Building More Homes (Economic Affairs Committee Report)

Viscount Chandos Excerpts

Thursday 2nd March 2017 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I warmly congratulate my noble friend Lord Hollick on securing this debate and on the work of the Economic Affairs Committee in producing this important report. The subsequent publication of the Government’s White Paper is also to be welcomed, particularly where it has responded positively to recommendations of the committee, even if in other respects it is perhaps longer on hope than on constructive policy.

Housing looms large in British life, whether measured by the value of the housing stock—£6.8 trillion, more than 3.7 times annual GDP and 1.5 times the value of all companies listed on the London Stock Exchange—or by the number of television programmes devoted to the usually more glamorous aspects of the subject. Emotional attachment to a family home cannot and should not be disparaged, and the ambition for ownership should not be discouraged. But, inescapably, the cultural and economic emphasis on home ownership in the UK, in comparison with the perhaps more utilitarian approach in other countries, creates a challenging context within which to pursue a successful housing policy.

The Economist wrote, in response to the publication of the White Paper,

“Part of the trouble with Britain’s housing market is that politicians like to tinker, rather than reform”.


The complex implications of radical reform on intergenerational wealth, and even on financial stability, certainly discourage a politician with any sense of career preservation from pursuing it. The current imbroglio on the revaluation of business rates, for instance, makes even the modest recommendation of the committee’s report for council tax revaluation—let alone more fundamental reform of property taxation, as advocated by the noble Lord, Lord Turnbull—seem like an unappetising invitation to an ambitious Minister.

While the Government’s timidity in this respect in the White Paper may be understandable, if regrettable, the further exacerbation of residential property’s special treatment inherent in the Government’s inheritance tax changes in the summer Budget of 2015 was inexcusable. As the Institute for Economic Affairs—hardly a think tank of Marxist hue—said in evidence to the committee, this was,

“a step in the wrong direction … By treating housing wealth preferentially relative to non-housing wealth, these changes will introduce further distortions, and further inflate demand without adding anything to supply”.

Sad. Against a background, therefore, of the distortions caused by such special treatment of owner-occupied housing and the unambitious targets adopted to date by the Government—at least until the Minister responds—specific measures to improve the situation risk being overwhelmed by the macro-headwinds.

I none the less take a little time at this late stage in the debate to comment on a couple of issues relating principally to social housing. In a report to 13 London boroughs, published in January with the rather indigestible title Viability and the Planning System: The Relationship between Economic Viability Testing, Land Values and Affordable Housing in London, it was disclosed that the delivery of affordable housing in London had fallen 37% since mid-2009. Although the report’s analysis identifies many of the factors already discussed this afternoon as contributing to this reduction, one not otherwise mentioned is the question of the planning obligations on new developments to provide affordable housing though Section 106 agreements.

The report concludes that, as these agreements are currently working,

“this has produced a circular situation in which the more a developer pays for a site, the lower the Section 106 contributions can be argued ... Cumulative changes to planning policies since 2012, as operated in practice, have had the effect of shifting the balance of power between developers, landowners and community with the result that landowners have been the primary beneficiaries”.

Will the Minister say whether the Government will review the workings of Section 106?

As other noble Lords have said, the supply and utilisation of land from both the private and the public sectors need urgently to be improved. The committee’s report recommended that local authorities have the power to levy council tax on developments not completed within a pre-agreed time period. I regret that the White Paper has ignored this. Will the Minister explain why this very reasonable and practicable measure is not being adopted on a basis, I would suggest, whereby the charge ratchets up as time passes?

The White Paper, has, on the other hand, recognised the need set out in the report for flexibility in the application of best value in the sale of public land, as a number of other noble Lords have discussed. However, it only commits to consultation, and giving the public sector bodies greater freedom in relation to best value might not in itself release the land needed without provision for the vendors to at least be partially compensated by central government. Will the Minister say whether a central fund to do this will be considered and vigorously negotiated with the Treasury?

Finally, I strongly support the committee’s report and many noble Lords who have spoken today in wishing to see local authorities enjoying greater freedom to borrow to invest in affordable and social housing. We are truly disappearing down a rabbit hole with Alice and attending the Mad Hatter’s tea party when local authorities are permitted, as the noble Baroness, Lady Wheatcroft, explained, to indulge in what hedge funds term a “carry trade”, buying commercial property from PWLB funds, while being prevented from borrowing to fund social housing.

In advocating this, I should make one caveat. At a time when local authorities are struggling to find the resources to maintain planning departments at fighting strength, we should not underestimate the challenge in building or rebuilding the development teams needed to execute successfully any significant social housing programme to the quality levels advocated by my noble friend Lady Young. Therefore, we need a mixed economy, combining direct building by local authorities with the necessary resources, and partnerships with housing associations and private developers for local authorities without them.

Civil Society and Lobbying

Viscount Chandos Excerpts

Thursday 8th September 2016 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I, too, thank my noble friend Lady Hayter for introducing this important debate and bringing to your Lordships’ House such a powerful analysis of the issues arising from the Government’s action and inaction in this area. My noble friend’s Motion is wide in its span of civil society as a whole and is focused on the specific area of lobbying and the inequitable and illogical approach the Government have taken to its regulation between charities and the corporate sector. I could not have made the argument on the question of lobbying better than my noble friend, and I wholeheartedly support what she said.

I shall speak primarily about the role of charities more broadly in society and the economy. I therefore draw your Lordships’ attention to my position as a trustee on both the grant-making and operational sides of a number of non-profit organisations which are set out in the register of interests.

The coalition Government launched with the then Prime Minister’s grand idea of the big society, a crude distancing of himself from Mrs Thatcher’s supposed nihilism combined with a convenient and hoped-for piece of sticking plaster for the injuries to be caused by the Government’s doctrinaire public expenditure cuts. The current Health Secretary made his pitch for political advancement from what was then his position of Culture Secretary—look where that got him and us—by rapidly agreeing with the Treasury large cuts to the DCMS budget while assuring the country that the arts would not be adversely affected as philanthropy could replace the lost statutory funding—a wholly unrealistic and implausible assumption, as we have now seen.

We then moved from big society to silent society, as the Government introduced, despite your Lordships’ best efforts, the arbitrary and prejudiced restrictions on lobbying by charities at the centre of today’s debate. Charities and civil society organisations, like the children or servants of a Victorian duke, should be seen but not heard the Government seem to be saying in response to the independent views and campaigning properly pursued by charities large and small. Lying behind this, apart from a thin-skinned unwillingness to allow the Government’s prejudices and actions to be challenged, there was also partisan paranoia within at least parts of the Government and the media by which they are so influenced that because some of the best and brightest of the Labour Government and their advisers had chosen to work for charities after losing office—a continuation of their public service—the voices of those organisations should be restrained.

There is a new Prime Minister and a new era. What, then, after the big society and silent society, do the new Prime Minister and her Government see as the role of charities? The very first decision is unusually difficult to interpret. The Prime Minister moved the Office for Civil Society and responsibility for charities policy from the logical and effective location given it by the Labour Government in the Cabinet Office to the Department for Culture, Media and Sport. “I wonder what he meant by that”, said Talleyrand about the death of the Turkish ambassador and Metternich about Talleyrand’s own death. I wonder what the Prime Minister meant by that. She and the new Culture Secretary have both suggested that the work of the Office for Civil Society fits perfectly with the DCMS’s mission to enrich lives. Hmm—it is hard not to suspect that pressure on Cabinet Office resources as a result of the Brexit vote may be the driving reason for this change.

Front Benches in your Lordships’ House are, of course, famously versatile, so perhaps we should not read too much into the fact that the Minister is, I am sure to your Lordships’ delight, spared long enough from her Cabinet Office brief to cover the subject for which the Cabinet Office is no longer responsible. Yes Minister. As the Prime Minister, following the statement of the Secretary of State for Exiting the European Union about the single market, has ruled that Ministers can apparently express personal views that are not necessarily those of the Government, it may be unreasonable to ask the Minister to say how the Government now see the role of charities, particularly in the light of this apparent ambiguity of departmental responsibilities, but I look forward to her response very much none the less.

In the meantime, I can end only by trying to reinforce the points made by, among others, my noble friends Lady Jowell and Lord Griffiths and the noble Baroness, Lady Scott, that charities cannot and should not be seen as a substitute for the proper responsibilities of government and should be allowed and encouraged to lead, innovate and, as a consequence, take risks.

I have quoted Bill Gates on the role of philanthropy in the past, but the authority that he brings justifies returning to his argument. From a perspective drawn from founding the largest grant-making foundation in the world, from a base in a country where philanthropy has been deeply embedded for over a century and where, across the political spectrum, the role of government is seen as smaller than here in the UK let alone elsewhere in Europe, Mr Gates has been clear: philanthropy cannot substitute for supra-national, national or local government spending. He has argued that it should take more risk than either government or business. That risk should not be uncontrolled or unsupervised. I agreed strongly with the noble Baroness, Lady Scott, that self-regulation should be the first line of defence and statutory regulation the second.

While there have been regrettable high-profile failures of governance in the charity sector, the general trend at the micro and macro level has been positive. In that context, I strongly welcome the establishment of the Marshall Institute for Philanthropy and Social Entrepreneurship at the LSE as the latest and most significant initiative to help enhance the effectiveness and impact of non-profit organisations.

There has been unanimity today about the key role of civil society within our overall society and economy. I hope very much that the Prime Minister, whatever the other pressures on her, will in due course set out her vision for civil society alongside her welcome and well-flagged commitment to industrial strategy. It need not—indeed, should not—be grandiose and overambitious like the big society, but should demonstrate her Government’s recognition of the proper role of civil society.

Charities (Protection and Social Investment) Bill [HL]

Viscount Chandos Excerpts

Wednesday 10th June 2015 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I welcome the Bill. I thank the noble Lord, Lord Bridges of Headley, for introducing it with such an excellent maiden speech and congratulate him on his appointment as Minister. I also pay tribute to the work of the noble Lord, Lord Hodgson, and his review and to the noble and learned Lord, Lord Hope of Craighead, and the members of the Joint Committee on the predecessor, draft Bill. I start by declaring an interest as a trustee of a number of charities, as disclosed in the register, in particular as a trustee and past chair of the Esmée Fairbairn Foundation, one of the largest grant-making foundations in the country and also one of the most active social investors. For that reason, in speaking briefly, I will concentrate on the issues relating to social investment.

I thoroughly welcome the clarification of the powers of charities in that respect, reflecting the recommendations, among others, made by the Law Commission. As well as expressing my strong support for the excellent points made by my noble friend Lady Hayter, I will first make a brief comment about the role of charities and the implications of that for the main measures included in the Bill, which is another way of saying what both the noble Lord, Lord Hodgson, and the noble and learned Lord, Lord Hope, have already said.

A few years ago, Bill Gates, on one of his visits to London, was asked how the Bill and Melinda Gates Foundation saw its role and its relationship to Governments—not just its own Government but Governments around the world. Innovation, he said, should lie at the heart of philanthropic activity. Philanthropy could never replace government funding for those in need, so its role had to be to lead the way. If that is true for a foundation with an endowment of over $40 billion, how much truer must it be for all other charities? With innovation, comes risk; and as in the corporate sector, charities must therefore be free to fail. Although I wholeheartedly support measures to ensure that the Charity Commission can act decisively to prevent abuse, this must not be at the cost of discouraging proper risk-taking or of the creation of a risk-averse environment that stifles the vital innovation about which Bill Gates has spoken. The noble and learned Lord, Lord Hope, spoke about the risk of the Bill’s provisions being too specifically restrictive. That is obviously something we should look at, but we should also be looking at and fostering the culture and environment around the third sector.

As the House has heard, the social investment provisions are essentially a clarification. The noble Lord, Lord Hodgson, has already described the UK as a world leader in this area. The Esmée Fairbairn Foundation and others have been able to pursue social investment prior to this clarification, but it is clearly welcome, across the board, that a wider range of trusts and foundations should be able to consider social investment. However, in clarifying this there is obviously the challenge of definition. In general parlance, “social investment” can cover—if I am allowed to use the phrase—a multitude of sins, ranging from quite lightly or negatively screened investment to take out tobacco or, fashionably, fossil fuels, all the way to mission-related investment. The Law Commission report has an excellent diagram showing the range of investments covered by the definition.

The Bill sets out a definition that there are two purposes of a social investment: both,

“furthering the charity’s purposes; and”,

at the same time,

“achieving a financial return for the charity”.

The very helpful notes provided by the Cabinet Office make the point that that return can be negative but cannot be wholly negative, otherwise a social investment is in reality a grind. It may be that in the later stages of the Bill we should look at whether the simple definition—that is the great benefit of its simplicity—needs to be clarified to make sure that it is not interpreted as requiring a financial return that is greater than zero.

It has always been easier to assess social investment where the financial return is low and the social impact high. Of course, it is difficult to measure social impact or impact in grant making. That is the holy grail of the charitable sector, and all the major foundations and trusts work hard to otherwise measure it. None the less, it is clear that if the financial return is 1% or 2%, there must be social impact to justify that sacrifice of financial return. There are those—including Sir Ronald Cohen, who has been one of the most important people in this area—who argue that you can make social investments without sacrificing financial return. While that may be true exceptionally, generally, if it is to be a meaningful definition there must be some sacrifice of financial return in exchange for the social impact. After all, almost everybody in this House would agree that all forms of investment through the financial market can and should be productive in terms of the economy and society—contrary to scurrilous rumours, that is certainly a belief on these Benches. The risk that social investors face when presented with investments where there is a high financial return and relatively low impact is that it may be easy to make poor commercial investments on the grounds of a somewhat illusory impact.

It may be the cynicism of old age but I wonder why the Government have introduced this clarification with this enthusiasm. The smoke signals that seemed to come out of the Cabinet Office during the last Parliament suggested that there was an element of seeing the investments of trusts and foundations as a cow to be milked to try to cover the challenges resulting from the public expenditure cuts being made.

It is hugely important, as the noble Lord, Lord Hodgson, said, that we do not force the pace of social investment. There are two risks if the pace is forced. One is that charities will lose money and see little or no benefit in terms of their objectives or mission. At the other end of the extreme, with regard to instruments such as social investment bonds, based on payments by results, if you chase volume rather than cost efficiencies, it is too easy for it to become another expensive way to finance social welfare—something similar to what we saw with the worst of the PFI.

This is a complex area. The nearly 90 investments that the Esmée Fairbairn Foundation has made over eight years cover every sort of instrument that you can imagine. We are fortunate to have the scale—even though the social investment portfolio is only 3% of the total investments of the foundation, two full-time executives run that programme. That is clearly not a resource that most trusts and foundations can justify. Therefore, in promoting the growth of this market, we have to be realistic about what prudently smaller trusts and foundations can do. There are already a number of social investment funds, and there will be an increasing number. If you have heard the vigorous debate in the investment management world about the trade-off between returns and fees, you can imagine that there is an even more complex debate when trying to assess fees against some mixture of financial and social return.

Subject to those quibbles, I very much welcome the Bill and the facilitation and encouragement of social investment that it brings. I look forward to the further stages of the Bill and its ultimate enactment.