Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018

Debate between Lord Best and Lord Shipley

Wednesday 13th June 2018 Lords Chamber

[Lord Best (CB)]

My Lords, I declare my relevant interests as in the register. I commend the Government’s two sets of regulations, which will make it compulsory for anyone who wants to operate a lettings agency to have client money protection insurance that is effective and not just a sham.

I felt unable to speak on this subject in this Chamber when the noble Baroness, Lady Hayter, pursued it so successfully, as I was then the remunerated chair of the Property Ombudsman, which was involved in this debate. However, I retired from that role last year and can now say what I think without any conflicts of interest.

Compulsory insurance sounds a dull technical matter of little interest, except to the landlords whose money is held by agents—mostly the rental payments due to the landlord later—who should now be better protected. However, the benefits of these measures go much deeper than simply covering a loss to a landlord if their agent disappears or goes out of business. These regulations will remove altogether from the lettings industry all those often small-time and sometimes pretty dubious property agents from whom not just landlords but tenants need to be protected.

In the absence of regulation, anyone can set up as a property agent. At present, no qualifications or training or financial resources are needed. The requirement to belong to a compulsory client money protection scheme will weed out all those firms, often comprising a single individual, that insurance companies assess as too risky to insure. Those are the men or persons of straw, who have no expertise and may even have a criminal record. Removing the less desirable elements from the still somewhat fledgling lettings industry is a necessary precursor to the forthcoming agents’ fees ban—the planned ban on the phenomenon of agents charging fees to tenants as well as landlords. This important ban is the next item on the list of measures to clean up the world of private lettings. It will often be the least reputable agents who have been making their money by persuading landlords to use their services by undercutting the fees that they ask of landlords and, instead, squeezing the tenant, who has no choice in the matter. The CMP regulations will make the fees ban more successful by removing in advance all those agents who are unable to get the obligatory CMP insurance.

My question to the Minister is about enforcement. We know that the problem with all aspects of regulation for the private rented sector is that trading standards officers and, in other contexts, environmental health officers, are not geared up to enforcing further regulations. Budgets for the work of these officers have been massively reduced as part of the wider cuts to local government spending. What steps is the Ministry of Housing, Communities and Local Government taking to ensure the additional enforcement that these regulations—and others covering property agents already enacted or yet to come—will require? Is it expected that the opportunity to retain the money from civil penalties will provide enough finance to cover the extra enforcement costs? While I wholly support the CMP regulations before us, it would be helpful to have reassurance that their effectiveness will not be undermined or blunted by an absence of resources for their all-important enforcement.

[Lord Shipley (LD)]

My Lords, I should declare my vice-presidency of the Local Government Association. I agree entirely with what the noble Lord, Lord Best, said, and in particular that we need to clean up the world of private lettings. As he rightly pointed out, this is one measure among a number that the Government are introducing and they are entirely welcome.

I welcome this draft statutory instrument. It has been a while in its gestation and of course it will be a further nine months, understandably so, before it finally comes into force. It is a very welcome addition to the measures to protect private tenants and landlords that the Government have been introducing. Client money protection schemes are an essential element of consumer protection, be the consumers tenants or landlords. We have to remember that some 4.7 million households are in the private rented sector, and the protection given to tenants and landlords alike means that all parties can have confidence that their money is secure. It is important to remember the scale of the sums of money involved: letting agents currently hold around £2.7 billion in client funds. Today, some 60% of lettings agents are members of a scheme when it is not mandatory to be so, which suggests that the behaviour of many lettings agents need not be a cause for concern. It is with the other 40% that there is a potential for problems, and this scheme will certainly help to extend the required consumer protection.

Like the Minister, I recognise the excellent work undertaken by the noble Baroness, Lady Hayter, and my noble friend Lord Palmer of Childs Hill, who co-chaired a working group to assess how a scheme might work. This statutory instrument is much the better for their work. Their conclusion that a mandatory scheme is needed if money is to be handled is the right one.

This takes me to the same issue that the noble Lord, Lord Best, has addressed of local authority enforcement. Local authorities will be responsible for enforcement, as they are for the enforcement of many similar reforms being or shortly to be introduced by the Government. Might the Government examine ways of improving publicity around this statutory instrument? Non-compliance can bring a civil penalty of up to £30,000, which can be retained by a local authority. Therefore, there should be no financial or resource reason for local authorities failing to undertake proper enforcement —except that there is, I think, an impediment to enforcement relating to a lack of understanding of the powers under the law by council officers. I am trying to be very specific about this issue: enforcement will work only if the officers undertaking that enforcement understand what their powers are and have the confidence to undertake them. I wonder whether the Government, perhaps in conjunction with the Local Government Association, might consider ways in which knowledge of the law can be spread further. In the end, Parliament may pass legislation that then fails to be implemented as it might be but, given the extent of the private rented sector these days, it is clearly important that government legislation is implemented. The test of the success of this statutory instrument will be on local authorities taking up the powers that they have, which could well be self-financing.

Homelessness Reduction Bill

Debate between Lord Best and Lord Shipley

Order of Commitment discharged (Hansard): House of Lords
Friday 10th March 2017 Lords Chamber

[Lord Beecham (Lab)]

My Lords, I shall be uncharacteristically brief at this late stage. I congratulate the noble Lord and the Government on proceeding with the Bill. It is very welcome. However, I hope that the noble Lord will take the opportunity after the Bill passes, which undoubtedly it will, to raise a couple of points with the Government—not immediately, perhaps. The Delegated Powers Committee published a report this week which, at paragraph 18, on the code of practice, raises a point about the method of revising the codes. I am not expecting any kind of formal response today, but perhaps the noble Lord will look at that. Perhaps he can also, in a relatively short time, invite the Government to say how they are going to approach reviewing the £61 million funding in the light of the possible increase in homelessness arising from the housing benefit issue which has been so controversial this week. I am not expecting the Minister or the noble Lord, Lord Best, to reply today, but those two points should be looked at in the next period.

[Lord Shipley (LD)]

I add our thanks to the noble Lord, Lord Best, for all his work on the Bill, which has been appreciated within Parliament and outside it. It shows that the amount of work done prior to the presentation of a Bill in the other place and here reaps rewards, because the Bill is very sound. I pay tribute to the work done on this by the noble Lord, Lord Best, which has got us to the position we are now in.

[Lord Best]

I thank noble Lords for their kind remarks. Bob Blackman MP in the House of Commons deserves the real credit for this Bill. I certainly undertake to speak with the Minister about the point raised by the noble Lord, Lord Beecham. The review of whether the sum allocated to fund the Homelessness Reduction Bill is sufficient will happen after the end of the first year of operation and will finish before the end of the second year, so that before two years are up we will know whether enough money has been made available to really bring about the reduction in homelessness. If insufficient funds have been available, I shall be the first to say so. I beg to move that the order of commitment be discharged.

Renters’ Rights Bill [HL]

Debate between Lord Best and Lord Shipley

Committee: 1st sitting (Hansard): House of Lords
Friday 18th November 2016 Lords Chamber

[Lord Shipley (LD)]

My Lords, I extend strong support to my noble friend Lady Grender for this amendment and for her Bill as a whole. This amendment really matters, given the current state of housing supply. It was reported this week that in the last five years, local government spent £3.5 billion on temporary accommodation for homeless people. I declare my interest as vice-president of the Local Government Association. The main reason for that spending is the cost of accommodation. One of the contributors to it for individuals is the up-front costs they have to pay, which in very many cases have become too high. This creates a barrier to people moving into a home.

As my noble friend pointed out, because tenants in the private rented sector tend to move more frequently than in the public social housing sector, the costs can be more frequent and become increasingly unaffordable. Removing the up-front cost from the tenant is the right thing to do and I hope that whatever happens to this Private Member’s Bill, the Government will take on board how serious this issue has become. I understand there is to be a housing supply White Paper some time after the Autumn Statement next week. Whether that comes in December or January—perhaps the Minister can help us with that—who funds what in the private rented sector has to be addressed, and for that reason my noble friend Lady Grender has our full support.

[Lord Best (CB)]

My Lords, I thank the noble Baroness, Lady Grender, for her work on the Bill, which highlights a number of key issues affecting the private rented sector. She introduced her amendment with one or two rather broader points about the private rented sector, which enables me as well to say something of a slightly broader nature.

At present, there is a real fear that as shorthold assured tenancies within the private rented sector, to which the noble Baroness referred, gradually terminate, tenants in receipt of housing benefit or universal credit will be rejected by landlords who will find a gap between the amount the tenant can pay using their housing benefit or universal credit and the market rent which the landlord can easily obtain. While that gap exists, landlords will want to see tenants currently in receipt of housing benefit or who in future will be on universal credit out of their accommodation. This is not simply cruelty; this is the market. It will be unwise for a landlord to continue to let to people who have a big shortfall between the amount they receive to pay their rent and the actual rent they are being asked to pay. Even generous landlords who are prepared to go half way will still find that they are in a very uncomfortable position if they know that the people from whom they are asking the rent do not have the money to pay it. They know that there will be trouble over time, so how much better to take a couple, both working, who can afford the rent?

I see a position in which, gradually over a period, virtually all those in high-pressure areas such as London who are currently letting to tenants on housing benefit will wish to see those assured shorthold tenancies terminated, so those tenants will be outside the private rented sector. Sadly, I fear that the social housing sector will find it very difficult to cope with the pressure that that will bring as all those tenants are shed. We are sure to see homelessness grow. I am indulging in some broader comments before addressing some aspects of Amendment 1.

I declare my interest as chair of the Property Ombudsman Council as well as my other interests as set out in the register. I fear that chairing the ombudsman service, which looks after complaints about agents and therefore about fees and the transparency issue that is being debated, prohibits me from using this platform to comment today.

I shall draw attention to one way in which this issue may be taken forward, if the Government feel unable to accept Amendment 1 today. I am leaning on the precedent created by the noble Baroness, Lady Hayter, who, during the passage of the Housing and Planning Bill pressed for an amendment that would place a requirement on managing and letting agents to take out client money protection insurance—this being a proxy for being a respectable body in many cases. Her amendment to place a requirement on agents was not accepted in the context of the Housing and Planning Act 2016, but the Government agreed to take the issue away and create a working group to look in depth at the issue. I suggest that if the Government feel unable to accept Amendment 1, they might think that that excellent precedent, which has now been brought to fruition with DCLG civil servants hard at work looking at these issues under the chairmanship of the noble Baroness, Lady Hayter, might be repeated in this context—in which case I hope very much that the noble Baroness, Lady Grender, could play a leading role in such a working group and I ask the Minister to consider it.

Housing and Planning Bill

Debate between Lord Best and Lord Shipley

Wednesday 20th April 2016 Lords Chamber

[Lord Best (CB)]

My Lords, I support this amendment, to which I spoke at greater length in Committee. I shall summarise my earlier points. This proposal for a parish council or neighbourhood to be able to appeal against a planning approval that cuts across an emerging neighbourhood plan was raised in the other place by Nick Herbert MP, with support from Sir Oliver Heald MP and Andrew Bingham MP, all Conservative Members, whose views were shared by Dr Roberta Blackman-Woods MP for the Opposition. Mr Nick Herbert said,

“speculative developers try to get in applications ahead of the completion of neighbourhood plans or even after they have been completed … either they are upheld by the local authority, which is fearful of losing an appeal, or the developer makes an appeal that is upheld by the planning inspector. The development is then allowed to go ahead”.

This totally undermines all the hard work of the volunteers who have spent endless hours gaining support for the neighbourhood plan before, to quote Sir Oliver Heald, it is,

“trashed by an application by a speculative developer ”.—[Official Report, Commons, 5/1/16; col. 222.]

This is a deficiency in the otherwise sensible arrangements for neighbourhood forums and plans which were devised and introduced by Greg Clark, now the Secretary of State for Communities and Local Government.

I have declared my interest in the excellent neighbourhood plan for the Cerne Valley in Dorset, where I own some land within the area covered by the plan. I followed the progress of the local volunteers who brought together this neighbourhood plan from the summer of 2011 until its approval in a public referendum on the plan in January 2015. The nerve-racking hazard facing all the local people involved was that their hard work was at risk from a developer putting in an application which in no way accorded with the emerging neighbourhood plan. Had this happened, neither the parish council or the neighbourhood forum would have had any way of appealing and the council itself would not have been able to use the neighbourhood plan to determine the planning application until the referendum on it was done and dusted. For all the 1,800 neighbourhood forums currently preparing neighbourhood plans, and all those to come— the noble Baroness, Lady Parminter, tells us that 9,000 could come down this route, and I hope there will be many more—this amendment would overcome the problem.

If the Minister wanted to modify this amendment so that the neighbourhood right of appeal applied only once the emerging neighbourhood plan had reached a later point in its progress—as was suggested earlier by some noble Lords—I feel sure that this would be acceptable to the proposers. I hope that the Minister will indicate a move in this direction. I support this amendment.

[Lord Shipley (LD)]

My Lords, I support this amendment. Noble Lords may recall that we had two different amendments in Committee. Although they were different, they had a very similar intent. We now have one amendment supported by the National Association of Local Councils and Civic Voice. I hope that the Minister will understand the importance of this, because if we are to encourage groups, parish councils and neighbourhood forums to create neighbourhood plans, they have to feel that the effort being put in is worth while.

As we have heard, neighbourhood planning is growing in strength. However, missing from the statutory powers of those bodies with neighbourhood plans is that right of appeal for a neighbourhood planning body against the granting of a planning permission by a local authority which conflicts with that neighbourhood plan, whether it is in place or well on the way to being approved. Of course, as Amendment 102ZA makes clear, the right of appeal would apply only in relation to housing.

We have heard that this amendment has broad cross-party support. I hope that the Government will understand the need to support it as the power to overrule a neighbourhood plan would be a serious disincentive to all those bodies—up to 9,000, apparently —that are considering introducing neighbourhood plans, given that only a little over 100 have actually been put in place.

The amendment is limited to the powers of a parish council or a neighbourhood forum. As such, I agree entirely with what previous noble Lords have said—namely, that this is a reasonable proposal. If we want to give a boost to neighbourhood planning, it should be supported by the Government.

Growth and Infrastructure Bill

Debate between Lord Best and Lord Shipley

Wednesday 27th February 2013 Lords Chamber

[Lord Best]

My Lords, I have added my name to Amendment 22, which was prepared by the Local Government Association. I am grateful to the noble Lord, Lord McKenzie, for introducing this amendment and explaining its purpose and value. My overarching concern is that the intention of Clause 6, which is to see stalled development up and running swiftly, will not materialise without substantial changes to this clause. Indeed, the knowledge that central government may overrule legal agreements between local government and house builders may encourage exactly the wrong response from some elements in the housebuilding industry, and this measure could backfire.

The Clause 6 procedure offers relief for house builders where they have paid too much for a site and now wish to be excused from their obligations to provide affordable housing. Amendment 22 would mean that only agreements already made could be addressed by going down this Clause 6 route. The practice of developers speculatively outbidding others—including housing associations keen to buy a site and fulfil the affordable housing obligations on it—would not be perpetuated into the future. It would no longer be possible for developers to say, “Let us gamble on house prices rising, but if they do not do so, we can go to the Planning Inspectorate and secure a release from our Section 106 agreement”.

In my most charitable moments, I can feel some sympathy for the small builder who is unable to work on a swings-and-roundabouts basis of some highly profitable and some less profitable site purchases and who unwisely paid too much for a site at the height of the boom some four years ago. The bigger house builders are currently doing very well. Persimmon and Bovis have just reported huge increases in profits of more than 50% and more than 60% respectively. Some smaller developers, however, may have been caught out in 2008 or 2009, thinking house prices would rise inexorably when they have been pretty flat outside London and the hot spots. Nevertheless, surely we do not want to encourage continuing speculation on the basis that, from now on, the state will bail out those who bite off more than they can chew. Any developer entering into a Section 106 negotiation at the current time is clearly doing so with their eyes open to the economic realities of the day. These negotiations make use of viability appraisals and the signal must go out to house builders that they can no longer sign agreements in the expectation that they will not really be necessary to honour those agreements because central government’s planning inspectors will set aside their obligations if the developers can show that they will not make a profit of 20% or so.

This amendment draws a line under state intervention in these Section 106 agreements from the date that the Bill becomes an Act. I strongly support it. Alternative amendments for a sunset clause three years hence seem to miss the point. It is now that we want people to get busy and get started on sites that they own and are currently stalled. Every time a local agreement to produce more affordable housing is set aside, households on low incomes waiting for a home are forced to wait longer. We should ensure that this happens on only the rarest occasions. I strongly support an amendment that would stop the perpetuation of the opportunity for developers to renege on agreements that they have signed with local authorities from henceforth.

[Lord Shipley]

My Lords, I will speak to Amendment 28. I strongly support Amendment 22 and the principle behind it that only planning obligations agreed prior to Royal Assent should be included in the Bill. Amendment 28 is a sunset clause, and the Government have, through their own Amendment 32, accepted the principles of this. Our view is that no applications should be made under this section three years after its coming into effect. I accept that there may be a case to give power to renew or extend a subsection if economic circumstances demand it. However, I am not convinced that it should be open-ended and effectively give a power to the Secretary of State to extend it for as long as he would wish it to be extended. I am seeking from the Minister some clarification as to what the Government’s intention actually is with their Amendment 32.

I will be very precise about the questions to which I think the House should seek to secure answers. It would be helpful if the Minister could refine her amendment at Third Reading, so that any extension to the time limit should be for no more than two years from the date it is proposed. That would have to be before April 2016, so it would give an absolute time limit of five years. Secondly, would the Minister commit to presenting a report to both Houses before bringing forward regulations to extend that time limit? Would the Minister also commit to consulting with social housing providers and others prior to presenting that report, in order to inform its contents? Thirdly, will the Minister also commit to accepting the will of both Houses in any vote to extend the time limit?

The Government should still look to extend Clause 6 to include the full range of planning obligations. Not only would this challenge any perception that the Government viewed affordable housing as of secondary importance in planning terms; but if other obligations are causing the delay, that could remove significant impediments to that development. We will have a chance in a further amendment to look at that a little more closely, but I remain concerned that the Government’s amendment is too open-ended.

Local Government Finance Bill

Debate between Lord Best and Lord Shipley

Monday 22nd October 2012 Lords Chamber

[Lord Shipley]

My Lords, I rise to speak in support of this amendment. My reason is that we need to understand better than I believe the Government do the impact of various changes being implemented at the same time over coming months.

Next year, a large number of people will be taken out of income tax because of the rise in the threshold. At the same time, universal credit, and its housing elements in particular, will begin implementation. We should note that demand for housing benefit is now rising because rents are going up, as opposed to going down, as the Government expected would happen a few months ago. At the same time, council tax benefit will be devolved to councils, being renamed “council tax support”, and it is likely that demand will rise because of the name change alone. In addition, there is a 10% cut in the grant given to local authorities for council tax support, and in actuality, many think that that cut is nearer to 12.5% because of that rising demand.

The Government have said that councils can make up the cut by charging 100% on empty homes and second homes. We know that that can work for some councils because they have enough numbers of one or the other, or both, to do it. However, it will not work for all. Many councils do not have enough empty or second homes to enable an increase to 100% to deliver the 12.5% cut in the budget. Even the transitional relief announced last week, prior to Report, will not solve the problem for all, and in any case, that transitional relief is only for one year.

The Local Government Association—I declare my vice-presidency—thinks that the Government’s package substantially underfunds the 8.5% cap on what an individual household would pay and that councils will need to find another £100 million to make up their loss. Putting aside the problems of councils, the problems for individuals could be very severe in the face of so much change at once and the need, in particular, of many working-age households to start paying some council tax.

I agree that as a minimum the Government should commission an independent review to report as speedily as it can, but certainly within three years, on how all the changes are working. I realise that the Government keep things under review but the problem is that more than one Whitehall department is involved and the Government need the support of an independent body such as the Institute for Fiscal Studies or the Joseph Rowntree Foundation to assess the impact in an independent way.

I regard this amendment as modest and the Government could and should accept it. I hope that the Minister will accept it as a helpful contribution to our understanding across government of the impact of these substantial changes.

[Lord Best]

My Lords, I hope that the Minister is able to accept this amendment or something akin to it. I agree with the noble Baroness, Lady Hollis, that it will be important to review the effects of localising the council tax benefit system. Down the line we will need to ask whether this change has led to a chaotic situation of dozens of different schemes and whether this localist approach has produced variations in benefit schemes that reflect not what local financial circumstances force on councils but what genuinely fits local conditions. We also need to ask whether it would be better to return to a national scheme incorporated into the universal credit arrangements.

My own emphasis for a review, however, would be on analysing the consequences of the cuts to council tax benefit on the households affected and on those councils which find it necessary to start collecting council tax from the lowest-income families who did not previously have to pay. What has been the cost in extracting these new taxes? What has happened to those who could not pay? It is a very serious matter deliberately to reduce the income of those who are trying hard to get a job, are not able to work or are in work but on the very lowest earnings. No government would want to hurt those of our fellow citizens who are living on the breadline and finding life a considerable struggle.

As I noted in Committee, the Institute for Fiscal Studies, the Joseph Rowntree Foundation and others have shown that it is those of working age on the lowest incomes who have seen the least improvement to their living standards over the past decade. The gap between rich and poor has widened and income inequalities have increased. It is those in relative poverty who expend the highest proportion of their incomes on fuel and food, and so now face the greatest pressures in making ends meet.

The various welfare benefit cuts introduced since 2010—with the largest still to come—are bound to have a cumulative effect. The same households that are hit by one cut may well be affected by another. Thus, many of the 660,000 households affected by the forthcoming “bedroom tax” will also be caught by having to start paying council tax from the very same day—1 April 2013. What will be the knock-on effects of the council tax benefit measures when added to all the other benefit changes? What unforeseen consequences may emerge from these measures? Are there impacts on physical and mental health, with consequential costs to the NHS? Are there burdens for children’s services? Are mounting rent arrears leading to homelessness, with higher costs for central and local government? When do these cuts reach a point when any reasonable person would see them as punitive and unacceptably harsh?

In response to an amendment in my name to the Welfare Reform Bill, the noble Lord, Lord Freud, agreed to a thorough-going and high-quality review of the impact of housing benefit cuts. He has made the point that he wants government policy to be based on sound evidence, which good research should bring forward. That can enable in-flight corrections to policy. For example, the noble Lord, Lord Shipley, mentioned the hopes of the noble Lord, Lord Freud, that cuts to local housing allowances and housing benefit would lead to rent reductions but they have not materialised. If the researchers for the review of the noble Lord, Lord Freud, show clearly that rents have instead been rising, Ministers may be wise to think again about their approach. In the case of council tax benefit, the cuts, unusually, are outside the remit of the Department for Work and Pensions, and an evidence-based review will need to be undertaken by the noble Baroness the Minister’s Department for Communities and Local Government. A parallel exercise there to the DWP’s would seem essential if lessons are to be learnt in time to rectify deficiencies in the new system. For example, I have learnt from working on this Bill that the Secretary of State has had the power since 1992 to vary the 25% single person discount for households. A review of the kind proposed by this amendment could be the catalyst to persuade the Secretary of State to use that power and allow a different discount level where the local authority concerned needs this change. It is this kind of policy change that a review could stimulate.

This is a modest amendment with minimal financial implications. It could prove of immense value to the Government and to those who could be hugely disadvantaged by the benefit cuts in the Bill. I heartily commend it.

Local Government Finance Bill

Debate between Lord Best and Lord Shipley

Thursday 5th July 2012 Grand Committee

[Lord Best]

My Lords, I support the amendments in this group. The British Property Federation has said that it and others have been deeply frustrated by the way in which a policy that could have been a significant driver of growth and urban renewal has been watered down to such an extent that it will have very little impact. It seems a real shame. TIFs could be such a valuable mechanism in helping local authorities to play a really serious part in achieving local economic recovery and growth. The disappointment is that the Government are planning to control so strictly the numbers of these projects that could be encouraged by being outside the business rates growth levy or the proposed business rate system resets.

I can suggest reasons why TIFs are necessary and useful. The first is that they will help the construction industry, which is in a very bad state—the worst position it has been in for several decades—to become the engine of growth that takes us out of recession once again. We need the construction industry, and it needs the boost that TIFs could bring. Specifically in relation to housing—my pet interest—TIFs would not fund any new housing development, but they could fund the infrastructure that supports and surrounds such developments. I chaired the LGA/DCLG commission on ways in which local authorities could ease housing shortages, and I was struck by how there is synergy between what TIFs can do and easing housing shortages. A housing development can so often not go ahead because the infrastructure scheme that would surround it cannot be financed. I saw a major site, a large site of derelict land in the London Borough of Newham, which needs a big bridge built to bring it to life and enable it to be regenerated for housing, offices and commercial developments. It needed a TIF infrastructure scheme to get it going, but it would pay for itself over a period.

Then there are benefits to central government: higher stamp duty revenues resulting from rising property values—I am trying to appeal to Treasury self-interest here—higher income tax and higher corporate tax due to the increase in economic activity. Then there are savings to central government as people would get jobs and no longer require the social and health benefits they were receiving and there are the social benefits of regeneration. All these things flow from getting this sorted.

As I understand it, what is worrying the Treasury is that TIF funding goes straight on to the national debt. It is counted as being part of public expenditure because local authorities are at the heart of it. If housing associations were the ones doing the borrowing—they could not possibly be—it would not count at all. It is because local authorities are there in the middle of this arrangement that the Treasury finds reasons to block this, other than on a very modest scale— £160 million is not going to get us going. This is a self-inflicted punishment that the Treasury is insisting upon because it is not commonplace in other countries to regard as public expenditure prudential borrowing that is going to be repaid out of a flow of income that is predetermined, clear and visible. The Treasury has decided this, and it could undecide it without troubling any European agreements. I think the anxiety is that the international banking community will say, “They are changing the rules in the United Kingdom. This will scare the international financiers. The UK is up to something with these new TIFs”. I think the international banking community would like to see the UK economy getting stronger and things happening and moving forward. I do not think that the Treasury is right in holding the line on its definition, which is contrary, for example, to the definition of public expenditure in Germany, France or Holland.

It would seem entirely sensible for the Government to adopt a lighter-touch approach in relation to the approval of potential TIF projects under option 2, enabling TIFs to be a really significant mechanism for investment with minimal bureaucratic interference.

[Lord Shipley]

My Lords, may I add some further remarks about tax increment financing and say how much I agree with all the comments so far on this set of amendments? For several years, I have been absolutely convinced of the importance of tax increment financing for driving cities. In recent months, I have assisted as an adviser to the Government on their cities policy; I declare that interest. This derives from being convinced by the group of eight English core cities and their secretariat, when I was leader of Newcastle City Council, that tax increment financing potentially unlocked growth in a way that conventional capital infrastructure funding schemes did not and could not. I am particularly struck by devolution in Scotland having led to there being, in various states of preparedness, some six tax increment financing schemes on the drawing board.

The importance of this has been exceedingly well explained so far but it really matters financially. This is not just about business rates; it is about other taxes, too. Once growth in building and development happens, other taxes will follow. For example, there will be stamp duty, income tax, VAT and corporate tax revenues, all of which enable the Government to gain from growth in the country generally.

The PricewaterhouseCoopers 2008 report made absolutely clear the potential for the UK here. It drew on 40 years of US evidence and made it clear that this could be replicated in the United Kingdom. Many professional bodies—this is not just a matter for local government—now say that tax increment financing is now a thing for the future and that we must just do it. However, delivering it means that the reins must be loosened by the Treasury. First, TIF should not be treated as an in-year spending decision. Secondly, the Treasury should not place an arbitrary limit on the number of schemes permitted each year. Its consent should apply to all those schemes that meet the criteria. Thirdly, there must be longer periods, of up to 25 years, over which debt can be repaid because investment requires certainty of income for investors. Therefore, TIF cannot just be prudential borrowing with resets. For many potential schemes, 10 years—or seven in the first instance—will not be enough.

I have shared the concerns of such organisations as the British Property Federation and many others, which all urge the Government to look again at tax increment financing to understand its potential for growth, and to encourage the private and public sectors, working in partnership, to make sure that growth can be delivered. It is through growth that government spending can be maintained at its current levels.