Tenant Fees Bill (Third sitting)
Rishi Sunak ExcerptsThursday 7th June 2018
(7 years, 6 months ago)
Public Bill CommitteesRead Full debate Tenant Fees Act 2019 View all Tenant Fees Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 June 2018 - (7 Jun 2018)
The Chair
Before we begin, I have a few housekeeping points. Will everyone ensure that electronic devices are turned off or switched to silent mode? Teas and coffees are not allowed during sittings.
We now begin line-by-line consideration of the Bill. The selection list for today, which is available in the Committee Room and on the Bill website, shows how the selected amendments have been grouped for debate. Grouped amendments generally deal with the same or similar issues. A Member who has put their name to the lead amendment in a group will be called first; other Members will then be free to catch my eye to speak about all or any of the amendments in that group. A Member may speak more than once in a single debate.
At the end of the debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or to seek a decision. If any Member wishes to press any other amendment or new clause in a group to a vote, they will need to let me know. I shall work on the assumption that the Minister wishes the Committee to reach a decision on all Government amendments, if any are tabled.
Please note that decisions take place not in the order that amendments are debated, but in the order that they appear on the amendment paper. In other words, debate occurs according to the selection list, and decisions are taken when we come to the clause that an amendment affects. I shall use my discretion to decide whether to allow a separate stand part debate on an individual clause or schedule following debates on the relevant amendments. I hope that explanation is helpful.
The Committee agreed on Tuesday to the programme order, which is printed on the amendment paper and sets out the order in which we have to consider the Bill.
Clause 1
Prohibitions applying to landlords
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Mr Sharma. I welcome all Committee members to the first of our line-by-line sessions. I hope that we make constructive and speedy progress through the various amendments and clauses.
The purpose of clause 1 is to ban landlords from charging any letting fees to tenants or other relevant people in connection with a residential tenancy in England, which very much achieves the overall aim of the Bill. In addition, the clause provides that landlords must not require a tenant to take out a loan in connection with a tenancy. Our approach to implementing this policy is to ban all fees, with the exception of certain permitted payments outlined in schedule 1, which we will no doubt discuss later.
The clause also provides that a landlord must not require a tenant to procure and pay for insurance or the services of a third party in connection with a tenancy, with the exception of utilities and communications services. That prevents landlords from circumventing the ban and charging fees by other means.
Melanie Onn (Great Grimsby) (Lab)
What does the Minister think about the terms of utilities and communications contracts that tenants may be entered into?
Rishi Sunak
Relatively straightforwardly, if a landlord has a utility arrangement in his or her name, as is common, it may be more sensible for the contract to stay in the name of the landlord but for the payments to be made by the tenant. That is what the clause refers to. That is reasonably common—indeed, it is accepted practice—and it is important that the Bill allows for it, as it is often cheaper and easier for all parties concerned for that to happen than for the name of the owner of the contract to be changed.
Rishi Sunak
As I am sure Committee members know, it is common for there to be hassle, time and cost involved in changing providers between people. I have personal experience of doing so for a satellite service and of adding my wife’s name to something. Those things can sometimes take time, and it is easier for all parties if they stay in the name of the landlord, with an agreement between parties that the tenant pays for the services as they are incurred. Indeed, it is common, generally accepted practice for the tenant to be obliged to pay for their use of such utilities as electricity or gas, as measured by inspection of the gas meters. That is what is allowed for under the clause.
Jo Stevens (Cardiff Central) (Lab)
May I ask the Minister about a situation in which a tenant wants to change supplier? If the contract is in the landlord’s name, how would the tenant be able to enforce a change of gas or electricity provider?
Rishi Sunak
That is a separate question between a landlord and tenant in any rental contract. The clause deals with the question of payment. It is important, if the Government are attempting to ban payments being charged to tenants, to note that there are certain exceptions. The clause captures the fact that, on occasion, tenants will continue to pay for the utilities they consume, and that that should not be captured by a ban on fees. It would obviously not be right for tenants to use electricity and gas without the landlord being able to make an appropriate charge for them, if that was how things were arranged.
In the Bill, the phrase
“in connection with a tenancy”
is defined deliberately widely. Requirements in consideration of the
“grant, renewal, continuance, variation, assignment, novation or termination”
of a tenancy that are included in the terms of the tenancy are all covered. That is to ensure that fees cannot be charged at any point during the tenancy, including upon exit. That addresses the concerns raised during pre-legislative scrutiny that the previous drafting, banning fees that were a condition of a grant in renewing or continuing a tenancy, might still allow fees to be charged at the end of a tenancy. That would have been contrary to the policy intention.
Landlords also cannot require outgoing tenants to pay for a reference, in the same way as employers do not charge their employees for a reference today. The clause also applies to a person acting on behalf of a tenant, and a person guaranteeing a tenant’s rent. Tenants and such persons are referred to as “relevant persons”. The clause is one of the principal clauses in the Bill, and as such I beg to move that it stands part of the Bill.
Melanie Onn
It is a pleasure to serve under your chairmanship this afternoon, Mr Sharma, and to join the Minister in debating a Bill in our present roles for the first time. I am sure that it will be a suitably memorable occasion.
The private rented sector is the fastest growing sector of the housing market. The number of private renters is predicted to grow by 24% by 2021, which means that one in four households will be renting rather than in owner occupation in three years, according to a report on the PropertyWire website last June. PropertyWire says that property rental
“has doubled in the last 10 years or so, and it is expected to continue to grow to 5.79 million households while 68% of renters still expect to be living in the rental sector in three years’ time, according to the latest tenant survey from real estate firm Knight Frank.”
PropertyWire also says:
“The report says that growth of the PRS has been spurred by conditions both in the housing and labour markets. Younger workers especially are taking advantage of the increased flexibility of renting as a tenure which allows moving between locations without any of the costs associated with buying or selling a property.”
It is clear, therefore, that far from being a nation of homeowners, we are shifting towards being a nation of renters, with about 4.7 million people renting their homes—some by choice, and some because there is no other choice. We must make absolutely sure that regulation of the sector is fit for purpose in the 21st century.
Melanie Onn
The hon. Gentleman raises a valid point. It is certainly the case that landlords often find themselves feeling that they have no other option but to put a prepayment meter in to avoid ending up as the recipient of all the bad debt that may well have been run up. However, I think it has become a bit of a choice for some in the sector, particularly at the lower end of the market, and by doing so they devolve themselves of any more responsibility in relation to their tenants. That is a shame, because it means that a good relationship is then not built up between tenant and landlord and there is not the element of trust, or of being treated like an adult, that one might hope for in that situation.
Landlords come in all shapes and sizes and are at variance across the country in the type and number of properties that they hold. There are landlords who are not resident in this country; entrepreneurial, buy-to-let landlords with small portfolios; those who inherit a family home on the death of a loved one; those who find themselves with an additional property after meeting a new partner; professional landlord companies that purpose-build to cater for particular groups, such as students or young professionals; speculative landlords who devolve all responsibility to agents; and those who live in the next street and keep a very close eye on things. Subsection (4), which relates to utilities and communications, needs to be clear to all those different types of landlords. Does the Minister think that that is the case?
That clarity is especially important because there is continuing growth of large-scale investment in build-to-let or multi-housing, which is professionally managed rental accommodation, usually at scale, in purpose-built blocks. That market, which only emerged in force in the UK in very recent years, is now worth an estimated £25 billion. Will tenants be protected against being required by these large corporations to enter into a contract that may not be the most economical, and that may take away their ability to choose between providers?
What will happen if there are difficulties in the contract that tenants have been required to sign up to? How easy will it be for the tenant to extract themselves from that contract—or could they prohibited from doing so if it is connected to their tenancy? For example, if they want to live in a building, will they have to go with Virgin for broadband or Npower for gas and electricity—other good broadband providers and power and energy suppliers are available—as the landlord gets a special tariff when those are supplied to the whole building? That would be entirely outwith the tenant’s control. What are the Minister’s thoughts on that?
Young professionals aged 25 to 34 make up the largest proportion of households living in the private rented sector. That is expected to remain the same in 2021, with their stay in the sector further lengthening, as the affordability issues surrounding home ownership—particularly gaining access to a deposit—remaining a challenge. Why should those people be limited in their ability to make a choice on their provider?
Among professionals living in the private rented sector, it is expected that there will be slightly faster growth in the number of under-25 households during the next five years, as well as an increase in older households—especially baby boomers. We must have consideration for those when it comes to the affordability of bills.
Under-25s receive a lower rate of minimum wage than other workers, so their disposable income will be much more restricted. Younger workers are usually paid less commensurate with their post and experience, which of course does not make them any less professional, and their ability to access things like housing benefit, the limits on local housing allowance and the shared occupancy rate all have an impact on their securing housing in the first place. How much they are required to top up from their own funds will have a severe impact on what utilities they can afford.
Hon. Members present must have had numerous constituents come to see them about the challenges of utility bills. The Minister has mentioned the difficulties of trying to change provider. Such difficulties are encountered particularly when prepayment meters are involved and perhaps when there are multiple occupants. Getting bills straightened out when there is confusion about meters is a lengthy process that, in my experience, results in carrier bags full of contradictory letters from those providers. Older renters on fixed incomes may also face financial restrictions, and I ask the Minister to consider that in his response too.
On the definition of a landlord, I outlined some of the common understandings of the types of landlords that we might all recognise, but I would like assurances from the Minister about who will be covered by the Bill. We cannot have a situation where Parliament takes all reasonable steps to further protect renters from the precipitous situations that they currently find themselves in, only to discover that organisations are deliberately seeking to absolve themselves of the responsibilities that all other landlords are subject to under the Bill.
In particular, I think about the case of Lifestyle Club London that I brought up on Second Reading. At the moment, that company can forgo many of the protections that are considered standard in a usual tenancy. By defining itself as a membership club, it can enter a property with absolutely no warning, it can levy huge fines to tenants for small things such as dirty dishes, and it can even give just seven days’ notice before terminating a contract and forcing the occupying person to move out.
Of course, that goes against many of the things that should be guaranteed for any renter, but companies such as Lifestyle Club London can justify that behaviour by saying that their residents are licensees and not tenants on assured shorthold tenancies. Residents pay a membership fee rather than a deposit, a monthly contribution rather than rent, and have terms and conditions rather than a tenancy agreement. That type of practice is completely unacceptable and unfair to residents, who often do not realise they are being exploited by companies that act in that way.
The Bill is the place to end that practice once and for all, by ensuring that licensees are covered by the same protections against fees as assured tenants and by prohibiting membership fees, monthly contributions and terms and conditions fines. The fact that a loophole exists to allow that type of agreement suggests that licensees of that nature have been left out of protections brought in by similar legislation to prevent landlords from acting in certain ways towards tenants.
I do not intend to move an amendment today because I await the Government’s response with interest. The Government have an opportunity to be explicit in their intentions and perhaps to table their own amendments in future to make it absolutely clear that companies such as Lifestyle Club London are covered by the Bill. Is it the Minister’s understanding that such clubs will be considered to be landlords under the terms of the Bill?
I would also like reassurance from the Minister that there are no loopholes around how tenancies and tenancy agreements can be defined that would allow de facto tenants to be afforded less protection from prohibited fees, and that if it turned out that a landlord could use alternative definitions to charge prohibited fees, the Government would return to the House to make the necessary changes to close that loophole as soon as it became apparent.
What type of loan is the Minister thinking of in subsections (5), (6) and (7)? I have spent a long time trying to conjure the purpose of such a loan from tenant to landlord, how that might come about and on what evidence the terminology is based, but it remains altogether unclear. I hope the Minister will provide some reassurance on those points.
Rishi Sunak
It is a great pleasure to embark on my first Bill Committee with the hon. Member for Great Grimsby and I look forward to going through it with her. I will try to keep this on point and address the specific issues that she raised.
First, on utilities and the provision thereof, some of her comments will be well directed at the energy price cap legislation that is working its way through Parliament. I am sure she will engage in that process. With regard to this Bill and this specific clause, I say to her that that process is something that any tenant would likely follow as part of their deliberations about which kind of property to rent, in the same way as I would imagine tenants decide whether a property has good mobile signal, any broadband available, what kind of energy is available, and so on. Those are all things a tenant will have awareness of in advance of making a decision with regard to the suitability of that particular property for their circumstances.
Daniel Zeichner
I would ask the Minister to think a little—I have examples in my own area—not about properties at the lower end of the market, but about new properties where there are shared heating schemes. I am not as convinced as he is that people moving into those properties are fully aware of the scale of charges they may face. There are disputes going on currently around this, because people do not necessarily understand and in some cases they feel that they are not fair or reasonable. I wonder whether he would consider inserting at some point a reasonableness test, because just passing on the charges without people necessarily understanding what they are when they enter into that agreement in the beginning, as I say, has created problems, which I am aware of.
Rishi Sunak
That is something that we are certainly looking at exploring in the guidance that is being developed in conjunction with various consumer rights groups, particularly around the “How to rent” guide, ensuring that potential tenants are aware of the things that they should be asking, which ought to be relatively common sense. As I said, there will be explicit notice in that guidance around the things that tenants should make themselves aware of. Those are the types of questions they should be asking to ensure that they have full sight of what that particular property and tenancy will mean for them.
Helen Hayes (Dulwich and West Norwood) (Lab)
We heard evidence this morning of the situation that many tenants find themselves in, having committed by way of a reservation to let a particular property, where they are unaware of many of the terms of the tenancy, including perhaps some of these contractual obligations, until it is far too late for them to back out of it, because money has already exchanged hands, they are already committed and they face consequences from pulling out at that stage. What does the Minister have to say to tenants in those circumstances?
Rishi Sunak
I would say to tenants in those circumstances that it is absolutely not a good idea to enter into an agreement without seeing the actual document that you are signing and committing yourself to. It is obviously good practice, as will be mentioned in the guidance that is to be published, that all potential people renting should seek to have a proper shorthold tenancy contract. That would be good practice that most people would aim for. There would be an obligation on them to take some responsibility for that, rather than entering into a situation where they are unaware of their obligations. I should make some progress, but if the hon. Lady wants to intervene one more time, she is welcome to do so.
Helen Hayes
I am grateful to the Minister for giving way again on that point. I think the Minister misunderstands the nature of the culture in much of the letting agency industry, where tenants are frequently told, “This is the only property available to you. It is the best offer at this time—you absolutely must. There is a queue of other potential tenants.” In practice, they do not have the type of choices at their disposal that the Minister seems to believe they do.
Rishi Sunak
I am confident that with the awareness that will be spread as a result of this Bill—we have heard a lot about the simplicity of this Bill, which will make it more effective for potential tenants to enforce and know about their rights—the circumstances in which that happens will be reduced. In case letting agents themselves are putting on the pressure, as the hon. Lady will know from being on the Select Committee, the Government are currently consulting on enforcing standards for the letting agency industry, a code of practice and potential licencing of that particular industry. Those are the kinds of tactics and behaviour that that consultation will look at.
Jo Stevens
The Minister just said that he is very confident that what my hon. Friend suggested will not be the case. On what evidence is his confidence based? I do not share it.
Rishi Sunak
As we heard in evidence, because of this Bill’s simplicity around banning fees, which is a simple and easy to understand message, and the awareness that will come around that and the fact that it will come into force on a particular day, together with the income provided to local authorities to raise awareness of these issues, I am confident that tenants will be in a much better place to know that their rights have been dramatically improved as a result of the Bill, and will be in a position to know those rights, ensure that they avail themselves of them and ask the questions hon. Members are saying that they should ask. I am particularly confident because new guidance will be published and widely publicised, which will make these rights, and questions tenants should ask, explicit and clear to them. I therefore remain confident.
As I said, there is separate Government work going on, looking particularly at the conduct of letting agents. Plans have been mooted for codes of practice and conduct, and for licensing of that industry. Some of the behaviours that have been mentioned are exactly the kinds of things that will be captured in that forthcoming piece of work.
Rishi Sunak
The clause bans letting agents from requiring a tenant or other relevant person to make a payment or loan, or secure insurance or services from a third party in connection with a tenancy. The clause works with clause 1 to ensure that the legislation applies equally to all tenants, no matter whether they let through a letting agent, as captured in this clause, or directly with a landlord, as captured in clause 1.
The provisions in the clause essentially mirror those in clause 1, so I will not repeat myself, but it may be helpful if I highlight briefly where the two clauses differ. The key differences are in the definition of “in connection with” a tenancy agreement, because the letting agent makes arrangements on behalf of the landlord and is not itself party to a tenancy agreement. There is also no exception allowing letting agents to require a tenant to procure utilities or communication services. That exception is relevant only to landlords, but clause 2 essentially has the same effect as clause 1, which is to ban letting fees.
Melanie Onn
I recognise that for the most part the clause mirrors the prohibitions applying to landlords. It is important that letting agents, which are often the professional guide to the amateur landlord and often operate on behalf of the landlord, developing close relationships over many years while in the pay of the landlord, have the propriety of their conduct considered closely.
The same principle applies to letting agents as to landlords, in that there are some excellent agents and some that fall far short, often seeming to set unreasonable charges without much comeback. Letting agents also lack the personable relationship with tenants that often develops between landlords and tenants. Landlords often develop levels of understanding with tenants that give tenants a bit of leeway, meaning that they could charge under the permitted fees under the Bill, and under a tenancy agreement through default fees.
Good landlords will often be empathetic about genuine and honest mistakes or problems that tenants make or face, and look for practical and easy solutions for both parties. For example, they may let tenants sort out replacing a lost key by themselves, and at a lesser cost, if it is a first offence. They may take some of the loss if a tenant has to move out in the event of a job loss, or a family emergency, or a genuine struggle to pay rent or exit fees. While there are some excellent letting agents that go the extra mile to keep tenants happy and in their property, too often letting agents take an extremely hands-off approach to tenants and only see them as a way to make money and collect fees, which are currently far too high, whenever they contractually can.
Currently, letting agents often charge fees that would be prohibited under the Bill during the move-in period and make a significant amount of money out of a new tenant. As a result of the Bill, letting agents will be far more driven by the desire to keep properties full for as long as possible, as they will see far fewer benefits from a property that rapidly changes tenancy than when they could charge those often high fees. That will help the drive towards achieving the aim of everybody in this room to see longer tenancies in the private rented sector, and increase the value of good-quality service from letting agents that keeps tenants happy and in place.
It will also move the balance of power in the letting market far more towards the tenant. Letting agents often make money through introductory charges to tenants and a percentage commission of the rent. Where once letting agents may have been happy to charge high fees and wait until someone comes along who is able and willing to pay them, the Bill will mean that letting agents will want a property to be filled as soon as possible, so they can earn commission on the rent. That will mean that letting agents have more reason to provide a good service to tenants and act to promote properties to get them filled as quickly as possible.
Tenants have no choice of letting agent if they want to move into a specific property. Who to choose as an agent for a property is currently at the behest of the landlord and therefore letting agents do not focus on offering a good deal to tenants, but on offering the best deal to landlords. Letting agents levy as much of the charge as possible on a tenant to avoid charging above the market rate to a landlord, as there is no point in trying to offer a good deal to tenants if no landlords use the agency to let their property. The result is that tenants are often charged well above reasonable amounts in set-up costs alone. They can often be expected to find hundreds of pounds for things such as credit checks, referencing and set-up paperwork, on top of a holding deposit, security deposit and the first month’s rent. Even for a modest property, that often runs into hundreds of pounds, perhaps even thousands.
We know that people on low and average wages often find it impossible to find the deposit to buy a property, but at the moment many would struggle to find the money to move into a rented property. That is grossly unfair, given that at the very least the landlords are the owners of a property that has increased often significantly in value over the past few years, and are often also rich in their own right. Yet they receive all the advantages in the letting agent market at the expense of our growing population of private renters, who are often young and increasingly likely never to own a home.
That is especially true in areas with high levels of student accommodation. For example, Leamington Spa has an extremely high level of student accommodation for a town of its size, due to a nearby university. Almost all that rental market is operated through agents and is used by students who have little knowledge of their rental rights and what is a fair rate for the charges that letting agents levy. It is a fast-moving market. There is pressure on students to secure a place that they like quite rapidly, often for a fixed-size group, six or seven months before moving in, and the pressure often leads to students paying £300 or £400, sometimes unexpectedly, if the pace of the property uptake surprises them, on top of their current rent and living costs while they are at university.
Melanie Onn
The important thing for students is that they understand the system that they are going to be entering, as for many of them it will be the first time they have moved away from home. They also should understand whether they are subject to unfair fees that are excessive for young people who are most likely to be reliant on student finance and part-time work if they do not have help from their family. We should also ensure they are fully aware of all their rights in those circumstances. The idea that they are having to make such decisions many months in advance when they are feeling the pressure leaves them wide open to exploitation. Their situation will hopefully be aided by the Bill.
Picking up what I was saying—it is a little haphazard, sorry—these costs represent a lot of money for a full-time worker, but for many students, they represent their whole living costs for a month. The balance needs to change dramatically. The extension of schedule 1 to letting agents will mean that they can no longer absorb the cost of a low landlord commission rate by passing the cost on to tenants.
We support the clause, but a few points of concern arise. As it is nearly identical to clause 1 in wording, I will not labour the points I raised in our consideration of that, but I want to seek some clarity on some particular differences between the clauses and draw the Minister’s attention to subsections (4), (5) and (6). Will he outline again the purpose of the loan and confirm that it is included as a preventive measure to avoid landlords seeking any alternative finance mechanism by which to re-route a payment? I would be grateful if he did. It would ensure that I have understood what he said.
The main point I wish to make about clause 2 relates to subsection (3), which states that a letting agent cannot require a tenant to enter into a contract for provision of a service or a contract of insurance. While the rest of the clause reflects clause 1, subsection (3) does not go on to specifically exclude utilities or communications. Why is that the case?
The Minister will know that letting agents can earn a commission for placing clients’ properties with particular utility companies. Switches of energy provider must be done with the bill payer’s consent, and that is likely to be the landlord during a period of the property being void, but it allows for a default situation to arise for tenants when they move in and start receiving bills that are not the most economical for them, requiring them to pay higher rates on generic tariffs. They are then free to change supplier, but they have already been paying at a higher rate and they then have to go through the process of moving supplier. I know that process is supposed to be easy and straightforward, but it is still a chore and an off-putting task for anyone trying to find the right and best deal.
Are letting agents to be permitted to continue to be incentivised to sign up unwitting renters to these rip-off rate utility companies? Will the Government commit to taking steps within the Bill, rather than waiting for guidance? If we are to deal with tenants’ fees and making things fairer for renters, why not do it all now? We should say that such inducements should not be available to letting agents. Renters should be notified in advance who the utility and any other established providers are and given the opportunity to make arrangements that better suit their budget. I hope the Minister can provide answers to those questions.
Rishi Sunak
To respond directly to the two specific points that the hon. Lady raised, I can give her the same assurance that I gave on clause 1: the exception for insurance can specifically not be a means to require a payment that otherwise would be prohibited by the legislation. The same assurance stands here, and I hope that gives her the reassurance she needs. Secondly, to focus specifically on the clause we are debating, it does not allow letting agents to charge for utilities or communications services, but clause 1 does. The specific reason for that is that the contract would typically be in the name of the landlord and would be a function of the landlord-tenant relationship. That should not be permitted for the letting agent. I assume that she does not think they should be included.
Melanie Onn
My concern is that letting agents are able, upon the agreement of the landlord, to set these things up in their own name. That does happen. Does the Minister think that that is okay, particularly given that they receive inducements for it?
Rishi Sunak
After the legislation passes, that would be a particularly silly thing for letting agents to do, because they would not, under the legislation and this particular clause, be able to charge the tenant for those utility arrangements. The clause specifically prohibits letting agents from charging those payments to tenants. The hon. Lady should feel reassured about that.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Prohibited and permitted payments
Question proposed, That the clause stand part of the Bill.
Rishi Sunak
Our approach to implementing this policy is to ban all payments in connection with a tenancy, with the exception of certain permitted payments outlined in schedule 1. The clause introduces that schedule, and provides for enabling the Secretary of State, by regulations, to amend the list of payments permitted under the Bill.
Although no changes to the categories of permitted payments are currently intended, the private rented sector is expanding and has a changing demographic as well as growing technological innovation. Similarly, legislative changes or other circumstances may arise where it becomes necessary to add, modify or remove a description of a permitted payment. We do not intend for the power to be used to significantly alter the objective of the legislation, but we recognise the broad scope of the power. That is why we consider it appropriate for the power to be subject to the affirmative procedure, to allow adequate parliamentary debate and scrutiny of any changes to the payments permitted under the Bill. That will provide sufficient safeguards that the power is not used for any purposes contrary to the objectives of the legislation, or to make changes that may have negative consequences for the lettings market.
It is also worth noting that the power to amend permitted payments is qualified by subsection (3), which states that the power does not extend to removing rent from the categories of permitted payments. We consider the negative procedure to be appropriate in the case of regulations made solely to amend the £50 cap on fees that can be charged to vary a tenancy when requested by a tenant. Any changes to that cap would purely be to reflect changes in the value of money, and the power could not be used to undermine the intention of the legislation.
It is important to note that in its scrutiny of the delegated powers memorandum accompanying the draft Bill, the Regulatory Reform Committee indicated that use of the power in clause 3 is justified to deal with changes in circumstances that cannot at the moment be anticipated or predicted. Clause 3 is vital to ensure that the legislation remains relevant and, in the words of the hon. Member for Great Grimsby, prepared for the future.
Sarah Jones (Croydon Central) (Lab)
It is a pleasure to serve under your chairmanship, Mr Sharma—it is the first time I have done so, so it is very exciting all round.
As the Minister set out, clause 3 spells out that only permitted payments defined in schedule 1 can be charged by landlords or agents. We have heard already from my hon. Friend the Member for Great Grimsby about the pressures faced by private renters. Given the rapidly increasing number of people in the private rented sector, with only the bare minimum of consumer protections people can be exploited financially and forced into substandard and sometimes dangerous accommodation. All of us in our everyday lives, as well as in our caseload, will have seen people who are either excluded from accessing the sector or charged exorbitant fees.
It is right that the Bill limits the number of things for which tenants can be charged. The most important role of the clause is to give effect to schedule 1, which restricts permitted payments to things such as rent, tenancy deposits, holding deposits, default fees, terminations and bills. I am sure we all agree that the clause is essential in making the Bill work effectively and allowing the private rented market to continue functioning.
However, Opposition Members would like to challenge several poorly defined, excessive or unnecessary permitted payments that are enabled by clause 3 and schedule 1. That includes issues with tenancy deposits, holding deposits, default fees and termination payments, and we will discuss those in more detail. There are other permitted payments enabled by clause 3 which we are not seeking to amend at this stage but, as the Minister will know, several of the permitted payments were added subsequent to the publication of the draft Bill, following Government consultation and pre-legislative scrutiny. The draft Bill presented last year included just four permitted payments: rent, tenancy deposits, holding deposits and default fees. As the Committee will note, there are now 10 permitted payments enabled by clause 3 and outlined in schedule 1. I hope the Minister can answer that he has confidence that the addition of those new permitted payments was done with sufficient evidence, and that he can tell us which views were taken into account when they were added.
The clause also gives the Secretary of State the tools to add, remove or amend what is considered a permitted payment if it is necessary to do so in the future. That has the potential to future-proof the Bill by ensuring that the Government can easily bring forward changes to prohibited and permitted payments if it turns out that there is a need for change, either through a loophole that becomes apparent after the Bill becomes law, or through a change in style of renting that means we need additional permitted payments, or a change to permitted payments if it becomes apparent that there is a route for exploitation.
The powers in the Bill should come with the responsibility to use them wisely and in a timely manner if it becomes apparent that it is necessary to use them at all; otherwise, there is a risk that the Bill’s provisions slowly become obsolete as our renting culture evolves over the years and decades. I look for reassurance that the Minister will use that power in a proper manner, to keep the Bill up-to-date as much as feasibly possible.
A particular concern I have with the Bill in general is that there are certain maximum thresholds contained in schedule 1 that are far too high to have a real positive effect on the everyday finances of tenants. That is why we have tabled amendments to try to tip the balance away from something that looks good on paper, but achieves very little saving for tenants. The Government are consistently slow to adapt to ideas to reset the balance of power between tenants and landlords—a Labour Government would have brought this Bill forward five years ago—so I suspect that things the Conservatives may oppose today, they may see as perfectly reasonable in three or four years’ time, once the harsh reality that tenants face in the housing market becomes even clearer.
I look for reassurance from the Government that they will continue to monitor the real-life effects of the numbers they have chosen in schedule 1, and to pledge to lower the permitted thresholds if it becomes apparent that the levels in the Bill are far too high to have a meaningful effect on the ground. Overall, the Opposition support the clause.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Schedule 1
Permitted payments
Sarah Jones
Amendment 7 seeks to amend part 2 of schedule 1, on tenancy deposits. We all agree, I think, that this long-overdue Bill will go some way to addressing some of the issues we have been debating.
Rishi Sunak
I am conscious that in the debate on clause 3, the hon. Lady posed a specific question that I did not respond to, about the changes in the permitted payments, to which I wish to respond, if she does not mind and if you would indulge me, Mr Sharma. As we are coming on to discuss those payments in general, I hope it is appropriate and within scope.
The reason for the expansion was that the previous drafting was less all-encompassing around the payments that could not be charged. As the drafting in clauses 1 and 2 was expanded to cover almost any incidence of anything happening during the tenancy, it then necessarily became apparent that we needed to add specific clauses to allow for payments that would previously not have been captured by clause 1, but now would be and needed to be expressly permitted, such as an early termination clause or a change in sharer. With the new drafting of clause 1 and 2, things such as that would not be permitted unless they were specifically listed in schedule 2, which is the reason for the expansion. I hope that gives the hon. Lady the reassurance she needs.
Sarah Jones
Thank you. As we have heard, the Bill will mainly address issues within the private rented sector through the banning of letting agent fees, but, as we all know, letting fees are not the only cost faced by prospective tenants, nor are they the largest or even the most common. Tenancy deposits are the largest and most common fees that renters face. Research by Citizens Advice found that nine in 10 renters pay a tenancy deposit, and that one third of tenants paid more than £1,000 for their deposit. According to deposit protection scheme data, the average deposit in March 2017 was £1,161—up from £979 in 2012. That is an increase of nearly 20% in five years.
We all understand the need for tenancy deposits of some kind, so it is absolutely right that they are included as a permitted payment in schedule 1, but the absence of a cap on tenancy deposits to date has left some private renters paying extortionate amounts. It is undeniable that that presents a major barrier to people looking to rent privately—particularly in areas such as London. We will not improve the situation for tenants to any significant degree if we do not solve the flaws in the tenancy deposit system.
Citizens Advice says that, in the past year alone, it has worked with almost 11,000 private renters who have come to it because of issues relating to deposits. One of my members of staff had to find £3,000 for a tenancy deposit—equivalent to eight weeks’ rent. One of my constituents who came to me about this issue is currently homeless with five children. She approached the council for help, but it deemed her to be intentionally homeless because she abandoned a tenancy in Manchester to come to Croydon as she was suffering ill health and wanted to be closer to her family. At present, she is staying in her brother’s house, which means there are eight people living in a two-bedroom flat. Her brother said she cannot stay for long, but does not want to kick her out on the streets. She is on universal credit and cannot afford to save for a deposit on a private rented property. She has been left in a Catch-22 situation.
People are looking to move to a new city, perhaps to find work or start a business, but are restricted by significant up-front costs. People face the combined costs of a large deposit, their first month’s rent and living costs for a month or more before they get their first paycheque. That means that, to move to a more expensive city, they must set aside £2,000, £3,000 or more before making the move. We cannot ignore the impact that has on our economy. It is important for people with the right skills to be able to move easily to places where those skills are in demand.
The Mayor of London has recognised the pressures in cities such as London, and has worked with London First and employers to give Londoners access to tenancy deposit loans. Organisations such as the Met police, Transport for London and other private companies now offer tenancy deposit loans to their staff. That has given more than 100,000 Londoners access to loans. Although that is commendable on the Mayor’s part and shows that he is on the side of tenants, it is a very sad state of affairs that the situation has got so bad that tenants have to borrow from their employers to cover their housing costs.
In addition to the actual cost, there are several ways in which tenancy deposits, in their current form, leave tenants out of pocket, which the Bill fails to recognise. One major issue is the need for tenants to pay a deposit on a new property before receiving their deposit back from a previous one. Tenants are charged high sums twice simply because of the way the system works. Tenants are also penalised through the deposit protection scheme. We all agree that the scheme’s introduction was a good thing, but it was set up in such a way that tenants are losing out to landlords, agents and the deposit protection companies.
Generation Rent has found that most of the £4 billion currently held in deposit protection is held by landlords and agents, who then pay a small insurance fee to deposit protection companies. Although in most cases that money is paid back to tenants, only 2% of tenants receive interest on their deposit when it is returned. Essentially, it gives landlords and agents a low-cost loan. Generation Rent estimates that tenants are missing out on £80 million per year in lost interest. Others advocate a proper reform of the system, such as a personal tenant account with passporting, which would allow tenants to transfer funds between deposits and to accrue the interest they deserve on their deposit. We will debate that point later.
A cap on tenancy deposits as part of schedule 1 is, in principle, very welcome, but in proposing a cap equivalent of six weeks’ rent and ignoring the significant other flaws with tenancy deposits, the Government have missed a huge opportunity and have ignored the advice of numerous experts. I hope the Minister will work with us today and will consider the merits of amendment 7 and the related amendments, which seek to bring genuine improvements for tenants. For too many people, tenancy deposits are one cost too many. As I will set out, in its current form the Bill is at the very least ineffective and at worst risks making things worse for renters than they already are.
First, I will explain why the clause is ineffective. The Government have said very clearly that they want to make things better for private renters. On Second Reading, the Secretary of State said that by setting a six-week cap,
“we are delivering on our commitment to make renting fairer and more affordable”.—[Official Report, 21 May 2018; Vol. 641, c. 645.]
However, we all know that in the vast majority of cases that is simply not true.
Polling by Shelter found that the majority of deposits—55%—are charged at just four weeks’ rent. According to the same polling, only 6% of landlords require a deposit of more than six weeks’ rent. Similar figures have been published by Citizens Advice, which found four weeks’ rent to be the most common deposit amount. It argues that in its current form this measure will make renting “more affordable” to just 8% of renters. That would not fulfil the Secretary of State’s objectives.
Sarah Jones
My hon. Friend makes an excellent observation, and I take his point completely. There are many parts of the country where the rental market is pressurised and prices are prohibitively high, so the impact would be the same as it is in London. He is right.
There is precedent for the Government setting a figure that becomes the norm, whether it is a cap or a floor. In many cases such a precedent has been created, and that could occur here. That price level is given inherent Government approval for those on the other side of the deal, who say, “This is what the Government say we can charge”. There are two obvious examples, one a cap and one a floor: tuition fees and the minimum wage respectively. We are all aware of how universities raised their fees to the maximum of £9,000 as soon as they could, despite claims that there would be price competition. Likewise, when the minimum wage was introduced, it was said that it would be an absolute floor but, sadly, for many workers it has become the norm.
If we are trying to make things better for private renters, which I am sure the Minister is, we should not be settling for the status quo, nor should we be considering something that may make the situation worse. We should be the leaders we were elected to be and change the Bill. To reiterate our argument for a three-week cap, if the most common deposit is now four weeks’ rent and the average amount returned is more than 75% of the deposit value, reducing the cap to three weeks would still leave more than enough room to give landlords financial protection while at the same time bringing real benefits to tenants.
Rishi Sunak
I appreciate that reasonable people can disagree about these amendments and the number of weeks that is suitable for a deposit cap. It is a tricky issue to balance. However, the amendments would not help tenants. Lowering the deposit cap to three weeks risks distorting the market and leading to behavioural change.
Using data from deposit protection schemes, we estimate that about 93% of deposits are for greater than three weeks’ rent, and as we have heard, most landlords require a deposit of about one month or five weeks’ rent. The deposit serves an important function as a deterrent. It gives tenants an added incentive to comply with the terms of their tenancy agreement. Further, if we lower the cap on deposits to three weeks’ rent, there is a higher risk that a deposit will no longer fully cover the damages to a landlord’s property or any unpaid rent. Landlords would be likely to seek to offset that risk by asking for more rent up front, or they may be deterred from investing in the sector entirely. Neither of those outcomes would help tenants.
We have listened to concerns that a cap at four weeks’ rent or less may encourage tenants to forgo their final month’s rent. The Housing, Communities and Local Government Committee also recognised that particular risk, acknowledging that this was an area where it is difficult to achieve balance, and interestingly suggested a cap of five weeks, which is considerably more than the three weeks that we are discussing. Furthermore, nine out of 10 respondents to our consultation on banning letting fees agreed that deposits should be capped at at least four weeks’ rent.
As the landlord or agent representatives we heard on Tuesday pointed out, a cap of six weeks provides the flexibility that landlords need to rent to higher-risk tenants. For example, lowering the deposit cap to three weeks’ rent might hurt pet owners or those who live abroad.
Sarah Jones
Does the Minister not accept the evidence from his own Department, which states that there is no link between high risk and deposits?
Rishi Sunak
It is important not to conflate aggregate information with the particular circumstances of individual tenants. We are talking about particular, unique circumstances pertaining to individual tenants that would put them at potentially more risk of a landlord cherry-picking and not wanting to rent to them if they did not have a deposit that would cover their risk. We heard that from the landlord and agent representatives on Tuesday. The groups in question often have to pay a higher than average deposit, to provide landlords with the assurance they need. That provides them with a home to rent.
Sarah Jones
Will the Minister consider accepting our amendments and introducing a separate one that applies to pet owners?
Rishi Sunak
It is hard to be prescriptive about all the circumstances in which someone might require a higher than average deposit, which is why the Bill provides a cap and guidance on interpreting that cap. It is for individual landlords to make the determination as they see fit. I remind hon. Members that these amendments would reduce the cap to three weeks.
Lastly, I will mention Scotland, which was raised by the hon. Lady and my hon. Friend the Member for Gloucester. It is important to know that Scotland has an eight-week cap, which is considerably higher than the six weeks that we are proposing. There was some concern that deposits would escalate up to that cap, but the evidence that we have seen and analysis that we have conducted thus far do not suggest that that is the case. The average deposit in Scotland remains at about a month’s rent. There is good evidence there that that fear is misplaced.
Sarah Jones
What does the Minister say about the fact we have seen time and again, such as with student fees and the minimum wage, that when the Government set a definition, that is where the industry moves to?
Rishi Sunak
The specific issue we are talking about is a cap on deposits. We do not need to look at potentially similar industries; we can look at an exactly analogous industry, because in Scotland where there is an eight-week cap that has been in force for a while. There, deposits have not gravitated to that level and have remained at about a month’s rent. There can be no more compelling evidence than that.
Richard Graham
The analogy offered by the hon. Member for Croydon Central is interesting, but it is not true, particularly for apprenticeship wages, where there is a minimum apprenticeship wage and very large numbers of apprentices get considerably more.
Rishi Sunak
My hon. Friend is right that the evidence on apprenticeships certainly does not suggest the conclusion that has been referred to.
The guidance that will be published will encourage landlords to consider on a case-by-case basis when to take a deposit and the appropriate level of deposit.
Sarah Jones
It would be nice if the Minister could publish the evidence on Scotland.
Rishi Sunak
I would be very happy to write to the Committee with the current analysis. In fact, I can give the Committee that right now: the statistics on deposits in Scotland suggest that average deposits have not accelerated to the cap. Average deposits in Scotland during 2017-18 ranged from £580 to £730, compared with a median rent of £643for a two-bedroom property over a similar time period. I will happy provide the Committee with the source for that, which I do not have to hand, as soon as I can.
I hope that the hon. Lady will withdraw her amendment.
Sarah Jones
We want to push the amendment to a vote.
Question put, That the amendment be made.
Rishi Sunak
I will speak first to clause 5 and schedule 2 in general, and then respond specifically to amendments 5 and 22 to 44.
Clause 5 and its accompanying schedule, schedule 2, relate to the treatment of holding deposits. The Government recognise the concerns of agents and landlords that, in certain circumstances, they can be put at risk because of a tenant’s actions—for example, if a tenant withdraws from a property despite reference checks having been undertaken. To address that, landlords and agents will be allowed to charge a holding deposit, capped at one week’s rent. That will act as a deterrent to tenants from registering in multiple or unsuitable properties, and ensure that there is a financial commitment from the tenant to a property.
We also do not want to inadvertently encourage agents and landlords to discriminate against individuals when considering potential tenants for their properties. The use of holding deposits will ensure that landlords do not cherry-pick tenants they perceive to be the most suitable and therefore likely to pass a referencing check.
We recognise that it may sometimes be appropriate for landlords and agents to retain the holding deposit. For example, if a tenant fails a right to rent check under section 22 of the Immigration Act 2014 and the landlord or agent could not reasonably have been expected to know that they would fail; if the tenant provides false or misleading information that the landlord is reasonably entitled to take into account when deciding whether to grant a tenancy; or if the tenant decides not to rent the property. In such cases, the landlord or agent will be entitled to retain the holding deposit.
We will of course encourage landlords and agents to consider, on a case-by-case basis, the appropriate amount of deposit to retain and to provide a reasonable explanation to tenants when they decide to retain a holding deposit. Guidance will be provided to support landlords, agents and tenants to understand their rights and responsibilities around holding deposits.
Rishi Sunak
If I may finish the sentence, the hon. Lady will be pleased to know that organisations such as those we heard from this morning—Generation Rent, Shelter and Citizens Advice—are currently engaged with officials in helping to draft that guidance. I am sure she will want that guidance to be as accurate and as helpful as possible. I think I am right in saying that a meeting may have taken place yesterday, so that guidance is well on the way.
Rishi Sunak
As the hon. Lady said, I will not be precious in this Committee, and I will take reasonable suggestions. I will take her suggestion on board and rephrase to “in due course”. I assure her that work on the guidance is under way, and we are working to get it right. As I said, we believe that this approach is fair to landlords and tenants.
On the amendments, it is important to clarify for Committee members what we are discussing. The amendments do not suggest reforming, improving or tweaking the holding deposits. They suggest that holding deposits be removed entirely from the list of permitted payments outlined in schedule 1, so that, under no circumstances, should there be any holding deposit. That was obviously not the Select Committee’s position following its pre-legislative scrutiny, and it was not the position of the witnesses we heard from this morning, all of whom, when asked if they agree with the principle of a holding deposit, said they do.
The amendments go against that set of opinion and suggest removing holding deposits entirely. To do so would be to take away a vital mechanism in the Bill that allows landlords security while reference checks are carried out. That is important for several reasons. From the outset of this policy, landlords and letting agents have expressed concern that one of the side effects of the ban on tenant fees would be that tenants might speculate on multiple properties.
Melanie Onn
Where did the Minister get the evidence that that has ever happened in the history of anything?
Rishi Sunak
Yes, I heard the shadow Minister’s points on this. It is important to note that there is no evidence for this because there are currently letting fees. Tenant fees are charged, and that is what we are all here to get rid of. The side effect of tenants no longer having to pay any fees will be that there will be no financial disincentive when they apply for a property. The disincentive to speculate currently applies, but when we legislate to remove tenant fees, which is exactly what we are doing, that safety lock and mechanism will not be there. That is why people consider it to be a side effect. Looking for evidence of something that has yet to happen is unlikely to be fruitful.
Helen Hayes
There are of course letting agents, including in my constituency, that ceased charging fees to tenants some time ago, so I am afraid that I do not accept the Minister’s assertion that there is no evidence to be looked for on this. Without evidence from those agents that already follow this practice, I cannot accept that the Minister’s arguments are well founded.
Rishi Sunak
The hon. Lady talks about a subset. I am also talking about groups of agents. It is not necessarily the case that speculating might or might not happen, but it is important to guard against it happening. That is surely fair, and landlords are reasonable in asking for some protection against it. This is not about unfairly withholding money from people. In the cases that I will come on to, and as we have already discussed, there is no reason why deposits will not be returned to tenants acting in good faith.
Melanie Onn
The Minister seems to be asserting that, in the absence of these up-front fees, people will suddenly be going around with wedges of cash in their pocket that they would not otherwise have had, rather than understanding the difficulty that people have had up until now to get any money together whatever for this purpose. It really is a slightly erroneous argument.
Rishi Sunak
I do not think it is erroneous at all. Removing tenancy fees from the legislation, as we are doing, will of course put money back into the pockets of tenants.
What we are talking about here is a deposit that is there for a number of days while a tenant applies in good faith for a property, which presumably they have the financial means to afford and have the deposit for. It is entirely reasonable to request that and, as we have heard, not all agencies require it. Indeed, the guidance will not say that it is mandatory or necessary. It is there as a safety mechanism, should landlords feel that it is appropriate to their situation.
Rishi Sunak
That will be a function for people to decide individually. The legislation sets a cap of one week’s rent for what can be taken as a holding deposit, but it is not mandatory that a full week’s rent is taken.
Melanie Onn
How long will it be before individuals can get their deposit back, if they are required to pay one?
Rishi Sunak
I believe I am right in saying that, from a tenancy agreement being signed, it is a matter of days. If the hon. Lady allows me, I will get back to her with that information. My memory is that it is seven days, and it can be used in lieu of the deposit itself, but I will happily come back to her on that point. She is right that it will not be stuck there in the system so that it cannot be used for a subsequent purpose to do with the tenancy. I think that is the general point she is making.
Allowing a landlord to ask for a holding deposit enables tenants to demonstrate that they are sincere in their application for a property. It ensures that landlords and agents are not out of pocket if a tenant registers an interest in a property, only to withdraw it when something better comes along.
Secondly and importantly, we want to ensure that landlords do not take an overly cautious approach and pre-select the tenants that they perceive would be most likely to pass a reference check. Removing holding deposits from the list of permitted payments would put the tenants who most need the protections that the Bill provides in a position where they are less likely to be considered.
Finally, holding deposits act as a means of security for the landlord, who is at risk of losing out on a week’s rent if a tenant withdraws from the application, fails a right to rent check, or provides incorrect or misleading information.
Helen Hayes
The Minister will be aware that a High Court challenge was recently permitted in relation to the right to rent policy. It is being taken to judicial review on the grounds that it is a prejudicial policy. First, does he agree that the right to rent policy is much more likely than an absence of holding deposits to cause landlords to take a prejudicial view of tenants? Secondly, will he confirm that, in the event that the judicial review is successful and the conclusion is that the right to rent policy is unlawful, holding deposits that have been withheld from tenants on the basis of that policy will be repaid to them?
Rishi Sunak
I am sure the hon. Lady will appreciate that I cannot comment on an ongoing legal case, nor speculate on what policy might be depending on its outcome. I remind her that we are considering an amendment that would do away with holding deposits in their entirety. That is not the recommendation of the Select Committee, of which she is a considered member, which wanted to tweak how holding deposits work.
The Bill does not require landlords and agents to take a holding deposit. The amount can be capped to prevent abuse, and the tenant will get their money back if they proceed with the tenancy and provide correct information. Of the tenant respondents to the Government’s consultation, 93% agreed with the general premise of the proposed approach to ban letting fees for tenants, with the exception of a holding deposit, refundable tenancy deposit and tenant default fees.
Sarah Jones
The Minister is using the evidence of tenants for one argument, but ignoring it for others. I ask him, throughout the Bill, to look at the views of tenants. In other cases, that would lead him to do a different thing entirely.
Rishi Sunak
I would like to think that we are focused on getting the policy right. We have listened and responded to all participants in the industry. It is not a question of one or the other. We want to get the policies right for the long term to ensure not only that tenants are treated fairly, but that the market functions and that a healthy buy-to-rent sector is available, with investment going into it. It is important for that reason to make sure that some of the concerns that landlords have are addressed and listened to in order to ensure the functioning of this market in the years ahead. In the past, we have seen the catastrophic consequences for the supply of private rented accommodation of dramatic impositions on landlords, and I am sure that none of us would want to return to those bad old days.
Richard Graham
All the figures that have been shown to us in evidence so far suggest that the demand to rent from the private sector will continue to rise considerably over the next few years. It is vital that this market functions well, and it is not just a case of doing everything that every tenant would want or everything that every landlord would want, but of finding the balance so that good landlords and good agents are motivated to provide the private sector housing that good tenants need. That seems to me to be the purpose of the Bill. Does my hon. Friend agree?
Rishi Sunak
I could not agree more with my hon. Friend, who puts it very well. This is not about demonising people; it is about making sure that the private rental sector, which, as he so rightly identifies, is likely to experience some growth, is healthy and well invested in so that people who are looking for somewhere to rent have somewhere to call home. That is why we get the balance right in the Bill.
To conclude, we heard evidence on Tuesday from agent and landlord groups who were quite certain that if landlords and agents were unable to take a holding deposit, they would cherry-pick tenants. None of us wants to see that. I remind the Committee that the amendment would remove in its entirety the idea that landlords can charge any holding deposit. We do not support that and think that it would damage the functioning of the market, so I urge the hon. Member for Great Grimsby to withdraw the amendment and ask hon. Members to agree to clause 5 and schedule 2.
Melanie Onn
I have listened carefully to the Minister’s response, but I am not convinced, unfortunately. I would like to press the amendment to a vote.
Question put, That the amendment be made.
Helen Hayes
It is a pleasure to serve under your chairmanship this afternoon, Mr Sharma. I wish to speak briefly in support of amendment 10, which appears in the names of my hon. Friends the Members for Great Grimsby and for Croydon Central.
The amendment seeks to address a loophole that was identified by the Housing, Communities and Local Government Committee, of which I am a member, during the pre-legislative scrutiny inquiry that we undertook. The loophole was the biggest issue with the Bill that the Committee identified. We spent a great deal of time receiving and considering evidence on this matter, and discussing possible solutions.
This Committee heard strong evidence this morning from representatives of the trading standards industry that the least scrupulous parts of the lettings industry will try to find ways around the ban on fees to tenants. It is my view that the loophole on default fees represents one of the ways in which they will try to do so, as the Bill stands. The Bill places no parameters on the charging of default fees and, while the Government have indicated a willingness to look at the issue, it is regrettable that the Committee does not have, by way of an amendment or draft published guidance, any way to scrutinise the ways in which it is proposed that that will take place.
It is already common practice for some agents and landlords to add spurious sums of money to the charges that a tenant has to pay both during and at the end of a tenancy, in the event, for example, that a key is lost, as garden maintenance charges, or through the blurring of the line between fair wear and tear and damage. We know that that happens. The Bill presents a risk that such practices may continue and increase as letting agents seek to make up the income that they will lose as a consequence of not being able to charge fees to tenants. It is easy to imagine the circumstances in which such charges might be imposed on tenants. In my view, that would be a significant failing of the Bill.
Amendment 10 seeks to ensure clear, transparent parameters within which default fees can be charged to ensure that they are reasonable and proportionate. Without the amendment, the Bill will be at significant risk of failing in its ultimate objective of reducing costs to tenants, and may even make matters worse by allowing costs to be imposed on tenants that are random, spurious and opaque. On the whole, the Bill has the potential to deliver significant improvements and benefits for tenants, but the Government will make a serious error if they do not take firm and robust action to close this loophole. The Bill will be poorer for that and may well fail in its ultimate objective as a consequence of overlooking this point. I therefore urge the Minister to set out in detail how the Government propose to close this significant loophole and to accept amendment 10, which presents a robust way to do so.
Rishi Sunak
I am pleased that hon. Members accept the principle of default fees and agree with the general view that it is not fair for landlords to pay fees that arise from default by the tenant. Our approach to default fees has been to avoid listing the types of default, as such a list would be likely to need updating in future. Although the amendment seeks to set out default fees through secondary legislation rather than on the face of the Bill, the principle against such a fixed list stands.
Helen Hayes
I fear that, once again, the Minister’s remarks fail to take into account culture and practice in the lettings industry and the extreme imbalance of power between landlords and tenants. What is to stop a landlord from saying, “Well, it cost me £150 to replace that, so that is what you have to pay”? That happens all the time. Notwithstanding current legislation, there is no protection in reality for tenants against such charges.
Rishi Sunak
I thank the hon. Lady for her comment, but the point of the legislation is that there will be far greater protection for tenants and a deterrent for landlords from behaving in the way she outlined, because there will be significant financial penalties and banning orders at stake for landlords who misbehave. There is a process for tenants to seek redress, partly informed by the recommendations of the Select Committee, such as going to the first-tier tribunal that does not exist today. The combination of all those things makes it much less likely that a landlord would behave in such a manner, for the simple reason that they would be behaving illegally. If that were to be found out by trading standards, the first-tier tribunal or any redress scheme, the penalties for that misbehaviour could be incredibly significant.
This legislation will have the impact required. The guidance we will put forward will specify that it will be best practice for the landlord to provide evidence of their loss, which they will do precisely because they know in the back of their mind that if they put out a speculative number and are challenged, the consequences will be significant for them. All in all, I ask the hon. Member for Great Grimsby to withdraw her amendment.
Melanie Onn
The Minister says that the Bill will seek to ensure that erroneous behaviours by landlords or letting agents will be far less likely, but that does not fill me with any kind of confidence. He goes on to talk about the enforcement element—the fines, trading standards and potential criminal prosecution if that happens more than once—but he fails to acknowledge the issues of enforcement, which I understand comes much later in the Bill, that have been very clearly expressed in the oral evidence we have heard.
Making the legislation work requires the enforcement to work. As we have not yet got to that point, it is very difficult for me to feel at all convinced that the Minister’s proposals will ensure that tenants will be properly protected from default fees and that letting agents or landlords will fulfil all their responsibilities. I know that the responsible ones will, but I am not remotely interested in them. For that reason, I am afraid that I will not withdraw the amendment.
Question put, That the amendment be made.
Dr Williams
I thank the right hon. Gentleman for asking that. I am not making any proposals about the standard of proof. I have suggested in the amendment that,
“the Secretary of State shall make regulations specifying the documentary proof required from the tenant for the purposes of this sub-paragraph.”
It could be that the threshold would have to be a criminal conviction. I believe that there are other circumstances in which a victim of domestic violence might get legal aid. I am not sure what the threshold of proof is for that, but it might perhaps be wise to use a similar one. The amendment gives the Secretary of State the power to set the threshold of proof. I urge the Minister to consider using this amendment to prevent individual crises turning into catastrophes.
Rishi Sunak
It is a pleasure to respond to the amendment tabled by the hon. Gentleman, my constituency neighbour. I am not sure whether the whole Committee knows that he is making a sacrifice to be with us today, since I think it is his daughter’s birthday. We all wish her a happy birthday—[Hon. Members: “Hear, hear!”]—and I hope we can speed him on his way back up north to her as quickly as possible. I look forward to welcoming both her and him back to their native home in north Yorkshire, where they will be very welcome in the Richmond constituency.
Dr Williams
I thank the Minister for his response and for his wishes; I will pass his message on to my daughter if I get there before she turns in to bed. I believe that a landlord has the power to terminate a contract with two months’ notice—I believe that to be correct.
Rishi Sunak
That refers to taking back possession under section 21 at the end of a shorthold tenancy. It is two months in advance of that period, which is typically six months or more likely 12 months. It is not for use randomly in the middle of the tenancy agreement.
Sarah Jones
I rise to speak in support of amendment 12, which would give tenants a right to leave a tenancy agreement after a breach of clauses 1 or 2, and amendment 11, which would prevent landlords from charging a tenant for termination of a tenancy if they leave under the provisions added in amendment 12. Those simple amendments would help to redress the balance in the relationship between landlords and tenants and offer real benefit to other areas of the Bill.
The Bill provides for a strong set of rights for tenants to dispute and reclaim money that was taken as a prohibited payment. Yet if there is one thing to take away from all the evidence we heard this morning and on Tuesday, it is that people on all sides want an enforcement system that works and want landlords who charge such fees to be held accountable for their actions. As the Bill stands, there is not enough funding in the enforcement mechanism for that to be done consistently by a trading standards body or enforcement authority. The Opposition want more funding for enforcement to catch out wrongdoers, but inevitably tenants may need to go to a first-tier tribunal themselves if they are charged a prohibited fee and wish to challenge it.
The Bill should therefore consider closely the drivers and the things that discourage tenants in reporting landlords and letting agents that charge prohibited fees. The amendment aims to resolve one of the real discouraging factors for anybody who has either just moved into a new house on a fixed-term contract or anybody who has agreed a long fixed-term contract with their landlord.
We know that the relationship between a tenant and landlord is important to having a happy and successful tenancy. Indeed, for those who live with their landlord it is a relationship with someone they see on an everyday basis and with whom they share facilities. Taking a landlord to a tribunal could drive a significant wedge into that relationship, and it would be natural for tenants to feel that they are no longer secure in their rental agreement through no fault of their own, after a landlord has tried to charge them a prohibited fee. Yet, as the Bill stands, they may need to remain in the agreement until the end of the tenancy. So the landlord has tried to charge a prohibited fee, but the tenant has to remain in the agreement until the end of the tenancy.
That would be a major barrier to bringing up the prohibited charge. People might think that challenging a prohibited fee is not worth their feeling uncomfortable in their rental agreement for months, possibly years, as opposed to just accepting the fee, so as not to sour the relationship with the landlord.
This amendment would get rid of that barrier by giving the tenant the ability to leave if they feel uncomfortable staying in an agreement with a landlord who has already charged a prohibited payment. It is a method both of improving the rights of tenants if they are charged a prohibited fee and of removing a barrier to reporting the charging of a prohibited fee by a landlord or letting agent.
It would also act as an extra disincentive to a landlord or letting agency charging a prohibited fee. If they could lose a tenant as a result of charging a fee, that could lead to the loss of rental income for the period between the tenant moving out and finding a new tenant, given that amendment 11 would prevent the charging of fees for the early termination of tenancy under this new provision. This set of simple amendments would improve the effectiveness of the Bill and I hope that Members from all parties will support it.
Rishi Sunak
I hope that we can do this very quickly. The Government believe that both amendments 11 and 12 are problematic, and this discussion comes down to just a simple difference of opinion on principle. Removing the obligation for a tenant to pay the remainder of their rent if they terminate their tenancy following a breach of the ban could lead, in our view, to landlords being disproportionately penalised for perhaps an inadvertent breach that they immediately take steps to rectify.
Clause 4 already ensures that any term that breaches the ban on fees is not binding on the tenant and the Bill also provides for tenants to recover any prohibited payments, and for enforcement authorities to take quite significant action in such cases, potentially leading to an unlimited fine.
For those reasons, and it is a simple difference of opinion on what is proportionate, I ask the hon. Lady to withdraw the amendment.
Sarah Jones
I heard the Minister; there is clearly a difference of views. I am happy to withdraw the amendment, but I obviously reserve the right to return to this matter on Report.
Amendment, by leave, withdrawn.
Question proposed, That the schedule be the First schedule to the Bill.
Rishi Sunak
We want to ensure that the effect of including a banning requirement as a term of a tenancy agreement is clear, and the clause provides that a term of any agreement that contravenes the proposed legislation is not binding on the tenant. The clause also establishes that the rest of the agreement will continue to apply where any part is found to be non-binding, to ensure that the tenancy can continue and that landlords and tenants remain protected by the terms of the contract. Finally, the clause provides that if the tenant or someone acting on their behalf has been required to make a prohibited loan, that money should be repaid on demand. Members of the Select Committee will be pleased that that provision has been included, as it reflects one of the Committee’s recommendations during pre-legislative scrutiny. The clause establishes vital protections for tenants.
Melanie Onn
The spirit of the proposed legislation is to protect tenants and remove burdens from them wherever possible, in order to rebalance power, which has for so long been in the hands of letting agents and landlords, in favour of tenants. That is as true for costs as it is for other things. We tabled amendments 11 and 12 because we would like to see more rights. Although we opted not to press them—we have not been very successful in votes this afternoon—we welcome clause 4, as it offers tenants greater protection from retaliatory evictions. Even if it is not as bold or strong as we might like, it is nevertheless a step forward legislatively.
As we know, retaliatory evictions are a real problem. They can cause a great deal of distress and concern for tenants, and they are one of the major reasons why people do not speak up against their landlords or seek to enforce their rights as tenants. The power imbalance in the relationship between the landlord and the tenant, which I have referred to throughout our deliberations, represents one of the worst abuses of the sanctity of people’s homes. Despite our amendments having fallen, any additional contract security for tenants is a good thing, although we urge the Government to consider strengthening it.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned.—(Kelly Tolhurst.)
Tenant Fees Bill (Second sitting)
Rishi Sunak ExcerptsThursday 7th June 2018
(7 years, 6 months ago)
Public Bill CommitteesRead Full debate Tenant Fees Act 2019 View all Tenant Fees Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 June 2018 - (7 Jun 2018)
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
Q
May I just start with a broad question as to the role of trading standards? Simon, you have touched on this. Do you think that we have got it right, in the sense that trading standards are the obvious and correct body to enforce this Bill? That was obviously the overwhelming view of the correspondence to the consultation, but I wanted to check with both of you whether you think that is appropriate.
Alex McKeown: I definitely think it is appropriate, because at trading standards we have the power and we are used to dealing with businesses. With the redress scheme legislation, it was the local borough or district council. Having worked in London on that sort of project, I know that the private sector housing departments are used to dealing with landlords and with the Housing Act 2004, but they are not used to going into letting agents and issuing those fines; we are, and we are the best people to deal with it. But the officers need proper training so we can get more officers up to speed to continue that work and encourage more boroughs to carry out this work. That is down to funding again; a lot of the chiefs are saying, “We haven’t got the funding, so we have other priorities at the moment.”
Councillor Blackburn: It should be either trading standards or private sector housing teams that deal with this, particularly in relation to small district councils, which are not weights and measures authorities. It may make sense in some areas for the private sector housing enforcement team, which would probably be one individual, to lead on it, because they will be most familiar. There needs to be flexibility, but in most primary authorities, it would be trading standards.
Mr Robert Goodwill (Scarborough and Whitby) (Con)
Q
Alex McKeown: Some of the difficulty with the legislation that is already there with regard to letting agents is that you have to have knowledge of housing and of trading standards, so you almost need a trading standards and housing officer hybrid person. I have worked in authorities where I was a trading standards enforcement officer but I sat with private sector housing, and that worked quite well.
It is difficult to know, because there are also different problems in different areas of the country. In London, there is a much bigger problem than in the leafy counties. You will not get the same issues. In London, there are more vulnerable tenants who are being exploited, and you get the rogue agent element, but I cannot really speak for how it will work outside London, because I have worked in London for so long.
The Chair
I am sorry; it is very frustrating that we have such little time, but the Minister has been very patient.
Rishi Sunak
Q
Alex McKeown: There is option to issue a £30,000 fine or to take criminal action. The difficulty is that criminal action is expensive. Often, we do not get our costs back and we still do not achieve very much. It is better to issue the fines but, again, the repeated offenders—
Rishi Sunak
Q
Alex McKeown: It is a significant deterrent.
Rishi Sunak
Q
Alex McKeown: I think I have; is this the one that says you can hold the directors—
Rishi Sunak
Q
Alex McKeown: To a degree, but the burden of proof is beyond all reasonable doubt.
Rishi Sunak
Q
Alex McKeown: To a degree.
Rishi Sunak
Q
Councillor Blackburn: I would have welcomed some earlier engagement to tell me that that was happening so that we could have co-designed it, but yes of course, Minister, I welcome that new development.
Rishi Sunak
Q
You talked a little about funding—I hope you welcome the £500,000 that has been indicated. Have you done any bottom-up analysis that you can give us today that suggests that the figure should be different and that provides the figure that you would be comfortable with?
Councillor Blackburn: I anticipated that question and spoke to my officials on the way over. I said, “So when he asks me what we think it ought to be, do we not have a figure?” The answer was that we do not have a figure, but we are doing that bottom-up research. We were consulted about how much we thought it might cost, but we were given about a week to turn that around, which was not enough time to get sufficient data from our members about how much it might cost. That is work is ongoing. As soon as we have a figure, we will come back to you with it.
Rishi Sunak
Q
Councillor Blackburn: Yes.
Alex McKeown: Absolutely.
Rishi Sunak
Q
Councillor Blackburn: I am reasonably confident that they will want to work with the LGA to help us disseminate best practice and to advise our members. That is certainly what has happened in the past.
Alex McKeown: I do not have anything specific that I would like to see. I suppose I look for it to be very similar to the national estate agency team, which I am used to already.
Rishi Sunak
Q
Alex McKeown: Yes, I think so. Generally, when complaints are sent via the national estate agency team, trading standards is more likely to do something about it.
The Chair
Thank you very much to both of you; you have been excellent and informative witnesses, but we have been beaten by time. Thank you very much for your attendance.
Examination of Witnesses
Rhea Newman, Katie Martin, Dan Wilson Craw and Izzy Lenga gave evidence.
Richard Graham
Q
Dan Wilson Craw: Yes, it is.
Rhea Newman: In their responsibilities for enforcing across the private rented sector, it is really important that trading standards and environmental health officers work together. That joint work is fundamental. They obviously have resource challenges at the moment, which need to be addressed. We have always supported having one responsible authority—trading standards—in the Bill, but if they can work with their district councils, that is really important.
Rishi Sunak
Q
I have a very quick question about the principle of a holding deposit. Obviously, there is some debate about that. The argument that has been put forward—we heard it again the other day—is that having a holding deposit is sensible because it does two things: it ensures that tenants have a financial stake in the process and that they are not speculating on multiple properties, and it protects landlords, so they do not cherry-pick among tenants. If there were not a holding deposit, landlords might be inclined to pick safer tenants. I understand that you might have some different views about the detail of how it is implemented, but first I would love to hear whether you agree with the principle of a holding deposit. Katie, do you want to start?
Katie Martin: Yes. As I said, we do not object in principle to holding deposits. We think they should be measured to ensure prospective tenants are not taken advantage of. We also think it is really important that the legislation ensures that the landlords or letting agents cannot retain the holding deposit following a failed credit check or reference check. They should do that only if tenants have provided misleading information. The circumstances under which holding deposits are withheld should be closely looked at, but we do not object to them in principle.
Rhea Newman: We also do not object in principle. We think they can play a role. We are not sure, in practice, how much tenants speculate on multiple properties at the same time—in highly competitive markets, tenants often feel lucky to find one property that meets their needs—but we accept the principle of a holding deposit. We have always argued for a lower cap of about two days’ rent, because one week’s rent—I think the average is £192 across England—is a lot to lose if your circumstances change. Our main priority is to ensure the terms for refunding holding deposits are really clear. We think there needs to be a paper trail around what information is taken before holding deposits are given. Landlords and agents should tell tenants how it will be treated, and if they do not refund it they should provide evidence for why they are doing that. We think that, at the moment, the terms are not clear enough.
Dan Wilson Craw: I agree. We think holding deposits serve a function in a market in which it takes a while to get a reference from the tenant. If technology and the market were to develop post the fees ban, and a tenant could be referenced instantly, you would potentially not need a holding deposit.
We have a couple of concerns. Having this Bill to formalise the process of taking a holding deposit is really important. Under the Bill, a landlord or a letting agent could still take holding deposits from several tenants and ultimately give the tenancy to only one tenant. What it would do for tenants who had put down a holding deposit and did not get the tenancy is to put their flat hunting on hold for 15 days. We would quite like to see the Bill tightened up in that respect. Also, as was mentioned before—
The Chair
Order. I am afraid we will never know what the second point was, because time has beaten us. You have been excellent witnesses. Thank you so much for coming.
That brings us to the end of the oral evidence session for this Bill. The Committee will meet this afternoon to begin the line-by-line consideration of the Bill. To remind Members, that will happen not in this Room but in Committee Room 12 in the Palace of Westminster at 2 pm.
Tenant Fees Bill (First sitting)
Rishi Sunak ExcerptsTuesday 5th June 2018
(7 years, 6 months ago)
Public Bill CommitteesRead Full debate Tenant Fees Act 2019 View all Tenant Fees Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 5 June 2018 - (5 Jun 2018)
Neil O'Brien
Q
David Cox: If we drop it to four weeks—the security deposit is a risk mitigation product, and therefore four weeks is effectively one month. If the tenant leaves without paying the last month’s rent and damages the property, if it is a month, they will either have the money for the lost rent or the money for repairing the property. That is why we have suggested the cap or agree with the cap at six weeks—because it gives the ability for the tenant not to pay the last month’s rent and to damage the property. That is why we have suggested and support six weeks, bearing in mind that, provided everything goes smoothly, the tenant will get that full money back at the end.
Isobel Thomson: I would like to see a permitted payment or an exemption for the situation where a tenant has a pet. Often, agents charge a higher deposit because of having a pet. We would not want to disadvantage people with cats and dogs, would we? That is something that should be looked at.
Adam Hyslop: I agree. The risk from limiting the level of deposit is simply that it limits tenant choice. Some tenants are higher risk than others. Pets are a good example where a landlord might want to take a higher deposit. Another example is that we get quite a lot of people who come from overseas and they are harder to reference. Although you can contact employers, they do not have a UK credit score and things like that. The remedy, without charging that tenant an actual fee, would be to increase the deposit to a reasonable level.
There are things such as rent in advance that can work around that, but frankly, a six-week deposit feels like a reasonable compromise to protect tenant choice on this, rather than foreclosing on some groups.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
Q
For the record, the Government and I do not have the intention of trying to drive letting agents out of business, as was potentially characterised early on. We very much recognise the valuable role that high quality letting agents play. We have got a great example of one here this morning. This Bill is just about improving the industry to make it work for tenants where there have been abuses of the system and an asymmetry of power. I wish to put on record our thanks for the work many good letting agents do.
In the brief time we have—and in a quick answer to the question—the Bill allows for default fees for things such as a lost key or a late rental payment. Do you think that is a sensible provision to have in the Bill? Also, the Bill allows for payment for changes to the tenancy agreement at the request of the tenant—such as an extra sharer added to the tenancy agreement—capped at the landlord’s reasonable fees for that. Do you think those are sensible? Do you think they should be limited or broadened?
Isobel Thomson: I would say that they are eminently sensible but we just need guidance around how they will operate. I know that civil servants have already started to engage with stakeholders on that.
David Cox: I would support that; I think they are absolutely necessary. I highlighted one example a few moments ago. Under the Bill, they will have to be written into the tenancy agreement so that tenants are aware of them from the outset. Our reading of the Bill is also that anything that is in the tenancy agreement will need to be in the fee schedule, that is displayed prominently in the office and on the website and, under the Bill, on any third-party websites such as Rightmove or Zoopla. I would just query on that one. A lot of agents use Twitter to display their fees; I am not sure how they would get the fees on to the advert in the necessary number of Twitter characters.
We also have to factor in that—
The Chair
Order. I am very sorry to interrupt. You have been a very engaging and useful panel and we could have gone on much longer, but I am afraid that under the programming motion, I have to bring the session to an end. Thank you very much for attending this morning.
Examination of Witnesses
Richard Lambert and David Smith gave evidence.
Rishi Sunak
Q
Richard Lambert: We believe that the tenant has to have some kind of financial stake in securing the tenancy, so that they do not game the system by putting in offers on a number of properties and then only taking one, whereas the individual landlords will remove the property from the market once they have a firm offer. We would have preferred the situation where the landlord could have charged directly for the reference fee, because we think that is clearer and more transparent. The holding fee is acceptable as far as we are concerned, but we would have preferred something that was much clearer and more transparent to both the landlord and the tenant.
David Smith: The market has tended to move away from holding deposits in the last few years and has simply charged a fixed fee, which ideally should have been linked to referencing, but has occasionally become linked to a random figure made up by the agent. I suspect that what will actually happen is that quite a lot of landlords and agents will not charge holding deposits, particularly in London, and they will simply run it tournament-style: whichever tenant gets there the fastest, with the mostest, will get it.
Rishi Sunak
Q
Richard Lambert: We would prefer not to have a cap at all. If the Government are determined to bring one in, six weeks is something that we think we can work with. What I was ambivalent about was whether it would mean that people who currently take four weeks as a deposit would automatically move to six. I think that very much depends on the individual, but there is evidence elsewhere in the economy that if you set a limit on what can be charged, the market tends to gravitate towards that limit.
David Smith: We will accept six weeks and will work with it if they put on a cap, but we would prefer to have some scope within the Bill. We have proposed an amendment to the Bill that would allow a slightly higher deposit where there is a particular set of risk factors such as a pet, or someone who is coming from overseas, or someone who can provide no evidence of their income. Otherwise, we feel that landlords just will not rent to those people.
The Chair
Thank you very much for coming today. It has been a most interesting session. We could have continued for longer, but I am afraid that the programme order requires me to stop the evidence session now. That brings us to the end of your evidence session today. The Committee will continue to take oral evidence in our next sitting on Thursday at 11.30 am, ahead of beginning the line-by-line consideration of the Bill at 2 pm.
Non-Domestic Rating (Nursery Grounds) Bill
Rishi Sunak ExcerptsTuesday 5th June 2018
(7 years, 6 months ago)
Commons ChamberRead Full debate Non-Domestic Rating (Nursery Grounds) Act 2018 View all Non-Domestic Rating (Nursery Grounds) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move, That the Bill be now read a Second time.
Agriculture is at the heart of our country’s rural life, and, moreover, at the core of our rural economy. It employs over half a million people and supplies almost half of everything we eat and drink in this country. In England alone, the rural economy is worth over £250 billion. We want our country to offer unparalleled business opportunities for an agricultural community that produces some of the finest food and drink in the world. At every stage of the food chain, the UK is creating exceptional food and drink enjoyed around the world, with lucrative opportunities for British exporters, international buyers, and investors. In just 10 years, global demand has grown by nearly a third, with total food and drink exports now exceeding £20 billion.
I am proud to represent a deeply rural and agricultural constituency, home to businesses like Wensleydale Creamery, HECK sausages, Stamfrey Farm yoghurt, and Thornborough Cider—all fantastic rural businesses producing food and drink that competes with the best around the world.
This Government are absolutely committed to supporting sustainable growth in the rural economy. Through the 2014-2020 rural development programme, we are investing almost half a billion pounds in England’s rural businesses. Our support for rural enterprises includes developing farm and horticultural companies. In February, the Government launched a wide-ranging consultation on the future of farming—one that supports farmers once the United Kingdom is outside the European Union. The Government are now analysing views and responses from all stakeholders who contributed. Our ambition is for a more dynamic and self-reliant agricultural industry. Supporting our rural economy and protecting farmers is an essential part of our exit from the European Union. Leaving the EU provides the Government with a unique opportunity to establish new frameworks that support our farmers to grow more, sell more and export more great British food and drink. As we develop this new approach to food, farming and fisheries outside the EU, we will not compromise on our high standards of animal welfare and environmental protection.
The Government are set to continue to commit the same cash total—£3 billion—in funds for farm support until the end of this Parliament. Then the Government will devise a new agri-environment system to be introduced in the following Parliament.
Mr Jim Cunningham (Coventry South) (Lab)
One of the big problems with regard to protecting farmers, as I am sure the Minister knows, is getting labour in from the EU and other parts of the world. That is where the big problem might lie after we have come out of the EU.
Rishi Sunak
It is not quite my place to comment on future immigration policy, but the hon. Gentleman will know that the new Home Secretary is devising a new immigration system for the UK after Brexit. Of course, ensuring that all businesses, not just in agriculture, have access to the talent and the labour they need will be at the forefront of that new system.
The Government have also said that they will use the structural fund money that comes back to the UK following the EU exit to create a UK shared prosperity fund. The needs and interests of rural businesses have to be addressed as part of any future plans.
We firmly believe that the business rates system plays an important role in supporting agricultural productivity. The agricultural exemption from business rates is a key part of this support. It is a broad-ranging and generous tax measure that ensures that no business rates are paid on agricultural land and properties.
Sir Greg Knight (East Yorkshire) (Con)
The Bill itself does not define what a “nursery ground” is, but the explanatory notes, which are not considered by Parliament and are not part of the legislation, do contain a definition of what a “nursery ground” is. Why is this? Would it not be better to put the definition in the Bill, or does it exist in other legislation?
Rishi Sunak
My right hon. Friend is right. My understanding is that other legislation has outlined the difference between the two, and I will come on to the Court decision that distinguished the treatment of the two.
It might be helpful, for Members who are not aware, if I explain the distinction. A nursery ground is where small plants or trees are propagated or sown with a view to their being sold on to someone else for growing on to their mature state, for sale to or use by the end consumer, whereas a market garden is where fruit, vegetables, flowers or plants are produced to be sold directly or indirectly to members of the public for consumption.
Rebecca Pow (Taunton Deane) (Con)
I have been much involved with the horticultural industry, so I am quite aware of the nursery industry, but I believe that many people are not aware of how significant it is for growing produce for our home market. We could grow it even more after Brexit—indeed, we need to—and the Bill will help a great deal by making these businesses more viable.
Rishi Sunak
My hon. Friend is, as ever, an incredible champion for agriculture and the rural community. She is right to highlight not only the current contribution of the fantastic horticultural sector to the UK economy in providing such fantastic food and drink for us to enjoy but the opportunities that will come after Brexit, as we make good on the promise of a global Britain where our food and drink exporters can look out to the world around, where demand is growing exponentially, and take advantage of all those opportunities. Consumers around the world will have the opportunity to benefit from high-quality produce developed in this country and always to high welfare standards, of which I know she is also a champion.
It is worth noting that the exemption from business rates for agricultural land has been in place since 1929. Before that, in the early part of the 20th century and before, agriculture benefited from a partial exemption from rates. For almost 100 years, the Government and Parliament have considered that agriculture should not pay rates. This Government and I trust that this Parliament has no intention for any change of direction in this matter.
It has been assumed until now that all plant nurseries where plants or trees are grown in the initial stages of their life, as I outlined, benefited from that exemption. That had always been the understanding of both rating valuers and practitioners, but in 2015, a Court of Appeal decision showed that the exemption did not apply to plant nurseries in buildings where the buildings were not used in connection directly with agricultural land. That does not reflect Government policy, and neither does it reflect our commitment to supporting sustainable growth in the rural economy.
This legislation will ensure that plant nurseries in buildings will once again benefit from the exemption from business rates for agricultural land and buildings. It will restore fairness for hard-working businesses hit by an unexpected tax burden, and it will enable the Valuation Office Agency to return to its former practice of exempting plant nurseries in buildings and removing plant nurseries that have been assessed from the business rates list. Plant nurseries paying business rates since 2015 will be eligible to apply for a backdated refund of their business rates, which will ensure that these businesses do not continue to suffer as a result of a property tax with an impact on the cost of farming and produce.
Bob Blackman (Harrow East) (Con)
My hon. Friend is clearly laying out the Government’s position, but can he clarify one issue that has been raised with me? Garden centres are commercial centres for direct provision to the public, but what will be the position under the new legislation of hybrids—in other words, plant nurseries with a garden centre alongside them that sells their produce directly to the public?
Rishi Sunak
I thank my hon. Friend for bringing up a helpful and important point that is worth clarifying. Under current legislation, garden centres are not exempt from paying business rates because they are not treated as agricultural businesses, which I am sure hon. Members will understand. It would be for the Valuation Office Agency to determine the individual facts of the case that he mentioned, but in general, it is perfectly possible for different parts of an entity to be treated in different ways. In the example he gave of a hybrid, where an agricultural business also had a retail operation, the Valuation Office Agency would be able to treat different parts of the business in different ways, and some may benefit from the agricultural exemption. Another example might be a working farm that also happens to have a retail element—for example, a farm shop—that might not benefit from the agricultural exemption, whereas the rest of the farm would. I hope that that clarifies my hon. Friend’s query.
In developing this legislation, we have worked very closely with the National Farmers Union to make sure that the measure meets our shared aim of ensuring that plant nurseries benefit from the agricultural exemption. I want to put on the record my thanks to the NFU for its invaluable insights and expertise, which has helped us to bring this effective legislation to the House. I very much welcome its support for the Bill.
I also want to put on the record my thanks to my hon. Friend the Member for St Austell and Newquay (Steve Double). He deserves enormous credit for highlighting this issue to both my predecessor and others last year, and he has continued to press the case with Ministers and other parts of the Government. I am glad that he will be able to see the fruits of his labour brought to bear today.
To return to the comment made by my hon. Friend the Member for Harrow East (Bob Blackman), the Bill will not otherwise disturb the existing boundary of the agricultural exemption, so uses beyond agricultural operations, such as garden centres, will continue to be subject to the normal business rates process.
Sir Greg Knight
Is the Minister in effect saying that all the Bill does is return the law to the same state we all thought it was in before the case of Tunnel Tech v. Reeves?
Rishi Sunak
My right hon. Friend is absolutely right: that is what the Bill seeks to do. It is a limited, targeted Bill that restores the practice previously widely accepted and understood by all participants in the rating system and ensures we will return to the state that existed before the Court of Appeal decision.
While I am responding to my right hon. Friend, let me clarify my earlier point. He asked where exactly the definition of nursery grounds can be found. I am reminded that it is precisely defined in case law, rather than in statute. That is where the definitions used over the years have been developed.
To turn to the business rates system in general, the Government are very clearly using the business rates system to create opportunities and to drive growth across the country. The Government have introduced a range of business rates reforms—worth over £10 billion by 2023—that will benefit the wider economy, including many businesses in rural areas. In April 2017, we permanently doubled small business rate relief to 100%, and raised the threshold from £6,000 to £12,000. As a result of these measures, over 600,000 small businesses—occupiers of a third of all properties—now pay no business rates at all. This demonstrates the Government’s clear commitment to supporting small businesses. We understand the impact of business rates in the rural economy in particular, so at the same time the Government also doubled rural rate relief from 50% to 100% for eligible businesses.
Rebecca Pow
I have an urban area in Taunton Deane, but I speak as someone whose constituency is particularly rural. There is a view that there is an increasing divide between urban and rural, particularly in the south-west, where we are largely rural. These business rates exemptions are absolutely crucial. Does the Minister agree that this Government are very much indicating that they understand their importance?
Rishi Sunak
My hon. Friend is absolutely right. She will know that I also represent a deeply rural constituency. I have seen at first hand the incredible difference that the business rates exemptions make to small rural enterprises, whether they are small business rate relief, rural rate relief or, indeed, some of the measures to support pubs that the Chancellor has announced in the last Budget or two. All of these measures add up to tangible savings for thriving enterprises, which are indeed the lifeblood of rural areas.
My hon. Friend will know, as I do, that rural areas typically do not benefit from large multinational employers. The backbone of rural economies are small and medium-sized enterprises, for which business rates are often a significant cost to bear. Any relief that the Government can give is always warmly welcomed, and it makes an enormous difference to their profitability and future success.
I am pleased to tell my hon. Friend that the Government continue to listen to business. At the spring Budget last year, the Chancellor announced a £435 million package to support rate payers facing the steepest rises in bills following the revaluation. Further answering calls from businesses, the Government brought forward to April this year the switch in the annual indexation of business rates from the retail prices index to the consumer prices index. That represents a cut in business rates every year. Although bringing forward that measure two years earlier than previously planned might sound technical, it is worth £2.3 billion over the next five years.
Furthermore, at last year’s autumn Budget the Chancellor also announced an increase in the frequency of property revaluations from every five years to every three years following the next revaluation. That will ensure that bills more accurately reflect properties’ current rental value and relative changes in rents. The 2018 spring statement announced that the next revaluation would be brought forward to 2021 from 2022, so that businesses can benefit from the change as soon as possible. After that, three-year revaluations will take effect in 2024.
To deliver on that commitment, the Government have already introduced secondary legislation to set the valuation date for the next revaluation on 1 April 2019, allowing the Valuation Office Agency to start preparing for a 2021 revaluation. The Government will introduce primary legislation to change the date of the next revaluation to 2021 in due course. The British Retail Consortium recognised that that was a positive move to improve the fairness of the system, and I look forward to meeting its representatives shortly.
In spite of all that, the Government are not resting on our laurels. We are also reviewing the wider taxation of the digital economy, and the Chancellor has been clear that we need to look more broadly at the overall taxation of the digital economy. The Government are working internationally to ensure that corporate tax rules deliver fairer results for certain digital businesses. We will use the output of those discussions to help inform consideration of the wider business tax system, to ensure that all businesses make a fair contribution to the public finances and that business rates continue to support the stability of local government funding.
Sir Greg Knight
I am grateful to the Minister for his generosity in giving way. What would be the position of a business adversely affected by the Court of Appeal decision? Would it be able to claim compensation for any losses suffered?
Rishi Sunak
I am happy to tell my right hon. Friend that businesses will absolutely be able to claim back any business rates they have paid from 1 April 2015. In Wales, businesses will be able to claim back to 1 April 2017. It might help Members if I explain the difference between the two dates.
The business rates system in England has relative lists of valuation dates—there is a 2010 list and a 2017 list. When we reach a certain point, it is then impossible to go back and change the list from the beginning. In this case, for any decisions that the Valuation Office Agency made after the spring of 2016, it was only possible to go back and change people’s bills to April 2015. Our understanding is that only a handful of businesses have been caught, and they will be able to use this legislation and subsequent regulations to appeal to the Valuation Office Agency and receive a refund backdated to when they first started paying bills.
Sir Greg Knight
Will the Minister clarify something—and if he cannot answer today, will he write to me? In addition to claiming back what has already been paid, will the businesses affected be able to claim costs and any other expenses arising out of the money that they erroneously had to pay?
Rishi Sunak
The businesses will not be able to claim costs; the new “check, challenge, appeal” system allows them to make a no-cost filing with the Valuation Office Agency, so there will be no cost to them as they claim back the bills they paid. However, it is important to note that, when they paid, the bills were not paid in error; they reflected the circumstances on the ground at the time.
I said that I would clarify why the date in Wales is different from the date in England. It is purely on the advice of Welsh Government officials. They do not believe that any businesses have been caught up by this in a way that would impact their previous list. In Wales, therefore, any active businesses caught up in this will only have their bills backdated to 2017 at the start of the new and current ratings list. Further retrospective dating is therefore not required.
Bob Blackman
My hon. Friend is clearly setting out to answer many of the questions from across the House. Will he clarify the number of businesses caught up in this and the total amount of money involved? I quite understand if he is unable to answer those questions today, but it would be helpful to many colleagues if this could be clarified subsequently in writing.
Rishi Sunak
I can answer my hon. Friend’s question now. The Government do not actually know, and are not in a position to know, the tax or business rates circumstances of individual businesses across the country. The VOA is under no obligation to share confidential taxpayer information with the Department. What I can say, based on informal conversations with the sector and the VOA, is that we believe just a handful of businesses impacted by the court ruling have subsequently had their bills changed. That is the working number we are aware of and I hope that provides the clarity he requires.
To return to digital taxation, the paper published at the 2017 autumn Budget sets clear expectations on what the Government hope to achieve on digital taxation: international momentum behind long-term corporate tax reforms and, pending that, the development of interim multilateral digital tax measures.
In conclusion, the Bill delivers on our commitment to support the rural economy and promote this country’s rural life. Moreover, it promotes fairness for hardworking businesses in the agricultural sector. I believe that it has widespread support from the agricultural community and valuers around the country. I very much commend it to the House.
Planning: Local Communities
Rishi Sunak Excerpts(7 years, 6 months ago)
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The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Mr Owen. I congratulate my right hon. Friend the Member for Loughborough (Nicky Morgan) on securing this important debate. I am delighted to respond to the points that she has raised, although I have to gently say that I thank her for the unintended promotion—I am but the Local Government Minister, not the Minister for Housing and Planning. However, I know the Minister for Housing, my hon. Friend the Member for Esher and Walton (Dominic Raab), will be keenly listening, and will hear from me regarding the points that she has raised.
My right hon. Friend for Loughborough raised the key role of communities in the planning system, and the need for local people to believe that being involved is worth while. Community participation is vital to their accepting the development required to meet our housing needs. My right hon. Friend referred to a number of specific planning cases but, as she kindly acknowledged, I am not in a position to comment on the detail or merits of those ongoing planning applications and appeals. However, I will talk more generally about the importance that the Government place on communities when it comes to plan making and planning decisions, and I will address the three areas of concern that she highlighted.
Local plans are prepared in consultation with communities and play a key role in delivering development and the necessary infrastructure in the right places. They provide clarity to communities and developers about where homes should and should not be built, so that development is planned rather than the result of speculative applications. It is crucial that local authorities have up-to-date local plans, produced in consultation with local people. As my right hon. Friend mentioned, her constituents are concerned that some development is placing pressure on existing infrastructure and services in their communities.
Up-to-date plans are an important means of identifying where infrastructure needs to be strengthened, and I am pleased to tell my right hon. Friend that the Government are introducing reforms specifically in that area. Those reforms will mean that developers know exactly what contributions are expected of them and that local communities are clear about the infrastructure that they will get in their area alongside new homes. Two separate consultations—one on developer contribution specifically and a broader one on the NPPF—have just concluded, and both included questions on that topic. The Government will introduce proposals in those areas later in the year, but the point that my right hon. Friend made is spot on: local communities need to know that infrastructure will be there alongside the housing that they are accepting in their area.
More broadly, as my right hon. Friend will know, the Government agree that supporting infrastructure is important. That is why we recently announced a £5 billion housing infrastructure fund, specifically to fund the types of infrastructure she referred to in areas where it can make the difference between a housing development happening or not. I hope that provides some reassurance.
My right hon. Friend pointed out that some authorities, including her own, are deemed not to have a five-year land supply due to land banking and slow rates of delivery. That lack of supply means that plan policies are not considered to be up to date, and applications are assessed against the presumption in favour of sustainable development. Importantly, the presumption in favour of sustainable development does not mean development at all costs. Any adverse impacts of a development will still need to be taken into account. Our housing White Paper acknowledged that the current policy on five-year land supply, although it has been effective in delivering homes, has had some negative consequences, such as those experienced in my right hon. Friend’s constituency.
In response, the Government have proposed some reforms to how land supply is calculated. The draft national planning policy framework offers local authorities the opportunity to have their five-year housing land supply agreed on an annual basis and then fixed for a one-year period, as my hon. Friend the Member for Henley (John Howell) mentioned. The Government believe that that will help to address the situation that my right hon. Friend the Member for Loughborough raised. That ability to fix for one year will reduce the number and complexity of appeals, and provide greater certainty to ordinary residents and to the local authority in their decisions. I hope that she will look at how that works when it is introduced, and then come back to us with her views on how it is working in her local area.
Obviously, in exchange for that new ability, local authorities need to be realistic about meeting their planning needs, and we are addressing that through the NPPF revisions. It seems that my right hon. Friend’s local authority is being forward-looking regarding its housing needs. It is sensible for all local authorities to have a broad range of sites, especially small ones, as my hon. Friend the Member for North Cornwall (Scott Mann) rightly mentioned. That is included in the NPPF, and provides a buffer on the five-year land supply so that areas are not vulnerable to individual sites being built out slowly. That way, they can ensure that individual developers and speculators do not hold an advantage.
My right hon. Friend the Member for Loughborough was right to highlight the very large gap between the number of permissions that have been granted by local authorities across the country and the number of new homes that have been built. The housing White Paper said that a third of all new homes granted planning permission between 2010 and 2015 had not been built out. That was quite a striking statistic, and there was clearly a concern, which my right hon. Friend highlighted, that it is in the interests of speculators and developers to snap up land for housing and then sit back and wait for prices to rise. Clearly, that would not be appropriate. That is why, as she acknowledged, the Government appointed my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) to examine that issue. We will see his initial conclusions shortly, and I know that she, like the Government, will be very interested to hear what he has to say.
Nicky Morgan
The Minister is making a very helpful speech, which I shall study with great care. Our right hon. Friend the Member for West Dorset states in his interim report that, once detailed planning permission is granted for large sites, the fundamental driver of build-out rates appears to be the absorption rate. That is the rate at which newly constructed homes can be sold—or, importantly, at which the housebuilder believes they can be sold—successfully into the local market without materially disturbing the market price. I hope that will be at the forefront of the final report and the Government’s response. Housing is needed, and although we are on the side of enterprise, as I am sure the Minister will agree, we must also be on the side of people trying to get homes. It is not just about developers’ profits.
Rishi Sunak
My right hon. Friend understands the power of enterprise and makes her point well. I shall ensure that my right hon. Friend the Member for West Dorset is aware of her point. It would be wrong for me to prejudge the final conclusion of his report, but she highlights a point of interest and I am sure that it will be taken into consideration in his deliberations.
I am delighted that we were joined in the debate by my hon. Friend the Member for Henley, who is the Prime Minister’s champion for neighbourhood planning. I attest to his personal ability to galvanise and support local communities as they go through the local neighbourhood planning process, not only in my constituency but up and down the country.
Scott Mann
On local democracy, I see the Minister’s Parliamentary Private Secretary, the hon. Member for Morley and Outwood (Andrea Jenkyns), in the Chamber. We were vice-chairs of the all-party parliamentary group for local democracy and firm believers that town and parish councils should be given the ability to allocate within their developments some registered social landlords’ properties, taking them away from the local authority and putting them into the hands of the real decision makers. Will the Minister look at that at a later date?
Rishi Sunak
I applaud the work in support of local democracy not only of my fantastic PPS, but of my hon. Friend the Member for North Cornwall. Indeed, it was a pleasure to attend the conference for star councils held by the National Association of Local Councils, which highlights the important work of parish councils. I am happy to look into the matter he raises, but he will forgive me for not giving a specific answer right now.
Through neighbourhood planning, communities may have an even greater say in how their areas are planned and real power to shape the future development of their areas. Neighbourhood planning provides communities with a powerful set of tools to say where developments such as homes, shops and offices should go, what they should look like and what facilities should be provided. I am delighted that more than 2,400 communities have begun to shape the future of their areas. Some 13 million people across England now live in a neighbourhood planning area, and four of those areas, including Barrow upon Soar, are in the constituency of my right hon. Friend the Member for Loughborough. I am grateful for her previous contributions in the House, which have demonstrated her support for community-led planning.
My right hon. Friend asked about support. The Government continue to support groups not just through the valiant efforts of my hon. Friend the Member for Henley, but financially, too—£23 million has been made available for various support programmes, from this year through to 2022. Support is also given through regulation: when a planning application conflicts with a neighbourhood plan that has been brought into force, planning permission should not normally be granted.
We recognised, however, that some neighbourhood plans were being undermined because the local planning authority could not demonstrate the five-year land supply. To remedy that, in December 2016 the Government issued a written ministerial statement to ensure that national planning policies provide additional protection to such communities. The specific change was to protect neighbourhood plans that are less than two years old and that allocate sites for housing, as long as the local planning authority has more than three years of deliverable housing sites. That was the point that my hon. Friend the Member for Henley made. I understand that the local authority of my right hon. Friend the Member for Loughborough has a supply for more than three years, so that protection should be particularly helpful in her case.
Lee Rowley (North East Derbyshire) (Con)
In councils such as mine, which have not particularly pushed neighbourhood plans, when a parish council does not want to take up the opportunity of such a plan, will the Government look at the potential for other interested resident groups in the area to do something similar to a neighbourhood plan even when the parish council is unwilling or unable to propose one?
Rishi Sunak
I suggest that my hon. Friend should, in short order, invite my hon. Friend the Member for Henley to visit his area. I honestly believe that when we bring together people from the parish council and the local area to listen to my hon. Friend, they will be galvanised into action. The powers contained in neighbourhood planning are significant, and a local community would be hard-pressed not to want to seize those powers and to shape its own destiny once it has received my hon. Friend’s wisdom.
Ross Thomson (Aberdeen South) (Con)
I speak from a Scottish angle, and I am interested in this debate as the former chairman of Moray Council’s planning committee. Does the Minister agree that there is a real risk that when communities get involved in decision-making processes and a planning committee such as Moray Council’s agrees with them, but then the decision is then overturned by the national Government in Scotland, as we see more and more often, those communities are left disenfranchised? The great work they can do locally is lost, because they do not feel that their say is being heard.
Rishi Sunak
I agree with my hon. Friend. This Government very much support local communities shaping their own destinies. That is why we have supported neighbourhood planning so strongly and strengthened the provisions under which local communities shape their own futures. I know that he will welcome that, and I hope that it provides an example for the Government in Scotland to follow.
My right hon. Friend the Member for Loughborough also talked about people being consulted on planning applications. She expressed some concern about people who objected to applications not being notified. I appreciate how distressing that must be for communities, especially for people who have taken time to engage in the process, as she rightly highlighted. The planning appeals regulations, however, already require the local planning authority to notify everyone who made representations during the planning application process that an appeal has been lodged. That notification should include information on where to send any representations on the appeal and by when. Also, when appeals are decided by a hearing or inquiry, the Planning Inspectorate notifies the appeal parties of the decision and publishes all appeal decisions on its website. The inspectorate will also send copies to any interested party who has requested one. I hope that that is of some help to my right hon. Friend. I appreciate that the process is not fully inclusive, but she will understand the need to trade off the burden in large situations where multiple people have engaged in the process against the ability to request notification.
Nicky Morgan
I thank the Minister for that response. Of course there is a trade-off, but modern technology—in spite of the general data protection regulation, which we are all struggling with at the moment—means that notification of large numbers of parties is possible. I encourage him to look at that in the spirit of doing things with local communities, rather than doing things to them.
Rishi Sunak
My right hon. Friend makes her point well. I shall certainly ensure that the Minister for Housing is aware of that.
Finally, in the brief time available, I turn to the question of Government guidance on the drafting and discharge of conditions, and whether that guidance is sufficiently robust. Normally, the drafting and discharge of conditions is a matter between the individual local planning authority and the developer. Planning inspectors are required to follow national guidance, and their internal training manuals are continually updated. The Department is not aware that the quality of guidance has been raised as a problem elsewhere, but if my right hon. Friend the Member for Loughborough or her local planning authority think that the guidance in any specific area is lacking, we would be delighted to consider any suggestions that she has for how it might be improved. We look forward to receiving those in due course.
I am grateful to my right hon. Friend for securing this important debate and to all hon. Members who have contributed to it. All of us as constituency MPs receive the correspondence to which she alluded. We know how important the place in which we live is, and how it develops and evolves in housing and all other aspects is incredibly important. That is what people tend to talk to us about when we knock on their doors—not about Brexit—so it is absolutely right for this topic to receive our attention and focus. I am delighted to say that the Government strongly support the principle of local communities shaping their future, using the powers that they have been given through the neighbourhood planning process and local plans. I hope that the reforms that we are making will go some way to addressing some of the concerns that my right hon. Friend has expressed today, but I look forward to continuing the dialogue with her in the months to come.
Question put and agreed to.
Somerset County Council: Unitary Status
Rishi Sunak Excerpts(7 years, 6 months ago)
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The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Mr Hollobone, for what I think is the first time in my new role. I congratulate my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger) not only on securing this important debate, but on his continued engagement on the topic of local government. I have enjoyed the discussions I have had with him in previous parliamentary Committees and debates, and I look forward to many more. It is also a pleasure to see my hon. Friends the Members for Yeovil (Mr Fysh), for Wells (James Heappey) and for Henley (John Howell) contribute to the debate, and perhaps we may have the honour of hearing from my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) later.
My hon. Friend the Member for Bridgwater and West Somerset will have heard me say before that the Government are committed to considering locally led proposals for unitarisation and mergers between councils, where requested. He will also have heard me say that the Government are not in the business of imposing top-down solutions on local government; we wait to hear proposals delivered, developed and initiated by local government.
Only last week, as my hon. Friend mentioned, we discussed in a Delegated Legislation Committee the draft secondary legislation that, if Parliament approves and it is made, would implement the merger proposal that was submitted to the Government by two district councils in Somerset, West Somerset and Taunton Deane. Today we are considering the possibility of Somerset councils wishing to pursue further restructuring to form unitary local government in Somerset.
As my right hon. Friend the Secretary of State for Housing, Communities and Local Government said earlier this month, the Government believe that there is space and scope for unitary authorities, and where unitary authorities can seek to make a difference, the Government will support that. However, we want to hear from the sector itself on the benefits that can be experienced, and we will listen.
There are two unitary councils in the ceremonial county of Somerset—Bath and North East Somerset Council and North Somerset Council. It is important to put on the record that the Government have not received any proposals from the county council or any of the district councils for further unitarisation in Somerset. However, should such locally led proposals emerge, we would of course consider them.
If such proposals were to emerge, the Government have laid out previously the three specific criteria that we will use to judge them. It will be helpful to Members if I lay them out. The first criterion is that the proposal is likely to improve local government in the area, by improving service delivery, giving greater value for money, yielding cost savings, providing stronger strategic and local leadership, delivering more sustainable structures and avoiding a fragmentation of major services.
The second criterion is that the proposed structure is a credible geography consisting of one or more existing local government areas and that the population of any proposed unitary authority must be substantial.
James Heappey
Since the county council kicked off this conversation a couple of weeks ago, it has come to my attention that the Government have a figure in mind for what “substantial” means, in terms of the minimum size of an authority. Will the Minister offer any detail on that?
Rishi Sunak
My predecessors, the Secretary of State and myself have previously laid out that a unitary authority should contain at least 300,000 people or more. That figure comes from research conducted by the Department in the past. However, each proposal will be considered on its merits.
The third and final criterion is that the proposal commands local support. In particular, the structure must be proposed by one or more existing councils in the area, and there must be evidence of a good deal of local support for it.
Mr Liddell-Grainger
Will the Minister say these wonderful words: there should be a referendum?
Rishi Sunak
I am afraid that I cannot say those specific words; indeed, that is not the Government’s previous guidance. The criterion is that there should be evidence of a good deal of local support for the proposal, including from business, the voluntary sector, public bodies and local communities.
My hon. Friend will know from the various proposals that the Government have already considered that there have been a range of ways to demonstrate that good deal of local support. Other areas have engaged electoral and polling agencies to conduct representative polling, county and district council members—who represent people in different areas—have voted and extensive engagement exercises and consultation processes have happened. There are various mechanisms, but the key is that, at the end of the day, there must be evidence of a good deal of local support.
I will elaborate a little further on what a good deal of local support means, as opposed to the mechanism for establishing that it is there. We would like to see a good deal of local support, which we assess in the round across the whole area—from business, the voluntary sector, public bodies and local communities. We do not mean unanimous agreement from all councillors, stakeholders, councils and residents. However, we expect as much consensus from councils as possible.
My hon. Friend talked about democratic deficits, and he is right to highlight the importance of local democracy. From parish councils and all the way up, strong local democracy serves communities well and can make a difference to how people live their lives and to the area that they call home. We have seen in previous reorganisations and restructuring an increase in the incidence of parishing, revitalising that most local form of democracy. For example, in Wiltshire, Salisbury became a town council as part of that process. We are seeing similar moves towards parishing in other areas, such as Suffolk, which is currently in the process of a district merger. The Government also have powers to confer charter trustees as part of any reorganisation.
John Howell
I agree that proposals will never get unanimous support from councils, but that is not the issue. In many cases when a unitary council has been created, parish councils have not even been asked. If we are to put the emphasis on parish councils as the basic building blocks of local government, they need to be asked and they need to be included in the decision-making process.
Rishi Sunak
My hon. Friend makes an excellent point. If a local area tries to demonstrate to the Government that it has a good deal of local support from every possible sector in the local area, parish councils would clearly be a set of institutions that it would be worth considering talking to. Indeed, previous proposals that we have received have specifically engaged parish councils as part of their deliberations. The charter trustee status that I mentioned also means that ancient civic traditions can be retained in an area, regardless of the final form of the restructuring that takes place.
James Heappey
I am keen to understand exactly what level of support is required among local authorities. If all or most districts involved in the proposal were against it, would that be sufficient to block whatever plans might come forward?
Rishi Sunak
I am afraid I cannot give my hon. Friend a specific quantitative mechanism or definition that needs to be met. I re-emphasise the guidance, which states that a good deal of local support is needed. I have tried my best to elaborate on how that will be interpreted by the Secretary of State when he considers proposals in the round, along with all the other criteria that he has to balance.
I am keen to give my hon. Friend the Member for Bridgwater and West Somerset a minute or two to wind up the debate, so in conclusion—[Interruption.]
Mr Philip Hollobone (in the Chair)
Order. In a half-hour debate, Ministers do not have the prerogative to give the Member who brought the debate time to wind up. The Minister has almost four minutes to go.
Rishi Sunak
Thank you, Mr Hollobone. I was not aware of that; I appreciate the extra time.
It is important that the councils of Somerset think long and hard about how best to serve their communities and about how to deliver the public services that people rely on, whether adult social care, children’s services, strategic planning or transport. It may well be that innovation and re-organisation will help to deliver for the people of Somerset, but it is crucial to note that that decision should be taken by the people of Somerset themselves. It will not be for the Government to impose a top-down solution.
Mr Liddell-Grainger
I will be very brief; I promise I will not wind up the debate, Mr Hollobone. I am confused, because the Minister says that there must be local involvement, but also that local stakeholders must support the proposals. Most of West Somerset’s local stakeholders are not based in the county, funnily enough. Ambulance services are based in Devon, the fire brigade is based in, I think, North Somerset and the police are up in Avon. I would love to know how that will work. I ask the Minister to think this through. The most important people are the 500,000 based in the county of Somerset.
Rishi Sunak
My hon. Friend makes a good point, and he is absolutely right to demonstrate that local people should have their say and that their voice should be heard. However, it is also important, when these deliberations are made, that we consider effective local government as one of the criteria. In any local area, there will be institutions and stakeholders, who may or may not be based in that area, who will make a difference to the delivery of local services, and their views will form part of those deliberations.
My hon. Friend started the debate by saying something that I wholeheartedly agree with: local government matters. I take that very seriously, as I know does the Secretary of State. That is why the Government will remain committed to responding and listening to proposals that come forward from local government. We will not seek to impose our view, but where there is a desire and a thrust for more change and innovation—whether in Somerset or elsewhere—we will look to support those involved, according to the criteria I have laid out. In conclusion, I commend my hon. Friend for the continued passion he has shown in ensuring that local democracy in Somerset remains vibrant and strong.
Question put and agreed to.
Tenant Fees Bill
Rishi Sunak ExcerptsMonday 21st May 2018
(7 years, 6 months ago)
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The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to wind up the debate and I thank the hon. Member for Croydon Central (Sarah Jones) for her constructive support for the principles of the Bill. I very much look forward to discussing the details with her in Committee.
At the outset, I pay tribute to the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for South Derbyshire (Mrs Wheeler), who could not be with us tonight. She deserves enormous praise for the way she has brought the Bill to the stage in which we are discussing it tonight, through her tireless engagement not only with colleagues across the House, but the sector at large, and extensively with the Housing, Communities and Local Government Committee. I thank her for all her work. She is the reason that we are talking about a Bill over which there is so much agreement.
I start by agreeing with my hon. Friend the Member for Carlisle (John Stevenson). Like him, I am a committed believer in the power of free markets and competition. I approach cases of caps and bans with some scepticism as well, so I am pleased to tell him that after careful consideration of the Bill’s provisions, I came to the same conclusion as my hon. Friend the Member for Gloucester (Richard Graham): what this Bill does is address a failure of competition and a failure of the free market, which Government Members believe so passionately in. There is an inherent unfairness in a situation where a potential tenant is faced with a monopoly provider of a letting agent, and it does not strike any of us as being right. That unfairness was highlighted by my hon. Friends the Members for Rugby (Mark Pawsey) and for Walsall North (Eddie Hughes) and is most clearly evidenced in the charging of double fees, where letting fees are charging fees on both sides of the transaction. This is evidence of the broader imbalance in the market that my hon. Friend the Member for Harrow East (Bob Blackman) highlighted, and the Bill seeks to redress the balance between landlords and tenants.
We have heard many helpful contributions from members of the Housing, Communities and Local Government Committee on both sides of the House. I pay tribute to its work and in particular, to the hon. Member for Sheffield South East (Mr Betts) and my hon. Friends the Members for Harrow East and for Northampton South (Andrew Lewer), as well as their colleagues. They did an excellent job. It is worth pointing out that I counted 19 separate recommendations of the Select Committee’s report and the Government were pleased to accept 15 of those. I hope that that speaks to the value that we place on pre-legislative scrutiny—[Interruption.] We should not dwell too much on the differences that separate us.
My hon. Friend the Member for Harrow East, the hon. Member for Sheffield South East and many other hon. Members asked about retaliatory evictions, and I am pleased to say that the Government are considering the Committee recommendations arising from its wider inquiry into the private rental sector, including on retaliatory evictions, and will reply in due course.
My hon. Friend the Member for Northampton South raised the issue of new burdens funding. I can tell him with my other hat on—as a local government Minister—that there is probably no more passionate defender of new burdens funding than me, so I will ensure that the funding is there for our local authorities to enforce the Bill properly.
That brings me to the comments by my hon. Friend the Member for Lewes (Maria Caulfield). She asked about enforcement and about the fees that would be charged and gave examples of exorbitant £200 or £300 fees charged when tenants want to add a second tenant to their contract or request permission for a pet. I am pleased to tell her that the Bill seeks to end that practice. Such fees will be capped at £50 or reasonable costs, which I hope gives her some comfort.
Enforcement is, of course, incredibly important. I am pleased to tell my hon. Friend and others that there are multiple avenues by which tenants can seek enforcement of their rights: first and foremost, through redress schemes, which the Government made mandatory for letting agents some years ago and are consulting on making mandatory for landlords today; secondly, through trading standards authorities and district councils where they are not the trading standards authorities; thirdly, on the advice of the Select Committee, through the first-tier tribunal; and, if none of that works, subsequently through the county court. The fines, starting at £5,000 and scaling up to potentially unlimited fines, are significant and will act as a deterrent to errant landlords.
Mr Betts
On enforcement, does the Minister accept that going to a county court is quite an experience for a tenant and would probably put them off, and does he therefore accept that the first-tier tribunal itself should take the matter of enforcement to the county court on behalf of tenants who have already won their case?
Rishi Sunak
We do not fully agree with the hon. Gentleman on that particular point, but I hope he takes comfort from our having accepted his recommendation that in the first instance the first-tier tribunal be available for tenants to take cases to and that this will serve as a benefit to them.
On fines, in criminal cases parties will be liable to potentially unlimited fines and banning orders. I think that the combination of all those things will serve as sufficient deterrent to errant landlords.
In conclusion, the Bill will save millions of tenants hundreds of millions of pounds and will deliver fairness. It is one of the many measures the Government are taking to fix the broken housing market, and I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Local Authority Overview and Scrutiny Committees
Rishi Sunak Excerpts(7 years, 7 months ago)
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Mr Clive Betts (Sheffield South East) (Lab)
I beg to move,
That this House has considered the First Report of the Housing, Communities and Local Government Committee, Effectiveness of local authority overview and scrutiny committees, HC 369, and the Government Response, Cm 9569.
It is a pleasure to serve under your chairmanship once again, Mr Sharma. Today’s debate will consider the report of what is now the Housing, Communities and Local Government Committee. At the time it was the Communities and Local Government Committee, but what’s in a name change, after all?
The report looked into the effectiveness of local authority overview and scrutiny committees, which is an important subject. Perhaps it is a bit technical, and does not catch the main headlines in the popular press, but local government delivers important services to our local communities, including social care services for the elderly and children, emptying the bins, sweeping the streets, running libraries, and producing housing. Those are all important services, and it is important that they are done well and that the performance of authorities is scrutinised and monitored effectively.
Let us go back, for those of us who can remember, to how scrutiny came about in local government. We used to have a system—indeed, some councils are going back to it—in which all councillors were involved in the decision-making process, in the sense that they were members of committees. Then we had the idea that the Cabinet system, because it worked so well at national level, should be replicated at local authority level. Cabinets were set up in local government, and a number of councillors were appointed to them. I think someone either in Westminster or Whitehall then had the thought, “What do we do with the rest of the councillors who are not on the cabinet, who now haven’t got committees to be on?”
Councillors perform a very important role as representatives of their local communities. Acting in their wards on behalf of their constituents is key to their role. Then someone thought, “What else can we do with them; they are sitting around the town hall, city hall or county hall with nothing else to do? Scrutiny committees are a good idea—we’ll have those.” I think it was a bit of an afterthought on top of the cabinet system, although people who devised it at the time might say that it was not. Unfortunately, for some authorities, it has remained an afterthought—somewhere we can put to one side those councillors who do not have much to contribute anywhere else or, sometimes, councillors who have too much to say somewhere else and are a bit of a nuisance to the leadership of the council. Those in the leadership put such councillors on a scrutiny committee, and hope that they will go away and do something that does not really affect them.
Unfortunately, some councils see scrutiny as a problem. People can raise difficult issues that should not be raised, and sometimes it can become an issue of party political contention. Opposition councillors get put on scrutiny committees to make the life of the ruling party difficult, and ruling party councillors get put on them and told not to ask any difficult questions, because questions can always be raised in their group meetings afterwards. Councillors tell us that that is what is said to them.
However, there are very good examples of scrutiny; like Select Committees in this House, councillors challenge the executive, take on issues, investigate thoroughly and comprehensively, produce good reports and, rather than simply looking at something after the event, take policy initiatives and help to develop policy. Sometimes when there is a complicated issue—perhaps there is a general understanding in the council of where they want to get to, but not of how to get there—scrutiny committees can be really good at delving down and doing what they call “task and finish” to identify the key issues and technical difficulties, and come to agreed, well thought through conclusions. There are some really good examples of effective scrutiny.
There are good examples of councils going outside their council body and getting witnesses, expert witnesses and advisers in to help them, as Select Committees do. Unfortunately, such examples are rare. When councillors are asked why they do not get people from their local university to come in and help—those experts would probably be quite happy to be part of their local community engagement and democratic process—the response is often, “Oh—can we do that?”
We recommend looking at examples of best practice. Councils should learn from one another, and from the best examples of how to conduct scrutiny independently and effectively, by drawing in advisers from outside and engaging with the public in a meaningful way. Sometimes the way the public are engaged with—sitting at the back of a room while a council officer reads a report that has been written well in advance—is not very good. That does not engage the public, but we are looking at different ways of doing so. Taking scrutiny out to the community, setting up websites, and using social media are ways in which councils can develop and enhance scrutiny, as some of our Select Committees do.
This weekend I am going to Birmingham because the Housing, Communities and Local Government Committee, together with the Health and Social Care Committee, is doing an inquiry into social care. We are going to talk to the citizens’ jury that we have established to provide information and evidence to the inquiry. It is the first time that our Committee has done that. The Committee is also doing an inquiry into the high street. We are using a website to try to get the public engaged in feeding in their information about what is happening in their high street, and what they think should happen. We would like to see such initiatives reflected in local government. Sometimes they are, and local authorities can learn from one another as well.
The key recommendation of our report is about the culture in local government. Do those in the leadership, both politically and at officer level, see scrutiny as important? Do they see it as part of the council’s function, and as something that can add value to council decisions, or just as a bit of an irritant that can be put to one side and forgotten about? That was key to our recommendations. The reality is that if councils value scrutiny and want to make it work, they can do it, even if they may do it slightly differently in different authorities.
I do not want to keep hon. Members for too long this afternoon, but the Committee made a number of specific recommendations. The Committee’s key observation was that Government guidance on scrutiny has not been updated for a long time. The Government have accepted that, and they will produce new guidance—we had a positive discussion with the Minister about that at the evidence session. That is a good starting point, because it means that we can look at some of the other recommendations positively. Scrutiny committees should report not just to executive members of the council, but to the whole council. Again, the Government have accepted that, and we welcome it.
We recommended that scrutiny officers should have the necessary skills to help members of scrutiny committees to do investigations into detailed policy matters. We should not just have a clerk system in which someone says, “We’re here to keep a record of attendance and get the witnesses in the right places.” It should be about helping members with proper monitoring and policy development. The Government have basically accepted that recommendation as well.
Another issue was scrutiny of elected mayors and combined authorities. When any deal is done, it is really important to look at scrutiny, and ensure that resources are available for it. Those mayors and combined authorities are a further step removed, in some cases, from the people who elect them. The arrangements can be complicated, and it is important that there is proper scrutiny of them. The Government have accepted that point as well.
Moving on to issues on which the Government’s response has been less enthusiastic, and those issues that need more consideration, the Government did not accept that a summary of the resources spent on scrutiny should be published each year alongside the summary of resources spent on the executive. The reality is that, in many councils, when cuts are made scrutiny is one of the things that gets cut, because it is a bit of an inconvenience and nobody will miss it if it does not happen. Of course, the executive looks after itself. That does not happen on all councils, but there is sometimes a feeling that that happens, because the executive makes the budget recommendations. We thought that saying to councils, “Look, just publish those figures,” was an interesting way of demonstrating the extent to which they fund scrutiny, compared with other functions of the council. The Government said no to that. It seemed to us a fairly harmless recommendation, and we do not understand why the Government did not support it.
The Committee also said that a statutory scrutiny officer should be appointed in every council. Why not? They exist in unitary authorities and in counties, but not necessarily in second-tier authorities—the district councils—which perform very important functions. Why not a statutory scrutiny officer there as well?
The issue of what information is available to scrutiny committees is absolutely key. Following our report, I have done two or three talks to councillors on scrutiny committees and scrutiny officers. Everyone started nodding at the point we raised the issue of what information is available. So many times councillors on scrutiny committees have been told, “You can’t have that information; it is confidential.” There are examples of councillors having to use freedom of information requests to get information from their own councils. That is ludicrous. It is nonsense. The words “commercial confidentiality” often appear as the explanation and the excuse.
The Government’s response in that regard was an attempt to be helpful. They said that there should not be a blanket refusal to provide information and that information should be dealt with on its own merits. The very helpful point was made—I hope it is given some prominence in guidance to councils—that when contracts are let by councils, clauses should be put in to make it clear that information can be relayed to councillors and not just to a handful of people on the executive. Companies tendering for work should understand that right from the very beginning of the tendering process, before contracts are let. The Government need to build on that in the guidance because it is an absolutely key point—if the information is lacking, scrutiny cannot be done.
In many councils, more and more functions are not delivered in-house but are contracted out to private companies. Officers delivering a service in house can be called before the scrutiny committee, but if the information about a private contract is classed as commercially confidential, the contract cannot be scrutinised and nor can the service to the public. At the end of the day, that is the key point. Addressing that issue is fundamental to getting scrutiny right in an age when so many services are now delivered by third-party contractors. We must make sure not only that the information is available but that those individuals who are running the contract have to come before the scrutiny committees as well.
We also called for scrutiny committees to look at the work of local enterprise partnerships. Billions of pounds of public money is spent by LEPs, which are almost unaccountable to any part of the democratic process. The Government were receptive to the idea and said that there should be proper oversight and transparency of the operation of LEPs. They said that they would go away to think about that and write to the Committee. I know that the post is occasionally slow in this country, but I think the letter has got lost in the post. We have not received it yet. I hope the Minister has one in his pocket this afternoon to hand across the Chamber.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
We are writing it now.
Mr Betts
Okay. Clearly, I think it is an important issue. Who else is going to oversee the spending and work of the LEPs if not council scrutiny committees? That is very important.
There is something that somehow got lost altogether in the Government’s response. Currently, councils have a right to oversee their own activities and the officers who perform them, although they need to do more about commercial companies. There is a very good set of rules for the health service. The service can be scrutinised by local council scrutiny committees and the health service bodies have to provide information. Officers have to come to scrutiny committees and be questioned about that. What about the other important public services?
The Department for Work and Pensions provides a lot of services at local level. So do the police. I know that the police have their own scrutiny arrangements for local police panels—I do not know whether they are quite the same—but certainly, lots of public services, such as those delivered by the DWP, are very important at local level. They do things that affect the public locally, but there is currently no local oversight. We suggested that they should be put in a similar position to health service bodies and that officials should have to provide information and evidence and be available to appear before scrutiny committees. The Government seem to have missed that out altogether in their response, as though they were a bit uncomfortable about it. I know that it might mean talking to one or two colleagues in other Departments, but it is a good proposal and one that would help transparency and monitoring of Government activity as well. I hope the Minister will be able to say a bit more about that this afternoon.
We look forward to the Government’s guidance, as well as clarification of the one or two issues that I have identified, including that long-awaited letter, but to a large extent, at the end of the day it is down to councils. We can give them guidance, but we need to encourage them to take account of the report and to work with each other to improve scrutiny.
I know that the Local Government Association is starting to look at the issues. We had a very helpful letter just before the debate from the Centre for Public Scrutiny, which has an important role to play. It gave evidence to the Committee and is now working with the LGA on how to deal with a number of matters in a practical way. They are looking at the issue of councillor training, and at examples of good practice. They are looking at how councils can be helped to understand their responsibilities. I hope that they are going to look at the idea we recommended, which the Government said they were going to talk to the LGA about, of doing some pilots on the election of chairs of scrutiny committees.
Councils are, in the end—the Committee is very clear about this—locally elected bodies, and on the Select Committee we are all, by and large, localists who believe that things can be best done and organised at a local level, but we thought the idea of having chairs elected by the home council was quite a good one. We did not want it to be imposed on councils, but we suggested one or two pilots to show what could be done. The Minister might be able to let us know how far that has gone.
We certainly welcome the work that the LGA is now doing with the Centre for Public Scrutiny to take those ideas forward. We look forward to the guidance that the Government are eventually going to produce on the basis of the report.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Mr Sharma, I think for the first time. I congratulate the hon. Member for Sheffield South East (Mr Betts) on securing the debate. I thank him and the members of his Committee for their important work. I stand here in some trepidation, responding to a debate in which I think I am the only parliamentarian who has not been a local councillor at some point.
Rishi Sunak
One job at a time, perhaps. Collectively, there is probably over half a century’s worth of local government experience in the room. I pay tribute to that service. The hon. Member for Sheffield South East said that this may not be a topic that attracts front-page headline news, but nevertheless it is an important topic. It is a credit to him and his Committee that they took the time to thoroughly investigate a topic that deserves scrutiny but that otherwise may not have had the chance to be debated and aired in this place.
Scrutiny is fundamentally important to the successful functioning of local democracy, so I welcome the opportunity to reflect on the Committee’s findings. It has a key role to play in ensuring local accountability and the efficient delivery of public services. Scrutiny committees can play a key role in voicing the concerns of local people. I hope the Government response makes it clear that I value the role that scrutiny can play in supporting accountable and transparent decision making and the effective delivery of council functions. The principal takeaway point for me from the Committee’s report, which the hon. Member for Sheffield South East alluded to, is that the organisational culture determines whether scrutiny works well. Where there is a culture of welcoming challenge, the scrutiny process in councils is effective.
I would like to start by setting out the core principles that underpin Government’s approach to scrutiny, before turning to the specific recommendations of the report. First, councils are democratically elected bodies and are ultimately accountable to their electorate. Secondly, as a localist, I take the view that councils are best placed to know which scrutiny arrangements will suit their own individual circumstances. Thirdly, Government have a role to play in ensuring that councils are aware of what effective scrutiny looks like and how best to carry it out. Lastly, overview and scrutiny is just one part of the wider accountability framework for local government, along with the requirement to publish certain information online for transparency, the requirements for independent audit, the complaints process and the presence of independent local media.
The rationale behind the Government’s response was, therefore, to accept those recommendations that would increase councils’ understanding of the importance of scrutiny and how to conduct it, but to tread carefully with the requirements that would place additional requirements on local authorities or reduce their flexibility to decide for themselves which scrutiny arrangements to put in place.
I will turn to some of those specific recommendations. The Committee’s first recommendation clearly will enhance councils’ understanding of the importance of scrutiny and how to conduct it. The Committee pointed out, not unfairly, that statutory guidance was updated more than a decade ago. I was more than happy to agree to update that. I am keen that the new guidance is of genuine use to councils and is not just a tick-box exercise that simply restates their legal obligations. My Department is already at work with the sector to ensure that it delivers the right messages in the right way. Broadly, the guidance will seek to ensure that councils know the purpose of scrutiny, what effective scrutiny looks like, how to conduct it effectively and the benefits it can bring. More specifically, it will cover some of the specific things that were heard today, such as reports to full councils or the role of the public. I look forward to publishing that revised guidance before the end of this year.
The hon. Member for Sheffield South East and the hon. Member for Makerfield (Yvonne Fovargue) raised the concern of public scrutiny of local enterprise partnerships. The Committee’s report seemed to suggest that it was the exception rather than rule. I want to reassure hon. Members that I agree fully that local scrutiny is essential to holding LEPs to account. The local enterprise partnerships national assurance framework is set by central Government and LEPs must comply with it to receive funding.
Last year, one of the Department’s non-executive directors, Mary Ney, led a review into LEP governance and transparency. We are in the process of fully implementing all her recommendations; but I agree there is more to do to ensure that LEPs and local partners collaborate effectively to deliver better outcomes for the public. That is why we are currently undertaking a Minister-led review that will consider the role of local scrutiny in LEP governance. It will also bring forward reforms to LEPs’ roles, leadership, accountability and geography. It will be published in the coming months.
I apologise to the hon. Member for Sheffield South East and his Committee that he has not received the letter that he is due. I will ensure that gets to him in short order, to set out what has already happened and what is happening to improve governance and scrutiny for LEPS.
Rishi Sunak
I would love to be, but the review is being conducted by my colleague, the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), so I do not have the exact timing to hand. The review was announced through the industrial strategy White Paper. I am sure that we will share as much information as we are able to with the Committee. The hon. Gentleman knows that, alongside that, the assurance framework is in the process of being reviewed and updated. That work is going on with people in the industry, including the Chartered Institute of Public Finance and Accountancy and officials. I will make sure that all that is contained in the letter, with as much transparency on timing as we are able to give.
Another key concern that the Committee raised was that scrutiny seemed to be a second-order matter for combined authorities. I assure hon. Members that I take accountability in these new authorities very seriously. I am confident that the framework we have put in place provides the basis for a robust and consistent approach to scrutiny for combined authorities across the country. In particular, the Combined Authorities (Overview and Scrutiny Committees, Access to Information and Audit Committees) Order 2017 was a key step in implementing devolution deals, and will ensure effective accountability for the new budgets and powers that have been devolved.
Members raised the question of resourcing. The Government announced at the last Budget that they will make available to mayoral combined authorities a £12 million fund for financial years 2018-19 and 2019-20 to boost Mayors’ capacity and resources. Combined authorities are free to use that to ensure that scrutiny and accountability arrangements are effectively resourced and supported.
I turn to the recommendations that the Government are considering. Access to information was raised by all three Back-Bench Members who spoke—my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Members for Blaydon (Liz Twist) and for Sheffield South East. They made a persuasive and compelling case that we should have a hard look at that area. As a new Minister, I tell my hon. Friend that the point about information was the one thing that really stuck with me. In our response to the Select Committee, we committed to looking at that and deciding how best to manage it.
I agree that scrutiny committees should be able to access the information they need to do their jobs effectively. I can see that some executives might seek to deny committees access to that information if they do not appreciate their obligations or understand the value of scrutiny. I want to take soundings from the sector and figure out how best to move forward before committing, but hon. Members’ case that this is something we should consider carefully will stick with me, and I will ensure that I take it away. If we decide that new measures are appropriate, I will of course come back to the Select Committee with those.
My hon. Friend the Member for Harrow East and the hon. Member for Sheffield South East also raised the role of elected chairs. My officials and I will speak to the sector and think about how best we can establish the impact of elected chairs on the effectiveness of scrutiny committees. In general, chairs should be selected on the basis of their skills, experience, integrity and objectivity, not of how amenable they are to the executive. Although the new guidance will remind councils that they already have the option to elect rather than appoint a chair, it is right that every council should decide for itself how to select its members.
Let me say a few words about some of the recommendations about which there is a small difference of opinion, which I hope I can explain. On the point about councils publishing a summary of resources, although the Government require councils to publish certain information for transparency purposes, making available details of the resources allocated to scrutiny would be difficult in practice, for the simple reason that councils often do not have a dedicated scrutiny officer or staff. Instead, they pull in resources as and when they are needed, so it may be difficult for them to produce accurate figures.
Bob Blackman
I remember that a former Secretary of State—namely, Sir Eric Pickles—believed absolutely in transparency, such that he insisted that every council must publish every item of expenditure in excess of £500. Given that I do not think that policy has changed, what is the problem with asking councils to publish what should be a considerably higher figure than £500?
Rishi Sunak
I agree that transparency is important, and I am glad that my hon. Friend supports the transparency agenda, which the Government continue to lead. Transparency is of course the best disinfectant and the best way for accountability to work in practice. There is a practical difficulty with trying to aggregate lots of small expenditures, which is why there is a £500 threshold in the transparency code. I agree that £50 here, £25 there and another £100 there may add up to a greater figure, but identifying all the individual components may be tricky. However, I agree that transparency is important.
The hon. Member for Blaydon mentioned training. In its report, the Select Committee suggests that the training offered to members and officers does not always meet their needs, and that the Department needs to better manage the funding it provides to the sector. Having looked into the training offer, I remain broadly happy with it. It already includes a specific two-day course for new or aspiring scrutiny chairs, and I am comfortable that, for now, it meets the needs of the sector.
I note that the Local Government Association wrote to the Select Committee to provide further details of the overwhelmingly positive feedback it has received about its training programme. The Committee will be aware that our new memorandum of understanding with the LGA sets out our expectation that it will remain responsive to feedback and ensure that the training it offers remains relevant and effective. However, I agree that training is important, and I hope that the response the Committee gets from the LGA reassures it that what is in place is at least a good foundation.
Liz Twist
I thank the Minister for those comments. Will he ensure that all authorities not only know that the training offer is there, but encourage their officers and members to take it up? We heard that not all authorities do that, so it would be really helpful if the Government, through the LGA, stressed that point.
Rishi Sunak
The hon. Lady is right. I note that in its oral evidence, the LGA recognised the need to get into councils that might not be doing scrutiny as well as they should. I think it will have taken that message away as a result of coming before the Select Committee and engaging on this topic, and I will pass that message on, too, to ensure that it was heard loud and clear.
Mr Betts
I am not sure whether the Minister covered this point. He spoke about the importance of access to information and about considering how that can be improved, but he did not make it clear whether that applies just to information held by councils themselves or to information held by other public bodies, such as the Department for Work and Pensions, the police service and the fire service, just as it already applies to the Department of Health and Social Care and its bodies at local level. Does he accept that scrutiny committees have a right to scrutinise and access information and witnesses from those other public organisations?
Rishi Sunak
I was talking specifically about information relating to councils’ own functions in the first instance. On the broader point, which was also raised by my hon. Friend the Member for Harrow East, there are existing mechanisms for health and crime because, when those structures were set up, those were the agencies that the sector felt it did the most partnership working with. I am happy to talk to the sector to find out whether there is appetite for a greater ability to scrutinise other bodies, whether that process would work practically, and whether the burden it would put on authorities is appropriate. It is important to recognise that many of those other parts of the public sector are scrutinised separately, and to ensure that there is not duplication of scrutiny. Every public agency tries to focus on its day job, so we need to get the balance right between having appropriate scrutiny and not duplicating scrutiny, which would mean taking focus and resources away from agencies doing their job.
Mr Betts
I thank the Minister for giving way a second time on this point. I hope that, having looked at that and talked to the sector about it, he will write back to the Select Committee with his findings. It is difficult to see where the Department for Work and Pensions has a spotlight shone on it often and effectively at local level. I recognise his point about putting burdens on local government. This is intended to be not a burden but an opportunity, which local authorities may take up if they wish. There would not be a requirement to scrutinise other bodies, but authorities would have the opportunity to do so if they wished.
Rishi Sunak
I will of course write to the hon. Gentleman when we have had conversations with the sector on that point.
Bob Blackman
I want to clarify the point about information, which goes absolutely to scrutiny. I made the point that the presumption should be that information should be available. Rather than the current position, in which officers grudgingly give information to scrutiny committees and suchlike, it should be for the legal officer to say why information should not be available. Will my hon. Friend look at that specific point in detail and come back to the Select Committee?
Rishi Sunak
Hopefully I can reassure my hon. Friend. The main point that I have taken from the debate from all contributions is about access to information and ensuring that it is not unreasonably withheld. It is tricky to get the balance right, making sure that time is not wasted and that information that is genuinely commercial or commercially sensitive in some other regard is protected. However, I have heard that message loud and clear and it is a fair point, so I will go away and think about it in more depth.
Of course, such conversations with the sector are already happening and if there is a path to do something different, we will consider it. I would be loth to commit to something now, but I can commit to examining the issue properly and seriously, given the weight and force of the arguments made.
It was reassuring to see that the Committee’s report acknowledges that scrutiny is working effectively in many councils. We should recognise that. Of course, we should accept that in some places it does not work as well as might be expected, but it does have a key role to play in ensuring local accountability and the effective delivery of services so it is important that councils know how to do it properly. I have committed to working with the sector to update the guidance, ensuring that it meets the needs of councillors and their officers, and I am happy to give further consideration to some of the topics I touched on earlier.
I thank hon. Members who have contributed to the debate. I am grateful to have had the opportunity to discuss this important topic. We are talking about scrutiny and, as was raised in Members’ comments, Select Committees, and in particular the Housing, Communities and Local Government Committee, which I am privileged to appear before, are a great example of how scrutiny can work in practice. It works best in this place—as it should in local authorities—when done on a collegiate basis, with people putting the interests of the public whom they serve first and working as a constructive friend of the people who are trying to make decisions. This Committee is a fantastic example for local authorities and the local government sector to look at. It is a pleasure to work with it, not just on this issue, but hopefully on other issues in the months to come.
Draft Dorset (Structural Changes) (Modification Of The Local Government And Public Involvement In Health Act 2007) Regulations 2018
Draft Bournemouth, Dorset And Poole (Structural Changes) Order 2018
Rishi Sunak Excerpts(7 years, 7 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
I will call the Minister to move the first statutory instrument, and debate on the second will follow. Debate on each statutory instrument may continue for up to one and a half hours. I remind the Committee that the debate should be confined to the statutory instrument being considered.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move,
That the Committee has considered the draft Dorset (Structure Changes) (Modification of the Local Government and Public Involvement in Health Act 2007) Regulations 2018.
It is a pleasure to serve under your chairmanship, Sir Henry. I am delighted to see so many hon. Members present. The statutory instruments were laid before this House on 29 March. If approved, they will provide for the abolition of the nine existing local government areas in Dorset and their councils, and similarly affect the existing boroughs of Bournemouth and Poole, the county of Dorset and the boroughs and districts in the county of Dorset. They will also allow for the establishment of two new local government areas and two new single-tier unitary councils for the area on 1 April 2019.
The Government, as made clear in our manifesto, are committed to supporting those local authorities that wish to combine to serve their communities better. We have also announced to the House that we will consider any locally led proposals for local government restructuring that are put forward by one or more of the councils concerned and that improve local government and service delivery, create structures with a credible geography and command a good deal of local support.
The Dorset councils’ proposals would establish a single tier of local government across the whole of Dorset, replacing the nine existing local government areas and their councils with two new local government areas and councils: one to cover the areas of Bournemouth, Christchurch and Poole, and a second covering the rest of Dorset.
Dorset estimates that that has the potential to generate savings of at least £108 million over the first six years. The full transformation programme, which unitarisation makes possible, offers the potential to save more than £170 million over that period. In bringing forward their proposal, the nine Dorset councils undertook extensive engagement and open consultation. That included a formal consultation from August to October 2016, comprising the following elements: an open consultation; a representative household survey; a survey of all parish and town councils; 15 lengthy deliberative workshops; nine in-depth telephone interviews with representatives of some of Dorset’s largest companies; and finally, the opportunity to submit written submissions.
Simon Hoare (North Dorset) (Con)
Could my hon. Friend amplify two points? First, the proposal is to create two new councils, not to merge existing local authorities; secondly, the most germane point is that this has been a grassroots-up proposal, not a top-down diktat.
Rishi Sunak
I thank my hon. Friend for both his points, which he made well and with which I am delighted to agree. This locally led and locally driven proposal came from the bottom up for Government to consider.
The consultation programme achieved well over 70,000 responses. There was clear support for moving to two unitary councils. In the representative household survey, 73% of residents were supportive. In general, across all the areas of Dorset, there was an emphatic preference for the proposed option, with 65% of residents in the representative household survey supporting it.
The then Local Government Minister, my hon. Friend the Member for Nuneaton (Mr Jones), told Parliament in February last year what criteria Government would use for assessing locally led proposals for local government restructuring, namely that the proposal is likely to improve local government in the area concerned; that it has a credible geography; and that it commands a good deal of local support.
Conor Burns (Bournemouth West) (Con)
The Minister is talking about the widespread grassroots support for the proposal. Will he also acknowledge that it enjoys my support as the Member of Parliament for Bournemouth West and the support of my right hon. Friend the Member for West Dorset, my hon. Friends the Members for Poole, for Mid Dorset and North Poole, for North Dorset and for South Dorset, and my right hon. Friend for Bournemouth East (Mr Ellwood)? Only one Member of Parliament in Dorset is in opposition to the proposal.
Rishi Sunak
I agree with my hon. Friend. He states the fact clearly: every Member bar one in the county of Dorset is supportive of the proposal.
Sir Christopher Chope (Christchurch) (Con)
I am that person, but I know that the Minister believes not in the tyranny of the majority but in democracy and the undertaking given by the Government in the House of Commons in 2015 that no local authority would be abolished without its consent. May I ask him to confirm that the criteria to which he has just referred were not published until after submission of the application? They were only published in response to a parliamentary question from me.
Richard Drax
I want to put on the record that I support the move, as my hon. Friend the Member for Bournemouth West has said. Initially, I did not take part in the discussion or make a decision because I believe that it is one for local people and local councils. However, the evidence that they wanted it was overwhelming, so I back them.
Rishi Sunak
I thank my hon. Friend for that comment. I say to my hon. Friend the Member for Christchurch that I am happy to discuss the issue now, except I fear that he may want to return it in reference to the exchanges on the passing of the Cities and Local Government Devolution Act 2016 and the assurances he believes he was given. He has corresponded at length with the Department on that point. Suffice to say, I think there was a misunderstanding on his part about what was said. It was clearly set out by the then Secretary of State, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), that the Government would not impose a top-down solution on local government but would respond to locally led and locally driven proposals. That was further clarified in the other place by Baroness Williams of Trafford, who made it explicitly clear that no one council should have a veto on restructuring proposals.
Simon Hoare
It is not only the noble baroness who has confirmed that point. In early December, during the Adjournment debate secured by my hon. Friend the Member for Christchurch, the then Minister, my hon. Friend the Member for Nuneaton (Mr Jones), confirmed in response to an intervention by me that unanimity was not required.
Rishi Sunak
My hon. Friend is absolutely right. In fact, my hon. Friend the Member for Nuneaton told the House that the Government’s intention was for those criteria to be assessed in the round and across the whole area subject to a reorganisation, and not to be considered individually by each existing council area.
Following on from that, on 7 November 2017 the then Secretary of State told the House in a written statement that he was “minded to” implement the proposal made by the Dorset councils. A period of representation followed, until 8 January this year, during which we received 210 representations. On the basis of the proposal, the representations and all other relevant information available, the Government are satisfied that all the criteria are met. On 26 February 2018 the Secretary of State announced his decision to implement the proposal, subject to parliamentary approval, and on 29 March laid the draft statutory instruments.
We believe that the proposed governance changes for which we are seeking parliamentary approval will benefit people across the whole of Dorset, in every district and borough. Our aim as a Government is to enable the people of Dorset to have as good a deal as possible on their local services. That is not the view of the Government alone; it is shared by 79% of all councillors across the whole of Dorset, and by other public service providers and businesses, including in particular those responsible for the provision of healthcare, and the police, fire and rescue, and rail services across Christchurch and the wider Dorset area.
As has been mentioned, on 29 November a number of my right hon. and hon. Friends with constituencies in the area wrote to the then Secretary of State, my right hon. Friend the Member for Bromsgrove (Sajid Javid), urging him to support the proposal submitted by the Dorset councils as the option that commanded strong local support and that will do the job that needs to be done. They stated that
“the further savings required to be made, if our councils are to continue delivering quality public services, can only be done through a reorganisation of their structures”.
The representative household survey, commissioned by the nine Dorset councils, estimates that 65% of residents across the whole of Dorset support the proposal. Of the nine Dorset councils, eight support the proposed change and have formally consented to the necessary secondary legislation.
Regarding the one Dorset council that does not support the proposal—Christchurch Borough Council—a third of its elected councillors do support the proposal. Those councillors wrote to my right hon. Friend the then Secretary of State, stating:
“We are acutely aware of the constraints on local government funding and the financial pressure that upper tier services are facing. We therefore consider it our duty to respond to these challenges by supporting the restructuring of local government in Dorset.”
Finally, it might be helpful to say something about the statutory framework.
Toby Perkins (Chesterfield) (Lab)
We have heard from many local Members about their support for the proposal. I have a letter here from the leader of Christchurch Borough Council outlining its view that Bournemouth and Poole could go together but, because 84% of residents voted against it in a referendum, Christchurch should be allowed to stay independent. Could the Minister explain why he came to the conclusion that Christchurch should be forced into it when the people seem to be saying that they are against it?
Rishi Sunak
I thank the hon. Gentleman for that intervention. I think the poll he refers to was an open-ended one run by the borough of Christchurch, which accounts for only 6% of the population of the Dorset area. Secondly, it is not only Christchurch Borough Council that is responsible for the services provided to the residents of Christchurch. The county council provides about 80% of those services. Across the piece, in the representative household survey, which was designed to be statistically representative, there is strong support among more than 60% of Christchurch residents for this particular proposal.
Simon Hoare
I have searched, as I am sure the Minister has, all the regulations and guidance for the status of a referendum in this process, but it cannot be found. To call it a referendum is incorrect. It was a parish poll, which is not binding on the commissioning body—that is, the borough council—and it is certainly not binding on Her Majesty’s Government.
Rishi Sunak
I thank my hon. Friend for his intervention. He is right to raise the validity of the poll. I am sure we will return to that issue later. Suffice to say, there are questions as to whether the poll is valid and they should be taken into consideration.
Sir Christopher Chope
In that case, why did my right hon. Friend the then Secretary of State encourage the holding of that local poll, at tremendous expense to local people, implying that the decision taken would be compelling evidence in the case?
Rishi Sunak
It is not my understanding that the then Secretary of State encouraged the running of that poll. Regardless of that—and my hon. Friend knows this because my right hon. Friend the previous Secretary of State told him—he did take the poll into account when considering the proposals.
To return to the statutory framework, the regulations vary the Local Government and Public Involvement in Health Act 2007 in its application to the case of the Dorset councils during the period from when the regulations come into force until 31 March 2020. The regulations require the consent of at least one relevant authority. In this case, Bournemouth, Poole, the county of Dorset, five of the districts within Dorset and eight of the nine councils in Dorset have consented to the regulations being made.
In conclusion, the merits of the abolition on 1 April next year of the nine existing local government—
Sir Christopher Chope
Before the Minister finishes, will he say something about the legal action that is being taken against the Government by Christchurch Borough Council on the advice of leading counsel, the letter before action that was sent, and the implications for good local government in Christchurch if we end up with litigation that ultimately results in the regulations being quashed?
Rishi Sunak
I am happy to do that. The Department has received what is called a pre-action protocol letter from Christchurch Borough Council, informing of its consideration of a judicial review. It is important to note that that is not the start of a formal legal proceeding. It is an exploratory letter, to which the Government have responded extremely robustly. We have set out in no uncertain terms why we believe—
Simon Hoare
I note the use of the word “again”, Sir Henry. Is my hon. Friend the Minister aware that in two conferences with leading counsel, which my hon. Friend the Member for Christchurch has referred to and one of which he attended, leading counsel advised Christchurch Borough Council that there were no grounds for a judicial review?
Sir Christopher Chope
I do not think we are going to make much progress in this Committee if there is such misrepresentation of the facts. Leading counsel was indeed asked by Christchurch Borough Council to look at the legal issues. It was only after the regulations were laid that the council went back to leading counsel and said that it was shocked to find that they were retrospective in effect. On going back a third time to leading counsel, they advised that the borough council had a good case for quashing the regulations and wrote a letter asking the Government to withdraw them. The point made by my hon. Friend the Member for North Dorset is completely irrelevant.
Rishi Sunak
My hon. Friend the Member for North Dorset was making a point about the substance of the case. I can tell the Committee the content of the Government’s letter in reply to the pre-action protocol letter. It notes that there is a bad case on the grounds of delay and that the substance of the case is wholly without merit; the Government believe that it is not arguable at all. I have no doubt we will hear from Christchurch Borough Council in due course.
Richard Drax
I want to make one more important point. As far as the decision makers are concerned, there was cross-party agreement—all parties agreed to this.
Rishi Sunak
I thank my hon. Friend for that intervention. It is important to note that there is widespread support from different parties and people from different walks of life, across the entire piece, for the regulations.
That is an important note to conclude on. This is a locally led proposal, submitted by the Dorset councils, which we believe will improve local government and service delivery in the area. It represents a credible geography and commands a good deal of local support. I have full confidence in the area to implement the unitarisation by next April, enabling the elections to the new council in May next year. On that basis, I wish the councils involved the best of luck and good speed with all the proposals they want to bring forward. I commend the regulations to the Committee.
Rishi Sunak
It is with some trepidation that I attempt to respond to my hon. Friend the Member for Christchurch, not only because he held this brief a long time ago and is a distinguished Member of this House, but because when I was a small boy growing up in Southampton, his was perhaps the first local MP’s name that I knew. I put on the record my respect and admiration for his persistence in pursuing this course. It is right that we have a proper thorough, detailed debate on the issues he has raised, which we will no doubt continue to discuss after we consider this statutory instrument and move on to the next.
I would also like to thank my right hon. Friend the Member for West Dorset and my hon. Friends the Members for North Dorset and for South Dorset for their contributions. I also note the presence of my right hon. Friend the Member for Bournemouth East (Mr Ellwood) and my hon. Friends the Members for Poole and for Mid Dorset and North Poole, who I am sure we will hear from later.
We have covered so many issues. In the short time I have to respond, I will summarise and pick up in detail in the next part. In short, I echo the comments of my right hon. Friend the Member for West Dorset. He put it very well: ultimately, what we are discussing today is about people. Often frail and elderly, they are the people whom we as MPs or councillors across Dorset have the privilege to represent. Those representatives have thought long and hard about how best to serve those people, and how best to provide the public services that their constituents rely on in the financial climate and changing demographics they face.
Those councillors and people in the local area, who know their constituents best, have put forward the proposals we are considering. As I opened, I will close: these are locally led proposals, which have been developed and supported extensively across Dorset. We have heard a lot about polls, retrospection, invitations and reorganisations but we should leave with this point in our heads: across the entire area, including in Christchurch, there is a good deal of support for these proposals. They will improve local government in the area, as we heard so eloquently from my right hon. Friend the Member for West Dorset. They will improve local government for the people who live in those places. The geographies we are considering make logical sense. As the Committee considers these undoubtedly complex and difficult matters, I leave them with that in mind. This is not a top-down, imposed reorganisation.
The Government have responded constructively and diligently to the proposals that were put forward. It has taken an incredible amount of time, care and patience to consider those proposals carefully. That has included engaging with my hon. Friend the Member for Christchurch and others on many occasions on the points he has consistently raised. I am fully confident that the proposals in front of the Committee deserve our support and will benefit the good people of Dorset in the years to come. I commend the regulations to the Committee.
Question put, That the Committee has considered the draft Dorset (Structural Changes) (Modification of the Local Government and Public Involvement in Health Act 2007) Regulations 2018.
Rishi Sunak
I beg to move,
That the Committee has considered the draft Bournemouth, Dorset and Poole (Structural Changes) Order 2018.
It is a pleasure to commence debate on the second order. The order, which is made under section 7 of the 2007 Act, has several provisions. First, it will introduce a single tier of local government for a new local government area, comprising the existing boroughs of Bournemouth, Christchurch and Poole, and a single tier of local government for a new local government area covering the remainder of the county of Dorset. It will wind up and dissolve the counties and boroughs of Bournemouth and Poole, and the county of Dorset and its districts, and it will provide appropriate transitional arrangements, a shadow authority and a shadow executive for each new unitary area. Finally, it will establish, in agreement with the councils, new electoral arrangements. The order provides contingency warding arrangements for the May 2019 elections, but it is important to note that we expect the Local Government Boundary Commission for England to undertake a full electoral review of the area in time for those elections.
The order gives practical force to our debate and the restructuring that we have already considered. This is a locally led proposal submitted by the Dorset councils, which if implemented will, we believe, improve local government and service delivery in the area. It represents a credible geography, and commands a good deal of local support. I have full confidence in the local area to implement unitarisation by next April, enabling elections for the new councils in May next year. On that basis, I commend the order to the Committee.
Rishi Sunak
It is a pleasure to wind up this spirited and thoughtful debate. I echo my hon. Friends in thanking the hon. Member for Oldham West and Royton for the typically constructive attitude he has brought to our proceedings. I look forward to many more discussions with him in the months to come. I join my hon. Friends in paying tribute to Mr Rowsell, who we have heard a bit about. He and his team have worked tirelessly over the past few years to ensure that we arrive in this debate having gone through thorough diligence and due process. He is a sidesman of the 11th century priory in Christchurch, which I believe has one of the longest naves in England.
Rishi Sunak
I am corrected by my hon. Friend; it is the longest. Mr Rowsell follows his father in that role, and I thank him and his team for all the work they have done on this project.
I will briefly touch on some of the substantive issues raised. All the contributions from Members of Parliament from Dorset have been thoughtful and passionate, and they have demonstrated clearly that they take seriously their duty to represent their constituents, to disagree respectfully and to ensure that all voices are heard. I thank them for the way they have approached proceedings.
We have heard a lot about the parish poll in Christchurch and what it meant or did not mean. Not only did the Secretary of State consider that poll in the round with all the other representations, but he also received representations that were highly critical of the conduct of that poll, with many suggesting that it should have little validity at all. It is worth bearing in mind that the properly representative sample survey that was done as part of the formal consultation shows that 63% of residents in Christchurch supported the principle of two unitaries and 64% supported the specific proposal that we are considering.
It is the Government’s view that there is nothing retrospective about what we are doing here. That is similarly the view of the Joint Committee on Statutory Instruments, which has not commented particularly on this matter. These statutory instruments modify existing legislation, so that in the future certain acts can take place. According to most people’s common understanding, retrospectivity means changing the legality of an act that has already happened. In this case no act has happened. We are talking about things that are to happen.
Rishi Sunak
I will not, because there is lots to cover, and my hon. Friend and I have discussed this topic a great deal.
Let me turn to the questions raised about council tax and savings. On council tax, it is right that people are expecting a view, and I can set out for the Committee the position, not just in this case but in previous cases. There is a joint committee in place at the moment involving the councils in both proposed unitaries. It will produce proposals for the Government setting out its plans for council tax harmonisation. The Government’s job is to bring legislation to the House—which we will before the summer—that sets in place the maximum number of years over which equalisation can take place. It is then for the local authorities to decide on the exact path. It is worth bearing in mind that in the previous round of unitarisations in 2009, the period envisaged in the legislation was five years. That is something that hon. Members can work with, and soon enough we will come to a view. In the meantime, we are happy to take representations from colleagues and anyone else on that important matter. As my hon. Friend the Member for Christchurch pointed out, there are specific criteria with which those will be judged.
I will conclude by paying tribute—
The Chair
Order. Minister, I am afraid we have to put the question now.
Question put, That the Committee has considered the draft Bournemouth, Dorset and Poole (Structural Changes) Order 2018.
Draft Somerset West and Taunton (Modification of Boundary Change Enactments) Regulations 2018
Draft Somerset West and Taunton (Local Government Changes) Order 2018
Rishi Sunak Excerpts(7 years, 7 months ago)
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The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move,
That the Committee has considered the draft Somerset West and Taunton (Modification of Boundary Change Enactments) Regulations 2018.
The Chair
With this it will be convenient to consider the draft Somerset West and Taunton (Local Government Changes) Order 2018.
Rishi Sunak
It is a pleasure to serve under your chairmanship, Ms Buck. I thank the other members of the Committee for joining us here early in the morning. The statutory instruments were laid before the House on 29 March. If approved and made, they will provide for the abolition on 1 April 2019 of Taunton Deane borough and West Somerset district, together with their councils. They will also provide for the establishment of a new Somerset West and Taunton district covering the same geographic area, together with a new council for that district.
The Government, as our manifesto made clear, are committed to supporting local authorities that wish to combine in order to serve their communities better. The Government have announced to the House that we will consider any locally-led proposals for district mergers that are put forward by the councils concerned and that meet three criteria—namely, that the proposals will improve local government and service delivery, create structures with a credible geography, and command a good deal of local support.
Let me turn to the proposal that these two district councils developed and submitted to us for the creation of a new district of Somerset West and Taunton. The councils have a history of shared service partnerships. They are clear that the savings in that respect will be safeguarded by implementing the merger and that the merger itself will secure savings of some £3.1 million per annum. That includes safeguarding the £2.6 million of savings already secured through partnership working, and saving an additional £500,000.
In bringing forward their proposal to merge, the two councils have undertaken an engagement programme, actively engaging with residents and stakeholders from December 2016 until February 2017. The programme included an independent, demographically representative phone poll; a dedicated website with background information and an online questionnaire; a series of eight public roadshow events throughout the area; a series of nine consultation events involving groups of parish and town councillors and representatives of community groups; and various meetings with key stakeholders—businesses, partners and other local bodies. The independent phone poll was undertaken to assess local residents’ awareness of West Somerset’s financial position and of the merger proposal. By the end of the consultation period, more than 60% of the population of the two areas were aware of both.
Following their period of engagement, the two councils submitted their joint proposal to merge to the Secretary of State for Communities and Local Government on 27 March 2017. On 30 November, the then Secretary of State, my right hon. Friend the Member for Bromsgrove (Sajid Javid), told the House that he was minded to implement the proposal made by West Somerset Council and Taunton Deane Borough Council.
There followed a period for representations until 19 January 2018. The Secretary of State received a number of representations, of which 114 supported the proposal, 14 were neutral and 123 were opposed. On 22 March, the Secretary of State announced that he was satisfied that the previously announced merger criteria had been met and that he intended to implement the proposed merger and to lay before Parliament the necessary secondary legislation. That was not just the Secretary of State’s view. It was shared by the two district councils and the county council; a significant majority of councillors in the area; all public bodies that made representations to the Secretary of State—all were either supportive or neutral—the local enterprise partnership and a majority of the businesses and voluntary sector organisations that made representations; and a majority of the town and parish councils that made representations. In addition, my hon. Friend the Member for Taunton Deane (Rebecca Pow) remains supportive of the proposal. Of course, that view is not shared by all, and I am sure that we will hear later from my hon. Friend the Member for Bridgwater and West Somerset.
Let me turn briefly to the statutory framework. The Somerset West and Taunton (Modification of Boundary Change Enactments) Regulations 2018 vary the Local Government and Public Involvement in Health Act 2007 in its application to West Somerset and Taunton Deane councils during the period from when the regulations come into force until 31 March 2020. Section 15(4) and (5) of the Cities and Local Government Devolution Act 2016 provide that such regulations,
“may be made only with the consent of the local authorities to whom the regulations apply”.
In this case, both councils have consented to the regulations.
The Somerset West and Taunton (Local Government Changes) Order 2018, if approved, will be made under section 10 of the 2007 Act and makes provision for various items: abolishing the existing local government areas for West Somerset and Taunton Deane; establishing a new district coterminous with the previous areas of West Somerset and Taunton Deane, named Somerset West and Taunton; winding up and dissolving the district councils of West Somerset and Taunton Deane and establishing a new council, Somerset West and Taunton District Council; providing appropriate transitional arrangements, such as a shadow authority and shadow executive; and establishing, in agreement with the councils, any necessary electoral arrangements. We expect the Local Government Boundary Commission for England to be able to undertake a full electoral review of the new area before the elections in May 2019.
In conclusion, in considering the two draft instruments, we are assessing the merits of merging the West Somerset and Taunton Deane districts and councils to become Somerset West and Taunton, with a new district council. In this instance, it is clear that the two councils have come together to work on a locally-led proposal that, if implemented, will improve local government and service delivery in the area and command a good deal of local support. The council area also represents a credible geography. The proposed new council of Somerset West and Taunton has wide support, and both councils have consented to the making of the regulations. I have confidence that the local area will implement the district council merger by next April, to allow the good people of Somerset West and Taunton to elect their new council in May next year. On that basis, I commend the regulations and the order to the Committee.
Rishi Sunak
It is a pleasure to have the opportunity to respond to the comments made by the hon. Member for Makerfield, my right hon. Friend the Member for South Holland and The Deepings, and my hon. Friend the Member for Christchurch. I hope that I can address all the points that they raised and, of course, those of my hon. Friend the Member for Bridgwater and West Somerset, whom I fully respect for representing his constituents in the way that he sees fit.
I shall start with the misconception, which ran through comments from hon. Members on both sides of the Committee, that in some way central Government are, as my hon. Friend the Member for Bridgwater and West Somerset said, riding roughshod over local government. My right hon. Friend the Member for South Holland and The Deepings referred to a delicate relationship between central and local government, and I agree with him. It is important that central Government do not ride roughshod over or dictate to local government, which is why the Government have been exceptionally clear that we want to see locally-driven proposals and will consider locally-driven, locally-originated proposals against a set of criteria, which the previous Secretary of State reiterated in the House. That speaks to the very nature of what we are talking about here. I want to remind hon. Members on both sides of the Committee that this was a locally-driven process. The Government received a proposal that had been generated, researched, engaged with and consulted on by the local councils in question, both of which have consented to the making of the statutory instruments.
My hon. Friend the Member for Christchurch talked about an invitation. There was no invitation from central Government to the councils to put the proposal forward. It was entirely a result of their own work.
The hon. Member for Makerfield talked about the narrow council majority. I think it would be helpful for hon. Members to know the results of the council votes that were held in both areas. When the proposal was considered in Taunton Deane, 32 councillors were in favour and 16 against, with two abstentions. That is a majority of more than 64%. When West Somerset Council voted on the matter in December, 20 councillors were in favour and just three against, with one abstention. That is an 83% vote in favour. In aggregate, that combines to 70%. I will leave hon. Members to make up their own minds as to whether that it is a significant or a narrow majority.
Not only are local councillors in support, but the local area is too, including the county council, all public bodies, businesses, the voluntary sector and a majority of the parishes.
Mr Liddell-Grainger
I gently say to the Minister that that is not the case. I represent one of the areas, although I admit that I do not represent the other. When I talked to the local enterprise partnership, it had been asked whether it thought it was a good idea. Well, if people are asked whether they like blueberry pie, they tend to say yes. It was not given any facts; it was just asked whether it was a good idea. One of the reasons that it said so was that Hinkley Point C nuclear power station is in west Somerset. A lot of it has been predicated on that. I therefore say to the Minister that I am not sure that is correct.
Rishi Sunak
It is not just the local enterprise partnership. On my understanding, all businesses, voluntary organisations and public bodies that submitted formal representations were in support or not against the proposals, so I do not think what my hon. Friend says is accurate in that sense. Obviously, he is against the proposals, but my hon. Friend the Member for Taunton Deane (Rebecca Pow), who represents the other area, is firmly in favour of them.
The key point is about respecting the views of local government and the local area. As I hope I have adequately demonstrated, not only did central Government not impose anything; we did not initiate anything. We responded to a proposal that was put forward and strongly supported by the local councillors and local councils involved.
We have also heard about the so-called democratic deficit and whether people of both districts would have an adequate voice in the new electoral arrangements. As hon. Members have said, that is a misperception in the minds of the constituents who wrote in about that. Again, I will give hon. Members the facts and leave them to make up their own mind. There will be a reduction in the number of councillors across the entire area from 83 to 58, but the number of electors per councillor for the new council is 1,927. To put that in context, the average for the country for two-tier district areas is 1,925. I would argue that that lies squarely in the average for the rest of England in terms of democratic accountability and representation for ordinary people. People should be assured by that.
I was asked about service delivery, the reasons for the merger and the financial savings. In the first instance, it is important to note that the merger will safeguard the existing savings that are in place between the two councils, which are in excess of £2 million. Financially, West Somerset Council is not in the best of shape. That is not my view, but the view of the council’s leadership, the statutory section 151 officer, the independent auditor and the county council. They all make the point that if West Somerset Council finds itself in further financial straits, that would jeopardise the entire shared partnership structure in place between the two councils, which generates savings and saves people money on their council tax bill. Therefore, in the first instance, the merger safeguards an existing way of working and an existing amount of savings.
Mr Liddell-Grainger
I am sorry to be so boring about this. The Minister covers a very rural area as well. He just said, “If West Somerset has a problem,” but it does not. It has balanced its books for this year, next year and the year after. It is doing well, but yet again we are being told that that is not the case.
Rishi Sunak
I tell my hon. Friend that that is not just my view, but the view of his own council and the statutory section 151 officer, who believes that without this merger, the future of West Somerset Council is “not viable”. It is also the view of the independent auditor in the comments they have made and of the county council. I know that my hon. Friend has corresponded with the Department over several months. We remain of the view that the opinion of all the people locally involved with the council believe that this merger will safeguard the savings and that without the merger the financial situation will be extremely difficult.
On the future relationship and service transformation, I was asked about employees. That will obviously be a matter for the new council but it is worth pointing out that the two councils already operate a relatively deep shared partnership structure and use common employees in a single area. It is unlikely that there would be significant changes but that will be a matter for them.
Yvonne Fovargue
Will the Minister comment on the view that at least 80 redundancies will be necessary to achieve the savings that are predicted for the first year?
Mr Liddell-Grainger
That has come from the councils themselves. The unions have done a lot of work on this. It is one in three jobs; that is where the savings are coming from—by getting rid of people. It is not a real saving; it is imaginary because it is necessary to get rid of people to make the saving.
Rishi Sunak
It is important to note that when we talk about savings of £3.1 million, only £0.5 million comes from the merger we are considering today. The remainder is already in place through the joint working and will be safeguarded by the merger. In terms of the incremental change, £0.5 million as a percentage of £3.1 million is relatively small. We are talking about safeguarding the existing joint working between these two councils, where there is not enormous duplication of staff, because in most instances there is already one set of staff delivering for both councils.
More broadly, the larger district council will be better at joined-up proposals for growth, whether it is Hinkley or developing a new university. It feels it will better execute its function as a strategic housing authority and dealing with stakeholders, all of whom prefer the efficiency and productivity of dealing with one entity. It also believes it will strengthen its hand when applying for various types of funding.
Turning to a couple of specific points raised about a unitary proposal, the Department has not received any formal unitary proposal for Somerset. Of course, should one emerge—
Mr Liddell-Grainger
Could I help the Minister again? I feel I am being too helpful. On the reason the county wants a unitary body, the leader of the county council came to see me and I will quote him next week in Westminster Hall. He said, “I’m going bust and want to take over the districts to balance my books.” Minister, we have a problem; let us not be cavalier.
Rishi Sunak
Far from being cavalier, the Government believe in doing things properly by due process. Should a proposal emerge from the county, of course we will consider it alongside the criteria that the previous Secretary of State laid out in Parliament. As I reiterated at the beginning, central Government will, as committed to do in our manifesto, support local areas that bring forward locally-driven proposals and consider them fairly and appropriately.
Mr John Hayes
The salient point is that the Minister has persuasively made the case that this proposal has emanated from the locality. If the locality, with the communitive interest I described at its heart, has requested that the Government consider these matters, then the Government are doing entirely the right thing in doing so. If the Minister is right—it seems from his evidence that he must be—he has satisfied my concern that these things must be driven by local people and local interests.
Rishi Sunak
I thank my right hon. Friend on one of the rare occasions that someone has changed their mind during a debate. I agree with him that not only have proposals been driven by the local area but they have been formally consented to by the two councils involved.
My hon. Friend the Member for Bridgwater and West Somerset made a detailed point about the definitions in the regulations and order we are considering. Of course, Taunton Deane is a district with borough status. That is very clear in the interpretation section of the order, which defines district councils for the purposes of the order. The definition is:
“‘the District Councils’ means West Somerset District Council and Taunton Deane Borough Council”.
I hope I have assured him that that was not missed.
Lastly, unfortunately my hon. Friend the Member for Bridgwater and West Somerset has raised some very personal allegations against the leader of another council, as he has in the past.
Rishi Sunak
Indeed. It is fair to raise those things if that is what my hon. Friend wants to do, but he has been told multiple times by the former Secretary of State, the Minister responsible for local growth, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), and the Prime Minister that if he has serious allegations of any criminal or fraudulent activity, he should bring those to the police. He was told that as early as November last year, and also before that. Six months later, no one has received anything. I again urge him that if he has evidence, the appropriate course is to take it to the police.
In conclusion, I thank all Members for their spirited contributions this morning. At this point, we should wish the councils in West Somerset and Taunton Deane all the best as they embark on a new, bright future together as a new entity—Godspeed.
Question put.