Housing and Planning Bill

Baroness Williams of Trafford Excerpts

Monday 14th March 2016 Lords Chamber

[Lord Beecham (Lab)]

My Lords, I, too, support the amendments in this group. The noble Lord, Lord Best, made a very powerful case in relation to the problems that would arise from the right to buy of council housing. Rural areas have commanded and will continue to command a great deal of concern in your Lordships’ House as the Bill progresses.

I confess that I am old enough to recall listening to “The Archers” when Grace Archer was consumed by a fire in, I think, about 1954. I have not been a particularly regular listener since, but I understand that, by chance or otherwise, the question of rural housing has featured rather largely in recent editions. I believe I am right in saying that the Grundy family have encountered enormous difficulties in finding suitable local accommodation and may be driven to palming off their ancient father into some sort of care. Whether this was motivated by concerns over the Housing and Planning Bill is perhaps questionable but nevertheless it illustrates a real concern in those areas.

Of course, there has been right to buy council housing for some considerable time. I wonder whether the Minister can indicate to us the extent to which the right to buy has been exercised and what proportion of houses that have so far gone under the right to buy have ended up as second homes or private lettings, and what the impact generally has been on the provision of council housing in rural areas.

Needless to say, I searched in vain for any reference to this issue in what passes for the impact assessment on the Bill, which makes no reference at all in relation to the relevant clauses that we are debating today to the impact of government policy. Again, the Minister may or may not have the information. Those who drew up the impact assessment clearly were not interested in having it. If the information is not available today, and it may not be, will she take steps to ensure that by the time we get to Report we will have an assessment of what will happen to the existing stock of council housing that will be subject to the right to buy—and, for that matter, to housing association properties that will also be subject to the right to buy—given the unlikelihood of like-for-like replacement being achieved?

I find it very frustrating—and I am afraid it is becoming a constant refrain of Members around the House—not to be able to form a judgment about what the Government’s policies are actually going to lead to. They are leading us, and perhaps themselves, into a blind valley, as it were, without any apparent awareness of the impact of their policies upon communities, where unfortunately there is very little political gain to be made by my party as they are regarded as the natural territory of the Conservative Party. Perhaps they take it for granted. However, they cannot take for granted the needs of young and older people with very little choice of accommodation, a choice likely to be increasingly narrowed if this legislation goes through without the kind of safeguards that the amendments in the group would provide, limited though they are but nevertheless very desirable. I look forward to hearing some kind of explanation from the Minister as to how the aspirations of people in those communities are going to be met if the legislation passes in the form it is presented to us at the moment.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con)]

My Lords, before responding to the specific amendments on the sale of high-value vacant housing, I will say a few words about more detail on the policy of the Bill as a whole. Last Thursday I undertook to the noble Lords, Lord Beecham and Lord Foster—and I am sure there were several other noble Lords—that I will ensure that your Lordships will have a timetable of secondary legislation in a week or so. Later this week, I shall write to all noble Lords setting out the timetable for laying, and in some cases debating, the secondary legislation.

As I said on Thursday, and as noble Lords have pointed out during our debates, there is a healthy set of regulations to follow, but I hope to provide an overview of what your Lordships can expect and when. The finer grains of details may be subject to change—my senses tell me to expect some debate at Report, for instance—but I hope the general outline will be helpful. In addition, I have asked my officials to provide policy notes in lieu of secondary regulations wherever possible with the ambition that these will be sent to noble Lords before Report. These will build on the policy fact sheets and the information sheets which we have already circulated to noble Lords. The noble Lord, Lord Foster, also asked me to confirm again today our response to the DPRRC report and I can reconfirm that that will be done by Report.

Before responding to the specific amendments, I will respond to a suggestion from my noble friend Lady Hollis—I have just called her my noble friend but I am sure she will not be offended—during the previous Committee discussion about setting up a working group with the LGA, the housing practitioners and others, to ensure that any fraud experienced through right to buy in the local authority sector is not repeated when we extend the right to buy to housing association tenants. I did watch the “Dispatches” programme over the weekend. I am delighted to confirm that I am happy to commit to setting up a working group with the local government sector and others to learn from their experiences in operating right to buy. For example, such a group could gather evidence about what has worked and what has not worked so well. It could also potentially build on the experience of a number of local authorities in tackling fraud more generally.

In extending the right to buy to housing associations, we are keen to ensure that we identify where any potential abuses could arise so that the right to buy goes from strength to strength and helps more people to achieve their dream of home ownership. We would also be interested in exploring whether such a group could usefully input on other related issues, including, for example, the provision of additional homes by local authorities that enter into an agreement with the Secretary of State following the sale of high-value vacant properties. This proposed working group will further extend our extensive engagement with local authorities and other stakeholders on high-value vacant housing. It will also help to inform our consultation with local authorities, representatives of local government and relevant professional bodies on the determination that will set out the payment required from each local authority.

[Baroness Hollis of Heigham (Lab)]

My Lords, before the noble Baroness moves on, I say thank you for the firm proposal. Whatever our views about the Bill—and they are very divided—the one thing that we all want is, as far as possible, to build abuse out of the system. I am glad that the noble Baroness had the chance to see the “Dispatches” programme, which confirmed some of our worst fears. Many of us have had similar experiences to boot. I am very pleased that the Minister has responded to that, and I hope that with the help of the noble Lord, Lord Porter, she will be getting together a really strong group to do exactly as she suggests.

[Lord Campbell-Savours]

On that matter, what happens if the working group comes up with conclusions which we are unable to resolve during the course of Committee or Report because the group reports after the Bill becomes law? What happens in those circumstances? That is my first question.

My second question is this. The Minister may recall that we were given an undertaking—two weeks ago now, I think—that we would receive information on starter home demand figures in the various parts of the United Kingdom. Despite repeated references to them in the Chamber by me and others, we have simply not received them yet.

[Baroness Williams of Trafford]

Before the noble Lord, Lord Kennedy, stands up, that is on the list for the end of the week, definitely.

[Lord Kennedy of Southwark (Lab)]

I just wanted to thank the noble Baroness for both her announcements; they are very helpful. On the first one, she talked about noble Lords receiving various policy position papers. Would it be possible, when she does that, to sketch out when she thinks—we will not hold her to this, but just some idea of when—we will get the various regulations? That would be very helpful.

[Baroness Williams of Trafford]

We will endeavour to the best of our abilities, if we know when those dates will be, to bring them to noble Lords. In reply to the noble Lord, Lord Campbell-Savours, I do not want to pre-empt any discussions that the group will have; I go into it with an open and clear mind. I am sure that we will glean information useful not just for the Bill but for housing policy generally.

[Lord Shipley (LD)]

My Lords, I am very pleased to have the movement that the Minister has announced. Perhaps I can make one further suggestion, because I am still not entirely clear what the timing of all this is, because, as I recall, last Thursday, the Minister said that we would not have further information about regulation on aspects of the Bill until after Royal Assent. To pursue the point made by the noble Lord, Lord Campbell-Savours, there is an issue about the Government’s plan to use the negative procedure, as opposed to the affirmative procedure, in secondary legislation. I draw the Minister’s attention to the two reports by the Delegated Powers and Regulatory Reform Committee, which had a lot to say on that. If the negative procedure is used and if the working group comes up with proposals which post-date Royal Assent, that makes it very difficult for the House to make any changes to the Bill. Therefore, accompanying the proposal to have a working group I hope that the Minister can now at least think with colleagues about how the strong criticisms of the committee about overuse of the negative procedure can be addressed.

[Baroness Williams of Trafford]

I will bear the noble Lord’s point in mind. It has just come to me that I may have sent that list to the noble Lord, Lord Campbell-Savours, last week, so it may be in his post pile today.

[Lord Campbell-Savours]

I looked for it.

[Baroness Williams of Trafford]

If the noble Lord cannot find it, I am happy to resend it.

I think noble Lords for their contributions on the amendments. I understand the pressures faced by rural communities, about which we have spoken a lot in your Lordships’ House, which are many and complex. I am pleased that we are taking time to consider them again today. Amendments 66D and 67A propose that housing in a rural area be excluded, or excluded if it would not be reasonable to expect at least one new affordable home to be built in the same or an adjoining parish for each property sold.

Turning to Amendment 68D, we have discussed the need for new homes across the country and the particular pressures in some housing markets in both rural areas and some of the high-value urban centres, including London. However, we have also heard many arguments on the protection of rural areas and the need for Government to continue to ensure that we do not adversely impact rural communities with large amounts of new housing. We come to the conundrum of not being able to have it both ways: we can build more housing across the country, including in rural areas, or we can restrict where housing is built. That is an issue that we need to consider.

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[Baroness Williams of Trafford]

My Lords, I hope that I have made clear my intention to bring forward information to your Lordships’ House by the end of this week as a “starter for 10”, and more in due course as the Bill progresses. However, we have debated the principle and the elements of this policy in some detail, and I rise for the last time to make the case for Clauses 73 to 77. I will also respond to Amendment 69A.

As I have previously explained, this chapter, on the sale of vacant high-value local authority housing, is an important contributor to the Government’s aims of increasing home ownership and increasing housing supply. Clause 73 simplifies accounting arrangements by reducing the total number of payments made between the Secretary of State and a local authority. It will apply if a local authority has, for example, made an overpayment through an incorrect data entry as a result of human error. It enables the Secretary of State to offset the amount that needs to be repaid against another payment that the local authority is due to make under this chapter or under Section 11 of the Local Government Act 2003, which concerns capital receipts from the disposal of housing land.

Clause 74 imposes a duty on local housing authorities that keep a housing revenue account to consider selling any vacant high-value housing which they own, recognising the importance of making the most effective use of valuable assets. The Secretary of State may exclude housing from this duty through regulations. The intention is that this will be in line with any exclusions made under Clause 68—that is, if we do not include housing in the calculation of payments, we propose that local authorities will not have a duty to consider selling it under Clause 74.

[Lord Beecham]

The Minister mentioned high-value properties but, as we have heard before, there is a greater proportion of high-value properties in rural areas. Does that not make the concept more difficult to apply in those areas in terms of the consequences of the policy for that category?

[Baroness Williams of Trafford]

My Lords, we will see how the mechanism works when it comes out, but I think I have said a couple of times in your Lordships’ House that we do not want to adversely and disproportionately affect one area compared with another, so the calculations will be made by area and by type of property according to the number of bedrooms. Noble Lords will have ample opportunity to scrutinise this through the regulations, and we may have more detail through the Bill as time goes on.

[Lord Kennedy of Southwark]

Can the noble Baroness tell the Committee how often these payments will be made? Will it be monthly, half-yearly or yearly? If an account overpaid an amount of money, when would that be put right? If a payment was due to be made in April and it was to be paid again the following April, the timing might be an issue.

[Baroness Williams of Trafford]

I take the noble Lord’s point. A local authority may be disadvantaged for quite a period of time if the payments were not made very often. I shall take that point away and consider it.

Clause 75 seeks to amend Section 34(4A) and Section 43(4A) of the Housing Act 1985 to add to the list of matters to which the Secretary of State may have regard when considering whether to give consent to a local authority wishing to dispose of housing. These amendments will mean that if a disposal of housing by the local authority to another person or body could result in a reduced payment to the Secretary of State under Clause 67, the Secretary of State may choose to take this into account, among other factors, when deciding whether to give consent to the disposal. Making this change will ensure that there is important clarity on the issues that the Secretary of State may choose to take into account when organisations are considering such transfers and that he or she can consider if disposal of housing by the local authority to another person or body could result in a reduced payment.

Clause 76 is a technical amendment to Section 11 of the Local Government Act 2003, existing legislation which concerns the pooling of capital housing receipts. It replaces the existing power in Section 11(5) which enables the Secretary of State to set off payments owed to a local authority under that section against any payments the Secretary of State is liable to make to the local authority, with a more limited power which mirrors the provision in Clause 68 of this chapter. Like Clause 73, this aims to simplify accounting arrangements by reducing the total number of payments made between the Secretary of State and a local authority.

Clause 77 deals with the interpretation of certain terms used in this chapter, the great majority of which are self-explanatory. However, I would like to mention one term in particular. Housing “becomes vacant” for the purposes of this chapter,

“when a tenancy granted by the authority comes to an end and is not renewed expressly or by operation of law”.

We have discussed this previously. There may be some circumstances where a high-value home would become vacant under this definition but we would not want it to be counted in the vacancy rate set out in the determination. The power in subsection (2) will enable such exclusions to be made. Providing this power through regulations will provide flexibility to ensure that if circumstances change over time, or if a need for further exclusions is identified in the future, this can be addressed more quickly.

The department is engaging widely with local authorities and other stakeholders and no decisions have been made yet on the circumstances in which housing that becomes vacant may be excluded from the chapter under subsection (2).

Turning now to the specific amendments, Amendment 69A seeks to end the duty for local authorities to consider selling high-value housing as it becomes vacant three years after the Act is passed. Noble Lords have provided many considered lines of debate today but I do not believe the amendments would have the effect they envisage or be beneficial to local authorities or to people in need of new homes. While they would prevent the duty to consider selling from applying for six months following a vacancy arising and would end the duty after three years, the requirement for payments to the Secretary of State would not be changed. The Secretary of State would still be able to make determinations, which would be based on the sale of high-value housing that is expected to become vacant, but these amendments would mean that local authorities would no longer have to consider selling their vacant housing to make the payments.

This moves away from the intentions outlined in the Government’s manifesto. The legislation is framed to provide local authorities with some flexibility on what housing to sell and how to make payments to the Secretary of State. The duty is an important part of this to ensure the payments are focused on high-value housing, both in the calculation by government and the way they are met by local authorities. These amendments would move away from the aims of the policy. Six months is a very long time for a property to sit vacant before the duty to consider selling arises, particularly given the need for housing across the country. On this basis, I hope the noble Lord will consider withdrawing the amendment. When the question is asked, I hope noble Lords will withdraw their opposition and allow the clauses to stand part of the Bill.

[Baroness Hollis of Heigham]

Can the Minister help me on a question that we have been pursuing through several Committee days? It is clear that there will be a time gap—even if one accepts the push in policy, which of course I do not—between selling more valuable property and the deployment of the money to fund housing association discounts. Housing association discounts will be required on day three after the Bill gets Royal Assent. The sales to fund it may take a year, two years, three years or four years to come through to fund the presumed demands that will come very quickly in the direction of local authorities.

Therefore, many local authorities will instead be levied in view of their sales. The information I had from my authority, Norwich, this morning was of a housing revenue account of around £50 million facing a loss of £7 million a year on its rental income as a result of the 1% reduction. The levy, in lieu of sales, because of the delay in sales coming through, is likely to cost up to—we do not know yet—£11 million. A quarter of its net housing revenue account will, therefore, be lost to funding housing association discounts until—and if—the sales come through in lieu

Can the Minister tell us when local authorities will have some idea what that levy is likely to be? Will it be governed by the pent-up demand or otherwise of housing association tenants? Will the Minister expect this to be rationed so that it proceeds on an equal path along with the diversion of local authority resources through high-value sales? How exactly will this work? At the moment, it stands to wreck my local authority’s housing revenue account.

[Baroness Williams of Trafford]

My Lords, that is precisely why we are engaged with local authorities to make sure that we get this policy right. The noble Baroness has given me some figures for Norwich. I do not doubt that she is correct, but could she send me the figures so that I can have a look at them and perhaps comment on them?

[Lord Beecham]

The noble Baroness has said that there will be time to see how the matter develops. I remind her that Amendment 69A, in my name and that of my noble friend, would allow for that because it is a sunset clause. It would allow a three-year period to see how the process worked. If it did work, it could be renewed by the affirmative procedure, which, as we know, should not take all that long. Why do the Government not accept that amendment and give some reassurance that they will not press ahead with this irrespective of the outcome? The amendment would allow them to affirm the policy, assuming they are still in office, after a three-year period and on the basis of experience. Is that not a more pragmatic way of dealing with a difficult issue?

[Baroness Williams of Trafford]

My Lords, the amendment moves away from the intentions outlined in the Conservative manifesto, but while the amendment would prevent the duty to consider selling applying for a period of six months following a vacancy, the requirement of payments to the Secretary of State would not be changed. However, we monitor all policy as we go along.

[Baroness Blackstone (Lab)]

I once again press the Minister on the issue of moving to the affirmative procedure. I have raised this question on other days. It has been raised twice this afternoon. On no occasion has the Minister answered the question of when the Government will let this House know whether they are prepared to move in this direction. That would be a much more satisfactory approach to dealing with the detail of the regulations.

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[Baroness Williams of Trafford]

I do not think the noble Baroness was in her place when I outlined, at the beginning of today’s session, my intention to bring forward that sort of information by the end of the week.

[Lord Sutherland of Houndwood (CB)]

My Lords, before the noble Baroness finally sits down, perhaps I may indulge myself with a comment on procedure. This is not my patch, which I am here to learn, but we have been here before. There was a very similar procedural wrangle and difficulty over the Childcare Bill. The Bill came forward without sufficient detail to allow the House to debate fully some of the very important issues in it. There was a common mind with the Government and, I think, around the House that two factors could alleviate the problem. One was affirmative resolution, which was agreed for many of the regulations; the other was groups of people convened by the two Ministers responsible to talk through the process of developing regulation and implementation. I think that helped immensely and I hope that something similar could be done here.

[Baroness Williams of Trafford]

I thank the noble Lord for his information. As I have just said, I will bring forward as much as possible, but I have also undertaken to meet noble Lords to discuss matters for regulations as we go forward.

[Lord Kennedy of Southwark]

Can the Minister repeat for the Committee what the Government’s problem is with Amendment 69A? It would not stop them doing anything. It is just a sunset clause and would provide them with the ability, if they proceed with the policy and find an issue with it, to stop it. If they wanted to carry on, they would bring forward the affirmative regulations to do so. I do not see what the major problem is. If the Minister could repeat her reasons, it would be very helpful.

[Lord Beecham]

Before the noble Baroness answers my noble friend, perhaps I may add to his question—it is the same point but viewed from a slightly different angle. If it turns out that the scheme is not working, on the face of it that would require the Government to bring in primary legislation to change the duty. What the amendment offers is a way of dealing with matters, if required, by secondary legislation, where that difficulty is much less—in fact, we complain about it being less much of the time. In this case, it would surely be a better way of dealing with it than imposing a duty to come back with primary legislation if the scheme proved not to be working properly.

[Baroness Williams of Trafford]

My Lords, it is not usual for a Government to bring forward legislation that they want to end. There have been sunset clauses in certain legislation, but, in this case, we do not particularly want to end it after three years.

[Lord Lansley (Con)]

I do not know whether the Minister agrees, but Amendment 69A would not only allow, as it would intend, that after three years one might examine the success or otherwise of the policy but risks significantly distorting any potential implementation of that policy, since in the intervening period any local authority which was disinclined to implement the duty to sell vacant high-value housing might well for a substantial part of that three-year period delay such sales in the hope that the duty would repealed under this amendment and not reinstated? Clearly, it would be inappropriate for the Government to pre-empt Parliament’s decision on any such regulation by making it clear that they wanted to extend it indefinitely, so local authorities would be placed in a position which allowed them to frustrate the policy and the Government would not be in a position to insist.

[Baroness Williams of Trafford]

My noble friend makes a very good point.

[Lord Campbell-Savours]

Is there evidence of that from any other legislation which has been subject to a sunset clause?

[Baroness Williams of Trafford]

My Lords, I think I have said what I can say on this matter. I recall legislation that has gone through this House with a sunset clause for a very specific purpose.

[Lord Kennedy of Southwark]

My Lords, I thank all noble Lords who have spoken in today’s debate: the noble Lords, Lord Stunell and Lord Campbell-Savours, the noble Baroness, Lady Williams of Trafford, and my noble friend Lady Hollis of Heigham. I was not particularly convinced by the points made by the noble Baroness, Lady Williams, and was struck by the intervention of the noble Lord, Lord Stunell, on the wide powers that this part of the Bill grants to the Secretary of State. I am obviously disappointed that the Government have not taken up my offer of a sunset clause. I thank the noble Baroness for undertaking to take away the issue I raised about when payments would be made.

[Baroness Williams of Trafford]

I now have an answer for the noble Lord: it is quarterly.

[Lord Kennedy of Southwark]

I thank the noble Baroness. That is interesting and I will reflect on it.

As I said, I will reflect on the points that have been made in the debate. We may bring this issue back—or some variation of it—on Report after Easter. With that, I beg to withdraw my opposition to Clause 73 standing part of the Bill.

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[Baroness Williams of Trafford]

My Lords, all I can confirm at this stage is that, as the noble Lord, Lord Best, said, there are two options on the table.

[Lord Best]

I hope I am right in thinking that the Government are minded to choose the lower of these two options. It would be cruel to suggest the lower figure and then choose the taper that costs tenants twice as much. For a household with two earners together earning £40,000 per annum outside London, with a 20p taper they would face an extra £40 per week on the rent—a serious loss of income. If the taper was at 10p in the pound, their extra rent would be £20 per week, which seems quite enough of an extra burden for two people both earning well under the national average.

I recognise that such increases will be offset to some extent by the Government’s cut in council rents over the next four years. Of course, for the relatively small number of households—well under 1% of council tenants—where household income is more than £50,000, the increases would require substantial cuts to the household budget. That does sound a painful change. Nevertheless, the headline here, following the letter to Peers from the Minister, is that pay to stay will not be quite as dreadful as it appeared earlier.

The amendments address the underlying problem. They would remove the compulsion on local authorities with council housing to introduce any higher-rents regime dictated by central government. Local authorities may well have their own ideas on schemes that would suit local circumstances, local rent levels and local incomes. Whitehall does not always know best. On top of losing their autonomy over relatively micro decisions on rent setting, local authorities will also lose all the extra rent which the pay to stay arrangements generate.

Since all financial benefits from the new arrangements accrue to the Exchequer, not to the local authority, once again it seems that every avenue is being blocked for councils that want to engage in providing more and better housing. Housing associations, including those where councils have transferred all their housing to a housing association, will be able to decide for themselves whether to adopt a scheme of this kind. I think that many will choose not to do so. If they do increase rents for better-off tenants, the housing associations will keep the extra money, not least to make up for some of the loss of rent they will suffer over the next four years due to the Government’s recent requirement on them to cut rents by 12% in real terms—but not councils.

In earlier sittings of this Committee we heard from noble Lords who are understandably aggrieved about other costs falling on councils but not—in just the same circumstances—on housing associations. Driving a wedge between the two providers of affordable housing is a very unfortunate by-product of the Bill. As a strong supporter of councils doing more not less to ease the nation’s housing problems, and as a very long-standing advocate for the contribution of housing associations, I find it very troubling to see the two set against each other in this way.

Surely councils, like housing associations, should be able both to decide on any rental schemes for higher-income tenants and to retain any extra rental income from tenants with higher earnings just as housing associations can. Many of your Lordships have already argued that councils should be able to retain receipts from sales of vacant properties, as housing associations can, and as councils can today but will be prevented by the Bill from doing tomorrow.

The nation needs all hands on deck—all sectors to join the fight to get more homes built. All of us in the housing world need to pull together and not allow ourselves to be pulled apart. These amendments would let councils continue to decide for themselves on any new rental arrangements and, as with housing associations, keep any rent receipts to help meet housing need. I beg to move.

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[Lord Shipley]

My Lords, I said earlier that I wanted to comment on Amendment 81 when it had been spoken to. It is part of Clause 84, and therefore Clause 84 stand part is relevant. This is a very important issue. The noble Lord, Lord Foster of Bath, referred to pages seven, eight and nine of the Delegated Powers and Regulatory Reform Committee’s report. I do not seek to repeat what the noble Lord, Lord Beecham, has said, but I hope that the Minister will have a clear reply because, as the Delegated Powers and Regulatory Reform Committee says in paragraph 37:

“It could be viewed as a form of taxation because it enables the regulations to require local housing authorities to make payments to the Secretary of State in respect of ‘any estimated increase in rental income because of the regulations’”.

It goes on to say that the memorandum of explanation that it received,

“gives only the barest explanation or justification for this power; indeed, it seeks to dismiss this highly important provision as ‘quasi-technical’.… The intended meaning of that expression wholly eludes us, and the House may wish to ask the Minister for an explanation”.

We have asked for this. Given that this has been available since 5 February, clearly the Government have time now to respond through the Minister’s reply as to how they plan to deal with that matter.

In paragraph 38, the Delegated Powers and Regulatory Reform Committee says:

“The Henry VIII power in Clause 83(4) will be subject to the affirmative procedure. Otherwise, the negative procedure applies to regulations made under all the other powers in this group of clauses. The justification in the memorandum is that the negative procedure follows ‘a clear policy framework that has been set in Clause 78 and the related clauses of the primary legislation’….We strongly disagree with the suggestion that the clauses in question offer anything like a clear enough statement of discernible policy to justify the delegation, far less the negative procedure”.

I want it to be clearly understood by the Minister that this is a very serious matter. I hope and anticipate that she will be able to give a full explanation of why this clause has been worded in this way.

[Baroness Williams of Trafford]

My Lords, before I turn to the amendments I want to outline the Government’s latest position on the policy for high-income social tenants, which I outlined in a letter late last week. I hope this will address some of the concerns from noble Lords, particularly those who have stated their opposition to the policy and the clauses in the Bill.

I recognise and share the concern about the level of detail that has been brought forward with regard to our policy for high-income social tenants. My priority over the past few weeks has been to finalise key aspects in order to give that detail. This is particularly important, as the greater part of the policy will be set out in secondary legislation. Although I do not have regulations to share with noble Lords today, I am able to set out a significant amount of detail about what will be included in those regulations.

I am clear that secondary legislation is necessary for this policy, as we need the ability to keep the policy under review and bring forward changes in future based on a thorough review of the effectiveness of the policy and its impact. I am sure that that will be supported.

It is fair to ask how the legislation will be used in the first place. Before I turn to that, I remind the Committee of the Government’s reasons for introducing the policy. The 2015 Budget set out that households in social housing on incomes of £30,000 or above nationally and £40,000 or above in London would be required to pay a higher amount of rent if their current rent was below the market value. It is simply not right that social tenants continue to benefit from lower rates of rent as their income rises when households in the private sector on comparable income levels do not have this luxury. Households in the private sector on those kinds of incomes would, in many cases, be expected to pay the market rent. This is fundamentally unfair when it is those same taxpayers who are contributing to the lower rents enjoyed by tenants on similar incomes in the social sector. The position cannot continue.

Many taxpayers will be surprised to learn that there are more than 40,000 households in the social sector on annual household incomes of over £50,000 a year who are continuing to benefit from taxpayer-funded lower rents. Of course, that figure is at the top end of the household income scale, and we recognise that there are far more social households in receipt of incomes between £30,000 and £40,000 a year. We have always recognised that we must not damage the incentive to keep and find work, as the noble Lord, Lord Foster, says, and I know this important aim will be shared by many in the Committee. Households earning above £30,000 should be able to contribute a little more towards their housing costs, and it is on that basis that we consulted in October 2015 on a proposal for a taper to ensure that rents would increase gradually above the proposed income thresholds.

There was a strong level of support for the proposed taper, with just under 90% of respondents to the question supporting the proposal. I am pleased to be able to confirm to the Committee that the Government will be introducing a taper, and we will use regulations to set out the design of the taper. There are a number of ways in which this could be done. For example, a taper set at 20% would mean an extra 20% in rent for every £1 earned above the income threshold. A taper set at 10% would mean an extra 10% in rent for every £1 earned above the threshold. Both examples would mean that, for households just above the starting income thresholds, the rent rise would be a few pounds each week, not the doubling of rental payments that has been a prominent accusation in recent weeks. I am sure the Government’s confirmation of the taper will provide some reassurance to members of those households who have been worried that rents will jump straight to market rental values.

[Lord Campbell-Savours]

My Lords—

[Baroness Williams of Trafford]

My Lords, perhaps I may finish this statement and then the noble Lord can intervene.

The noble Baroness, Lady Bakewell, mentioned a lady who wrote to her who was a housing association tenant. Of course, this measure would not apply to her.

Of course, for those households earning far more than the proposed starting thresholds, the rent increases would be greater. However, the taper will reflect what we consider to be the best balance between ensuring fairness between the social and private rented markets, and protecting the incentive to find and keep work.

I should take the opportunity to remind the Committee about the Government’s home ownership offer to social tenants, particularly those on the kind of incomes we are talking about. If a social tenant were to make the move into home ownership, via either Right to Buy, shared ownership or Rent to Buy, the policy for higher rents simply would not apply to them. This is an important message.

The consultation also asked for views on how the administrative costs for local authorities should be dealt with. The proposal was to allow local authorities to retain a reasonable amount of admin costs, and I can confirm today that the Government will honour this proposal—the noble Lord, Lord Shipley, asked about this. Further work with local government is necessary to understand what the actual costs will be, and we will explore in detail how to implement a policy that minimises the burden on local authorities.

Moving forward over the next few months, the priority for my department is engagement with local authorities and housing associations. The work will inform much of the rest of the regulations and will be focused on three key areas: how “income” is defined for the purposes of the policy; how market rents should be established; and the process for returning money raised from local authorities to the Exchequer. I assure noble Lords that we want a policy that is workable, and this is why the engagement work is so important. I will pick up on these areas in more detail as we move through the amendments.

I hope that these opening remarks have been helpful to noble Lords and that some reassurance has been provided on key aspects of the policy on the taper and the treatment of admin costs.

[Lord Lansley]

Just for the avoidance of doubt, when my noble friend referred to the two illustrations on the taper, she referred to 10% and 20%. I understood that we are in fact talking about 10 pence and 20 pence in the pound.

[Baroness Williams of Trafford]

My noble friend is absolutely right. I had not realised that I had made that error. At this point, I shall let the noble Lord, Lord Campbell-Savours, intervene.

[Lord Campbell-Savours]

I think that the noble Lord, Lord Best, said that he thought that the Government were minded towards the lower taper. If he thought that, he must have had some indication, either from officials or from within the department. Has any discussion gone on and who is privy to it?

[Baroness Williams of Trafford]

My Lords, I think that the noble Lord spoke in hope rather than anything else. I have not had private conversations with him about what those figures would look like. I am sure he will speak for himself if he wishes to do so.

The amendments would give local authorities the option to adopt a voluntary policy for high-income social tenants. While I understand why this may seem an attractive way forward, particularly for local authorities, a voluntary approach does not help achieve our aim of a consistent and fair approach for all local authority tenants.

Amendment 69C, tabled by the noble Lords, Lord Kerslake, Lord Best, Lord Kennedy and Lord Stoneham, would give local authorities the choice about whether to raise rents for high-income social tenants. As I have explained, the policy will be mandatory for local authorities to ensure fairness and a consistent approach.

It may be that noble Lords have in mind that the policy will still be voluntary for housing associations, and it may help if I provide more detail on that decision—this goes to the point raised by the noble Lord, Lord Foster. I am sure that noble Lords are all aware that following the reclassification of the housing association sector as public by the Office for National Statistics, the Government have taken the necessary steps to persuade the ONS to reverse that decision. This means not putting in place controls over the sector, and there are clauses elsewhere in the Bill that aim to deregulate it. Part of this approach is to make sure that we do not tell housing associations how to run their business and, on that basis, we cannot force them to operate a pay-to-stay policy. However, we want as many housing associations as possible to operate a voluntary policy, and my department is taking forward discussions with the National Housing Federation and housing associations to ensure that the majority do so. Early indications are that housing associations are interested in adopting a voluntary policy and, as these conversations develop, I will bring forward more detail.

The noble Lord, Lord Foster, asked about the data from the right to stay—I think he called it—in 2012. We did not collect those data because so few housing associations and local authorities operated it, and that is still the case today.

[Lord Foster of Bath]

I meant on pay to stay.

[Baroness Williams of Trafford]

No, I am afraid not.

Amendments 69D and 76A, tabled by the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, would have the same effect as the previous amendment: they would make the policy voluntary for local authorities. I have explained why that is not our preference.

The noble Baroness, Lady Hollis, asked how pay to stay would work with taxable years. We have not yet decided how it will work. We have not decided whether it will be calculated by looking at taxable income and we are also considering whether it should be based on previous income or current income.

[Baroness Hollis of Heigham]

Can the Minister help me on this? Under UC and so on, we are dealing with real-time information, where people’s income fluctuates month by month. Does this mean that the Minister will not be interested in that fluctuation month by month in terms of the taper? As far as local authorities are concerned, and as far as I can see, they will be required to have personally tailored rents, probably revisited every month, and a different rent for every house in the street. The Minister may go on to answer that, but as far as I can see, almost no thought has been given in all the papers that I have read to the interaction between what is proposed for local authorities and what a fellow department, DWP, is seeking to achieve.

[Baroness Williams of Trafford]

My Lords, on the interaction between UC and the policy, we are doing as a priority a piece of work to explore that relationship, but there will obviously be an exemption for those on housing benefit. Officials and I have given some thought to that very point about fluctuations from month to month—for example, for someone who is on a zero-hours contract. That is the very type of thing we are looking at in terms of making this policy fair, because there will be many situations where that is the case.

[Baroness Hollis of Heigham]

Does the Minister therefore not accept that the path that she appears to be going down is individually tailored rents which will fluctuate month by month, which local authorities will be expected to determine and collect?

[Baroness Williams of Trafford]

My Lords, I may not have articulated it properly, but that is the very sort of issue that we are looking into. I hope that in due course we will see an equitable conclusion.

The noble Baroness, Lady Lister, asked about the equality impact assessment. As if by magic, by the end of this week—in fact, as we speak—I believe that it is going on the Bill website, and I have asked for a copy to be sent directly to her. If by Thursday it is not with her she knows where to come.

[Baroness Lister of Burtersett]

I am very grateful, but I remind the Minister that the Equality and Human Rights Commission said that the whole point of the assessment is that it is done while policy is being made, not in the middle of Committee, when we are discussing it.

[Baroness Williams of Trafford]

I take the point made by the noble Baroness. I can give her that confirmation today.

The noble Baroness, Lady Hollis, talked about the problems relating to data sharing. We will come on to this issue in a later group. Suffice it to say for now that HMRC will not collect any new information. The landlords collect it and confirm it with HMRC. It is a criminal offence to disclose HMRC data unlawfully, but as I say, we will come on to this matter in a later group.

[Lord Campbell-Savours]

Will the Minister answer the direct question I asked of her? Is it true that private companies will have access to information on the incomes of council tenants where the total income of the household exceeds £30,000 a year? The answer to that is yes or no.

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[Baroness Williams of Trafford]

The answer is yes. The landlord will collect the information and confirm it with HMRC, which is slightly the other way around, if that makes sense. As I say, perhaps we should leave the discussion about HMRC—

[Lord Campbell-Savours]

Having agreed that that is the case, will the noble Baroness confirm that this is the first time in history that that has happened?

[Baroness Williams of Trafford]

My Lords, landlords collect the information and they send it to HMRC. It is not a question of HMRC collecting any new information; HMRC will not be doing that. Perhaps we should park the HMRC issue because we will come on to it in a later group.

I turn to Amendment 70D tabled by among others the noble Lords, Lord Best and Lord Beecham. This would give local authorities a choice about how to set rents for high income social tenants. Taken together with previous amendments that seek to make the policy voluntary, this would mean that a number of different approaches would be taken up and down the country. As I have said, that is not our preferred route as we want a consistent approach for all local authority tenants. This is best achieved by the introduction of a taper, which I hope I have covered thoroughly already. Regulations under this clause will be used to confirm the taper.

Housing associations will be free to decide on the most appropriate level of rent, although we hope that the majority will copy the approach of the taper that will apply to local authority tenants. The housing associations we have spoken to have suggested that this will be the most likely scenario.

Amendment 70E would enable local authorities to decide how rents should be set, presumably after they had taken the decision on whether to adopt a policy. I refer the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, back to the previous discussions and the commitments I have given on rents by way of a taper. This will apply to all local authority tenants and will link rent rises to increases in household income.

Amendment 75C, tabled by among others the noble Lords, Lord Best and Lord Kennedy, would change the status of the guidance issued by the Secretary of State. Local authorities will be very clear that if they are to be required to operate the policy, they need guidance about the steps they should take. The purpose of guidance will not be to prescribe exactly the processes and technical support needed to operate the policy within an authority but it may set out, for example, how income has been defined under the policy and the types of evidence that may be acceptable to help to verify declarations made by tenants. I am sure that noble Lords will be interested in any guidance that we intend to issue, and I will certainly share it when it becomes available.

Amendment 79C is concerned with the approach for non-declaration of rents by social households. I thank the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, for the amendment and I will turn to the reasons for the power in a separate part of the debate. This amendment seeks to make the power voluntary for local authorities, but we believe that where action is needed for tenants who do not declare, the approach should apply consistently across the country. We are considering how this power could also be used by housing associations in discussion with them, and I am clear that there should be a fair and consistent use of the approach for non-declaration.

Finally, Amendment 81, tabled by the noble Lords, Lord Kennedy and Lord Beecham, would mean that payments made to the Government under the policy could not be based on an estimate of the rental income increase or on a formula approach based on a set of assumptions. We have not taken a decision on the approach as further engagement with local authorities is necessary. I think that also answers the point put by the noble Baroness, Lady Hollis. However, there needs to be flexibility in the power to ensure that the most appropriate approach can be taken. I will carefully consider both the benefits and the drawbacks to an approach based on actual receipts and one based on estimates. Engagement with local authorities will continue over the next month, and the issue of how to return money will be at the top of the agenda. We will listen carefully to the arguments before making a decision.

As I have said, I recognise why there is a desire for local authorities to operate this policy voluntarily, but I hope I have done enough to persuade noble Lords why that would not be the best way forward. The Government have a clearly stated policy that high income social tenants should pay a fairer level of rent. On that basis, it is only fair that it should apply consistently across local authority tenants. I have outlined why we cannot do the same for housing associations, but that we are working closely with them to ensure they take up the policy. Alongside this, I have provided confirmation of our commitment to a taper that will meet a reasonable level of the costs of operating the scheme for local authorities. On that basis, I ask that the amendment be withdrawn.

[Lord Kennedy of Southwark]

I think I heard the noble Baroness correctly, but I might be wrong, when she said earlier that council tenants receive a taxpayer-funded subsidy. If that is the case, will she say a bit more about it?

[Baroness Williams of Trafford]

My Lords, I talked about council tenants on higher incomes benefiting from a taxpayer subsidy when many people in the private rented sector who are on lower incomes would not be able to avail themselves of such a subsidy.

[Baroness Hollis of Heigham]

Could the noble Baroness specify what form that subsidy takes? Certainly in the local authorities I am familiar with, the rents charged cover maintenance, repairs, collection, administration and the like, and receive no taxpayer subsidy—unless the Minister is saying that anything below market rent is a subsidy by definition, which I think is an absurd position. As far as I am aware, there is no subsidy. Perhaps the Minister can specify in what ways the taxpayer subsidises council tenants.

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[Baroness Williams of Trafford]

As the noble Baroness says, the rents are below the market rent.

[Baroness Hollis of Heigham]

What the noble Baroness is saying is that every time private landlords’ rents go up, the subsidy to council tenants from the taxpayer is increased. That is Orwellian.

[Baroness Williams of Trafford]

My Lords, I think that we will have to agree to differ. I recognise that there are different opinions across the Committee on this, but I have made the point because social rents are lower than market rent.

[Lord Beecham]

Market rents are artificial. There is nothing God-given about market rents because they are determined by landlords, largely on the basis of a shortage of affordable housing anyway. In so far as there is a subsidy, surely it is the subsidy that is paid in the form of housing benefit for private tenants, about which the Government propose to do nothing at all.

In addition to that, the noble Baroness referred to the need for consistency across all local authorities. She has not made an argument for that, she has merely stated it as a given. The Government do not take the same view about council tax. They did in a sense when they introduced the poll tax, and they seem to be making the equivalent mistake here with local authority rents. It is an absurd proposition that the same system should apply across all local authorities irrespective, for example, of the value of the housing and average local incomes. Where is the justification for the simple assertion that that must be the basis of the scheme?

[Baroness Williams of Trafford]

I am sorry, I thought that the noble Lord was going on to make a speech. The fact is that generally social rents are cheaper than market rents, although they have been going up at a higher rate than rents in the private sector. I do not think we can compare this proposal with council tax because different areas have different needs in terms of the services they provide.

[Lord Best]

My Lords, I am grateful to all noble Lords who have joined in this debate. As has been the pattern in other parts of the Bill, we have started with a lengthy session which has looked at the full policy implications in this area. There are a lot of amendments yet to come on pay to stay, but I think we have already aired some of the broader policy issues.

The noble Lord, Lord Shipley, commented on the administrative costs of handling this scheme, to which many other noble Lords drew attention. We will come to Amendment 75A and have another go at that issue, which is clearly very important if the scheme will cost an awful lot of the money raised just to administer. That is money just going round in circles and achieving nothing at all.

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[Lord Kennedy of Southwark]

My Lords, this group of amendments largely looks at conditions of exemption to the pay-to-stay provisions proposed by the Government. All the amendments in the group bear the names of either myself or my noble friend Lord Beecham, with the exception of Amendment 82A put down by the noble Lords, Lord Lansley and Lord Young of Cookham. Their amendment identifies an omission and seeks to correct it. It is welcome but, as the noble Lord, Lord Lansley, said, the Government seemed to confirm that it is not necessary.

Amendment 70 is in my name and that of my noble friend Lady Lister. It seeks to put in the Bill a number of exemptions to which any regulation made by the Secretary of State under Clause 78 would not apply. My noble friend Lady Lister moved the amendment, which is at this stage only a probing one that seeks to highlight a number of problems with the across-the-board application of these regulations, making people pay to stay in their council property.

The noble Baroness, Lady Williams, may shortly tell your Lordships’ House that none of these exemptions are necessary. Maybe when we hear the Government’s response, we on these Benches will come to the conclusion that some of them are not. However, senior citizens who have worked all their lives, people with registered disabilities, or households with people in receipt of care or where a member of the household is a carer for another person living there are such exemptions: the Government should seek to protect such people from this unfair policy that will make life difficult for people on quite modest incomes.

Could the noble Baroness respond to the comments made by my noble friend, apparently attributed to Marcus Jones MP in the Bill Committee in the other place? That would be very helpful. If not, could she write to us about that? It would also be helpful if she provided more information about the work the department is doing in this respect.

I recently saw a job advertisement, I think in the Evening Standard, from a London borough recruiting parking enforcement officers. The pay was about £21,000 or £22,000 a year. I thought, “Two parking enforcement officers living in the same property in London would be deemed high-income social tenants”. That is ridiculous. I agree with the noble Lord, Lord Kerslake, who said that this policy evolved under the coalition and today, under the Conservative Government, has been pitched at a much lower level to catch a lot more people, many of whom can in no way be regarded as high-income earners. Couples earning more than £30,000 outside London are not high-income earners in any respect. If would be helpful if the noble Baroness explained how this policy has evolved since last year’s election.

Amendment 70B in the names of the noble Lords, Lord Best, Lord Kerslake and Lord Low of Dalston, and my noble friend Lord Beecham, seeks to make these regulations effective only for new tenancies granted after April next year, again as a mechanism not to penalise those presently holding a tenancy.

Amendment 70C seeks to afford some protection for a tenant following a mutual exchange or transfer. I signed up to it, along with the noble Lords, Lord Best and Lord Low of Dalston. It raises a particular issue regarding mutual transfers and could even encourage people to undertake such a transfer, perhaps releasing a larger property to a family. It may not be quite right but I hope the noble Baroness can see the problems that will be created and the issues that regulations will have to tackle to avoid some real injustices coming out of this ill-thought-out policy.

Amendment 74, in my name and that of my noble friend Lord Beecham, seeks to provide some protection for affected tenants by building in a process of external valuation of high-income rents. Even with the much talked about taper the Government have said they will introduce, some external valuation of the rent must be of benefit to tenants and would help to bring some element of fairness to this most unpopular policy.

Amendment 75, in my name and that of my noble friend Lord Beecham, seeks to bring in the higher rents over a period of time: first, a notice period of one year before the new rents become payable; then some transitional protection as the tenant moves to the higher rent. This, in effect, is the taper the Government talked about and on which we will need to see much more information.

Amendment 75B seeks to pilot these proposals, as the noble Lord, Lord Kerslake, referred to them, in a number of areas before rolling them out across all local authorities. Of course, this was used in respect of the new requirements in the Immigration Bill for landlords to check tenants’ documents to satisfy them that they are able lawfully to rent a property. I know the noble Lord, Lord Best, was involved in the evaluation process in that respect. He spoke about how well the pilots had gone. It would be beneficial for the Government to adopt a similar pilot approach here.

Amendment 76 is similar in its intention to Amendment 70B. This is an interesting group of amendments, raising real, practical difficulties. As with previous groups, I may have some further questions for the noble Baroness as she responds to the debate.

[Baroness Williams of Trafford]

My Lords, this second group of amendments is concerned mainly with exemptions from the policy and seeks to put a substantial amount of detail into the Bill about who the policy should apply to. Of course, it is important that where there is a strong justification for an exemption, we consider it carefully. We are doing just that, and putting the detail in the Bill would prevent us thinking through the pros and cons of potential exemptions carefully. We need some flexibility to conclude our work and put detail in regulations.

I will start with Amendment 70, tabled by the noble Lord, Lord Kennedy, and the noble Baroness, Lady Lister. It specifies a wide range of groups that the policy should not apply to. As I have explained, we do not want to put this detail in the Bill but I will outline my position on each of these groups. First, while I do not immediately see why someone on a zero-hour or seasonal contract whose household income is above £30,000 should be exempted, I recognise entirely that it will be important to build in some flexibility for households where income fluctuates, as I mentioned earlier. I will return to that issue later.

I am also not attracted to an exemption for people over 65. Income from pensions can be considerable and it would not be right to exempt a group of people who are mainly retired but where the annual income is greater than that of people in work. That strikes me as quite unfair. Having said that, we are of course giving careful thought to the issues of different pension incomes, including the treatment of Armed Forces pensions.

I am very sympathetic to the suggestion that we should consider how to protect those with a registered disability or who have significant caring responsibilities. However, we must recognise that even in these scenarios the household income may, in certain circumstances, be high. It would not be right on that basis simply to provide an exemption for whole groups. A better approach may be to design the policy to ensure that income from certain state benefits is not included in the eventual definition of income.

I will turn to the definition of income more generally in a later grouping but it is worth highlighting now that the disability living allowance is not a taxable benefit. It is unlikely that we would include income from this in the final definition of income. Carer’s allowance is a taxable benefit but this does not automatically mean we must include such income in our eventual definition. We will give this careful thought, and I welcome the views of noble Lords on it. The noble Baroness also mentioned the impact on certain protected groups. The data from the Family Resources Survey have been analysed to consider the impact on different household types. This is set out in the—now infamous—impact assessment.

I hope this section of the debate has persuaded the Committee that we are giving the issue of exemptions careful thought. I am happy to meet noble Lords privately on this issue, as I recognise how important it is.

Amendments 70B and 76, tabled by the noble Lords, Lord Kerslake, Lord Best, Lord Kennedy, Lord Stoneham, and Lord Beecham, seek to restrict the policy to new tenants only. In most circumstances, new tenancies of social properties should be given to those in most housing need, where they are below the income thresholds that we have set. Those in the greatest need of social housing are therefore more likely to be new tenants with an income under the proposed thresholds. It is existing tenants who are more likely to be on higher incomes, and the policy should apply to those currently living in social housing.

I have already outlined the Government’s significant home ownership offer to existing tenants, particularly those on higher incomes, and I would encourage all tenants to look at the opportunities that are available, but it would not be right to exclude existing tenants from the policy.

[Lord Beecham]

Would the effect of encouraging people on higher incomes to buy their houses not be, ultimately, to diminish the number of houses for those who cannot afford it and who, apparently, the Government want to help?

[Baroness Williams of Trafford]

Would the noble Lord please repeat what he has just said?

[Lord Beecham]

The Minister has just said that the object of the scheme is to get people with higher incomes to pay the full rent, move out of the property or perhaps buy it—she was talking about Help to Buy. The effect of that, ultimately, is to diminish the pool of houses available for rent by the people whom she thinks need support.

[Baroness Williams of Trafford]

My Lords, that is why we have right to buy and why we have a programme in place to build so many houses, of different tenures, in the course of this Parliament. It is not undermining it; it is making sure that there is a more level playing field for both tenants on higher incomes and the new tenants, whom I referred to as being in genuine housing need. That is not to say that the other tenants are not also in genuine need.

Amendment 70C seeks to exempt households which exchange their property for another social home. I thank the noble Lords, Lord Best, Lord Kerslake, Lord Kennedy, and Lord Low, for this amendment, but I do not see the rationale for it. If a household is on a higher income, then the rules should apply equally, regardless of whether they exchanged their property voluntarily or not. Those households would be subject to the taper arrangements that I have set out at length. I am also reluctant to provide an exemption for homes that have transferred as part of a large scale voluntary transfer. For example, for homes that have transferred to a housing association, the policy should apply if the housing association has a voluntary policy in place. We want housing associations to adopt voluntary policies, and so my instinct is that there should not be an exception for properties transferred.

Amendment 74, brought forward by the noble Lords, Lord Kennedy and Lord Beecham, seeks external valuation of high-income rents. I do not believe this is necessary. An external valuation is not only unnecessary but would add bureaucracy, cost and delay. I have confirmed that we will be introducing a taper, which will be the basis of rent setting. It will also be important for the Government to articulate how the process of establishing a market rent value for properties should work. The powers in the Bill can also provide tenants with an appeal mechanism if they feel that their rent levels are wrong. This is an important protection and we intend to use regulations to give tenants this right of appeal.

Amendment 75, also tabled by the noble Lords opposite, would provide for a notice period of one year before the rent becomes payable and transitional protection as the tenant moves to the higher rent. I am not sure how this would work, because rent setting is usually done around three months before a new rent year. Providing for a notice period of a year before the new rent comes in would mean that the rental amount would not be consistent with changes in household income over the notice period. As I have already said, we are giving careful thought to how income and implementation would work.

[Baroness Hollis of Heigham]

Would the Minister please repeat her statement about the difficulties caused by rents changing as a result of this policy, particularly in the period between notification and payment? The whole push of our previous two hours’ discussion has been that she is producing a system in which every tenant will pay a different rent—probably month by month—according to what is happening to their earnings.

[Baroness Williams of Trafford]

I will repeat my statement. Rent setting is usually done around three months before a new rent year. Providing for a notice period of a year before the new rent comes in would mean that the rental amount would not be consistent with changes in household income over the notice period. However, I will return to rent reviews shortly.

Amendment 75B, tabled by the noble Lords, Lords Kerslake, Lord Beecham and Lord Stoneham, seeks to pilot the policy before full implementation. I recognise that pilots have some benefits in certain circumstances, but it would not be workable here as it would be unfair on tenants in those areas. The policy must apply nationally from April 2017. Although we will not be piloting the policy, I recognise that we need a strong approach to implementation. Local authorities have told us that they need time to put in place the arrangements for implementing the policy. That is a fair request. My department is pushing forward with engagement, and the next few months will be critical. We intend to issue guidance to ensure that authorities are ready to operate the policy, engage with tenants, and set correct rents from April 2017.

I will also take this opportunity to update the Committee on engagement with tenants. We need to make sure that they have the best source of information and advice. Our engagement strategy includes a plan to talk to tenant representative groups and Citizens Advice. For example, it will be important for them fully to understand the commitment I have given to bring forward a taper to ensure that rent rises are affordable.

Finally, Amendment 82A seeks an exemption for rent-to-buy schemes. I can confirm to the noble Lords, Lord Lansley and Lord Young, who tabled the amendment, as well as to the rest of the Committee, that the policy will not apply to tenants in a rent-to-buy or shared ownership property. I have already reinforced the point that the home ownership offer to tenants, particularly those on higher incomes, is very important. I would rather see those households taking up the offer of home ownership than facing higher rents under the policy for high income social tenants. I hope noble Lords will feel able to withdraw their amendments.

[Lord Kennedy of Southwark]

Many of the amendments in this group are probing ones and these matters would be better left to regulations. However, we come back to the problem: we have not got any regulations so scrutiny is extremely difficult. That leaves us having to put down amendments on these issues to try to drag out the Government’s thinking. At the end of the day, the amendments are on the Order Paper today only because the Government have sought to push the Bill through at such a pace and not wait for the regulations to be made.

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[Lord Kennedy of Southwark]

Perhaps I might make one final comment—it will be my last on this group. Will the Minister agree to reflect on some of the comments made in this debate and the previous debate, particularly the comments of my noble friend Lady Hollis? In the previous debate we were talking about income levels and rent levels changing almost weekly or monthly, but here the Government want a consistent level. For me, the two debates highlight some inconsistency and we need to look at that. Again, we do not want to get ourselves into difficulties in the future.

[Baroness Williams of Trafford]

My Lords, the noble Baroness, Lady Hollis, said that I said that higher-income tenants should think about buying. It was not a direction for higher-income tenants to think about buying but, going forward, they may well think about buying—86% of people aspire to own their own home. This may be the opportunity for them.

The noble Lord, Lord Kerslake, said that the pilots need not be inequitable because they do not need to introduce the new rents. I would have thought that the reason for the pilots would be to see how the new rents actually work.

The noble Lord, Lord Beecham, asked about the CAB and whether conversations were going on. We are in continued engagement with the CAB and other—

[Lord Beecham]

With respect, I welcome the fact that discussions are going on. My question was: were there discussions with those organisations about the whole policy before the Government settled it?

[Baroness Williams of Trafford]

I will have to get back to the noble Lord on that precise detail. Somebody asked me a fourth question—I think it might have been the noble Baroness, Lady Hollis—but I did not write it down fully.

[Baroness Lister of Burtersett]

My Lords, a number of different points have been raised in what we call a wide-ranging debate, albeit a relatively short one. I was particularly struck by what the noble Lord, Lord Kerslake, said—it was echoed by the noble Lord, Lord Best—about the need for a pilot; otherwise, it is a leap in the dark. It is disappointing that there is resistance to the idea of a pilot—although I have to say, after the pilot we had under the Immigration Bill on the right to rent, my enthusiasm for pilots has rather waned given how that one has panned out.

I am grateful for what the Minister said in response to Amendment 70 in so far as she said that the Government are sympathetic to the position of severely disabled people and people with caring responsibilities. But then she pointed out that household income may be high. As in our previous debate, she did not really address the point about how you cannot look just at income, you have to look at needs—what is being met by income. Yes, needs would be partly met by exempting certain benefits: but, as Habinteg points out, even if people are receiving those benefits, they go only part of the way towards meeting the needs associated with disability and caring.

I am not asking her to come back now but I would be grateful if she could address in any subsequent letter the specific point about people in adapted accommodation. It is a really important point and, as I said, a similar point applies to victims of domestic violence under the sanctuary scheme. For the record, the Minister appears to be nodding—I think in acceptance that this is an issue.

I thank the Minister for what she said about the possibility of a meeting. But it would be important to bring in those who work directly with carers and disabled people because they can bring an expertise to that meeting that I cannot, and I would want to know what they felt about different approaches to exemptions that would best meet the needs of carers and disabled people, in the spirit of the kind of engagement that she was talking about. Again, I detect a slight nod, so I hope that might be possible.

Going back to some of the issues that have just been raised about the right to buy, I was very struck by some of the people who wrote to me and came to see me, who either said that they had deliberately, as an act of principle, not bought their home or said that there was no way they could even countenance buying their home on their income—so it really is not any kind of answer.

Can the Minister say when we will have the information about what the regulations will say with regard to exemptions? Will it be before Report? If it is not before Report, we will just be working in the dark again on Report.

[Baroness Williams of Trafford]

My Lords, as I said earlier, I will get information about regulations in so far as I can by the end of the week. I cannot undertake to get information on exemptions by Report, but by the end of the week I will have as much detail as possible on some of the regulations that are coming forward and, most importantly, the timeline for them as well.

[Baroness Hollis of Heigham]

My Lords, I think we recognise that the Minister is doing her best to be helpful but does she not think that this is a little odd? She had a firm view about pensioners—that they should not be exempt from pay to stay—but she did not really have a clear view on whether any of the other groups mentioned in the amendment would be entitled to some consideration or exemption from pay to stay. We are in Committee, the Bill having gone through the other House, and the Minister still cannot help us—I am sure she would like to—as to who will be caught by this policy.

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[Lord Campbell-Savours]

My Lords, Amendment 79, which was tabled by my noble friend on the Front Bench, took my eye. It provides that the definition of,

“high income cannot be set at a level lower than median incomes”.

As I understand it, the effect of that would be to raise the threshold by from about £30,000 to £40,000 on properties outside London and from £40,000 to more than £50,000 in London.

[Baroness Williams of Trafford]

My Lords, could the noble Lord repeat that? I could not quite hear the beginning of what he said.

[Lord Campbell-Savours]

Amendment 79 states that the definition of high income cannot be set at a level lower than median incomes. That would raise the thresholds, would it not? I do not like the system at all, but that at least raises the level at which people would start to pay a higher rent. Will Ministers seriously consider that amendment?

I really want to talk about Amendment 72, which provides that the amount of rent to be charged to high-income tenants is,

“to take into account the need to promote socially cohesive and mixed communities”.

That is a very important issue. The other night, I was talking about what happened in west Cumberland, when I was minded to support right to buy early in the 1980s. Some of the estates in my area had a high density of renting populations, and I did not believe that was particularly good for social cohesion. I believed at the time that the introduction of the right to buy in areas such as mine in the north of England would help social cohesion by widening aspiration within communities.

The provisions of the Bill make me worry that as property is subsequently sold, which is what will happen, there will be pressure due to higher rents being demanded. In employment law, I think it is called constructive dismissal; in this field, I would call it constructive eviction. That is what people will feel: they will be all but evicted by the requirement to pay higher rents.

I am losing my train of thought. Perhaps I should give in at this stage. I will retake my seat and gather my thoughts. I am very sorry.

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[Baroness Williams of Trafford]

My Lords, I thank all noble Lords who have debated these amendments. I should say to the noble Lord, Lord Beecham, first, that I think that his letter may be in the post, just as the noble Lord, Lord Campbell-Savours, may have two letters in the post—this one and the one to which I referred earlier. I turn to the noble Lord’s various questions. He asked how many people in London were affected; there are around 46,000 social tenant households with incomes of over £40,000 who could be affected in London. That includes both local authority and housing association tenants, should the housing association wish to implement this.

I turn to the large group of amendments on income and rent setting. I start by reiterating the commitment I have given to introduce a taper, which will see rents rise gradually as income rises. I give advance warning that this commitment will be the basis of my response to most of these amendments.

I remind noble Lords of the purpose of the clauses to which the amendments relate. Clause 79 will set out a definition of high income and say how this will be calculated. It should be made clear that, in the context of the policy, the income threshold will apply only to the tenants or joint tenants and their spouses or partners. Clause 79 also allows that regulations can specify certain important aspects of that calculation, including the definition of high income for different areas, such as is the case with London; the clause also allows Government to specify what should, or should not, be treated as income for the purposes of the policy. As I mentioned earlier, when we are looking at possible exceptions of groups from the policy, Clause 79 would allow us to make sure they are not adversely impacted.

Clause 80 will make sure that landlords have the power to require the necessary information of households and that reasonable timeframes are provided for the submission of this information to the landlord. In the event that households fail to provide this information, Clause 80 would sanction that rents would automatically rise to a higher level than they may normally pay. This increase in rent should encourage prompt declarations, in a proportionate way. Protections under Clause 82 will ensure that rents will return to their normal levels once the necessary information is declared. This also applies to those tenants whose income falls below the high income threshold following a change of circumstances.

The noble Baroness, Lady Lister, asked me—I think in this group, although time blurs the groups into each other—about particularly vulnerable people who have had a crisis and are not able to provide information. As we work through this aspect of things, that will become clearer, but I am mindful of when that might provide a real problem, particularly for people in crisis.

Clause 83 will give local authorities the power to change tenancy agreements to apply the policy. This clause, most importantly, would give tenants the right to appeal the calculation of their income should they believe that they are incorrect. Clause 83 is fundamental in ensuring that tenants have the opportunity to challenge a calculation, and that a proper process is in place should they wish to do so.

[Baroness Hollis of Heigham]

I thank the Minister for giving way. We know that appeals procedures usually take several months; we also know from experience that people’s income fluctuates very widely. How would the Minister protect local authorities from having to recalibrate the rents to be charged each and every month to their tenants? How will the local authority ever stay on top of that information when the tenant is going to appeal continually and reiteratively, I suspect, on the basis of the misinformation of the local authority in imposing the last rent increase, which was based on information sent into them four, five or six months before? Surely, this is the point made by the noble Lord, Lord Kerslake—that the administration of this should have been piloted; then there would be a learning loop as to the problems. I would hate to have to do this, if I were in charge of housing in a local authority. The Minister is passing a nightmare over to local government with monthly, individually tailored rents as income monthly fluctuates.

[Baroness Williams of Trafford]

The intention is certainly not that tenants would pay different levels of rent every month. That is precisely what we want to get right—to reduce the administrative burden and reduce the anxiety for tenants, particularly those with varying incomes, either month to month or week to week. That is the type of thing that we will work through with this.

[Baroness Hollis of Heigham]

My Lords—

[Baroness Williams of Trafford]

My Lords, I am not going to give way.

Most importantly, Clause 83 will give tenants the right to appeal the calculation of their income, should they believe that they are incorrect. Clause 83 is fundamental in ensuring that tenants have the opportunity to challenge a calculation.

I will start with Amendment 70A, tabled by the noble Lords, Lord Best, Lord Cameron, Lord Kerslake, and Lord Kennedy. This amendment seeks to restrict the amount by which rent is increased within this policy. I have already outlined in some detail our commitment to introduce a taper to ensure that increases in rent are more closely linked to increases in income. This will ensure that rent rises are affordable and protect the incentive to find and keep work.

Amendment 71 seeks to establish a test of local affordability in rent setting. I thank the noble Lords, Lord Kennedy and Lord Beecham, for this amendment. The Government believe that this is best achieved through a correct setting of market rents within areas, and I have confirmed already that we are considering how this will work. We need to find an approach that can be easily implemented by local authorities but that is a fair representation of the market rental rate. This issue forms a key part of our engagement work with local authorities.

Noble Lords opposite have also tabled Amendments 72 and 77. Amendment 72 asks us to take into account the need to promote socially cohesive and mixed communities. I find this a slightly odd amendment, as I would have thought that the issue of low rents for households on high incomes is actually a divisive issue for communities. Social housing should be aimed squarely at those in real housing need, and it is absolutely right that when families need support they benefit from being in a mixed community. This is our policy.

However, there are more than 40,000 households with incomes of £50,000 or more who are benefiting from lower rents than their neighbours in the private rented sector. Far from being an issue, our policy aims to establish a level playing field across communities. It is worth pausing again here to consider the home ownership offer that the Government have for tenants of social housing, which they may wish to take up—but I am certainly not directing them to take it up.

Amendment 77 seeks to define high income in relation to average incomes in an area. Currently, the median household income figure is £26,000, which I should point out includes both working and non-working households. It is important to recognise that there are working households in the private sector on or below this median amount who are expected to find rents higher than that enjoyed by social tenants on similar incomes. On that basis, our starting threshold of £30,000 nationally is a fair point at which higher rents should become payable. I have already outlined our commitment to a taper to ensure that rent rises are gradual beyond this income threshold.

The noble Lord, Lord McKenzie, who is not in his seat, asked what constituted a household. There is a definition in the voluntary scheme; it includes tenants, joint tenants, spouses, partners and civil partners. That is the kind of thing that we are looking at.

The noble Lord, Lord Cameron, tabled Amendment 77A, which seeks to include a provision to take into account the variability of household income within the definition of high income. The amendment is unnecessary as we already have the power set out in regulations to treat variations in income within a year. That goes back to the point made by the noble Baroness, Lady Hollis. We certainly intend to cover this in regulations. There will be circumstances that are obvious candidates for inclusion, such as the death of a household member or a sudden and significant drop in income, but beyond that we must strike a balance between allowing a review of rent and minimising the burdens on landlords. We cannot have landlords constantly reviewing rents, for example, as the noble Baroness, Lady Hollis, suggested. There must be a sensible approach.

Amendment 79A, tabled by the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, seeks to put higher income thresholds in the Bill. We are not doing this as it would prevent us from bringing forward changes to the thresholds if the evidence supported a change. Our intention is to keep the policy under review and I am sure that that will be supported. I am sure—the noble Lord, Lord Shipley, confirmed this—that the purpose behind the amendment is to question the starting thresholds that were set at the Budget. We have said that rents should rise where household income is more than £30,000—£40,000 in London—but I once again draw attention to my commitment to put in place a taper. It will ensure that for those households on £30,000 the rental increase will be limited to a few pounds each week. While the starting incomes for thresholds are right, we have accepted that there is a need to protect work incentives and this is the purpose of the taper.

Amendments 79B and 79D concern the ability to raise rents where income information has not been provided by tenants. I thank the noble Lords, Lord Kerslake, Lord Beecham, Lord Kennedy, and Lord Low, for tabling these amendments as this is an important part of the Bill. I recognise why there are concerns about the power to raise rents for non-declaration. I will spend some time outlining how we see this power working. Tenants may be required to declare their household income and I have already outlined that we are thinking through the options for defining “income”. We are also considering what evidence is needed to support a declaration. It will be important for tenants to have plenty of time to gather this evidence and I have set out our intention to communicate this policy effectively to landlords and tenants groups.

It is, however, inevitable that there will be some households who, for whatever reason, do not declare details of their income. In these circumstances the Government face a choice. Do we make it a criminal offence or do we take a different approach? My preference is for the latter as a criminal offence seems entirely disproportionate. The power that we have taken therefore would give landlords the ability to set rents at the highest available in that area if there is a consistent failure to declare details of income. When I say “consistent”, I mean that there will be clear guidance for landlords on the amount of effort that they should put in to trying to contact tenants, and only when all of these approaches have failed should rents be raised.

I also make it clear that we do not see higher rental rates applying for the whole of the rental year. If raising rents for non-declaration spurs a household to take action to declare details of income at a later point in the year, the Bill allows for the rent to be set back to the correct level and regulations will set out this approach. I also give a firm commitment that we will clearly communicate this area of policy to landlords. Guidance will require them to set out the impact right from the start in all communications to tenants.

On Amendments 80B and 80C, tabled by the noble Viscount, Lord Hanworth, I refer back to some of the discussion on how reviews of rent could be treated. There will be certain circumstances in which a review of rent would be appropriate: for example, the death of a household member or a sudden loss of income. The power in question, however, deals primarily with circumstances when the income level of the household drops below the threshold for a high-income rent. In those circumstances we intend to use regulations to state that the rent levels should revert to the original level. This will include circumstances where rent has been raised as a result of non-declaration and it is subsequently determined that the rent level should remain as it is currently.

Finally, Amendment 82AA, tabled by the noble Lord, Lord Bassam, seeks a published review into the effect that the policy would have on community cohesion within all local authority areas. I have already expressed our intention to keep the policy under review and also explained my views regarding the detrimental effect that low rents for households on high incomes can have on communities.

[Lord Campbell-Savours]

What is the latest estimate of the number of households above the £30,000 and £40,000 thresholds? There must be a government estimate. If there is an estimate, does that not suggest that the work has already been done on the exemptions; otherwise, they would not have been able to produce an estimate?

[Baroness Williams of Trafford]

My Lords, I have the figure for London, as the noble Lord, Lord Beecham, asked for it. There are around 46,000 social tenant households with incomes of over £40,000 in London, but that does not presume exemptions.

[Lord Campbell-Savours]

And outside London?

[Baroness Williams of Trafford]

I do not know. I will get that figure to the noble Lord.

[Lord Kennedy of Southwark]

The Minister just referred to the amendment from the noble Lord, Lord Bassam; does that not come in a much later group?

[Baroness Williams of Trafford]

I did wonder, given that the noble Lord, Lord Bassam, was not in his place. I will just refer to the Marshalled List. The noble Lord is absolutely right, so if noble Lords could just ignore what I have said on Amendment 82AA.

I ask the noble Lord to withdraw the amendment.

[Baroness Hollis of Heigham]

I still have not got the faintest understanding of how pay-to-stay rents will connect with people’s incomes and UC. Clearly, universal credit is established on a monthly basis on real-time information and in due course will include housing benefit, if that is a flow of income. How often does the Minister expect pay-to-stay rents to be adjusted by the local authority over the course of the year in the light of changing incomes as reflected in UC—monthly, quarterly, yearly? Every answer has a distinct downside.

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[Baroness Williams of Trafford]

As I think I have said to noble Lords on several occasions, this will be laid out in due course. Clearly, we would not want to be adjusting rents month in, month out for people. That is the sort of detail we will be working through, and it brings my thoughts back to a different policy brought in under the Labour Government—tax credits. You had to let the authorities know if your pay changed. The detail will be laid out in due course, as I think I have explained several times.

[Baroness Hollis of Heigham]

It is not a detail—it is at the core of local authorities’ ability to handle this scheme.

[Baroness Williams of Trafford]

As I said, details on regulations and timelines will be with noble Lords before the end of the week.

[Lord Campbell-Savours]

Does it not mean that in effect, there will be year-end rent bills for tenants?

[Baroness Williams of Trafford]

My Lords, that is in the detail.

[Lord Kennedy of Southwark]

I am sure the Minister has picked up from the debates on this group and the previous couple of groups that, the more we drill into this, the more and more complicated it is getting. She and her ministerial colleagues have some job to get this right. I am sure it will get worse. It is very difficult to get this right and, in some ways, I wish her all the best.

On another point, I think I heard the Minister give the number of people on incomes of more than £50,000. If she is using that figure in her arguments, why are we setting the rates for higher rents to start at £30,000 and £40,000?

[Baroness Williams of Trafford]

My Lords, I was simply making the point that there are a high number of households with incomes of more than £50,000.

[Lord Kennedy of Southwark]

I get that point, but it is a bit odd that the Bill before us refers to incomes of £30,000 and £40,000, but in her argument the Minister uses an income of £50,000.

[Baroness Lister of Burtersett]

The Minister may be coming to this but I asked—as I did at Second Reading and am still waiting for the answer—why the threshold has been reduced from that used in the voluntary scheme.

[Baroness Williams of Trafford]

My Lords, I cannot speak for the Government back in 2012 and say how they arrived at their figures, as I simply was not here to be part of those discussions. However, I will try to provide some background for the noble Baroness.

[Baroness Lister of Burtersett]

Can the Minister also let us know what will happen to the threshold in the future? I know that average wages are not going up by very much at present but they will gradually go up and surely the threshold should reflect that.

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[Baroness Williams of Trafford]

I answered that in responding to a question from the noble Lord, Lord Shipley, about not putting the thresholds in the Bill because they might change.

[Lord Best]

My Lords, I apologise for my delay in rising to speak. I did indeed lead on this amendment, although I spoke to it very briefly compared with the debate that has followed. The rather modest recommendation in my amendment that these rent increases should be limited on the basis of 5% or inflation plus 2% is one of very many ways in which one could make a significant difference to people’s lives with the disruption that is still coming down the road, even with the tapers that we have heard about.

It may be that others have not read into the mysterious letter, which has gone to a number of noble Lords, what I have: that we have a choice of two levels of taper—10p in the pound or 20p in the pound. I hope very much that the Government will go for the 10p. Those are the options the Government are now seriously considering, and we have to accept that. It is a very much better deal than people had feared. Now, you would have to have an income approaching £100,000 in order to pay the market rent in Camden for some of the highest-value properties. The gap is so wide that at 10p in the pound or 20p in the pound, it will take a long time to fill it.

I shall not detain the Committee any longer. I apologise for being slow to get to my feet, and I beg leave to withdraw the amendment.