Lord McKenzie of Luton
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“Tenancy strategies
(1) A local housing authority in England working with registered providers of social housing in its area, residents, and other stakeholders shall consider appropriate responses to relevant tenancy issues locally.
(2) A local housing authority must publish information detailing the approach taken locally to tenancy issues in any manner it considers appropriate.
(3) This information may include how the local housing authority, registered providers and partners will work together in relation to—
(a) the kinds of tenancies they grant,(b) the circumstances in which they will grant a tenancy of a particular kind,(c) where they grant tenancies for a certain term, the lengths of the terms,(d) the circumstances in which they will grant a further tenancy on the coming to an end of an existing tenancy, and(e) any other issues as determined appropriate by the local housing authority.(4) The powers in this section may be exercised by a single local housing authority or by two or more local authorities acting jointly.”
Lord McKenzie of Luton
My Lords, my noble friend Lord Kennedy is having a well earned rest. He has passed the easy stuff to me.
In moving Amendment 23, I shall also speak to Amendment 24, which is consequential. Amendment 23 addresses the issue of tenancy strategies and seeks to replace the provisions in the Bill with an alternative formulation. It provides that the local housing authority in England, working with registered providers of social housing in its area, residents and other stakeholders, shall consider appropriate responses to relevant tenancy issues. The local housing authority must publish information detailing the approach taken locally to tenancy issues in any manner that it considers appropriate. The information may include how the local housing authority, registered providers and partners will work together in relation to a range of tenancy issues. The powers may be exercised by a single local housing authority or two or more local authorities acting jointly.
We have no objection in principle to tenancy strategies but consider the formulation in the Bill as it stands to be misplaced and too prescriptive. This was debated in the other place, so the issues are not new, just unresolved. Noble Lords will recognise that the amendment has been provided by the LGA and the National Housing Federation. The fundamental concern with how the Bill is drafted is that it reflects a centrist approach that of itself will do little to support better housing outcomes locally. Our amendment is an encouragement for co-operative working in developing strategies that reflect views not only of the local housing authority and registered providers of social housing but of residents and other stakeholders. The amendment could very much go with the grain of how councils are already working across the country with local landlords to identify and meet housing need. This work requires a good understanding of the local housing market, including new supply, the private rented sector, social housing, the impact of the new homes bonus and affordable rent—many of the issues debated earlier.
We have been presented with case studies that underline excellent work that is ongoing. I shall refer to two. There is the case of Hackney, where the Better Homes Partnership brings together a wide range of partners, including housing providers, community and voluntary representatives, to identify support and steer the delivery of Hackney’s long-term strategic objectives as set out in its sustainable community strategy. The partnership board is co-chaired by the deputy mayor and the chief executive of Hackney Homes, and the board has a housing management and housing investment subgroup that focused on strategic issues affecting Hackney’s people and places, such as antisocial behaviour, overcrowding, investment challenges and opportunities and the design and sustainability of new homes.
Shropshire Council’s housing strategy identifies housing needs and sets out how the council will meet them through an action plan agreed with internal and external partners. There is a clear focus on strengthening partnership with both registered social landlords and the private sector, and the council’s affordable housing allocation has been developed in consultation with tenants, applicants, housing associations and other stakeholders. The council is currently in discussion with registered providers regarding the development of its strategic tenancy policy.
The amendment would facilitate working across single local authority boundaries, as we have just instanced, and the development of local tenancy forums. Further, as the LGA points out, the timing of policy in Clause 137 is not well thought through. It requires the commencement of strategies that start in April 2012 but, given that the affordable rents model commenced in April 2011, that seems to be a bit late. I do not believe that we are apart on the need for strategic tenancy strategies, nor, I suspect, on the vision of how they might be developed. We suggest, though, that unfortunately once again the Secretary of State cannot let go and trust local councils and communities to deliver as they see fit. I beg to move.
Baroness Hanham
My Lords, I recognise that the amendment is founded on the concerns that the creation of tenancy strategies would enable local authorities to dictate to the housing associations in the area—exactly what the noble Lord, Lord McKenzie, said. I reassure the House that that cannot and will not be the case.
A housing association has to be aware of the strategy and take it into account as a relevant consideration when deciding what its own tenancy policy should be, but each individual landlord will be able to decide for himself—or itself, as far as the association is concerned— how it will use the new flexibilities that the new provisions in the Bill offer. We discussed that on the previous amendment.
Concerns in other quarters that a tenancy strategy represents the imposition of a heavy and centralist burden are, we believe, unfounded. All we are seeking to do is ensure that local policies on tenure are developed collaboratively and transparently, and that the tenancy strategy provides a simple framework for that to happen.
A tenancy strategy is not going to be difficult or burdensome to produce. There is no requirement for it to be in a specific format or to be of a particular length, and there is no barrier to local authorities working jointly with social landlords to produce one. I believe that we have struck the right balance between encouraging joint working and maintaining an individual landlord’s freedom to decide how they will use their new flexibilities, and that this is done in a light-touch way.
Clause 139 adds tenure to the matters on which the Secretary of State has the power to direct the social housing regulator regarding the standards that it has set. This power is key to the delivery of our proposals on tenure reform. The revised tenancy standard, to which I have already referred, will determine the detail of the additional freedoms on tenancies available to landlords and protections available to tenants, so it is right that the Government are able to give a direction on tenancy standards to the regulator. The Government’s power to direct the regulator is limited to a very few key areas, and it has always been acknowledged, including by the current regulator, that tenure is fundamentally a matter of government policy.
It is important to remember that the overall effect of the changes that we are making to the standards will actually be to reduce the level of regulation to which social landlords are subject and increase their flexibility. I hope that the noble Lord will accept that response and be willing to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for her response and her explanation of the Government’s position. She says that she is interested in and focused on a light-touch approach. I would, if anything, describe ours as slightly lighter and less centric, but we shall not argue about this. It is an issue that we have aired tonight and in another place. It is important that there is genuine flexibility in these arrangements, and that there are opportunities for full engagement across the piece locally when these strategies are being developed—not only by local housing authorities and providers but by representatives of tenants and the community more widely. That is the particularly important thing that we sought to probe in this amendment. Having said that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, my noble friend Lord Kennedy has added his name to this amendment. I support everything that the noble Lord said in moving the amendment. I have nothing further to add. I do not propose to move Amendment 33, which is grouped with this amendment, when we come to it.
Baroness Hanham
My Lords, as I said in Committee, Amendment 28 is not necessary. The review already ensures that a decision by the landlord not to renew the tenancy must be fair and in line with the landlord’s published tenancy policy. Should the reviewing officer decide that the decision is not in line with the landlord’s policy, the landlord will need to reconsider his decision. Where a landlord seeks possession of a tenant’s property despite a review concluding that he was not acting in line with his own policy, the court will refuse to grant possession, as the Bill makes clear. Amendment 33 will not be moved. I hope that the noble Lord, Lord Shipley, is minded to withdraw Amendment 28.
Lord Wigley
My Lords, I intervene briefly to ask about the implications for Wales. I am grateful to the Minister for indicating that she has taken up the view supported by the National Assembly. That is very good and moves things forward. With regard to Amendment 36, the Explanatory Notes, to which I referred in Committee and which refer to the original Bill presented to us, suggested that the clause on repairing obligations in leases of seven years or more was applicable to both England and Wales. Was that incorrect or have things changed during the passage of the Bill? My question is parallel to another that I asked. On that occasion, the Minister said that the clause was intended to cover possibilities that might arise in future. I would be grateful, when she has had an opportunity to get advice, if she would clarify the position so that we in Wales know where we stand on the amendment.
Lord McKenzie of Luton
My Lords, I will speak briefly, subject to anything that arises from the question raised by the noble Lord, Lord Wigley. Obviously we support the amendments. I take the opportunity to thank the noble Baroness and her team for the volume of correspondence that we have had, which has explained the government amendments and the position on amendments that were withdrawn. I will not comment on timeliness—I understand that we have had a further missive during the course of our proceedings today—but it is generally helpful to have things set down in correspondence in the way in which they have been.
Baroness Hanham
My Lords, I thank the noble Lord, Lord McKenzie of Luton, for that. A prodigious amount of work went on during the Recess. We were very conscious that, with the withdrawal of all the amendments at the end of the previous stage, it was important that noble Lords understood what we had done. I say to the noble Lord, Lord Wigley, that we made this correction in line with the Welsh Assembly's wishes that the repairing obligation change would not apply to Wales.
Lord McKenzie of Luton
My Lords, the noble Lord, Lord Palmer of Childs Hill, makes a very interesting case. I do not propose to follow him into the detail of ground 8, but I shall comment on the fact that we are going through a period of some upheaval in relation to housing benefit, which brings a particular poignancy to the point which he raises. If we look at what is on the cards, we know that local housing allowance rates are now set at the 30th percentile of local market rents. We know that a cap on the local housing allowance rate has been introduced. We know that under the Welfare Reform Bill, local housing allowances are going to be uprated by CPI in future rather than by reference to what is happening to rents. We know that there is an increase in the non-dependant deduction, and we know that there are changes to the shared room rate as well. Each of those things creates some challenges in the administration of housing benefit.
Moreover, we are on the cusp of having something called universal benefit, and all the housing benefits will eventually be paid through that process but at a time when the Government are seeking to uncouple the administration of housing benefit from council tax benefit. The practicalities of that present a real challenge, because we know that lots of councils will have contracted out those joint arrangements and how you unpick and administer them is a really challenging issue—quite apart from the issue of whether they are going to be direct payments or how the payment of housing support is going to flow through. We know what the Government’s answer is going to be because we have read it in the book that was presented to us, and I doubt that that has changed over the weeks since that appeared. The point made by the noble Lord seems to me to be especially relevant at this time because of this great upheaval around housing benefit.
Baroness Gardner of Parkes
I would like to ask a question about this amendment, which I am not entirely clear about. I have been told recently by people who have had court possession orders and eviction notices served on them that that does not really put them out of anything until the bailiffs come in. What is the position if the court grants a possession order but the bailiffs have not been instructed? I understand that there is usually quite a time lag between those two events and that the housing benefit comes through in that time, particularly when it has been delayed. How would that work in relation to those two different procedures?
Lord Palmer of Childs Hill
My Lords, I thank the Minister for her detailed reply both in writing and verbally. She has not misunderstood anything but she lives, as perhaps we all do, in this utopia where all landlords are good. I am afraid that in the world in which I live not all landlords are good, and I believe that there are a modest number who will use ground 8. I hope that only a modest number will do that, but there will be some who will. There should be nothing in legislation that removes the discretion of the court to do what is right. The matter of when the bailiffs move in was raised. Those who have had experience of the courts know that that is a varied situation because it often depends on whether the landlord has set the thing in motion to get early occupation of the property.
That is particularly important at this moment. The noble Lord, Lord McKenzie, talked about when benefits—universal benefits and the like—are paid. Those of us who have been local councillors—I have been a councillor for 25 years and still am—know that local authorities and social landlords use IT systems to deal with housing benefits. For years, my local authority used Pericles, which went dreadfully wrong. It is not an indictment of any landlord that they should use a system that goes wrong, because IT systems often do, but the fact is that, with the changeover to universal benefits, which has already been mentioned in this debate, there is a great probability that housing benefits arrears will be built up unintentionally because of a changeover in computer systems. In that case, there would be the danger of ground 8 evicting people without the courts having a chance even to postpone eviction. I would ask that my noble friend the Minister looks again at how many such cases there have been and whether there is a need to tweak this in the legislation.
Lord McKenzie of Luton
Does the noble Lord agree that the issue is compounded because there will be a split of housing support, which is going via the universal credit, and council tax benefit, which is staying with local authorities? The noble Lord from his experience would know that often those systems run together and are contracted out jointly, although I do not know whether in this particular instance that is the case. Therefore, having to unpick those two systems, as well as having to build the universal credit, adds a particular dimension to the issue that he has raised.
Lord Palmer of Childs Hill
I thank the noble Lord for emphasising that point. In my view, during this volatile period there is a great danger of more notional housing arrears arising that would pose the danger of eviction. Good landlords, as my noble friend the Minister said, will be able to deal with it, and that is why I concurred with what she said. But can any noble Lord doubt that there will be some bad landlords? Some bad landlords may seek to use ground 8 knowing that the courts have no power to protect the tenant. Perhaps between now and Third Reading the Minister could look at that. Having said that, at this stage, which is always a mixture of Committee and Report stage, I beg leave to withdraw the amendment.
Lord Best
My Lords, the amendments of the noble Lord, Lord Whitty, would leave out a whole series of clauses that relate to the housing revenue account. I have added my name to Amendment 46, which would leave out just one of those clauses. That implies that I am happy with the others, as indeed I am.
The housing revenue account is regarded in local government circles as well past its sell-by date and there is general acclaim for its abolition. It is a significant aspect of the localism agenda that financial responsibility for council housing is to be put back into the hands of councils. In place of pooled debt and pooled rents, each council involved will henceforth assume direct responsibility for housing debt according to its ability to repay it, and it will keep all the income from rents for managing and maintaining its own council stock. Efficiency gains on its rented account will go back into improved housing provision. These are helpful reforms, but they stop well short of giving councils the full financial independence that could enable proper asset management of their housing resources and harness significant prudential investment in new homes. These freedoms are enjoyed by even the smallest housing association.
Amendment 46, in leaving out Clause 158, would remove the restriction on councils that want to borrow prudentially—knowing that they can repay what they borrow—for housing purposes. When councils move to a self-financing regime with the housing revenue account buyout on 1 April 2012, they will face new restrictions on borrowing for housing purposes—a new capping regime—despite the continued presence of the prudential code that has operated perfectly well since 2003. The chairman of the Local Government Group points out that it has demonstrated on many occasions that councils have a strong record of sound financial management and manage borrowing responsibly in accordance with the prudential code. He says that local government’s view is that these rules to which it adheres provide sufficient protection that councils will undertake only borrowing that is affordable, and that imposing a cap on councils’ ability to borrow for affordable housing will severely restrict their ability to invest in an increased number of affordable homes, which government wants to see. Paradoxically, housing associations are being encouraged at exactly the same time to borrow a lot more to replace the shortfall resulting from smaller grants. A lot of housing associations are borrowing more, but not councils, which must accord with the new cap. The Local Government Group says that it hopes that if government will not remove the new cap, Ministers will at least consider committing that local government will be properly consulted in determining the level at which the cap is to be set for each authority to allow some crucial further investment on a sustainable basis. I support the removal of the clause as proposed by Amendment 46.
Lord McKenzie of Luton
My Lords, I suppose that there are not many people who like to collect together at this hour to discuss local housing finance, but it falls to us to do it. We understand that the amendment of my noble friend Lord Whitty is probing in nature to try to gain an understanding of where the Government currently stand on this issue. If I have to be fair to the Government—I try not to be—I think that they have been quite active in putting out consultations; there is one due in November if my understanding about the final figures which will be debated with local government is correct. Of course, they have built on the prospectus that was issued in March last year under the previous Government.
As with the noble Lord, Lord Best, we support the thrust of most of these clauses except for Clause 158. They provide the framework for the self-financing scheme for local authority housing stock which will replace the existing housing revenue account subsidy system. As noble Lords have recognised, the current subsidy system is based on a range of assumptions about local authority housing stock, covering rental income, maintenance and management costs, costs of service in debt and of major repairs. An authority will either receive a subsidy from the notional calculation if it was in deficit or pay to the Exchequer amounts when the calculation showed a surplus.
When the current subsidy system started, no local authority was in surplus but, as I understand it, by 2008-09 the system overall had tipped into surplus with the aggregate of amounts paid to the Exchequer exceeding the aggregate of subsidy payments. The reforms reflected in these clauses were initiated by the last Labour Government. As my noble friend recognised, the current system had become a source of discontent for a variety of reasons, particularly because it is complex and lacks transparency, with changes from year to year making it difficult to plan effectively over the long term. We believe it is right to change that, which is why we support the thrust of these amendments.
The reform consulted on by the previous Government involved a devolved, self-financing system where there is no redistribution of revenues in return for a one-off allocation of debt to local authorities. This allocation would be based on each authority’s ability to service the debt and maintain its housing stock. In essence, this represents a deal between central government and local authorities. In return for allocating excess debts to local authorities, the latter will obtain greater spending power over the long term through retention of future rent increases. It represents a transfer of risk from the Government to local authorities.
My noble friend Lord Whitty will doubtless recall that the proposition for a self-financing regime proposed by the then Housing Minister, John Healey, included the one-off distribution and allocation of housing debt. All rents and receipts from the sales of housing and land in the HRA were to be obtained by the local authorities, with rental income to be based on current rental policy—that is, convergence with standard housing association rents by 2015-16. The housing stock would be valued using the 7 per cent discount rate. The latter component in particular—the 7 per cent discount—would have given local authorities headroom to be able to fund 10,000 new council homes each year.
Noble Lords will be aware that the principle of moving to a self-financing regime was overwhelmingly supported by local authorities. As these clauses make clear, the coalition Government are proceeding with the self-financing option and the basic method of debt allocation is to be as set out in the March 2010 prospectus—that is as I understand it but the Minister will tell me if I am wrong.
However, there are some differences and some major concerns, which are reflected in subsequent amendments. In particular, the discount rate to be used is 6.5 per cent not 7 per cent. This may seem a small difference but the effect is for central government to be some £1.2 million to the good and to remove much of the headroom that would have been in the system for building additional council housing. As the noble Lord, Lord Best, has said, the plan to cap the overall borrowing of each authority at a level linked to opening debt runs contrary to the spirit of localism and the self-financing concept.
We would argue that central government already have powers under the Local Government Act 2003. I should be grateful if the Minister could specifically deal with this. Section 3 of that Act talks about a local authority determining and keeping under review how much money it can afford to borrow. Section 4 gives the Secretary of State, by regulations for national, economic reasons, power to set limits in relation to the borrowing of money by local authorities. If that is on the statute book already, we do not need Clause 158. I agree with my noble friend and with the noble Lord, Lord Best, that that should not stand part of the Bill.
As for rents, retaining the approach of convergence with RSLs by 2015 is all very well, but the impact of changes to housing benefit, the urban benefit cap, the non-dependant reductions upratings and the 2013 room- size criteria for the working-age tenants create additional uncertainty and risk. Reversal of the plans for local authorities to retain all the receipts from right to buy should not be accepted, and we will debate that shortly.
Although my noble friend is right to challenge these provisions, we consider that it is right for the self-financing regime to proceed. However, as ever, the devil is in the detail and we look forward to an update from the Minister.
Lord Shutt of Greetland
My Lords, I thank the three noble Lords who have addressed this issue, particularly the noble Lord, Lord Whitty, for the way in which he addressed the several deletions. I am told that reference to housing finance did not enter the ranks in Second Reading and that there were no amendments the like of that proposed by the noble Lord, Lord Whitty, in Committee. It is interesting that we have got to Report and the fundamentals are being raised by the noble Lord, Lord Whitty.
Lord McKenzie of Luton
If the Minister will permit me to intervene, amendments were tabled in Committee dealing with Clause 158. The noble Lord, Lord Best, had one that we put our name to.
Lord Shutt of Greetland
Indeed, but there was not the wholesale abolition of the entirety of the clauses in the Bill on this whole issue of housing finance. I know that the amendment was moved in a probing way—I accept that—but it was not done at that point.
I understand the sense that there is a fundamental change here, and there is a need. I undertake that a document will be provided that sets out the change in simple terms. That is what the noble Lord, Lord Whitty, is asking for. He is saying, “I can’t cope with all this lot—what’s it all about?”. So there is a need for a simple document explaining that change. However, if we accepted his amendment, we would be stuck with a discredited and underfunded system for financing council housing instead of moving to self-financing, which is the culmination of a long-held ambition held by local government for councils to take full responsibility for their rental income and the management of their housing assets for the benefit of their tenants. It has been overwhelmingly supported in two public consultations, was originally a Labour Party policy and enjoys broad cross-party support.
Under the current system, Whitehall makes a series of complex annual decisions about what councils should raise in rents and what they should spend on their homes. Government then redistributes income between councils with an increasingly large profit being made for the Exchequer in the last few years as the methodology assumes that rents are rising significantly faster than costs. The result is that councils have no certainty about future income and no ability to plan long term as well as insufficient funding to maintain their houses to a decent standard. Through the Localism Bill, we will replace that subsidy system with one in which councils keep their own rents, thereby providing a direct link between the rent that councils charge and the services that they deliver. Tenants will, therefore, be able to hold their landlord to account. Councils will on average have 14 per cent more to spend on their stock than under the current system. This increase in funding is to meet the real costs required for management, maintenance and major repairs as identified in independent research.
I have some notes here that refer to a later amendment, but it is perhaps appropriate to deal with points raised by the noble Lord, Lord Best, about Clause 158. It is not a minor or technical part of these reforms, but instead is integral to protecting the Government’s central fiscal priority to bring public borrowing under control. I appreciate that many councils do not like that restriction, but our reforms must support national fiscal policy. Self-financing will give local authorities direct control over a large income stream, which could potentially be used to finance a large increase in public sector debt. Prudential borrowing rules have been effective to date in ensuring that local authority borrowing is affordable locally, but in the current fiscal context it must also be affordable nationally.
I am aware that the borrowing cap will place pressures on some councils in the early years of self-financing. These pressures, however, should be seen in the context of a deal that significantly increases funding for all council landlords at a time when other parts of the public sector are facing a very tight fiscal position.
I think that that covers the point that has been raised. It really is a case of the national position and the problems of the fiscal position affecting local authorities in terms of the restrictions that we have with our national economic situation. I hope, particularly on the basis that we will be able to produce a simple document of explanation, that this will be acceptable to the noble Lord to enable him to withdraw the amendment.
Lord McKenzie of Luton
Before the Minister sits down, could he deal with the point about the existing powers that the Government have under the 2003 Act, for national economic reasons and by regulations, to limit borrowing by local authorities? Why do they need the additional provisions of Clause 158? Do they not have those powers, or why are those powers insufficient?
Lord Shutt of Greetland
I am afraid that I will have to write to the noble Lord about that. I do not have a firm answer as to why that should be the case, although it may well be that someone is sending me a document on that. It is suggested that the existing power in the Local Government Act 2003 allows central government to,
“by regulations set limits in relation to the borrowing of money by local authorities”,
in order to ensure that the local authority does not borrow more than it can afford. While this power provides powers to cap local authority debt, it links local caps to local affordability. Our concern is not that councils will act in ways that are imprudent locally but that on aggregate these borrowing decisions may be unaffordable nationally. That is the situation there. If that does not cover the point, though, as I indicated earlier, I will write.