Draft Housing (Tenancy Deposit Schemes) Order 2026

Gareth Bacon Excerpts

Monday 2nd November 2026 General Committees

[Gareth Bacon (Orpington) (Con)]

It is always a pleasure to serve under your chairmanship, Sir Desmond. I welcome the opportunity to sit opposite the Minister again, whom I have seen more often in the past few days than my own wife. I appreciate the remarks that he has made, and I welcome the opportunity on behalf of His Majesty’s Opposition to address this measure, but I must be frank: we do not like the draft order very much, because it appears to be little more than an act of state-sponsored thievery. In this Halloween season, lurking in the shadows is not a vampire or a monster, but the larcenous light fingers of Marsham Street.

The draft order seeks to give the Secretary of State the power to hive off a portion of the interest accrued on someone else’s money and pocket it on behalf of the Government. As a Conservative—as a believer in private property—I am astounded to find the Government pushing through yet another stealth tax just days after the Budget. I know I should not be—after all, it is not the first, and I doubt it will be the last stealth tax we see in this Parliament—but the brazen lack of respect for other people’s money beggars belief. That is why the Opposition will seek to divide the Committee and will vote against the draft order today.

As the Deposit Protection Service has stated, at present interest goes towards the effective running of the scheme, back to tenants or landlords, or in some cases to charity. In siphoning off funds to pay for the Ministry of Housing, Communities and Local Government’s litany of costly policies, the Government’s action raises a number of questions—some of which, to be fair, the Minister may have just answered. For example, will the draft order leave the deposit protection schemes financially exposed? What assessment has been made of the funding needed to keep these schemes running so that tenants and landlords are protected with certainty, along with the jobs that these companies provide?

The draft instrument has no clear purpose, outlines no formula and sets no clear cap. We are being asked to approve a power without knowing how much money the Government are seeking to take, nor what limit the Secretary of State will impose on herself in a scheme that lets the Government profit from other people’s money.

I also want to raise concerns about the relationship between this policy and the planned abolition of insured tenancy deposit schemes. Taken together, hiving off the interest on deposits for the Government’s benefit and moving all deposits into the custodial schemes will create a perverse incentive. If the Government take income from the same custodial deposits that they are forcing the whole market towards, how can they demonstrate that profiting from interest on other people’s money has played no part in their decision-making process?

That is a very serious concern and it deserves far greater parliamentary scrutiny than hon. Members have been afforded today. We believe that there is a convincing argument that these changes should be made not through a statutory instrument, but in primary legislation. We can make no amendments today, we have little time to probe the details and we are being asked to approve a new tax outside the place best suited constitutionally to scrutinise financial legislation. The draft order lets the Secretary of State, on behalf of the Government, take a share of the interest earned on tenants’ deposits. It does not say how much, it does not say what the money is for, and it sets no cap and no formula. The Government are asking the House for a blank cheque to draw down on other people’s money. That money does not belong to the Government.

By changing the system a week after a tax hike on landlords, the Government are creating another stealth tax. That comes on top of a new database fee and a rewritten tenancy system, in a sector in which landlords are already considering the viability of their portfolios. Every cost eventually lands on renters. The Opposition’s tests are simple. Is this a stealth tax? Yes, it is. Is it the Government’s money? No, it is not. Does it deliver for renters? Clearly not. For all those reasons, we will divide the Committee and vote against this instrument.

--- Later in debate ---

[Matthew Pennycook]

I thank the shadow Minister, the Liberal Democrat spokesman and my hon. Friend the Member for Tamworth for their contributions. I will clear up a few misconceptions on a couple of points, and then I will respond to the other discrete points that have been put to me.

First, it is worth pointing out that the Government have already improved the value that tenancy deposit schemes deliver for tenants and landlords. The current administrators of custodial schemes are already expected to pay part of the interests accrued, in addition to the original value of the deposits, to tenants. The allocation mechanism is different for each of the three current schemes, but requiring administrators to pay interest to tenants and landlords will continue to be an option for future arrangements.

As I tried to make clear in my opening speech, the order is not intended to enable Government to profit from tenants’ deposits. It enables future scheme arrangements to provide for part of the interests accrued on protected deposits to be paid to the Secretary of State. That additional flexibility, as I said, will be particularly relevant where high interest rates mean that scheme returns on the deposits held considerably exceed the administrators’ costs of providing the scheme and wider ancillary services. The shadow Minister, the hon. Member for Orpington, is perfectly at liberty to take issue with the principle of that and to take the view that administrators should benefit from the entirety of the interest accrued on the deposits. We take a different view. We think we should have the flexibility to provide for other uses.

I hope I can provide the Liberal Democrat spokesperson, the hon. Member for Taunton and Wellington, with some assurances on that point. Our intention is that the funds received would be used towards programmes or activities that benefit tenants in the private rented sector. They would not be, as he asserted, siphoned off into some Treasury fund that does not deliver on that purpose.

[Gareth Bacon]

If that is so, why not simply put that into this statutory instrument? I share the suspicion of the hon. Member for Taunton and Wellington—he and I seem to be agreeing a lot these days, which I am sure makes us both feel uncomfortable. The Minister has used this phrase again, “the Government expect”, which we have heard so many times over the years. An expectation is not the same thing as something actually happening. It needs to be put into the law. Why not simply put it into the SI?

[Matthew Pennycook]

Simply because—I was coming on to make this point—this order is enabling in nature. It does not require any payment to be made to the Secretary of State, nor does it prescribe how any payment amounts would be determined. Those matters would be determined through future scheme arrangements established via procurement and contractual processes. I have said it before, and I will say it again for reassurance: the Department will publish information about any amounts received, the programmes funded and any metrics demonstrating the value delivered, so there will be full transparency on the use of funds.