Draft Insolvency of Registered Providers of Social Housing Regulations 2018

Debate between Dominic Raab and Jim Fitzpatrick

Wednesday 21st March 2018 General Committees

[The Minister for Housing (Dominic Raab)]

I beg to move,

That the Committee has considered the draft Insolvency of Registered Providers of Social Housing Regulations 2018.

It is an enormous pleasure and an honour to serve under your chairmanship, Mr Evans.

The regulations were laid before the House on 7 February 2018. Increasing the supply of homes is a top priority for the Government, and that includes increasing the number of homes for social and affordable rent to help people access decent housing in which to build and improve their lives. Since 2010, we have delivered more than 357,000 new affordable homes, including 257,000 affordable homes for rent. The Prime Minister recently announced an extra £2 billion of funding for affordable housing, which will increase the overall affordable homes programme budget to more than £9 billion. The new funding will support councils and housing associations to build more affordable homes where they are needed most—where families are struggling with rental costs and some are at risk of homelessness. Only last week, the Chancellor announced a further £1.67 billion to provide an extra 26,000 homes to further boost affordable housing in London.

Housing associations are a key part of the delivery of those new homes. Three things enable housing associations to borrow cheaply: a stable operating environment, a robust regulatory framework and the fact that there has been no default in the sector that has resulted in loss to lenders or investors. Insolvencies in the sector are rare. To date, there has only been one insolvency since the moratorium arrangements were introduced back in 1996. Both lenders and providers value very highly the no loss on default record of the sector, meaning that no lender has lost money in the event of a housing association insolvency. It is vital that we maintain that robust financial regime so that housing associations continue to deliver the homes we need.

We also want to protect tenants so that their homes are not put at risk should any landlord get into difficulty. That is why, in the Housing and Planning Act 2016, we introduced a special administration regime for the social housing sector. The regime will give the Secretary of State the power to apply to the court to appoint a housing administrator in the event of a private registered provider being at risk of insolvency proceedings. In introducing those changes, we were responding to concerns that the existing moratorium provisions were not suitable for modern, large, developing and complex housing associations that might conceivably get into financial difficulty. Although financial failure is extremely rare, the housing association sector has changed significantly in recent years. The level of private finance has grown from £48 billion in 2012 to £70 billion last year.

Having introduced the main provisions in the 2016 Act, the regulations extend the housing administration framework in that Act to registered societies and charitable incorporated organisations. For those who are unfamiliar with those terms, a registered society is defined in the 2016 Act as having the same meaning as in the Co-operative and Community Benefit Societies Act 2014. It is a particular type of legal entity. Registered societies include co-operative societies, community benefit societies and pre-commencement societies registered before August 2014. They need to be registered with the Financial Conduct Authority. A charitable incorporated organisation is defined within the 2016 Act as a charitable incorporated organisation within the meaning of part 11 of the Charities Act 2011. Again, it is a particular type of legal entity. There are four main types of charitable structure: the incorporated organisation, the charitable company, which is limited by guarantee, the unincorporated association and the trust.

Due to drafting complexities, the provisions in the 2016 Act apply only to those housing associations that are companies. That is the key reason we are here today. There are 1,483 non-local authority private registered providers of social housing in England, providing 2.6 million homes; 885 charitable incorporated organisations with more than 2 million properties; 336 companies with 380,000 properties; and 262 registered societies with more than 95,000 properties.

A further piece of legislation will be needed before the special regime can be enacted: a statutory instrument setting out the rules that apply to administrators’ conduct of a housing administration. That will follow the negative procedure.

Under the law at the moment, where a housing association gets into financial difficulty and steps are taken towards entering a formal insolvency procedure, a 28-day moratorium begins that restricts creditors’ ability to enforce their security during that period. If the regulator cannot reach a solution with creditors during that 28-day period, or during an extension, creditors are able to call in loans and seek to recover their debts through the sale of assets, which can include social housing stock.

At least in theory, that could lead to a fire sale of social housing, meaning the stock would no longer be regulated and tenants would lose the protections of the social sector, including rent regulation. Therefore, the 2016 Act gives the Secretary of State, or the regulator of social housing with the Secretary of State’s consent, the power to apply to the court to appoint a housing administrator. The administrator would manage the affairs, the business and the property of the registered provider of social housing for the duration of the housing administration.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I apologise for interrupting the Minister in mid-flow. I am not sure if it is the same in the rest of the country, but in London we are seeing a wave of amalgamations and takeovers of the smaller housing associations, apparently driven by Government policy, whether deliberate or unintentional. Is that part of the overall scheme? Does that fit into the protection that the Government are trying to introduce in terms of insolvency, or is that totally separate?

[Dominic Raab]

The hon. Gentleman makes an important point. One reason we are introducing these regulations is precisely because the housing association sector has changed. That does include some of the mergers and acquisitions—the consolidations—that we have seen with housing associations. It is ultimately a balance, but there is a real benefit to housing associations realising economies of scale in the way he has described, because that has a stimulus factor on the supply of new homes, which must be a plus.

Equally, as a responsible Government, we want to be mindful of any risks involved. The regulations can certainly be seen as ensuring that we have a strong regulatory regime in place so that we glean the benefits of the behaviour that the hon. Gentleman described, but also ensure that we mitigate the risk as best we can.

As with any administration regime, the main objective would be to rescue the organisation or return money to creditors. The crucial difference is that a housing administrator would also have a second important objective, which is to retain as much of the social housing as possible within the regulated sector. I think that goes to the point the hon. Gentleman alluded to. In addition, a housing administrator would not be constrained by a 28-day timeframe and would have the time to investigate the business and find the best solution possible in order to meet the objectives. We are ensuring that the process is flexible enough and specific to the housing association sector.

Extradition

Debate between Dominic Raab and Jim Fitzpatrick

Thursday 24th November 2011 Westminster Hall

[Mr Raab]

That is exactly the point, and exactly why the assumptions that underwrite the European arrest warrant are fraudulent. I cannot think of any other way of putting it.

It is not good enough just to sit back and hit and hope on the Greek justice system getting better. For one thing, it may be getting worse. Transparency International’s corruption perceptions index is a well regarded measure of standards of justice in national administration and legal systems. On a score of one to 10—one being the most corrupt—Greece has fallen from 4.2 to 3.5 in the past 10 years.

Even if there were grounds for optimism that the Greek justice system would improve over time, which we all hope for, we need to protect our citizens right now—not in five or 10 years’ time, but today. That is why we need an amendment to the European arrest warrant framework decision, a prima facie test, a proportionality safeguard, and the other recommendations made by the Joint Committee on Human Rights.

In fairness to the Baker review, it acknowledged the case for an amendment to the EAW to accommodate a proportionality test, which is one of the other crucial safeguards that are required. However, in other areas the report ignores, almost wholesale, major flaws in the current arrangements. It casually disregards evidence that shows that warrants are being issued for investigation rather than for prosecution.

That important point is best illustrated by the evidence given by Michael Turner to the Joint Committee. Michael Turner set up a property business in Hungary in 2005. When it failed, as some business ventures do, he paid off his staff, filed for bankruptcy and returned to Britain. Three years later, he was extradited to a Hungarian jail, accused of defrauding on certain administration fees. He was detained in a prison that was formerly run by the KGB. He has now been allowed to return home, but he remains under investigation. At the time of the extradition, the Hungarian authorities assured the UK courts that they were ready to prosecute: that this was not a hit and hope; they were trial-ready. Yet six years after the alleged offence took place, Mr Turner has not been charged with any crime whatever. The extradition that threw his life into turmoil was little more than a hit and hope fishing expedition. Again, the Baker report remains oblivious, if not blind, to the basic injustice and the human toll that that kind of ordeal takes on those affected. I am talking about not just the victims but the families.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I congratulate the hon. Gentleman on securing this debate. During the course of his research, has he had the chance to look at the case of Babar Ahmad, who is a constituent of my right hon. Friend the Member for Tooting (Sadiq Khan), the shadow Justice Secretary? My right hon. Friend is in his place in this Chamber, but protocol restricts him from speaking in this debate. Babar Ahmad has been in detention for seven years. Can the hon. Gentleman qualify the validity of the fact that Babar Ahmad has not been able to be extradited, deported or tried in the UK, but languishes in a detention centre?

[Mr Raab]

I thank the hon. Gentleman for his remarks. I want to be careful about what I say about the Babar Ahmad case. We must bear in mind the fact that, whatever the nature of the allegations—some of the individuals in the cases that I have mentioned are plainly and demonstrably innocent—we are dealing with that basic principle of British justice that a person is innocent until proven guilty. We are losing sight of that in this country. Irrespective of the nature of the allegations against Babar Ahmad, and I do not deny for one second that they are grave, the period of pre-trial detention is unacceptably high and should be looked at carefully within the scope of the UK-US treaty in relation to both the “most appropriate forum” safeguard and the other safeguards that might be available.