Insolvency Act 1986 Part A1 Moratorium (Eligibility of Private Registered Providers) Regulations 2020

Lord German Excerpts

Friday 24th July 2020 Lords Chamber

[Lord German (LD) [V]]

My Lords, in supporting these regulations I would like to explore some of the issues surrounding the remaining procedure, which derives from the 2008 Act, as amended. This remaining procedure provides, as we have heard, a 28-day or four-week moratorium for the regulator to establish and agree a proposal for ensuring that the homes remain within the social housing sector, and that tenants’ security is not affected by such a proposal.

The regulations before us apply only to England, so I would be grateful if the Minister could tell the House what the position is in respect of moratoriums in Scotland and Wales, where the duality of approach is still in place, given that the 2020 insolvency Act approach to moratoriums still applies across the United Kingdom.

These regulations put beyond doubt how special administration schemes for the 322 social housing providers in England will be approached, but I must comment on paragraph 10.1 of the Explanatory Memorandum. It says that ignoring those providers in the consultation which led to the 2020 insolvency legislation was because they were so few. That totally ignores the scale of the impact that these 322 providers have on the lives of millions of people. For those living in, or seeking to live in, the homes they provide and for their families, having a roof over their head is a fundamental part of their lives. I am sure that the Minister appreciates this, but I would be grateful if he could tell the House what steps the department has taken to ensure that they are not forgotten again.

The 28-day—four-week—moratorium provided through the earlier Act, which these regulations now confirm, is where I would like to explore a few issues. The clock starts on this moratorium, or space to work out a solution period, when one of a number of things occur, but, as the regulator states in its guidance, social housing providers should give it early warning. The guidance says it

“expects the PRP to notify the regulator”

where it has a potential problem or threat to its viability. I would be grateful if the Minister would reflect on whether an expectation is sufficient. Clearly, if it were a requirement, the regulator could step in earlier to assist. In that way, the danger of falling into housing administration, or even a moratorium, could be averted. It is this crucial relationship between the provider and the regulator that matters so much here.

The regulator has, by law, to see if it can rescue the housing provider, get a better result than it going into administration, sell the property in a portfolio or ensure that the housing remains in the regulated housing sector. I must add that I think these last two are somewhat contradictory and I would value some explanation from the Minister, but these are significant challenges if the regulator has only four weeks to complete this work. Of course, it can extend the moratorium if all the secured creditors agree. These creditors are, fundamentally, banks—the lenders which lend against the security of the property—and experience tells me that they are not always patient in seeking to get their funds returned. This will especially be the case with those housing associations which are highly geared. In that respect, I notice that the Minister, in his outline at the beginning, said that there was £80 billion of private sector money in the sector in 2020, whereas his colleague in the other place said that there was £100 billion in 2020. Can the Minister explain the difference of £20 billion between what he and his colleague told each House of Parliament? More than anything, will the Minister consider making the early warning a requirement, rather than an expectation?

The second issue is about the financial support that may be made available by the regulator to achieve its objectives, which are set out in statute. The guidance says that these funds are not a guarantee but, clearly, financial support would be very useful in retaining properties within the social fold, rather than selling them to realise an asset for repayment for secured creditors. Will the Minister indicate the level of financial support that has been provided by the Secretary of State in recent years upon an application by the regulator, and how often the Secretary of State has refused such an application?

Finally, and most importantly, these moratorium periods are very worrying for those occupying the homes. Tenants will understandably be concerned that their home can no longer be as secure as it was, with no guarantee that a second moratorium can occur, since that would require all secured creditors to agree. Providing comfort for tenants is critical at a time of great uncertainty. Emails and notes through the door might be welcome, but, in themselves, they are not as comforting as a face-to-face discussion with these home occupiers. Can the Minister reassure the House that face-to-face discussion is the required approach?