would ultimately harm both tenants and landlords alike.
Moreover, the legislation includes provisions enabling tenants to challenge rent increases more easily. While the right to challenge unjust rent hikes is important, the process outlined in the Bill could overwhelm our already stretched court system. As highlighted by my noble friends Lady Eaton and Lord Northbrook, a system that allows all rent increases to be appealed with no downside risks flooding the court system. How will the First-tier Tribunal manage the added burden of rent appeals, when it is already struggling with its current case load?
The abolition of Section 21 repossessions means that responsible landlords will be forced to rely on the courts to process legitimate possession cases. However, as the Housing Minister himself admitted in the Bill Committee in the other place, the UK court system is “on its knees”. While the Minister correctly argues that “court readiness” is essential to the successful operation of the new system, which I assume refers to the abolition of Section 21 and the resulting shift in the equilibrium of the renters’ market, His Majesty’s Government have yet to clarify what “court readiness” truly means in practical terms. What resources will be allocated to ensure that the courts are properly equipped for these reforms? The Law Society has rightly warned that
“without investment in housing legal aid and the courts, the Bill will not achieve its aims”.
Student lets have been raised by many noble Lords. The Bill exempts purpose-built student accommodation from the requirement to end fixed-term tenancies, a provision that we agree with. However, this exemption will not apply to other forms of student accommodation, such as private rental properties where second- and third-year undergraduate students typically reside. This Government have abandoned our commitment to sufficiently carve out student accommodation, where it is essential that both landlords and tenants have the certainty of fixed-term contracts to plan for subsequent years. What about master’s and PhD students, who often require longer-term accommodation, typically in smaller, privately rented properties? According to data from accommodationforstudents.com, one- and two-bedroom properties make up one-third of all student housing. The provisions for purpose-built student accommodation should be extended to include all student properties, ensuring the smooth operation of the entire student housing market and protecting the annual cycle of student rentals.
In conclusion, the need for more homes in the private rented sector is urgent. Savills estimates that, by 2031, we will need as many as 1 million additional homes for private rent to keep up with rising demand. How, then, can we afford to risk policies that may drive landlords out of the market and make this shortage even worse? As the noble Earl, Lord Lytton, said, how do we strike the right balance between protecting tenants and maintaining a healthy rental market that supports investment and meets the needs of renters across the country? It is crucial that the Government listen to the voices of landlords, housing experts and tenants who have raised concerns about the impact of the Bill, and we intend to table amendments that address some of the most pressing concerns. Ultimately, we must ensure that the policies we put in place strengthen, not weaken, the system that provides homes for renters, while also supporting landlords, who are crucial to meeting the nation’s housing needs. The future of our rental market depends on striking that balance.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank all noble Lords for their excellent contributions. It has been a very interesting and thoughtful debate, and it has been a pleasure to listen to the contributions with the expertise that we have around the House. At times, I felt a bit like Doctor Dolittle, as the debates ranged from fleas, to parrots, to packs of Alsatians— I will come on to pets in a moment.
First, I congratulate my noble friends Lord Wilson of Sedgefield and Lady Brown of Silvertown on their outstanding maiden speeches. The noble Lord, Lord Wilson, made very moving references to the history of our industrial heritage and his own family’s part in that. I congratulate him on his new grandchild and wish his mum a happy 100th birthday.
I was very pleased to hear about the East End heritage of the noble Baroness, Lady Brown. That is where my own family came from, with my dad’s family growing up in Bethnal Green and then Walthamstow, in Highams Park where I spent a great deal of my childhood with my granny. I welcome both noble Lords to the House; we all very much look forward to working with them. All three of us are examples of the social mobility which should be everyone’s opportunity, not just in our country but, as the noble Baroness, Lady Brown, pointed out, across the world. Safe, secure, affordable housing is part of that social mobility, so it is very appropriate for today’s debate.
I will endeavour to respond to all the points raised by noble Lords. There was a great deal raised in the debate, so, if I miss anything, I will of course write to noble Lords afterwards. We can also have many further discussions in Committee on these points.
Before I get on to those specific points, as others have said, it is a bit disappointing, bearing in mind that this builds on the Bill brought by the previous Government, that the Conservatives voted against this Bill in the Commons. To the remarks of the noble Lord, Lord Howard, about my Government’s competency on housing, I hope he was listening to what many other Peers said about the housing crisis, because it is his party that has presided over that, not mine.
I will go into some more detail on the Bill and the points that noble Lords have made. There were some very important issues raised, to which we will give much further consideration in Committee. Abolishing Section 21 was mentioned by many noble Lords, but by the noble Baronesses, Lady Scott and Lady Thornhill, and the noble Lord, Lord Cromwell, in particular. It is one of the Government’s most pressing objectives to remove Section 21 from the statute book as soon as possible. The new tenancy system for the private rented sector will be introduced in one stage. At this point, it will apply to all private rented tenancies and existing tenancies will convert to the new system, including those that currently have a fixed term. New tenancies signed after the date will also be governed by the new rules: thereafter, no private landlord will be able to serve a new Section 21 notice. This single date will prevent a confusing two-tier system and give all tenants security in their homes immediately.
As the noble Baroness, Lady Thornhill, said, I am very grateful for all the briefings we have received on this and to all those organisations that have campaigned so hard and for so long on behalf of both landlords and tenants. I reassure noble Lords that we will work closely with all parts of the sector, including the courts, to ensure a smooth transition to the new system, and we will provide sufficient notice ahead of implementation.
The noble Baronesses, Lady Eaton and Lady Thornhill, and the noble Lords, Lord Howard, Lord Cromwell and Lord Marlesford, made points about the abolition of fixed terms. I understand the concerns about that but, as I made clear in my opening speech, this is a core principle of the Bill and a change this Government believe is fundamental to providing security of tenure. It was also the policy of the last Government and stands as a core foundation of our tenancy regime. We just do not accept that fixed terms offer the best structure for renters. They oblige them to pay rent regardless of the standard of the property or whether it is best for their circumstances, and they restrict renters’ freedom to move if they need to.
These changes do not pose any threat to good landlords who operate fairly and comply with the rules. Tenants do not move house unless they absolutely have to, because of the cost and upheaval. If they leave, they will be required to provide two months’ notice, giving landlords time to find new tenants. We are not prepared to lock tenants in for longer, which would prevent them leaving properties with dangerous hazards or even in situations of domestic abuse.
Several noble Lords—I will go through the list, as there was quite a lot of them—mentioned the potential impact of these reforms on supply in the private rented sector. They include the noble Lord, Lord Best, who was a bit more positive about this, as well as the noble Baronesses, Lady Scott and Lady Thornhill, the noble Lords, Lord Willetts, Lord Shipley, Lord Thurlow, Lord Carter, Lord Howard, Lord Cromwell, Lord Northbrook and Lord Jamieson, the noble and learned Lord, Lord Etherton, and the noble Earl, Lord Lytton. I understand the concerns about supply; we have considered it very carefully. While we understand that the new system may spark a period of adaptation, we do not believe that the reforms will lead to the sort of landlord exodus that some have mooted. The sector has doubled in size since the early 2000s, and there is no evidence of an exodus since the reform has been put on the table. In addition, the recent 2023-24 English Housing Survey indicated that the size of the PRS has remained broadly stable since 2013-14.
Our proposals will make sure that landlords have the confidence and support they need to continue to invest and operate in the sector. The noble Lord, Lord Best, made some good points about the potential for PRS properties to return to social housing; I would like to think that that might be the case, but we will wait to see whether that happens. Some local authorities are already starting to buy up private property that comes on the market.
Noble Lords raised the issue of the affordability of properties, including my noble friend Lady Lister—who made a very powerful intervention, and I am grateful to her for that—the noble Lords, Lord Truscott and Lord Desai, and the noble Baronesses, Lady Thornhill and Lady Janke. We recognise the affordability pressures faced by those living in the private rented sector. The Renters’ Rights Bill works to strengthen tenants’ rights as a whole. Stronger powers to challenge excessive rent hikes complement the increase in security through the abolition of Section 21 evictions. Tenants will no longer be too frightened of eviction to challenge bad behaviour. The Bill takes practical steps to help renters, by ending unfair bidding wars, preventing landlords demanding large amounts of rent in advance, and tackling rental discrimination. We hope that that will help.
My noble friend Lady Lister raised the issue of local housing allowances. To deliver our commitment to build more affordable homes, we have had to take some difficult decisions to address the challenging fiscal context. The Government currently spend around £30 billion annually on housing support, and the April 2024 one-year local housing allowance increase will cost an additional £1.2 billion in 2024-25 and approximately £7 billion over five years. However, we will keep this under review and continue to look at it.
The noble Baroness, Lady Scott, and the noble Lords, Lord Truscott, Lord Marlesford, Lord Northbrook and Lord Jamieson, the noble Earl, Lord Kinnoull, and others raised concerns about the strain on the court system. It is a serious concern, and we take it seriously. We do not believe that it is appropriate to tie in the implementation date of these urgently needed reforms to what could be a subjective assessment of court readiness. I reassure your Lordships that we are working very closely with the Ministry of Justice to assess the impacts of our legislation on the courts and tribunals, and to ensure that the justice system is prepared for the implementation of the Bill more generally. Our discussions with the MoJ cover a range of options for managing the impact of these and our other housing reforms, including mitigations to help avoid disputes arising in the first place, thereby keeping away some of this from the courts, and to manage the risks that are associated.
After my many years in local government, I was not at all surprised that noble Lords raised the issue of local government resourcing. The noble Baronesses, Lady Eaton and Lady Thornhill, and the noble Lords, Lord Tope and Lord Davies, rightly pointed out that strengthening the enforcement framework will count for little if local authorities do not have the resources to act. Some local authorities already enforce effectively, but we acknowledge the resourcing challenges that many authorities face.
It should be noted that local authorities will not need to enforce the full set of reforms until later down the line, as measures in the Bill do not all happen at the same time. In the first instance, we want to pursue a “polluter pays” approach, which will see bad landlords meet the costs of the enforcement against them. We are supporting that by extending and increasing civil penalties, which will be ring-fenced for that enforcement. However, I accept that more must be done. In accordance with the new burdens doctrine—I think that the noble Lord, Lord Tope, asked about that—we will ensure that additional asks on local authorities as a result of our reforms are fully funded. We will look hard at how best we can further boost capacity and capability, to create that sustainable funding system over the longer term.
A number of noble Lords raised issues around extending the provisions in the Bill. The noble Baronesses, Lady Grender and Lady Thornhill, particularly referred to MoD accommodation, although I think other noble Lords raised this as well. The Government strongly agree that we should allow dedicated military personnel and their families safe and decent homes. However, bringing that accommodation within the scope of the Bill is not the right way to achieve that. The decent homes standard is already used by the MoD as a benchmark for service family accommodation. It has a policy that no homes fall below the decent homes standard and, if they do fall below this level during occupation, works are undertaken to restore them to the minimum standard.
The MoD has developed its own higher defence decent homes plus standard, its target standard for all service family accommodation, and MoD Ministers are committed to reviewing that target standard as part of the new military housing strategy for service accommodation, with the aim of improving the standard of service family accommodation across the estate. This is in line with the recommendations of the Kerslake review, which was mentioned by noble Lords, and the House of Commons Defence Committee’s recommendations in its report into service accommodation, which was published at the end of last year. The MoD will provide further information on this review early in this year.
On the extension to Home Office accommodation mentioned by the right reverend Prelate the Bishop of Lincoln, the noble Baroness, Lady Lister, and the noble Lords, Lord Tope and Lord Davies, the contracts the Home Office has with providers of asylum accommodation should already require it to meet the decent homes standard. I have heard the messages from noble Lords and I will have further negotiations and discussions with colleagues in the Home Office about that. I have also seen the briefing by London Councils and, again, I will discuss that with Home Office colleagues. On temporary and emergency accommodation, we need to think about that and I will come back to that in Committee, if that is okay.
I thank the noble Lord, Lord Cashman, for his persistence in raising the issues of houseboat owners and residents. We recognise that the occupants of residential boats have the benefit of protection under the Protection from Eviction Act and wider consumer protection legislation, but they do not enjoy the same level of tenure security as those in the private rented sector. This Bill is focused on reforming the assured tenancy regime. Houseboat owners fall outside the scope of the assured tenancy regime, but we will consider what further action might be necessary to provide house- boat owners with greater security in their homes.
I move on to pets for a moment and some very interesting contributions on this subject from the noble Lords, Lord Trees, Lord Carter and Lord Black, the noble Baroness, Lady Fookes, and other noble Lords. I say to the noble Baroness, Lady Fookes, that I am very happy to have a meeting with her. The guidance may come from the outcomes of the appeals and our consideration as we go through Committee, but I thank her for her contribution. Very little can be done to evoke the same sense of joy, as the noble Lord, Lord Black, outlined, as a beloved family pet. We do not believe that experience should be denied to those who are not able to own their own home and, for this reason, we are introducing the right. There are reasonable limitations to that, but these measures will end the choice between having a pet or a rented home and ensure that everyone in England can benefit from the great companionship that having a pet brings.
I hope we can continue to work with the noble Earl, Lord Kinnoull, on the insurance issues. They were also raised by the noble Baroness, Lady Scott, and by the noble Lords, Lord de Clifford and Lord Trees. Landlords will be able to charge reasonable costs of insurance. We listen to the concerns that insurance products will not be available to cover the risks of pets, but there is currently a reduced demand for landlord pet insurance as many landlords simply refuse to allow pets. So we hope the market will respond to the increased demand for these products. To the noble Lord, Lord Trees, I say that I will take up his point about assistance dogs—that is an issue,
I think we have covered pets. On the issues around students, which many noble Lords have raised, we have introduced a new ground specific to the so-called typical students: those living in shared houses who sign up each year. This will preserve the annual cycle of student housing. I understand the issues raised by noble Lords and no doubt we will come back to this in Committee, but we must be very careful not to leave a loophole here. We do not intend this to capture every student—far from it. For example, I do not think that it is right for a parent who lives alone with their children to be evicted just because they are studying at university. Those tenants should have the same security as everyone else. To the noble Baroness, Lady Scott, my noble friend Lady Warwick and the noble Lords, Lord Willetts and Lord Shipley, we can discuss this further, but we need to proceed with caution here.
A number of noble Lords spoke about ground 4A being too narrow. The Government recognise the impact that the new tenancy system will have. While we believe the ground covers of the majority of the market, there is not a one-size-fits-all solution. We think it is reasonable that the ground will apply to full-time students in larger house-share situations. Students studying part-time alongside work or who live in smaller properties should enjoy the same security as other tenants.
The noble Baronesses, Lady Eaton and Lady Janke, and the noble Lords, Lord Northbrook and Lord Marlesford, raised rent increases. The Government are clear that this will stop a minority of rogue landlords who try to use rent increases as a means of back-door eviction. Measures in the Bill will ensure that this does not happen. All rent increases will take place via the Section 13 process, so the tenant can challenge them if necessary. That is really important in giving tenants the assurance that they need. We will allow only one rent increase per year and will increase the required notice to give tenants longer to prepare for rent increases.
The noble Lords, Lord Shipley, Lord Howard and Lord Inglewood, all raised the issue of rent appeals. We will give tenants greater confidence to challenge unfair rent increases at the First-tier Tribunal by ensuring that the tenant will not pay more than the landlord originally asked for, following a tribunal determination. We are going further. We will end the practice of backdating rent increases, to prevent tenants being thrust into debt. To protect the most vulnerable tenants, in cases of undue hardship the tribunal will be able to delay the start of the rent increase for up to two months. Taken together, these measures ensure that tenants have a right of appeal, and prevent rent increases being used as a back-door route to eviction.
The noble Baronesses, Lady Grender, Lady Jones and Lady Janke, and my noble friends Lady Lister and Lord Davies spoke passionately about rent controls. This is an important topic for me to clarify. The Government have no plans to implement rent controls. Doing so may hinder rather than help the market. The evidence strongly suggests that controls would have a long-term negative impact on housing supply, discouraging investment and leading to declining property standards. Heavy-handed controls tend to mean higher rents at the start of a tenancy and can make it harder for tenants to find a home. They also encourage the growth of unregulated subletting, as seen in countries such as Sweden, where rent controls have been introduced. These can leave the most vulnerable tenants exposed to even higher costs and minimal protections. That is not to say that the Government do not care deeply about affordability. We are helping with the practical steps of ending bidding wars, prohibiting requests for large amounts of upfront rent and empowering tenants to challenge unreasonable rent increases.
Noble Lords have suggested that the rent-in-advance provisions will make it harder for some tenants to access the private rented sector. We have heard the arguments that requesting large amounts of rent in advance can give landlords the confidence to let. However, for the majority of renters, who do not have access to large cash reserves, these requests are simply too big a price to pay. In terms of guarantors, landlords and agents will have the final say on who they let their property to.
We are clear that landlords should consider a tenant’s individual circumstances when negotiating the rental. They are free to agree rental conditions within the law that best enable a sustainable tenancy. Landlords will be able to continue to take a holding deposit of up to one week’s rent and a tenancy deposit of five or six weeks’ rent.
I see my time is drawing to a close, so I am going to conclude my remarks. I knew I would not get through all the issues, but I will respond in writing to all noble Peers who have taken part in the debate to answer the other questions. I reiterate my thanks to your Lordships for engagement with the Bill to this point. As the Bill progresses, I am very happy to accommodate any request from noble Lords for additional briefings, wherever possible and helpful.
The Renters’ Rights Bill honours our Government’s manifesto commitment to overhaul the regulation of the private rented sector. I believe these reforms take great strides in empowering tenants, giving them greater security and stopping them from being exploited. Landlords will also be supported, and rogue operators who tarnish the reputation of the good ones will be driven out. It is important to reiterate that the intention is not to demonise landlords or tenants; they both want stable tenancies with well-maintained properties and regular rent payments. I look forward very much to working with your Lordships during the passage of this important Bill, and I commend the Bill to the House.
Baroness Taylor of Stevenage
That the Bill be committed to a Committee of the Whole House, and that it be an instruction to the Committee of the Whole House that they consider the Bill in the following order: Clauses 1 to 4, Schedule 1, Clauses 5 to 31, Schedule 2, Clauses 32 to 74, Schedule 3, Clauses 75 to 101, Schedule 4, Clause 102, Schedule 5, Clauses 103 to 146, Schedule 6, Clauses 147 to 149, Title.