Non-Domestic Rating (Nursery Grounds) Bill

Rishi Sunak Excerpts

3rd reading: House of Commons & Committee: 1st sitting: House of Commons & Legislative Grand Committee: House of Commons
Tuesday 10th July 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship today, Dame Rosie. I should like to start by reiterating this Government’s commitment to supporting the sustainable growth of farming and horticultural businesses. We firmly believe that the agricultural exemption from business rates plays an important role in supporting this aim and boosting agricultural productivity. This measure will therefore help to drive our ambitions for a more dynamic and self-reliant agricultural industry. Until a Court of Appeal ruling in 2015, the long-standing practice of the Valuation Office Agency had been to apply the agricultural exemption to all plant nurseries. However, the ruling clarified that the exemption did not apply to plant nurseries in buildings that were not occupied together with agricultural land, and used solely in connection with agricultural operations on that or other agricultural land. This does not reflect Government policy, and neither does it reflect our commitment to growth in the rural economy. The Bill will therefore amend the Local Government Finance Act 1988 and enable the Valuation Office Agency to return to its former practice of exempting all plant nurseries solely consisting of buildings. It will also enable the VOA to exempt those plant nurseries that have been assessed since the ruling.

The Government have been consistently clear that they would take action on this matter. In March 2017, we set out our intention to legislate in a written ministerial statement. A further written ministerial statement was made in 2018, restating our intention to legislate and for the first time confirming that the measure would have retrospective effect in England from 1 April 2015. In Wales, the measure will have effect from 1 April 2017. The Bill delivers on that commitment and, once enacted, it will restore the previous practice and enable refunds to be provided to the handful of plant nurseries that have already been assessed for business rates as a consequence of the Court of Appeal ruling. While the Bill will restore the practice of exempting plant nurseries and buildings, it will not otherwise disturb the existing boundary of the agricultural exemption. The Bill amends schedule 5 to the Local Government Finance Act 1988, which determines the extent to which certain hereditaments are exempt from business rates.

Turning specifically to clause 1, it amends paragraph 3 of schedule 5 to the 1988 Act, providing that a building that

“is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground”

will, subject to the passage of this Bill, be exempt from business rates. Clause 1 also contains a provision that the measure will have effect from 1 April 2015 in England and from 1 April 2017 in Wales, as requested by the Welsh Government. That will ensure that the measure has the intended retrospective effect and that refunds can be provided as necessary.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

Dame Rosie, you will be pleased to hear that the Bill is non-contentious. It simply fixes the position as it was before the 2015 Court of Appeal ruling and, on that basis, the Opposition are happy to allow the Government to go ahead without objection.

It was said both in the press and when the Local Government Finance Bill was in Committee before the election that the Government were pledging to right the wrong of the Court of Appeal’s hearing after listening to businesses’ concerns, but several other similar representations have been made. For example, in towns where the banks have closed and there is no post office, a convenience store might step in to install a cash machine, but it would straight away be taxed on the turnover of the cash machine, which could take the store over the threshold for small business rate relief. There have been calls for that issue to be examined, but we are yet to see any progress.

Another big issue affecting many high streets and town and city centres is the impact of business rates on the viability of retail. We see companies go under on an almost weekly basis because they cannot afford to meet the high running costs of operating in primary locations. Communities resent seeing their local high streets and town centres go downhill, and businesses and representatives of other organisations have made the same point, but the Government have offered nothing comprehensive in response, because there would be a big bill.

However, the truth is that if we want to save our town centres and high streets, we must be bold and fully examine how such premises are taxed if they are to have any future. This goes beyond business; this is about communities. When people talk about how well or badly their communities are doing, they will often point to their town centres and high streets as a barometer. When people see the roller shutters pulled down or boards over windows, that has a material effect on how they feel about their community, and the Government ought to take note of that.

When the Local Government Finance Bill was in Committee, the Opposition made the offer that where there were non-contentious issues on which local government was seeking progress, we were happy to sit down and go through a plan for the legislation that ought to be brought forward. That would be done away from partisan interests because it is the right thing to do for our communities, and I look forward to the Minister arranging such a meeting.

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[Rebecca Pow]

I have written down in brackets “and cream”. During the tournament last year, more than 166,000 portions of strawberries were served, with cream. That is 33 tonnes of strawberries. Were I not speaking in this debate, I would be at Wimbledon. That is how important I think it is that we get our business through.

Many strawberry plants, like other plants in the horticultural chain, start life being propagated in nursery grounds, which are often the lifeblood of the horticultural industry. They are the hotbed of germination, propagation and cultivation, and we are discussing them because the Bill exempts from non-domestic rates buildings that are, or form part of, a nursery ground, as several hon. Friends have already said. It gives nursery grounds parity with their agricultural counterparts.

The south-west region, where I come from, is a rural region with a good climate for gardening, growing and horticulture, and it supports so many businesses in the sector, not least in Taunton Deane, which is one reason why I particularly wanted to speak in this debate. I also wanted to speak because in a previous life I worked for the National Farmers Union and got quite involved with the horticultural industry, and I was for many years a horticultural and gardening journalist and broadcaster, so this subject is close to my heart.

I certainly appreciate the hard graft—to use a horticultural term—involved in the industry and the very tight margins, especially for those at the start of the chain. It is difficult for them to pass on their costs: they cannot have huge add-ons because they do not deal with the general public. For this small sector of the industry to discover recently that it was to be penalised by having to pay business rates, when previously it had been exempted, like its agricultural counterparts, was a bitter blow.

Let me give some background. Nursery grounds were exempt from non-domestic rates from 1928 until recently when, through one particular court decision, about which we have heard from colleagues, it was found that the exemption was an incorrect application of the law. This was a bolt from the blue and, as can be imagined, caused a huge amount of angst in the nursery industry, which was already up against the tight margins that I mentioned. The Horticultural Trades Association reported that the change would be detrimental to the industry: if nurseries had to pay business rates that they had not paid previously, that would inevitably drive up costs that would be passed on to the consumers at the end of the chain. As Conservatives—we are the party of business—that did not sit easily with us. The HTA reported that some of its members could face bills to the tune of hundreds of thousands of pounds if the situation was not rectified.

I am delighted to say, though, that through the ripening of this small but perfectly formed Bill, the wrong has been righted. The fruitful outcome that we are witnessing today clarifies once and for all that the situation will again be aligned with the previous practice of exemptions. I am particularly pleased to hear that the funds will be backdated, as specified in the Bill. The Bill demonstrates that, in such an instance, where unfairness has so obviously been demonstrated, the Government, particularly the meticulous and attentive Minister, have listened—and they have not just listened but acted.

The Bill is fully in step with the Government’s commitment to a vision of a productive, competitive and sustainable UK agricultural sector, of which horticulture and the plant nursery sector are an important part. In fact, I believe there is great scope for the industry to grow and blossom, particularly as we exit the EU. With the right back-up, such as that demonstrated through this Bill, there is an opportunity to grow more of our plant material at home, to fuel our landscaping and ornamental plant industry, thereby avoiding the inherent plant disease and pest threats that are associated with importing plants for this trade. For example, we hear a great deal about the disease xylella, which is wiping out olive trees and many other herbaceous and woody commercial plants in Europe. We do not want that in the UK.

After the granting of Taunton’s new and most welcome garden town status, designated through the Ministry of Housing, Communities and Local Government, I am working to see more trees included in our townscape. Would it not be wonderful if, at the same time as improving the environment and people’s health and wellbeing, along with all the other benefits that we get from trees, those trees were home-grown, so that the economy benefits at the same time?

Let me touch on the idea of growing the whole horticultural industry and why it is important to put in place measures such as the Bill to stimulate the industry. It is thought that there is great scope to grow the industry, perhaps by as much as an incredible £18 billion. In fact, tomorrow the all-party group on gardening and horticulture is holding an inquiry into how we can skill up the industry and what we need to do to make that happen. There is consensus from the Horticultural Trades Association that if the gross value added—that is, the goods and services that emanate from the diverse horticultural and gardening industry—was measured, which it currently is not, it would demonstrate exactly how valuable the sector is to the economy. It would then be easier to make a case for putting in the right measures, including research and development and so on, to grow the sector.

This small but perfectly formed Bill rights an injustice relating to the imposition of business rates on a special sector of the important horticultural industry, one of the very veins of the supply chain. In so doing, it benefits the industry by not saddling it with an unwelcome property tax and thus helps all those who work in the trade and the whole economy, by giving back to the industry one of the benefits that it needs to thrive. It will have particular resonance throughout the south-west, so I fully support the Bill.

[Rishi Sunak]

It is a pleasure to respond briefly to the various points raised. I thank my opposite number, the hon. Member for Oldham West and Royton (Jim McMahon), for the typically constructive way he has approached this type of legislation; of course, we do not agree on everything, but it is fantastic to be able to move these relatively technical matters through the House speedily.

The hon. Gentleman expressed, as he has before, a specific concern about whether the presence of an automated teller machine in a convenience store could take the rateable value of that small shop above the threshold for small business rate relief. Having looked into the matter, I am delighted to tell him that we do not believe that that should be the case. If an ATM is rateable, it would appear as a separate assessment on the ratings list and the ratepayer would typically be the financial institution that operates the ATM, not the shop itself. I assure the hon. Gentleman that we are discussing the specific issues with the Association of Convenience Stores to ensure that its concerns are investigated and addressed.

The hon. Gentleman turned to the important topic of high streets. I know that all of us in this House celebrate our local high streets; they are vital parts not just of our communities, but of our economies. I am very pleased to tell him that my hon. Friend the Member for Rossendale and Darwen (Jake Berry) is the Minister for high streets and is fully focused on the issue at hand through the Future High Streets Forum. More excitingly, he has just launched the Great British High Street Awards 2018. I will do a plug and call on all Members to nominate their local high streets. Nominations are open until the end of August. The last iteration of the competition saw almost 1,000 entries from across the country and hundreds of thousands of votes from the public to choose the eventual winner. There is a considerable cash prize on offer for the winner and, indeed, a new rising star category. The winner will also receive expert advice from industry professionals. I hope that the hon. Gentleman knows that we take the issue of high streets very seriously indeed.

Let me touch briefly on some of the other contributions. My hon. Friend the Member for St Austell and Newquay (Steve Double) should take enormous pride in the role that he has played in ensuring that we are discussing this important issue today. Hopefully, this legislation will eventually receive Royal Assent and that will be in no small part owing to his efforts to put this issue on the agenda of Ministers, and he deserves enormous credit for that.

My hon. Friend the Member for Nuneaton (Mr Jones), who had this job before me, put in motion the Bill that we are discussing today and engaged with my hon. Friend the Member for St Austell and Newquay on this important topic, ensuring that when I arrived in the Department this agenda was ready to take forward, and he also deserves credit for that. It is always intimidating to have to respond to him in this Chamber, as I am always reminded that so well did he do this job before I inherited it that the job had to be split between two different people. The Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for South Derbyshire (Mrs Wheeler), sits beside me on the Bench. The two of us together do our best to replicate what he did before us and we are grateful that he left everything in such good shape for us to pick up.

My hon. Friend the Member for Boston and Skegness (Matt Warman) has been a stalwart in speaking about business rate tweaks. I join him in hoping that there are far fewer of these to come in the immediate future, but thank him for his support of the Bill. He spoke eloquently about defending the rural interests in his constituency, which will benefit from this Bill, as he did when we enabled business rates relief for new fibre installations, a topic that is dear to his heart and which he pushed hard for. He should shortly be seeing the benefits of that policy in action across the country.

My constituency neighbour, my good hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), has, as I know at first hand, a very mixed constituency. As ever, he did an excellent and eloquent job in talking about the importance of small businesses across Teesside and the efforts that this Government have put in place to ensure that the tax burden on those small businesses is as low as possible. I welcome his support for the £10 billion-worth of measures to alleviate the burden of business rates on small enterprises across Teesside. I am glad that they are benefiting from that. In the rural part of his constituency in East Cleveland, the agricultural community will, I am sure, welcome his support and lobbying for this measure as it can ensure that its productivity remains high in the months and years to come.

What better place to end than with my hon. Friend the Member for Taunton Deane (Rebecca Pow)? As ever, she gave us a brilliant defence and a brilliant celebration of our rural economy and everything that it contributes to our national life. We are, of course, grateful to her for gracing us with her presence today, when she could have been at Wimbledon enjoying the strawberries, the Pimms, the cream and everything else on offer. I must say that, when it comes to slipping requests, she clearly has a much better relationship with the Whips than I do, as my previous requests for various exemptions for cricket matches and tennis matches were firmly denied, so I have something to take up with the Whips in due course.

I am glad that we have had a very constructive discussion today and that there is widespread support for this particular clause.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment (Standing Order No. 83D(6)).

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. As indicated on the Order Paper, the Speaker has certified that the Bill relates exclusively to England and Wales on matters within devolved legislative competence. As the Bill has not been amended, there is no change to that certification. Copies of the certificate and the consent motion are available in the Vote Office. Under Standing Order No. 83M, a consent motion is required for the Bill to proceed. Does the Minister intend to move the consent motion?

[Rishi Sunak]

indicated assent.

The House forthwith resolved itself into the Legislative Grand Committee (England and Wales) (Standing Order No. 83M).

[Sir Lindsay Hoyle in the Chair]

[David Linden (Glasgow East) (SNP)]

On a point of order, Mr Deputy Speaker. I beg to move that the Legislative Grand Committee do sit in private.

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[Rishi Sunak]

I beg to move, That the Bill be now read the Third time.

I thank all hon. and right hon. Members who have contributed at the various stages of the Bill in supporting the measures involved and highlighting the contribution that it makes towards furthering the Government’s ambitions to support agricultural and horticultural productivity. I am grateful to the Clerks of the House and for the work done by the officials both in DEFRA and in my own Department.

I thank the National Farmers Union for its strong support for the Bill. We have worked closely with the NFU to make sure that nurseries benefit from the exemption in the Bill. I am grateful for its invaluable insight and expertise, which has helped to bring these effective measures to the House.

This Bill is just a small part of how the Government are using the business rates system to create opportunity and drive growth across the country. It has wide support, restores a long-standing policy position, and will support a vibrant and sustainable rural economy. I commend it to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Parks (Sheffield, Brightside and Hillsborough)

Rishi Sunak Excerpts

Monday 9th July 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I congratulate the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss) on securing this debate and on her passion for her constituency and its parks. That passion shone through her speech. I am grateful to her for highlighting some important issues and sharing her experiences of the huge benefits that local green spaces bring to lives of so many.

I recognise the ambition of local councils, working together with their communities and Government, to preserve good-quality parks and green spaces now and for future generations. The Government are committed to ensuring that our parks and open spaces continue to provide vibrant and inclusive places for local communities to enjoy. Local parks are great at connecting communities and encouraging interaction between younger and older generations and between people from different backgrounds. I recognise that to achieve that shared goal we need to support local councils to deliver it, so it may be helpful if I set out what the Government are doing to support the hon. Lady’s local area and, more broadly, if I touch on some of the activity the Government are undertaking to safeguard parks and open spaces.

On overall funding for local government, this Government believe strongly that local people who know and understand their community are best placed to decide how funding should be spent in their area. That is why funding provided through the local government finance settlement is largely not ring-fenced, as it allows local authorities, which are independent of central Government, to manage their budgets in line with local priorities. In practice, that means there is no specific funding stream for parks, just as there is not for waste services or children’s services, for example. Local communities are best placed to decide on their own local priorities.

I pay tribute to the many local authorities that have done a fantastic job over the past few years to continue delivering high-quality services, from improving adult social care to maintaining our roads, public spaces and parks in what has been, for some, a difficult financial climate. The most recent local government finance settlement, announced earlier this year, provided a £1.3 billion increase in resources to local government over the next two years, taking the total to £45.6 billion in the forthcoming financial year. Of this, Sheffield will be able to access more than £1.2 billion between 2017 and 2020 to spend on all its important local services, including its parks. I am pleased to say that this year Sheffield will see a real-terms increase in the core spending power available to its council.

In addition to funding from the settlement, the current business rates retention scheme is also yielding strong results, and it is warmly welcomed by local authorities across the country. Sheffield itself estimates that, in this financial year, it will keep just shy of £5 million in business rates growth. All in all, there are significant financial resources that Sheffield can decide how to spend among its various priorities.

There are many local authorities across the length and breadth of our country that are doing great things at local level and exploring new and innovative approaches to attracting funding and reinventing park management. I recently had the pleasure of addressing the Local Government Association’s “Action on Parks” conference, and I was hugely impressed by the great examples of local authorities working collaboratively with local communities, health bodies and academics to explore new approaches to joining up services to realise the benefits for parks.

The truth is that there is no single answer to achieving good-quality green spaces. An example of the excellent work that local authorities are doing to help raise the quality of parks is participation in the green flag award scheme, which recognises a high standard of parks and green spaces. The scheme is owned by the Ministry of Housing, Communities and Local Government and operated under licence by Keep Britain Tidy. A record 1,500 green flags were awarded last year, illustrating the scheme’s success. We are seeing ambitious local councils striving to achieve green flag status for more of their local parks, and I am pleased to say that Sheffield is among the leaders, with 13 local green flag award-winning parks.

Furthermore, Sheffield is embracing opportunities for attracting new funding. Since 1996 the council has received £13.7 million of Heritage Lottery Fund grant investment for its various parks, which includes fantastic support for the botanical gardens and Weston Park.

In 2014 the innovative “Rethinking Parks” programme, delivered by the Heritage Lottery Fund and the National Endowment for Science, Technology and the Arts, awarded £100,000 to support two new projects in Sheffield to develop new ways to fund and manage parks. Since 2010, Sport England has invested just shy of £1 million in 30 grassroots sports projects across the city, including a £65,000 award to Wisewood Juniors football club to improve its football pitches.

However, no one size fits all. For example, Newcastle is a pioneer in exploring an innovative charitable trust model for its parks in conjunction with the National Trust, and Sheffield has also looked at that in the past. That model has the potential to make it easier to raise outside funding from social investment and businesses; to ring-fence budgets; to focus on a single objective of the parks in question; and to mobilise volunteers.

I am pleased that the Government have already taken steps to support improvements to our local parks and green spaces. We heard about the Communities and Local Government Committee’s excellent report—I agree with the hon. Lady that it was fantastic. In response, the Government created the parks action group, which is a testament to the importance we place on government at all levels coming together with the sector to identify the right solutions to the various issues she has presented this evening. I would like to give my personal thanks to the membership of the parks action group, who have worked tirelessly to explore some of these issues. Its membership is a veritable “Who’s Who” of the sector, and includes excellent organisations such as Fields in Trust, Natural England, Groundwork, Keep Britain Tidy, the National Federation of Parks and Green Spaces, the Association for Public Service Excellence and many others. The group has begun to develop some key programmes of work, which will be supported by half a million pounds that the Government have committed to support its work.

That activity will support the delivery on six priority workstreams, which touch on some of the topics that the hon. Lady raised: exploring the funding landscape and proposing solutions; setting parks and green space standards; sharing a vision for parks and green spaces; empowering local communities; increasing knowledge and building skills, and increasing usage by all. I look forward to sharing more details on the work that the group will undertake to better secure the future of parks. I will provide an update to the Select Committee later this year, but I expect to be able to set out the programme of work in more detail in the coming months.

I wish to address the question from the hon. Member for Strangford (Jim Shannon) about the planning framework. I am pleased to tell him that the national planning policy framework offers protection to all recreational facilities, including parks. The framework is clear that recreational land should not be built on unless an assessment has been carried out and has shown clearly that a park is surplus to requirements or that the loss resulting from the proposed development would be replaced by equivalent or better provision in terms of quantity and quality in a suitable location.

Lastly, I wish to deal with the point the hon. Member for Sheffield, Brightside and Hillsborough raised about access to parks in a deprived area. She makes an important point, and one that I am keen to ensure becomes a reality as the parks action group carries on its work. She will be pleased to know that there was a previous programme called the “pocket parks” programme, whereby the Department funded £1 million-worth of small parks and almost 90 were created up and down the country. Ensuring access in deprived areas is a high priority for allocating that funding. I will be pleased to start looking through the results of that work to ensure that the money found its way to the right places, so we can use that work in formulating future plans in the parks action group.

Again, I thank the hon. Lady for securing this important debate and for ensuring that the value of parks is recognised. I pay tribute to local councils up and down the country for the hard work and dedication they put into parks. As we have heard, parks are often at the heart of our communities and are the space where families and local communities come together. I believe we have a shared vision of providing good-quality open spaces for our local communities, and I firmly believe that by working together we can build a better future for our green spaces.

Question put and agreed to.

Local Government in Gloucestershire

Rishi Sunak Excerpts

Tuesday 3rd July 2018 Westminster Hall

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Stroud (Dr Drew) on securing this important debate. I very much recognise and respect his long-standing personal views on the topic, no doubt informed by his many years of service at various tiers of local Government, which I am sure he draws on today. He will have heard me say before that, when requested, the Government are committed to consider locally led proposals for unitarisations and mergers between councils. He will also know that we recently legislated to create two new unitary councils in Dorset, as well as mergers of district councils in Somerset West and Taunton, East Suffolk and West Suffolk. In each of those cases, the councils developed their proposals locally, as is currently happening in Northamptonshire, where a public consultation is underway to help inform the councils’ proposals for the Secretary of State.

Turning to Gloucestershire, there is currently the county council and the six district and borough councils, and adjacent to the administrative county there is also the unitary council of South Gloucestershire. It is important to state for the record that the Department has received no proposals from the county council or any of the district councils for local government reorganisation in Gloucestershire. I am not aware of any other plans in development that are to be presented to me imminently. The Government’s stated policy is to consider any locally led proposals that are submitted.

To answer the hon. Gentleman’s first question, it might be helpful for me to talk a little about the processes for unitarisation. There are two legislative processes that can be used. First, the Cities and Local Government Devolution Act 2016 allows a process to proceed if at least one affected authority consents. This process was used recently for the creation of the two unitary councils in Dorset. Secondly, we can use the Local Government and Public Involvement in Health Act 2007, as we are currently doing for Northamptonshire. Regardless of the legislative process used, the Government have been clear on what our criteria for unitisation are and how the Secretary of State will assess any proposal.

I want to spend a moment outlining the three main criteria. First, the proposal has to be 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 fragmentation of major services. Secondly, the proposed structure has to be for a credible geography, consisting of one or more existing local government areas, and the population of any unitary authority must be substantial.

[Matt Western (Warwick and Leamington) (Lab)]

So many authorities are under significant financial pressure, as the Minister described. The majority of those named are smaller, more rural authorities. In that light, is it not appropriate to go through this exercise as a matter of course, to explore what sort of cost savings could be made? In Warwickshire that would enable us to understand what sort of savings and efficiency improvements in the services delivered could be made.

[Rishi Sunak]

We are here to talk about Gloucestershire today and not Warwickshire, but I will address the hon. Gentleman’s underlying question about the Government’s role in this process when I answer the second question from the hon. Member for Stroud.

The third criterion for judging a proposal is that it commands local support. In particular, the structure must be proposed by one or more existing councils in the area and there is evidence of a good deal of local support, including from business, the voluntary sector, public bodies and local communities.

[Matt Western]

To that end, rather than just getting anecdotal support from businesses and other organisations, would the Minister support going to the public with that at the time of an election or through a referendum?

[Rishi Sunak]

The hon. Gentleman anticipates what I was about to say, so let me elaborate on what the Government mean by a good deal of local support. The Government would like that to be assessed across the area from business, the voluntary sectors, public bodies and local communities. That does not mean unanimous agreement from all councils, stakeholders and residents, but it is vital that any proposals to change structures in local government are truly locally led. That is why we feel that a public consultation is so important.

That has been the experience of recent proposals, where the councils involved have used opinion services or consultants to engage extensively with the public through discourse, surveys and events, to ensure that they have captured the state of public opinion on the proposals they are due to submit to the Department. Having received those proposals, following an invitation, the Secretary of State must consult all affected local authorities that are not signed up to the proposal, and any other persons he considers appropriate, before reaching a decision, judged against the three criteria I outlined. The extent of any consultation would depend on the extent of the consultation that those making the proposal have already carried out.

It is essential that those making a proposal carry out an effective consultation before submitting their proposal, not least to provide evidence about the level of local support. The Secretary of State may then implement the proposal by order, with or without modification, or decide to take no action. Such an order is subject to the affirmative resolution procedure but does not require the consent of any council.

Let me turn to the question from the hon. Member for Stroud about the Government’s role. He will hopefully have seen as I have been outlining the process that our role is to receive proposals developed locally in a particular area; it is not to enforce or dictate from on high the organisation of any local area’s affairs. It is for local councils and local people to develop those proposals. However, as he said in alluding to the new Secretary of State’s remarks, the Government remain open and willing to engage with areas that want to embark on this journey and will willingly receive proposals and adjudicate on them in due course.

[Dr Drew]

For Northamptonshire—thankfully, we are not quite in that situation—the Government came up with solutions, seemingly with the support of Northamptonshire’s MPs. Whatever the Minister means by “receiving” a particular idea, when do the Government intervene to say, “This is right and proper, and we need to get on with it”?

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[Rishi Sunak]

To differentiate, there was a statutory intervention in Northamptonshire because of the situation that council found itself in. A statutory inspection was carried out and, after careful consideration, the Secretary of State appointed commissioners to go into the authority. However, Max Caller, who carried out the inspection, recommended that unitarisation might be part of the solution, which prompted the Secretary of State to issue an invitation. It is important to note that those proposals are being developed locally by the authorities in Northamptonshire. That remains a fundamental point: proposals come directly from councils, in consultation with local people. The process in Northamptonshire originated from a situation that no one would want to see in Gloucestershire—no one is suggesting that it is close to that, as the hon. Gentleman said. In that sense, the two counties are not directly comparable.

Turning to Gloucestershire, all councils should plan for and embrace the future and ensure that they can provide for their communities. I was heartened to see “Gloucestershire 2050 vision”, the extensive consultative exercise on which the county is embarking. The hon. Member for Warwick and Leamington (Matt Western) alluded to the need for councils to consult the public, and that is what Gloucestershire County Council is doing. More than 600 members of the public and 30 exhibitors attended the “big conversation”, the launch of the exercise in February at Cheltenham racecourse, where the council discussed its plans for the future to ensure that Gloucestershire remains a vibrant place to live, raise a family, grow old and, indeed, work and start a business.

[Dr Drew]

The Minister is being most generous in giving way. Of course, one of the proposals was for unitary local government, but sadly that was not one of the preferred solutions to Gloucestershire’s future needs. Will the Minister at least look at the earlier proposal and see that as a trigger for a proper discussion in Gloucestershire?

[Rishi Sunak]

The hon. Gentleman keeps tempting me, but I will keep saying that it is not for me to dictate to the people of Gloucestershire the appropriate way for them to organise government in their area. It is for the people, the councillors and all those involved locally to develop such proposals. Indeed, many ideas will be debated as part of that conversation, such as those I saw for a new cyber-park, a “super city”, a regional area of natural beauty and a water park to attract tourism. It may be that not everyone agrees on them, but the point of the exercise is to think about the best way to serve the people of Gloucestershire and ensure that their area remains a vibrant, prosperous, safe and healthy place to live. I am delighted to see Gloucestershire carrying out that exercise and wish it every success.

The hon. Member for Warwick and Leamington touched on the financial situation, and it would be remiss of me not to respond. I pay tribute to councils up and down the country, which have done an extraordinary job of maintaining a high level of public services in the face of a difficult financial climate in the past few years as the Government embraced the difficult task of ensuring that the country lives within its means again. I am pleased to say that, in both this financial year and the next, the county of Gloucestershire will see a significant real-terms increase in core spending power, which is the total amount of money available to spend on its residents.

I am grateful to the hon. Member for Stroud for alluding to the fact that Gloucestershire is one of the 10 or so 100% business rates retention pilot areas. That programme, which will ensure that many millions of pounds in extra revenue will flow to Gloucestershire this year, was not available to everyone, and I know that the county is delighted to have access to it. Although there have been challenges in children’s services—it is right that those receive urgent attention—I am pleased to see a strong performance in social care in reducing delayed transfers of care. The latest statistics show that Gloucestershire reduced delayed transfers by 58%, considerably exceeding the national average of 35%. Indeed, its performance is now 20% better than the national average. I pay tribute to the county council for that excellent performance in tackling a difficult social care challenge.

First and foremost, it is imperative that the councils of Gloucestershire and those elsewhere in the country consider how best they might serve their residents, deliver high-quality services and ensure financial sustainability. Of course, the creation of unitary councils can lead to service improvements for residents and achieve savings, which may be of interest to residents. However, it is ultimately for the councils and people of Gloucestershire to decide, having informed views locally. If they so choose, it is for them to submit a proposal to the Government, which we will consider.

I commend the hon. Member for Stroud once again for securing the debate on an issue that he has thought about long and hard. I wish Gloucestershire County Council well with its 2050 vision and hope that the conversations it has with its residents prove fruitful, ensuring a bright and prosperous future for its people.

Question put and agreed to.

Council Tax and Second Homes

Rishi Sunak Excerpts

Tuesday 26th June 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I commend my hon. Friend the Member for St Ives (Derek Thomas) for securing this debate. The issue of second homes is a subject that I know he cares about passionately and has raised repeatedly in the House. It is right that he voices his constituents’ views on this topic, for they deal with the issue of second homes more than most. When we look at the percentage of a local authority’s housing stock accounted for by second homes, we find that the Isles of Scilly ranks second among authorities in England and Cornwall ranks 13th. I have some personal familiarity with this issue, due to the reasonably high prevalence of second homes in my rural constituency of Richmond (Yorks), especially in the Yorkshire Dales national park. As we heard, in areas where the number of second homes comprises a significant proportion of the housing market, there is a risk that local people, particularly those who might be looking for their first home, might be priced out of the local market. There are legitimate concerns about the effect on local services, as well as on community cohesion.

However, it is also important that we do not lose sight of the benefits of second homes: the boost they can give to local economies and the tourism trade. Many local livelihoods will depend on tourism. This Government are not in the business of removing people’s right to choose where they want to purchase property. There can, of course, be many reasons for owning more than one property. Although second homes are frequently referred to as “holiday homes”, they can just as easily be properties that enable someone to work in and contribute to the local economy of an area, while being able to return to a family home in another part of the country on a regular basis.

However, we do recognise the concerns, which have been set out so clearly by my hon. Friend in this debate. As such, I would like to highlight for the House the range of actions the Government have put in place to mitigate the impact of second homes in affected areas and pass on more benefits to local residents. Let me start with the second home discount. The Government inherited a situation where second homes were automatically entitled to council tax discounts. There was a presumption that those who do not use local services for much of the year should pay less, but we shifted away from that approach. From 2013, the law was changed so that local authorities were no longer required to offer council tax discounts in this way, allowing them to target any discounts as necessary, according to their particular circumstances. I am pleased to report that that change has made a difference. Last year, no local authorities still offered blanket exemptions for second homes; nearly a third of billing authorities offered no discount at all on second homes; and, perhaps most clearly, fully 92% of second homes were charged the full rate of council tax.

Secondly, although that was a positive step, we have gone further. Beyond council tax, the Government raised stamp duty rates for those buying second homes. Since April 2016, anyone who has purchased a second home has paid a stamp duty charge of three percentage points above the current rates. Since then, more than half a million people have bought their first home, and first-time buyers now make up an increased share of the mortgage property market. It is worth noting the other significant support for first-time buyers, in the form of the total removal of the need to pay stamp duty on homes worth up to £300,000, which will benefit many people in the constituency of my hon. Friend the Member for St Ives.

Thirdly, the community housing fund is helping to channel funds back into local communities. It has allocated part of the additional revenue raised from the higher stamp-duty rates to areas with the potential to deliver community-led housing. That specifically includes areas with high rates of second-home ownership. Community-led housing is affordable at local income levels and is almost exclusively additional to any housing developed by other sectors, because it is brought forward on sites that would not normally be granted planning permission to speculative house builders.

The community housing fund has provided revenue and capital funding for numerous schemes since 2016, as I have seen at first hand in my own constituency, where the Hudswell community centre used the funds to develop affordable homes for people with local connections to that village. I was delighted to open up the homes and see how the scheme had enabled tenants with strong family ties to the local area to move in. I am aware of other shining examples throughout the country. Indeed, in the first round of the scheme, Cornwall received £5 million to support community housing projects, including the Cornwall Community Land Trust, which I am sure was welcomed by my hon. Friend and others across Cornwall.

Fourthly, through neighbourhood plans, communities have the direct power to develop a shared vision for the future of their areas. Over 590 such plans have been completed so far. The plans allow communities to make decisions on where new homes, shops and offices should be built, what they should look like, and what facilities and infrastructure should be provided. I am delighted that the Government have committed more than £20 million to support communities in the development of neighbourhood plans over the next few years.

Through the neighbourhood-plan process, residents can develop plans that manage second-home ownership of new builds. We are aware that communities in areas such as Cornwall and Northumberland have put in place neighbourhood plans with such restrictions. Indeed, one of the more well-known plans that does exactly that is in my hon. Friend’s constituency of St Ives, where new open-market housing is permitted only where there is a restriction to ensure its occupancy as a principal residence. It is quite right that local residents should have the opportunity to express their views on the design of their areas and ultimately to approve neighbourhood plans via a referendum.

Lastly, my hon. Friend expressed his concern about the possibility that some second-homeowners may be registering their properties for business rates and consequently not paying their share in council tax. Indeed, I have discussed this issue not just with my hon. Friend, but with my hon. Friends the Members for St Austell and Newquay (Steve Double), for North Cornwall (Scott Mann), for Suffolk Coastal (Dr Coffey) and for Totnes (Dr Wollaston), among others.

Holiday lets are a valuable part of the local business landscape in many communities. It is absolutely right that such genuine businesses should pay business rates and, as such, be able to avail themselves of small business rate relief, where appropriate. In the case of holiday-let accommodation, the properties are assessed for business rates rather than council tax if they are currently available for short-term lets for 140 days or more per financial year. This rule is widely understood and provides a clear method of deciding whether a property should be liable for council tax or business rates. It also ensures that properties do not switch between the two systems year to year merely due to success in letting out the property.

However, I assure all hon. Members that the Government take any suggestion of council tax avoidance or gaming extremely seriously wherever it occurs. My hon. Friend the Member for St Ives is absolutely right to point out the potential impact on his area. A reflection of this is that 17% of all holiday lets registered for business rates in England are to be found in Cornwall, and 97% of those have rateable values of £12,000 or below, so may potentially be eligible for small business rate relief.

[Bob Stewart]

I thank both you, Mr Speaker, and my hon. Friend for also allowing me to intervene. Does a business rate raised on a holiday let go to the local council or to central Government? In other words, if it is roughly the same as council tax, does the local council get the same amount?

--- Later in debate ---

[Rishi Sunak]

In general, business rates are split between central and local government. Depending on the particular area, that share may be more or less, but a rough rule of thumb is 50:50. Obviously, the particular question that my hon. Friend the Member for Beckenham (Bob Stewart) asked as to the level of difference between the two will depend on the rateable value of a typical business. The thing to bear in mind, as I said, is that 97% of holiday lets registered in Cornwall, for example, have a rateable value below £12,000, which means that they will be eligible for small business rate relief and to pay no business rates at all, and therein lies the issue that my hon. Friend the Member for St Ives highlighted.

Clearly, if these properties ought not to be eligible for business, rates this could represent a financial loss to both the local and central Exchequer and that would not be fair. I know that there are different approaches to how such properties are taxed. Wales is a case in point. There, such properties must provide evidence of actual letting in the previous year in order to be valued for business rates, rather than for council tax. There may indeed be merits to such an approach, and I am happy to listen to views and ideas on this.

I very much understand the concerns that my hon. Friend the Member for St. Ives has raised. As he knows, I have been looking at this issue for some time and have tasked my officials to investigate this matter in detail, and especially to speak to their counterparts in Wales about their experience there to see whether we should change the criteria under which holiday lets are valued for business rates. Whichever approach is taken, it is crucial that we strike a balance between ensuring that properties pay the right tax at the right level, and also ensuring that genuine small businesses receive the reliefs that they deserve.

To conclude, I have explained the wide-ranging measures that this Government have put in place to deal with the issues raised by second homes—from abolishing mandatory council tax discounts to increasing stamp duty rates, and from allocating funds to community-led local affordable housing to supporting neighbourhood planning. I hope that hon. Members will agree that the Government have been proactive in this area. However, ever restless to ensure that we are taking all sensible steps to address any issues, I am also examining the particular concern raised by my hon. Friend with regard to business rates and look forward to reporting back on this issue to him and to other Members in due course.

I end where I started: by commending my hon. Friend for so tenaciously and passionately continuing to raise this vital issue for his constituents. He is making a real difference to them by putting their issues directly on the Government’s agenda, and I know that he will continue to do exactly that in the days and months to come.

Question put and agreed to.

Oral Answers to Questions

Rishi Sunak Excerpts

Monday 18th June 2018 Commons Chamber

[Liz Twist (Blaydon) (Lab)]

14. What recent assessment he has made of the ability of local authorities to deliver their statutory duties for adult social care.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

As part of the Ministry’s oversight of local government, we consider the financial stability and service delivery of individual authorities, liaising with the Department of Health and Social Care on adult social care. On that basis, we have no immediate concerns about the ability of local authorities to fulfil their statutory duties.

[Liz McInnes]

Wow! I am shocked by that response. This year’s precept of 1% raises only 0.8% of our total adult social care budget in the Borough of Rochdale. With nursing home beds being converted into residential beds because of providers’ difficulties in recruiting and retaining nurses, how does the Minister suggest that my local authority provides the nursing home beds that my constituents so desperately need?

[Rishi Sunak]

This Government have increased funding for social care across the country. Rather than talking down the hon. Lady’s constituency and local authority, I point out that Rochdale’s performance in reducing delayed transfers of care is among the best in the country and deserves praise, rather than being talked down.

[Liz Twist]

This weekend we heard the announcement of additional funding for the NHS, but there was no mention of funding to resolve the issues in social care as part of that package. What discussions were there with the Secretary of State about the future funding of social care in advance of that announcement?

[Rishi Sunak]

This Government want to guarantee the security and dignity of people in old age and are absolutely committed to providing a long-term sustainable settlement on social care, on which the hon. Lady will know the Health Secretary is working. He will bring forward plans in due course.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Some 1.2 million older people in England are living with unmet care needs, according to Age UK. More than 400,000 fewer people are receiving publicly funded social care than in 2010. Council spending on adult social care fell by 10% in real terms between 2010 and 2015. A miserly £150 million in funding was announced for 2018-19 in the local government finance settlement, and now we hear that there is no funding for social care in yesterday’s NHS announcement. With social care in crisis, putting pressure on the NHS and sending councils across England towards bankruptcy, when is this Minister going to do his job and secure the resources that our councils need to give the elderly the dignity they so desperately deserve?

[Rishi Sunak]

This Government are already responding to the pressures in social care, which is why we announced £2 billion in last year’s Budget for local authorities up and down the country. That represents a real-terms increase every year from last year to next year in social care spending, and we are seeing it translate into action on the ground, with a 40% reduction in social care delayed transfers of care just last month.

[Nigel Huddleston (Mid Worcestershire) (Con)]

7. What steps his Department is taking to support the building of new social housing.

--- Later in debate ---

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

11. What assessment he has made of the effect on the long-term financial viability of local authorities of the use of their reserves to fund children's services.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

Settlement funding has increased in recognition of pressures, including demand for children’s services. In addition, many local authorities have built up substantial reserves over recent years. It is absolutely right that they use those where necessary to protect high quality services for taxpayers.

[Ms Rimmer]

Baby P, Victoria Climbié, Shannon Matthews—I am sure the House remembers those names. Child safety is a major concern right across our country, with councils starting no fewer than 500 child protection investigations a day. St Helens Council has almost twice as many looked-after children as the national average and has pulled £5 million from reserves to fund their care. That is unsustainable. Does the Minister really realise what is at stake? What will the Minister do to ensure that councils have the money they need to support our vulnerable children, instead of washing his hands of this?

[Rishi Sunak]

This Government have ensured that all local authorities have increased resources to deal with all the various services they have to provide, including children’s services, on which, I am pleased to say, over £9 billion will be spent this year. The hon. Lady mentions reserves. She may know that last year reserves in her local authority were actually higher than they were five years ago.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

We all want to live in a Britain where young people are safe, well cared for and nurtured, but for too many real life is very different. They rely instead on council safeguarding services to give them the protection they need, the very services that are facing a £2 billion funding gap and that have already overspent by £600 million. The question is simple: when can we see real action, with real money going directly to children’s services?

[Rishi Sunak]

As I just said, £9 billion is going to children’s services just this year. As the hon. Gentleman knows, we are undertaking a fresh review of the relative needs and resources of all local authorities. As part of that work, there is ongoing work with the Department for Education to understand in detail the specific drivers for children’s services up and down the country. I look forward to his contributions to that piece of work.

[Sandy Martin (Ipswich) (Lab)]

12. What recent assessment he has made of the ability of local authorities to discharge their statutory responsibilities to vulnerable children.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

15. What recent assessment he has made of the ability of local authorities to discharge their statutory responsibilities to vulnerable children.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

Her Majesty’s chief inspector of education, children’s services and skills is responsible for the inspection of local authority children’s services. Last year, spending on the most vulnerable children increased to over £9 billion. I very much welcome the efforts of colleagues in the Department for Education and in local councils, who continually look for ways to improve their services.

[Sandy Martin]

Following the murder in Ipswich two weeks ago of a 17-year-old and the critical stabbing of a 16-year-old on Wednesday evening, does the Minister recognise the serious effects that cuts to support for looked-after children and other vulnerable young people are having on their ability to lead safe, productive and law-abiding lives?

[Rishi Sunak]

I am sure the thoughts of the whole House are with the families of the young children the hon. Gentleman mentions at this difficult time. Matters of policing and crime are for the Home Office, but the Government and local councils agree about the importance of high quality children’s services. He will know that a new inspection framework was introduced earlier this year. I am pleased that Suffolk County Council, his local authority, was rated good in its most recent inspection.

[Bambos Charalambous]

Has the Minister spoken to his counterparts at the Department for Education to discuss ways to improve the educational attainment of looked-after and vulnerable children? If not, why not?

[Rishi Sunak]

I thank the hon. Gentleman for that question. He will be pleased to know that just last week I met the Children’s Minister to discuss exactly the topic that he raised. In particular, one of the topics that we discussed was the care leavers covenant, which the Government are piloting and introducing to improve the educational and employment outcomes for children and young people leaving care.

[Helen Whately (Faversham and Mid Kent) (Con)]

17. What steps his Department is taking to make the property rental market fairer and more affordable.

--- Later in debate ---

[Jeremy Lefroy (Stafford) (Con)]

T2. Will my hon. Friend advise me on when Stoke-on-Trent and Staffordshire will get their business rates retention?

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

My hon. Friend has been a long-standing advocate for rural funding in his county, and I am pleased to tell him that we will continue to pilot reform of the business rates retention system in the forthcoming year. We will publish details of the new pilot very shortly and would very much welcome Staffordshire’s application to become a pilot.

[Christine Jardine (Edinburgh West) (LD)]

T5. My constituent Shirley Todd, a wheelchair user, carried out a survey of part of the city and discovered that 72% of businesses were inaccessible to wheelchair users. She has now launched a national campaign and petition. Will the Minister agree to consider plans to make local authorities responsible for proactively enforcing the provisions in the Equality Act 2010?

[Rishi Sunak]

I thank the hon. Lady for raising this important topic. She will know that in the past I have spoken about greater provision of Changing Places in this House. Building regulations set the access requirements for new buildings, while the Equality Act requires providers to make reasonable adjustments. If someone feels they have been discriminated against, there are several means of redress, and the Equality Advisory Support Service can provide help and support in that process.

[Mr Philip Hollobone (Kettering) (Con)]

T4. Local councils in Northamptonshire today launched their official five-week consultation on how the eight councils in the county might best be merged into two by 2020. Will the Secretary of State join me in encouraging all local residents to take part so that their views can be heard loud and clear?

--- Later in debate ---

[Clive Efford (Eltham) (Lab)]

The discussions about any increase in funds for the NHS have been well publicised, but it is shocking that there is no extra money for social care. Was the Secretary of State aware that those discussions were taking place, and did he make any representations to increase funding for social care?

[Rishi Sunak]

As I have said, the Government are committed to providing a long-term, sustainable settlement for social care. That work has been ongoing for a while and is continuing. It includes the Secretary of State, along with the Secretary of State for Health and Social Care, and there will be a report in due course.

[Tom Pursglove (Corby) (Con)]

Corby and East Northamptonshire is at the forefront when it comes to building new homes, but there are currently a number of planning applications in the system that are completely unwanted and on green open space, although we more than exceed our housing targets. Does my hon. Friend agree that, in such instances, when local communities are doing all the right things, local developers should respect their wishes?

--- Later in debate ---

[Mr Speaker]

These are all magnificent questions, but I hope the House will take it in the right spirit if I say that I do not think many hon. and right hon. Members have yet read the textbook on pithy questioning available on general release from the right hon. Member for New Forest West (Sir Desmond Swayne). It would be a very useful Christmas present.

[Rishi Sunak]

The public health grant is not being ended; it is being folded into the business rates retention plan that the local government sector has welcomed and agreed for that process. Also, a new funding formula is being worked out with the Department of Health and Social Care specifically for public health, and I am sure we will welcome the hon. Lady’s contributions to that.

[John Grogan (Keighley) (Lab)]

Has the Secretary of State yet personally had the chance to consider the important matter of Yorkshire devolution, and will he agree to meet the Yorkshire leaders from all parties before Yorkshire Day on 1 August—the Secretary of State personally?

Parking Charges: Chippenham

Rishi Sunak Excerpts

Wednesday 13th June 2018 Westminster Hall

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Mr Gray, especially in this Wiltshire-themed debate.

[James Gray (in the Chair)]

Order. It might be helpful to remind the Chamber that although it is a Wiltshire-themed debate and I am a Wiltshire MP, I am here as Chairman and therefore I neither agree nor disagree with anything that might be said.

[Rishi Sunak]

Point noted, Mr Gray.

I congratulate my hon. Friend the Member for Chippenham (Michelle Donelan) on securing this important debate. She has been an incredibly long-standing champion for parking in her local area. From the moment she arrived in this place—and before—not only has she advocated on behalf of her constituents, but she spoke passionately about the Parking (Code of Practice) Bill on which I had the pleasure of leading for the Government some time ago. That Bill would clamp down on rogue parking operators, and she made a powerful speech in that debate.

My hon. Friend is also a champion of small businesses, and in many debates she has spoken with authority and passion about the importance of supporting small businesses, just as she did today. I congratulate her on all those things, and I very much agree with the central premise of what she is saying: high streets and town centres are a crucial part of our local and national economy, creating jobs, nurturing small businesses, and injecting billions of pounds into the economy. Key to a thriving town centre and high street is accessibility, and effective parking is a key element of that. The ability of shoppers and visitors to park is integral to increasing and maintaining footfall on our high streets.

For many people, their day begins and ends with parking their car. Local authorities should analyse people’s need for parking provision, and adjust their strategies to support local need. Suitable parking provision is a matter on which local authorities must decide what is best for their area, as I am glad my hon. Friend acknowledges. As our communities are all diverse and unique, there should not be a one-size-fits-all approach, or a directive that comes from this office, and instead parking should be managed intelligently and be part of a wider holistic transport plan that is tailored to the needs of each local area.

The Government, together with key stakeholders and partners, promote the use of best practice and encourage the sharing of what does and does not work. We support the use of innovative techniques, such as flexible tariffs and the use of mobile technology, to create the most enjoyable experience for visitors to our towns and high streets. On that point, I am very happy to look at the Department’s current operational guidance, which it provides to local authorities, to see whether there is any merit in revisiting it and making sure that best practice is more widely shared, as was suggested by my hon. Friend. I will also have that conversation with the Local Government Association in my work with it on this topic and others.

Research by the British Parking Association and the Association of Town and City Management shows that flexible and intelligent tariffs are a factor in the success of parking management strategies for high streets and towns. Perhaps that is the type of research that my hon. Friend would like to be shared more broadly. Richmondshire District Council instigated free parking for the Tour de Yorkshire in May. That encouraged people to come and enjoy a fantastic event. As the peloton travelled through my constituency, it was a boost to local businesses, supporting community spirit.

Unrestricted free parking is not always a magic bullet: it can have a negative impact on town centre footfall if spaces are used more often by workers or commuters parking all day, meaning that spaces are not available for leisure users such as shoppers. There is a balance to strike. Intelligent tariffs, such as reduced parking charges or free parking, can be used effectively to incentivise people to visit their high street. My hon. Friend mentioned reducing the cost of parking to support local markets and events, or even during off-peak periods. That is a tool that the Government would urge local authorities to consider when developing high street parking strategies.

New technologies are supporting better access to high street and town centre parking. Technologies such as AppyParking give real-time reports of on-street and off-street parking availability, and they interface with payment apps used by local councils to offer a one-stop shop that allows users to find and pay for parking. Similarly, car parks are increasingly embracing technology to improve accessibility to customers. Larger parking companies, including NCP, now offer the ability to book spaces, giving motorists certainty that they can access high streets and economic centres conveniently.

My hon. Friend spoke clearly on the subject of high streets, and parking strategies that support our high streets and market towns are more important than ever. High streets are changing: we see it happening around us every week and the Government are committed to helping communities adapt. If a high street or market town centre is to flourish, local people, businesses and councils in an area need to work together to develop their own unique offer for the high street and town centre that resonates with the local community. It is not just about retail. People care about high streets because they are the centres of their community. Consumers are looking for a range of experiences when they visit a high street, from leisure to health services. I am pleased to say that the Government are taking forward a wide range of measures to support high streets and businesses.

In Chippenham, as my hon. Friend will know, there is a growth deal project to improve the train station. The project aims to enhance the station facilities and to develop the surrounding land for improved commercial and residential property, including increased car parking capacity. She was right to point out that local authorities should ensure that there is adequate provision for parking in town centres. My understanding is that, through that project, car parking capacity at the station will double, which I hope is welcome. In addition, there will be public realm improvements to signpost to the high street to improve access.

More broadly, since 2010 the Government have helped to create more than 360 town teams and have given more than £18 million to towns. That has included successful initiatives such as Love Your Local Market, and the Great British High Street competition. We also support Small Business Saturday UK. An estimated £748 million was spent with small businesses across the UK for Small Business Saturday UK 2017, which was up 4% on the previous year’s spend. I know that my hon. Friend, as a devout and passionate supporter of small business, will welcome those measures, and no doubt she has been involved in supporting them in her area. The Government also established the future high streets forum, which is chaired by the Minister for local growth, my hon. Friend the Member for Rossendale and Darwen (Jake Berry). The forum consists of developers, investors and retailers and provides leadership from the Government and the business community to support our high streets and town centres to adapt and compete in the face of changing consumer and social trends.

We also believe in celebrating success, including the wonderful work that communities put into their high streets, making them community hubs. The Great British High Street awards highlight some of the excellent examples of high streets up and down the country. Members may know that the last awards, in 2016, garnered more than 900 applications across 15 categories, and more than half a million people participated in the voting.

Because of the knowledge and insight with which my hon. Friend the Member for Chippenham speaks on matters relating to parking and the success of high streets, I have spoken to the local growth Minister, who has responsibility for high streets, and arranged for her to meet him at the earliest opportunity to convey her views on how parking should feed into the Government’s wider strategy on high streets. The Minister is working intently on the topic as we speak, and exciting things are to happen in the near future, so I urge her to meet him as soon as she can to feed in some of her ideas.

My hon. Friend asked about consultations, and I am pleased to tell her that the Government are developing the secondary legislation under the Parking Places (Variation of Charges) Act 2017. The Act provides for powers to simplify the procedure for lower parking charges. It also introduces a requirement for local authorities to consult businesses and communities on increasing charges, to ensure that local decisions are informed by local views. I know she will welcome that.

I think that we can all agree that parking provision is essential to making our high streets accessible, and to supporting them as vibrant economic centres. An intelligent and tailored parking strategy, taking account of local needs and designed to support high streets and town centres, should be central to local authorities’ transport plans. Suitable parking tariffs and, where appropriate, free or discounted parking are positive elements of such plans. We will continue to work with local authorities and key stakeholders to ensure that our high streets thrive in the future.

I end by echoing what I said in beginning: I thank my hon. Friend for securing the debate and for continuing the work that she does to champion her constituents, in this instance in relation to parking but, more generally, in the matter of supporting high streets and small businesses. She has been a tireless advocate of her constituents on those issues and I know that she will continue to press me and other members of the Government to ensure that they get the best possible deal.

Question put and agreed to.

Tenant Fees Bill (Fourth sitting)

Rishi Sunak Excerpts

Committee Debate: 4th sitting: House of Commons
Tuesday 12th June 2018 Public Bill Committees

[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 look forward to our making speedy progress today.

The Bill proposes a number of enforcement measures that offer a strong deterrent to irresponsible agents and landlords and, in doing so, protects tenants from unfair letting fees. Clause 6 places a duty on local weights and measures authorities—that is, trading standards authorities—to enforce the ban on letting fees and requirements relating to holding deposits. Trading standards have an important role in enforcing existing legislation on letting agents—such as the requirement on agents to display their fees transparently. With their existing local knowledge of the industry, trading standards are the clear choice to enforce the ban on letting fees. Indeed, 69% of respondents to the Government consultation agreed that trading standards should enforce the provisions of the Bill. We have also spoken to trading standards officers, who agree that enforcement of the Bill aligns with their responsibilities to enforce other legislation relating to fair trading and consumer protection.

Trading standards authorities are responsible for enforcement in their own local areas. Where a breach occurs in the area of more than one trading standards authority, a breach is considered to have occurred in each of the relevant local areas. Trading standards must have regard to any guidance issued by the Secretary of State or lead enforcement authority. The investigatory powers available to a local trading standards authority for the purpose of enforcing the Bill are set out in schedule 5 to the Consumer Rights Act 2015.

[Daniel Zeichner (Cambridge) (Lab)]

Will the Minister explain to the Committee what assessment he has made of the capacity of trading standards departments to implement the measures that he is discussing, and what additional resources he intends to give them to make that possible?

[Rishi Sunak]

I am very happy to answer the hon. Gentleman’s question briefly now, as I am sure that we will come to it when we consider the various amendments and clauses that deal particularly with capacity and resources. In a nutshell, we believe that the Bill and the enforcement measures in it will be self-financing with the fees that can be charged by local enforcement authorities and trading standards authorities; on top of that, they will receive seed funding in the first year of up to £500,000.

As I was saying, the investigatory powers are set out in schedule 5 to the 2015 Act.

[Melanie Onn (Great Grimsby) (Lab)]

The Minister just mentioned charges. Is he referring to the fines?

[Rishi Sunak]

Yes; I meant the fines that will be charged of up to £30,000 for a second offence and £5,000 in the first instance.

To return to the investigatory powers, they are laid out and provide the ability for trading standards authorities to investigate, inspect and enforce the provisions; they enable them to carry out their enforcement activity.

I hope that the clause will stand part of the Bill.

[Melanie Onn]

It is a pleasure to serve under your chairmanship, Mr Sharma.

As we have heard and read in the evidence from the likes of the Local Government Association, the Chartered Trading Standards Institute and the Chartered Institute of Housing, there are significant concerns about the enforcement powers being conferred on the local weights and measures authorities around the country. For the avoidance of doubt, we are talking in this clause about local trading standards teams. As I have mentioned before, they have a wide and varied remit. They enforce laws on behalf of consumers on matters such as age-restricted products; agriculture; animal health and welfare; fair trading, which includes pricing, descriptions of goods, digital content and services, and terms and conditions; food standards and safety; intellectual property, including counterfeiting; product safety; and, of course, weights and measures.

Trading standards cover more than 250 statutory duties, including providing businesses with advice. The CTSI says that the service is already overstretched and underfunded, with just £1.99 per head being spent. The situation has been recognised by the National Audit Office, which has said that there is a direct threat to the consumer protection system’s viability as a whole, yet here the Government seek to add another layer of responsibilities, technicalities and duties to those of the service without giving due consideration to the implications of the request, and simply assuming that their assessment that the scheme will be fiscally neutral after two years will come to pass. That seems a rather carte blanch approach to me—a “close your eyes, cross your fingers and hope for the best” kind of plan. It is not robust and it is not a process modelled on the evidence of the experts who operate in the roles, day in and day out. There is time for the Minister to correct this.

Our constituents will mostly know trading standards for tackling rogue traders. My constituency being a port town, we have a very active trading standards department, which regularly discovers dodgy goods that people try to smuggle in, including recently some dangerous counterfeit cigarettes, filled with anything up to and including asbestos, for sale cheap on the black market, with a street value of around £8,500. Trading standards are often the first in a position of authority to come across goods linked to organised crime and criminal gangs, and they provide essential eyes and ears within local communities.

Is the Minister confident that the addition of these tenant fees enforcement powers to trading standards’ responsibilities, with only pin money for start-up and roll-out, will not impact on its already essential role protecting consumers? How can he be sure, and what steps will he take to ensure that that is the case going forward? We heard of cuts to trading standards departments of 40% to 50% at a local level.

Across the country, the Chartered Trading Standards Institute tells us that there has been a cut of more than 50% of skilled officers. Does the Minister seriously think that trading standards will be able to effectively implement these new powers? If so, how? What priorities should trading standards officers have? If faced with tracking down an influx of poisonous fake spirits, surveilling for evidence to prosecute the sale of knives to under-18s or taking action against a landlord requiring a £150 prohibited fee from a tenant, which would he suggest the officers pursue as urgent?

If the Minister concedes that the loss of money is likely to be less urgent in its nature than the matter of illegal spirits or the selling of knives to teenagers, at what point does he anticipate that an officer ought to get around to looking into the issue of the prohibited fee? Given the restrictions on time and staffing levels, is not a TSO, rather than acting in an individual case, far more likely to deal with a single landlord facing multiple allegations of charging prohibited fees? It will be dealing with the big fish, rather than the small fry, that will be a reasonable and proportionate use of staff time. Has the Minister thought about the practicalities of enforcement? Has he compared it with how enforcement of housing matters is currently dealt with, or even tried to plug some of those gaps?

In order for the London Borough of Newham’s landlord licensing scheme to be effective, it had to bring together several different agencies, including the police, the UK Border Agency and specialist housing officers, and had to invest in systems to accurately identify those properties that were incorrectly licensed. While it has drawn in significant revenue for the Treasury and the council, it took a laser-focused determination from the political leadership in Newham to get their processes up and running to tackle landlords operating outside the regulations. Can the Minister guarantee that the same will happen to trading standards departments around the country, when it could be said to be somewhat of a Cinderella service? How will he monitor that, and what will his measure of success be?

The Local Government Association said in its evidence that, given the reduction in capacity of trading standards across many authorities, there should be flexibility for local areas to determine whether the ban is enforced by local trading standards or private sector housing teams. Does the Minister agree? The LGA went on to say that the Government had ignored the findings of the working group, which concluded that there should be enforcement of mandatory client money protection by local authorities, rather than trading standards. Is the Minister content to ignore the working group’s findings?

Has the Minister listened to the CTSI when it says that a self-financing enforcement model would potentially create a disincentive to provide regulatory compliance? That certainly seems to be the case with the current system around the display of fees. The fine acts as neither a disincentive for the businesses nor an incentive for the enforcement teams. The LGA pointed out that the Government’s theory that funds generated by fines will increase when non-compliance increases does not add up if companies close themselves down, only to re-emerge under a different name or structure in order to avoid a fine.

The CTSI also says that the costs of providing advice and guidance to a company that is subsequently compliant are not factored into the Government’s calculations. Of course, there was the issue raised by CTSI in our evidence session regarding the differences in the burden of proof and the framework of enforcement. The enforcers, in this instance the trading standards officers, will be required to prove offences beyond all reasonable doubt. What does this mean in practice for people—for families—who are already likely to be afraid about not securing the property that they want to live in and perhaps are under pressure to secure it because they have given notice on a prior residence, or are being thrown out of a property that they already reside in? Will this substantial basis of evidence encourage people to come forward, to make a complaint and seek redress? Let us remember that they are already in a significantly less advantageous position than the landlord or the lettings agent. They are not the experts in renting and even less so are they experts in the most recent legislative changes.

It goes back to the point I made earlier: the reality is that enforcement officers are far more likely to try to build up a stronger case with multiple complainants than deal with breaches on a single case-by-case basis. Does the Minister consider that this is serving tenants’ best interests? The remedy would not be sufficient in financial terms for the local authority, nor will the legislation be seen as fit for purpose by those it is intended to protect. Is he really content to preside over this? The CTSI says that most consumer rights breaches and the Estate Agents Act 1979 are obtainable on a balance of probability test. Why does he not consider amending the Bill to reflect this modest yet effective change? If it is the case that the higher the evidential requirement, the more work is involved and the more risk there is for the local authority, and the less likely it is that the Act will be easily enforceable, should he not just do the right thing and make the amendment now? I say that because one of the biggest frustrations of my constituents is around laws that are not enforced. Whether it is parking restrictions, dog mess or fly-tipping, they expect the rules to be fully and fairly applied. Where they are not, the blame comes back on an unfairly overstretched local authority, trying to do its best against the financial odds—financial odds that I know the Minister has recognised in previous comments that he has made.

I do hope that the Minister will take my comments on board. These are the views of royally chartered organisations, which work within the current legislative framework and can anticipate the difficulties of seeing this legislation in operation. It is only through proper enforcement with enforceable regulations that we can hope to see this law do everything the Minister has set out for it to do; otherwise, I am confident that it will be left wanting.

[Rishi Sunak]

There are in general three broad questions or buckets of comments. First, whether trading standards are the right institution to take on this task; secondly, prioritisation of resources for the things that trading standards have to do; and thirdly, a specific question about the burden of proof required for the penalties that are in place in this legislation. I will try to answer each of those three questions directly.

First, regarding whether trading standards are indeed the right body, which the hon. Lady questioned, there is unanimous agreement among leading industry bodies that trading standards are the logical choice. Indeed, the Chartered Trading Standards Institute itself, which the hon. Lady referred to, said that trading standards

“are well placed to enforce the ban”,

thanks to their local knowledge of landlords and letting agents.

[Melanie Onn]

Would the Minister accept that in the evidence we heard there was a reference to trading standards working closely with housing officers in particular, to better inform their local knowledge in an area that they may not have information relating to, because the trading standards authority has said that in terms of tenants they currently receive a small number of complaints in this area.

[Rishi Sunak]

I am generous in giving way, but in this occasion I may have been too generous, because I was just about to make that point. It is exactly because we recognise that in different areas there are different situations that we do not want to mandate a top-down approach. We have encouraged close co-operation. I do not want to pre-empt our debate on the next clause, which talks specifically about the powers for district authorities to enforce the provisions in the Bill. Also, on the particular question raised about client money protection and who ought to be the body enforcing that, 74% of respondents to the consultation said that that enforcement should primarily be by trading standards. It is important to note that trading standards can, under this legislation, discharge their responsibilities to the local housing authority, should they feel that is most appropriate for their area. I hope that addresses concerns on that point.

--- Later in debate ---

[Melanie Onn]

I thank the Minister for his response. The suggestion that there has been unanimous agreement across professional bodies on TSOs does not stand up to the evidence we heard. In all the submissions we had in writing, concerns were raised about the level of training available for trading standards officers, the level of experience they have in this area and their expertise, and they may well be better assisted by other organisations.

[Rishi Sunak]

I would be grateful to know if the hon. Lady is aware of an industry body that does not believe that trading standards should be the enforcement agency for this legislation. If she could name that industry body, who else does it propose should be the enforcement body?

[Melanie Onn]

I am commenting based on the evidence we heard last week. We heard from the CTSI and the LGA, which both raised those concerns. It is not about not having trading standards involved, because they clearly have an area of expertise, but there were concerns about their level of expertise, experience, training and resources.

The issue of resources was repeatedly mentioned in the evidence we received in writing and verbally. I appreciate the points the Minister made about resources and about looking to Torbay as the standard bearer for all enforcement and revenue-raising operations. I presume that we will look to Torbay in the future as the arbiter of whether this legislation is working.

On the burden of proof, the Minister says that nobody raised issues about that in the Select Committee’s pre-legislative scrutiny. However, it has come to light more recently. The high level of the burden of proof is something that we have heard about and that industry bodies have raised as a concern, given what they are used to dealing with as trading standards officers. It would be an error for the Minister to dismiss those comments lightly.

--- Later in debate ---

[Melanie Onn]

My hon. Friend makes an incredibly important point about being proactive and about the intention of trading standards officers or others to undertake that initial work, rather than just relying on the enforcement element of the legislation. I hope the Minister has heard those points, takes them seriously and receives them in the manner in which they are intended. We will not be pressing this matter to a vote, but we reserve the right to return to it on Report.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Enforcement by district councils

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

The clause places a duty on local trading standards authorities to enforce the ban on letting fees and the requirements relating to holding deposits. It gives district councils the power to enforce the provisions if they choose to do so.

Local housing authorities enforce other measures in private rented sector legislation, such as the provisions related to banning orders for rogue landlords and agents. We very much encourage close working between district and county councils in non-unitary authorities to ensure effective enforcement. That is why we are giving district councils that are not trading standards authorities the power to enforce this legislation. That will ensure that local housing authorities are able to take enforcement action should they become aware, while undertaking their other duties, of a landlord or agent breaching the provisions of the Bill.

District councils must have regard to any guidance issued by the Secretary of State or the lead enforcement authority. The investigatory powers available to a district council for the purposes of enforcing the Tenant Fees Bill are set out in schedule 5 to the Consumer Rights Act 2015, which the clause amends.

[Melanie Onn]

The Government included the clause following the Bill’s pre-legislative scrutiny. We understand that the devolution of powers between different tiers of local government is in the interest of promoting collaborative relationships with a range of stakeholders, but will the Minister explain how a district council will enable or access these powers?

The Bill provides district councils with the same powers as a weights and measures authority. The Government’s response to the Housing, Communities and Local Government Committee’s report on the Bill says that a district council may choose to be an enforcement authority, but the Committee’s recommendation refers to a weights and measures authority being able to delegate its powers to other tiers of local government where appropriate. Will the Minister explain what process he envisions district authorities having to go through order to be able to undertake enforcement roles in this context?

If weights and measures responsibilities are held at a county council level, and if additional funding for staffing or training has been directed there, but a district council wishes to undertake its own enforcement measures, will there be a requirement for that funding to be cascaded down? Or do the Government expect that funding bids will be made at the outset by those authorities that wish to be enforcers, and that there may then be overlap in the bidding and awarding of such funds?

The Committee’s report contained evidence that any system based purely on hypothecated funds would provide a challenging environment for councils, as it would not provide for up-front or proactive work. It is in the interests of local authorities, tenants, landlords and letting agents that fines are a last resort; it is the early work that will prove the most important.

[Rishi Sunak]

With regard to district councils enforcing the Bill, there is no special process that they need to go through; they have the same rights and powers as trading standards authorities, so they do not need any special permissions. They can get on and do that should they see fit.

With regard to the hon. Lady’s last point, just like trading standards authorities, an authority that enforces against the contravention of the Bill will of course keep any fines that are levied, which will help to fund that enforcement.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Financial penalties

[Melanie Onn]

I beg to move amendment 2, in clause 8, page 5, line 13, leave out “£5,000” and insert “£30,000”.

--- Later in debate ---

I fear that this matter has been under-examined by the Government, and the potential consequences underestimated. Will the Minister please reassure me of his logic on this point? The concept of “beyond reasonable doubt” is a real issue, and one that has been expressed by the industry. It would be right for the Minister to take the matter rather more seriously than he has done to this point.

[Rishi Sunak]

After careful consideration of all the feedback received during the consultation and engagement process, the Government are of the view that the level of financial penalties provided in the Bill is the right one. Furthermore, the approach to financial penalties aligns with that in other housing legislation. Most would agree that a £30,000 fine for an initial breach of the ban, as the amendment suggests, is excessive and could cause significant devastation.

[Melanie Onn]

Can the Minister explain the circumstances in which he anticipates a £30,000 fine will be imposed against an initial offence?

[Rishi Sunak]

My understanding of the amendment tabled by the hon. Lady is that that is what it proposes—an initial breach of the ban would be £30,000.

[Melanie Onn]

But what about in the Minister’s version?

[Rishi Sunak]

In the Government’s version, it would be £5,000, and that is what we are discussing. My understanding of the hon. Lady’s amendment is that the financial penalty for an initial breach would be £30,000 rather than £5,000. We propose to leave it at £5,000. I am happy to take an intervention if she wants to clarify.

[Melanie Onn]

indicated dissent.

[Rishi Sunak]

No—okay.

The Government’s aim has been to provide a sufficient deterrent for an initial breach of the ban that still allows landlords and letting agents who may inadvertently commit a breach not to be disproportionately penalised. We therefore resist amendments 2 and 3.

As hon. Members have noted, breaches of legislation related to letting agents, such as the requirements to belong to a redress scheme and to be transparent about letting fees, are subject to a fine of up to £5,000. However, we have listened to concerns that a £5,000 fine may not be enough of a deterrent for some agents and landlords, so clause 8 proposes a financial penalty of up to £30,000 for a further breach of the ban.

Importantly, that upper limit is consistent with the higher rate of civil penalties introduced in April 2017 under the Housing and Planning Act 2016. Given that the repeated charging of fees is a banning order offence, we firmly believe that the level of penalty needs to be consistent with the legislation under that Act, which brought banning orders into force.

It is too early to argue that the higher level of financial penalty at £30,000 has not been successful in offering a more significant deterrent to non-compliance. In the evidence that Alex McKeown of the Chartered Trading Standards Institute gave last week, she said that she believed that £30,000 would act as a “significant deterrent”.

[Richard Graham (Gloucester) (Con)]

There is a slight note in the debate of some who see landlords and agents as villains and enemies to be bashed at every conceivable opportunity. For many of us, however, the issue is about how we construct a partnership that gives tenants more rights and that provides a better sense of fairness in the relationship, but which ensures that there is a strong and functioning market and that we do not go back to the 1970s when the Opposition created a situation in which there was very little provision of private sector housing, of which we know that we will need a great deal more.

[Rishi Sunak]

I thank my hon. Friend for another thoughtful and measured comment. He is absolutely right: we are not in the business of demonising particular groups of people; we are interested in having a fair and functioning market. The balance that that requires has been a focus throughout all the deliberations on the Bill.

[Melanie Onn]

Would the Minister accept that the principle of the fines is not to demonise anybody, but to act as a successful deterrent?

[Rishi Sunak]

Indeed, I was quoting the evidence from the Chartered Trading Standards Institute that said that £30,000 was a significant deterrent.

[Melanie Onn]

If the CTSI says that £30,000 is a suitable deterrent, does the Minister think that that should be the minimum?

[Rishi Sunak]

Again, I fear that I have been too generous in giving way. I was about to make the point that it should not be forgotten that an agent or landlord convicted of an offence under the ban is liable for an unlimited fine, if that is the route of enforcement that the enforcement agency wants to go down; £30,000 is the alternative to a criminal prosecution where fines can be unlimited and people can be subject to banning orders, which I am sure all hon. Members agree are extremely serious and significant deterrents. The guidance that we will produce will support local authorities in determining the level of the penalty in any given case. I urge the hon. Lady to withdraw her amendment.

[Melanie Onn]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

We have aimed to be ambitious and tough in our enforcement approach to provide a sufficient deterrent to the continued charging of fees. Clause 8 sets out the fact that a breach of the fees ban will be a civil offence with a financial penalty of up to £5,000. However, if a further breach is committed within five years, that will amount to a criminal offence. In such a case, local authorities will have discretion on whether to prosecute or impose a financial penalty. Clause 8 provides that enforcement authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution, as we have discussed. The level of fine reflects the feedback that we received during the consultation period. I will not rehash the arguments for why we think that is an appropriate level.

A financial penalty cannot be imposed if the landlord or agent has failed to return the holding deposit because they have received incorrect information about the tenant’s right to rent property in the UK. That reflects a recommendation from the Select Committee on this particular point. Before imposing a financial penalty, enforcement authorities must be satisfied beyond reasonable doubt that the landlord or agent has breached the ban on charging tenant fees. Only one financial penalty may be imposed per breach and an enforcement authority can impose a penalty for a breach outside its area. This clause should be read with schedule 3, which sets out the procedure to be followed by an enforcement authority after it imposes a financial penalty. Financial penalties, I believe, will act as a serious deterrent to non-compliance.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Schedule 3

Financial Penalties Etc

Question proposed, That the schedule be the Third schedule to the Bill.

[Rishi Sunak]

It is important that there is consistency in the way in which local authorities impose financial penalties and that the process is fair. This schedule sets out the procedure to be followed.

Enforcement authorities must give the landlord or agent notice of their intention to service a financial penalty within six months of the breach occurring. This notice must contain relevant information about the reasons for imposing the penalty, the amount and the right to make representations. The landlord or agent then has 28 days to respond. If the enforcement authority decides to impose a penalty, it must provide a final notice setting out the amount of penalty, how much to pay, the rights of appeal and the consequences of failing to comply. An enforcement authority may at any time withdraw or amend a notice of intent or final notice. The landlord or agent must be notified of this in writing.

Landlords and agents have a right to appeal to the first-tier tribunal against a final notice. This appeal must be brought within 28 days of the final notice and is to be a re-hearing of the enforcement authority’s decision, but the tribunal may admit evidence that was not heard before the enforcement authority, if relevant. The final notice is suspended until the appeal is determined or withdrawn. The first-tier tribunal may confirm, vary or quash the final notice. It may impose a penalty up to the same maximum penalty as the enforcement authority could have imposed. If the landlord or agent fails to pay all or part of this financial penalty, the authority can seek repayment on the order of the county court. Similarly, if the authority requires the landlord or agent to repay the tenant any prohibited fees and they fail to do so, this can be recovered under an order of the county court.

I am aware that concerns have been raised about the resources of local authorities. I trust that the Committee welcomes the schedule, as it enables an enforcement authority to retain the proceeds of any financial penalty, as we have discussed, for future housing enforcement.

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma, for our second day in Committee. As the Minister has set out, schedule 3 provides some clarity over financial penalties, including notices of intent, recovery of penalties and proceeds of those penalties. The Opposition support the schedule as drafted. We are seeking clarity, however, from the Minister on certain aspects, before we give our support for its inclusion in the Bill. I would like to focus on paragraphs 6 and 7, which deal with the specifics of appeals and the recovery of penalties.

As with any piece of legislation such as this, the right to appeal is extremely important. It is correct that this is reflected in the Bill. It is also vital that the conditions of any appeal are presented with the utmost clarity to prevent abuse or a miscarriage of justice. Pre-legislative scrutiny by the Select Committee rightly raised concerns about how the Bill defined grounds for appeal, arguing that a first-tier tribunal should decide appeals as complete rehearings, which should take into account all matters, whether known to the local authority at the time of its decision or not. We are glad that the Government took that into account and amended the Bill accordingly. However, a number of questions about appeals remain, and I hope that the Minister can offer some clarity in his response.

--- Later in debate ---

The second issue is companies that are deliberately folded to avoid payment. Linked to my previous point about foreign ownership, the situation in the private rented sector is such that ultimate ownership of property can be obscured by multiple shell companies or other opaque ownership structures. It is not impossible to imagine a situation in which rogue landlords and agents are able to game the system—for example, ownership structures for property that might allow owners to avoid a fine by folding one company while keeping others going. That would also allow rogue landlords or agents to continue trading on the rest of their assets, thereby avoiding any potential ban. Overall, the Opposition support the inclusion of the schedule in the Bill, but I hope that the Minister will look at the points I have raised and will offer reassurance that they will be considered carefully.

[Rishi Sunak]

It is a pleasure to respond to the hon. Lady. I am cautious, as I wish to stay on point, with your direction, Mr Sharma. The hon. Lady raised some review periods, which we will no doubt discuss more specifically towards the end of this sitting when debating the new clauses tabled by Opposition Members, and with regard to phoenix companies, which are specifically covered by clause 13. I will leave discussion on those matters to the debates on the relevant clauses.

On the hon. Lady’s broad point about the level of fines, I thank her for recognising that the Government took on board the advice of the Housing, Communities and Local Government Committee’s on drafting these clauses, and we amended the draft legislation. I hope that she appreciates that. As I said, we took on board the Committee’s specific recommendations about the first-tier tribunal and the process that will be followed.

More specifically, on the hon. Lady’s point about the level of fines that can be varied, as with all judicial matters that will be a matter for the tribunal or the judicial processes of the county court—whichever avenue the enforcement mechanism finds itself in. Guidance will be published on the appropriate level of penalty, dependent on a broad range of situations, which will serve as a framework for how local authorities will enforce that penalty. The first-tier tribunal will subsequently have regard to that. It will not be for the Minister or the Government to direct in every circumstance what the level of fine should be.

As the hon. Lady rightly recognised, it is appropriate, as it is across our judicial system, that the courts have the flexibility to determine things on a case-by-case basis. I hope she welcomes that flexibility, which was added to the Bill at the request of the Select Committee. I look forward to debating phoenix companies and other such matters with her when we debate subsequent clauses.

Question put and agreed to.

Schedule 3 accordingly agreed to.

Clause 9

Power to amend maximum financial penalties

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

The clause is straightforward and contains a power for the Secretary of State to make regulations amending the amount of financial penalty that a local authority can change. This is purely to reflect changes in the value of money.

Permitting local authorities to levy financial penalties of up to £30,000 for breaches of the regulations on fees is intended to serve as a significant deterrent to agents and landlords. Including a power to amend the maximum penalty ensures that the Government can address any issue where the deterrent effect has not kept pace with inflation. We consider that regulations by negative procedure are appropriate in this case, since the changes are intended only to reflect the value of money, not to alter the intent or effect of the legislation.

Subsection (3) enables the Government to make transitional, transitory or saving provisions in relation to the uprating, in order to ensure that there is a smooth transition from one upper limit to another. In summary, the clause will enable the legislation to remain relevant over time.

[Melanie Onn]

It is crucial for this policy and for the hopes within it to be impactful that the fines are sufficient to act as a deterrent. Opposition Members have raised concerns throughout Committee stage that they might not be.

Any punishments for wrongdoing by rogue landlords and letting agencies must be sufficient to be seen as more than simply the cost of doing business. That is not simply my opinion but that of a landlord advocacy group. Indeed, Richard Lambert, chief executive of the National Landlords Association, said earlier this year:

“The NLA supports making the punishment fit the crime because too many of the criminals who operate in the private rented sector”—

it is somebody within that sector who said this—

“see the current level of fines as little more than a cost of doing business and we would welcome greater consistency between civil and criminal penalties.”

As is clear from the amendments we have tabled, we have concerns that the Bill will not go far enough in ensuring that its aims can be fulfilled. The fines are a clear example of where the tension between aims and the probable reality of any impact is at its greatest. If fines can be as little as £5,000, as with the penalties for the display of tenants’ fees, that seems to act as a minimal deterrent to landlords. Surely the best that we should hope for is that those fines encourage the sector to operate well within that framework, and that they do not have to be levied. In the more lucrative markets, that is a very small sum. For larger landlords, it is small fry.

To add to that hypothetical, trading standards and local government up and down the country have had their budgets decimated. As we heard at the evidence session last week from Councillor Blackburn of the Local Government Association, as I have mentioned, there has been a 56% drop in trading standards enforcement officers since 2009—more than half of them have been lost. It is a vital sector, which will enforce the Bill, but without good trading standards officers, there is a real risk that the legislation, for all its good intentions, could lack impact on the ground.

There is a lack of expertise and resources, and those problems seem likely to get worse. Rogue landlords and agencies are likely to factor the likelihood of any claims being made against them into their business calculations, as Richard Lambert of the NLA suggested. As things stand, their calculations might suggest that taking a risk is worth it, particularly in areas where tenants are not as clued up, or where local authority services and budgets have been really affected.

Any changes need to be made by means of new primary legislation, but perhaps that is not the ideal approach; perhaps the Minister or the Secretary of State should be able to look at the matter again in conjunction with evidence about how the enforcement process has been going, and whether the fines are sufficient sticks to encourage that good practice across the board. It is clear that the Government want the policy to be part of transforming letting to make the tenant’s life much fairer than it is under the status quo, but for that to be done, there needs to be some real, critical engagement with the facts on the ground from the Government in future. For the legislation to have its proposed impacts, it is key that the Minister has an open mind about how it is best put into practice. The punishments have to fit the crime, and they need to be responsive to the realities of the letting market, which means that there must be space for rethinking that which is required.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10

Recovery by enforcement authority of amount paid

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Rishi Sunak]

We want to ensure that when a tenant has paid an unlawful fee, they are repaid as soon as possible. Clause 10 enables an enforcement authority to require a landlord or letting agent to repay the tenant or other relevant person any outstanding prohibited payment or holding deposit. Similarly, if the landlord or agent required a relevant person to enter into a contract with a third party, they may be required to pay compensation. That may be ordered if the local authority imposes a financial penalty for a breach of the Bill. It does not apply if the tenant has made an application to the first-tier tribunal to recover the payment or if the amount has already been repaid.

Clause 11 enables the enforcement authority to require the landlord or agent to pay interest on any payment referred to in clause 10. That ensures that the agent or landlord does not receive any financial benefit from a prohibited payment.

[Melanie Onn]

For the Bill to have an impact, it has to be possible for prohibited payments to be recovered, and for those enforcing the legislation to fulfil their roles. We have already touched on our concerns about whether there are sufficient resources for local authorities and trading standards to function as the Government would like. These clauses highlight a particular potential issue in the legislation as it stands. The need for a criminal level and burden of proof for the civil financial penalties discussed in this Bill is a flaw that could well hamper its effectiveness. We all want to see legislation that is effective, that leaves tenants and landlords clear on what is permissible and what is not, that ensures that rogue traders are dealt with effectively, and that leaves tenants able to bring claims when things do go wrong.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clause 13 stand part.

[Rishi Sunak]

It is vital that strong action is taken against irresponsible agents and landlords who persist in charging unlawful and unfair fees to tenants. This will act as a strong deterrent and better protect tenants. Clause 12 provides that a landlord or letting agent who breaches the ban on fees commits an offence if they do so within five years of conviction or imposition of a financial penalty for an earlier breach. Agents and landlords who commit an offence are liable on conviction to an unlimited fine. An enforcement authority has, in each case, the discretion to decide whether to impose a financial penalty of up to £30,000 or to pursue prosecution. A financial penalty issued as an alternative to prosecution does not amount to a criminal conviction. Subsection (6) amends the Housing and Planning Act 2016 to provide that an offence under the clause is a banning order offence, which means that if a landlord or agent is convicted of an offence a local housing authority may apply to the court to ban them from letting housing and/or acting as a letting agent or property manager in England for at least a year.

In our consultation there was strong support for prosecuting and/or banning repeat offenders. We have listened, and the clause shows that we are serious about cracking down on rogue operators. If the court makes a banning order, the local housing authority must add the landlord or letting agent to the database of rogue landlords and property agents established under the 2016 Act. By giving local authorities the power to take robust action against the worst operators we better protect tenants and ensure that reputable agents and landlords are not undercut or tarnished by rogues.

Clause 13 provides that, as well as the business itself, an officer of a body corporate or a member with management functions can be prosecuted for a breach of the ban on letting fees. The clause addresses issues raised by the hon. Member for Croydon Central and is designed to ensure that individuals with responsibility for repeatedly breaching the ban on tenant fees can, along with their organisations, be prosecuted and banned from operating. That will help to prevent the establishment of so-called phoenix companies, whereby an individual moves from a firm that has been banned and opens up a new business only to continue disreputable practices.

[Melanie Onn]

I want to make a couple of points. On the rogue landlords database, have the Government conceded that they will open it up, making it far easier for tenants to assess whether their potential landlord is someone from whom they wish to rent a property?

The provision regarding phoenix companies is incredibly important and I am pleased that the Minister has taken the opportunity to include it in the Bill, but is he confident that it will work in practice? I have seen such companies operating in other industries, and I am concerned about whether individuals who are overseas can be prosecuted. Will it be easy to prevent such individuals from continuing to be landlords within phoenix companies? Although an individual may be named as part of a company in Companies House records, a phoenix company can arise in the name of someone else with whom that person has a close association. Parent companies and subsidiaries can be established and registered in other names, but an individual can have an association with each of the subsidiaries of a parent company that might not have direct influence on or knowledge of what those subsidiaries are doing. That might come about regularly, so on whom will justice be brought to bear for breaches of legislation?

[Rishi Sunak]

I am glad that the hon. Lady generally welcomes the approach to tackling something that I think we all want to see prohibited. We are confident that the provisions will work. Overseas landlords and letting agents are subject to all the existing requirements for being a member of a redress scheme, and we have consulted on those provisions and will extend them. It is mandatory for letting agents to be a member of a redress scheme. Without such membership they cannot function in the market and will be in breach of their legal obligations. Whether people are overseas or in the domestic realm, there are multiple levels of protection and they must comply with the regulations in order to let property.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

This clause, too, is relatively straightforward. It places a duty on enforcement authorities to notify other relevant authorities when taking action. That is necessary for a number of reasons, each of which the clause provides for. First, if a local trading standards authority takes action outside its local area, or a district council takes action, the relevant local trading standards authority is notified and work is not duplicated. The relevant local trading standards authority is then relieved of its enforcement duty, unless it is subsequently informed that the proposed enforcement has not taken place. Secondly, a record can be kept by the lead enforcement authority where a financial penalty has been imposed, withdrawn or quashed on appeal. That will inform whether any subsequent breach is dealt with as an offence. A trading standards authority must notify the local housing authority if it has imposed a financial penalty or made a conviction. That ensures that the relevant information is communicated to the right authorities at the appropriate time. As such, the clause has a key but simple role in ensuring that the enforcement of the legislation is carried out effectively and all relevant parties are aware of what is happening on the ground. I urge the Committee to support the clause.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Recovery by relevant person of amount paid

[Melanie Onn]

I beg to move amendment 13, in clause 15, page 10, line 36, after “that” insert

“, with the consent of the relevant person,”

This amendment provides that the consent of a tenant or the person acting on their behalf or who has guaranteed to pay their rent must consent to the use of a prohibited payment for rent payments or tenancy deposit payments.

Under amendment 13, the tenant would have to consent to their holding deposit or a prohibited payment being used to cover rent or deposit costs. We do not object to the principle of subsection (6), which the amendment seeks to change. The payment of a tenancy deposit or a prohibited payment into a deposit or as part of rent is entirely sensible and in many cases will be an optimal arrangement for both the tenant and the landlord. In the case of the holding deposit, this can be an important agreement between the tenant and the landlord that reduces the burden of paying a deposit, rent in advance and holding deposit all at the same time. Allowing a tenant to put that money towards a deposit can make it easier to pay what for many is a high fee and a significant amount, and prevent the holding deposit being held for as much as a week after an agreement has been made, when the tenant is likely to be short of money. We are therefore glad to see the principle in the Bill.

However, as the Bill stands, the landlord will have discretion as to whether to apply that payment. Although that does not seem to be a significant problem at first, and in many circumstances may not cause a problem, allowing landlords to do so indiscriminately could lead to difficulties for tenants in certain circumstances. The first problem arises from the fact that many people pay their rent on a monthly basis, through a fixed-sum standing order. Although standing orders are amendable, that can be a time-consuming process for the tenant. To deduct the prohibitive fee from a month’s rent, they must amend the standing order twice to account for the change. Government Members might feel that that is quite a trivial point, as making changes to bank payments is part of daily life, but we believe it will result in the tenant having to go out of their way for something that is not their fault. We must remember that when considering this amendment. It would be wrong for tenants to end up doing time-consuming work to receive their money in a timely and orderly fashion, given that they are not the ones who charged the fee.

A second problem that we seek to address with the amendment is how subsection (6) would apply to people with a joint tenancy. Taking the example of a joint tenancy in which the tenants pool the rent in one account and pay it to the landlord as a lump sum, if one tenant loses their key and is required to pay a default fee, which is later deemed to be prohibited, would the landlord be able to deduct that from the rent? In that scenario, taking the prohibited fee from the rent would not be a simple way of paying back the tenant. They paid the fee from their own pocket, but the rent deduction comes out of a pool for which all tenants are jointly responsible. Given that the deduction would not automatically be tied to the person who is entitled to it, the process could be abused by other people who are part of the pool. Although in most cases such agreements are set up by families or a close group of friends, it should not automatically be assumed that it is an easy or preferred way for the relevant person to receive their money.

It is their money. I have set out several scenarios, but a significant rationale for this amendment is the principle. Put simply, it is the tenant’s money, and they should have the final say about what happens with it. As it stands, subsection (6) allows landlords to do what they want with the tenant’s money that they have been required to give back and ought not to have had in the first place. I hope that Committee members will recognise that this is a practical and fair amendment. If someone has been wronged, it should be made as easy as possible for them to receive the repayment to which they are entitled.

[Rishi Sunak]

An important principle of the Bill is that any unlawful payment can be recovered in full by the tenant, as it is their money. Tenants can do that either by seeking direct recovery from the landlord or agent, or by going to the local authority or applying to the first-tier tribunal. It is important to note that they can also go to their agent’s redress scheme if they are seeking the recovery of a prohibited payment from an agent. Offsetting the prohibited payment against the rent or deposit will ensure the tenant is not left out of pocket. It is best practice for a landlord or agent to ask the tenant, or any person guaranteeing their rent, whether they are happy for any unlawfully paid fee to contribute towards a future rent or tenancy deposit payment. We are planning to encourage that through guidance, and we expect that most landlords and agents will do that. We do not currently see the need for specific provision to that effect in legislation.

That said, I have been considering this broad area for a while, and I want to ensure that what we have in place works. I hear what the hon. Lady said. The clause was designed to ensure that the repayment process is relatively automatic. We did not want to put extra steps, which might delay things, into the process. We are looking at some of the areas that she mentioned. With that in mind, if she will bear with me as I look through those things, I ask her to withdraw the amendment.

[Melanie Onn]

I am glad the Minister is listening. He said that the automatic expectation is that, to seek redress, tenants will go through a first-tier tribunal or go to a local authority just to get back what is theirs, which is in the hands of the landlords, despite the fact that the Minister clearly thinks it is best practice for landlords to have a good relationship with tenants. It is not inconceivable that the relationship has broken down if it is deemed that a prohibited payment has been made.

I was going to press the amendment to a vote, but given that the Minister has requested that we bear with him, I will not do so. I will hold him to his word. I will withdraw the amendment, but I reserve the right to table it again if we are not satisfied with what he comes back with. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Melanie Onn]

I beg to move amendment 14, in clause 15, page 11, line 4, leave out

“all or any part of”,

and insert—

“a sum of money not less than and not more than three times”.

This amendment would enable tenants to claim back prohibited payments without assistance from the local authority, along with compensation from the landlord or letting agent worth up to three times the fee paid.

The amendment would entitle tenants who seek to claim back prohibited payments without assistance from the local authority to compensation from the landlord or letting agent worth up to three times the fee paid. During the evidence sessions, we heard often how the Bill needs more resources to enforce the new provisions that it will bring in and to fully achieve its aims. One thing necessary to improve the enforcement of the Bill is to provide further encouragement to tenants to self-report and to call out the use of prohibited fees by their landlords.

Trading standards will face practical difficulties in enforcing the Bill. They face a lack of resources across the country, which has meant their losing, as we have said, 56% of enforcement officers since 2009 and therefore lacking the expertise with letting agents that they would like. There is therefore a need to look at self-reporting as an addition to trading standards, and the addition of clause 15 to the Bill shows an acknowledgment of that by the Government. The amendment would strengthen that by providing tenants with compensation, when making a claim, for three times the initial sum charged.

A three times figure is already used to enforce deposit protection regulations, so both the three times figure and the idea of compensation for mistreated tenants has a basis in current property law. The amendment would act as an extra deterrent to landlords’ and letting agents’ breaking the law, by increasing the level of punishment, and would provide sufficient motivation and compensation for tenants to go through what could be a stressful and time-consuming tribunal process. As the amendment would help to enact the purpose of a Bill that both Government and Opposition want to be effective, I hope that both will accept it and thereby increase the enforcement power of the Bill.

[Rishi Sunak]

Tenants absolutely should get back any unlawful payments in full, whether direct from the landlord or agent, via the enforcement authority or through an order of the first-tier tribunal. However, we do not think it appropriate for the tenant to receive further compensation, given that the landlord or agent is liable for a significant financial penalty in addition to reimbursing the tenant.

It is also worth noting that the Bill provides further protection to tenants by preventing landlords from recovering their property, via the procedure set out in section 21 of the Housing Act 1988, until they have repaid any unlawfully charged fees. To add in compensation, as the amendment suggests, risks penalising agents and landlords multiple times for the same breach, which is not fair. We believe that our existing approach strikes the right balance and offers a serious deterrent to non-compliance. I ask the hon. Lady to withdraw the amendment.

[Melanie Onn]

Unfortunately, I will not withdraw the amendment. I do not feel entirely satisfied by the Minister’s comments on this and I do not think that he has addressed the issues around the negative position that tenants find themselves in compared with landlords, so I will press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Rishi Sunak]

Clause 15 works with clause 10 to establish multiple routes for tenants to be able to recover any prohibited payments. It enables a tenant or other relevant person to apply to the first-tier tribunal for compensation where they have been required to make a prohibited payment or where a holding deposit has been unlawfully retained. We have listened to the Select Committee on this point and acknowledge that the first-tier tribunal is generally more accessible for tenants as it is less formal and costly than the county court. If a landlord or agent refuses to abide by an order of the first-tier tribunal, a tenant would be required to go to the county court to have the decision enforced and to recover their fees. We have made provision in clause 16 for a local authority to help the tenant with that. I ask hon. Members to agree that clause 15 stand part of the Bill.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Assistance to recover amount paid

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 16 is another straightforward clause. It provides that an enforcement authority such as a local trading standards authority can help a tenant recover unlawfully charged fees or a holding deposit that has been unlawfully withheld. That is because we recognise that tenants might require or would like assistance to navigate the county court process. The enforcement authority would help a tenant or other relevant person to make an application to the first-tier tribunal: for example, by providing advice or by conducting proceedings.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Restriction on terminating tenancy

[Melanie Onn]

I beg to move amendment 15, in clause 17, page 12, line 3, at end insert—

“(5A) No section 21 notice may be given in relation to the tenancy until the end of a period six months from:

(a) the day after the day on which the final notice in respect of the penalty for the breach was served; or

(b) the day after the day on which any appeal against the final notice is determined or withdrawn.”

This amendment would protect tenants against the issue of a section 21 notice when a penalty has been applied in relation to a breach under Clauses 1 and 2 of this Bill.

I believe the amendment would strengthen the provisions in the clause. As the Bill stands, landlords are unable to serve section 21 notices while there is still an outstanding balance of a prohibited payment or holding deposit to be repaid to the relevant person. The principle behind the clause is welcome. It would be wrong for a tenant to be served a section 21 notice while a landlord has failed to serve their obligations in terms of repaying money that was taken incorrectly. The same principle guides the inability of landlords to serve section 21 notices if they do not properly protect a tenant’s deposit, and more recently if they do not carry out their obligation to undertake any necessary improvements.

Such extra protections should improve a tenant’s rights and mean that rogue landlords cannot get away with retaliatory evictions if a tenant challenges bad practice. However, too often the principle is not matched in practice. This can be seen in the enforcement of the Deregulation Act 2015, which led to the banning of revenge evictions if a landlord was ordered to carry out repairs by a local council. A 2014 study by Shelter estimated that 200,000 private renters had been served with an eviction notice after complaining to their landlord about a problem with their home. The legislation should have led to significant action, given how widespread the problem of retaliatory evictions is, yet more than half of councils in the UK did not use the new powers in the Act a single time within a year of enactment. There is clearly a disconnect between what leaves this place as law and the reality of what is actually enforced.

Protection against section 21 evictions is vital for tenants who fear that standing up to a landlord could lead them to be evicted. It is worth remembering what landlords have to do to be exempt from serving a section 21 notice. These are landlords who do not protect tenants’ deposits, do not provide repairs in a timely manner, and who will charge prohibited fees under this new Bill. So these landlords have, at best, already shown a lack of knowledge as to their rights and responsibilities, and at worst are rogue and exploitative to the point where they will cross legal lines to avoid their obligations. This comes to the heart of why enforcement in this area is so important and needs to be done far better under current housing regulations, and needs to be enhanced in the Bill as it stands.

We know that the vast majority of landlords comply with regulations and discharge their obligations in a timely and professional manner. Those landlords would never threaten retaliatory evictions and would ensure that they followed the rules regarding serving a section 21 notice if needs be, but there are too many rogue landlords who look to shirk their responsibilities and exploit tenants at every opportunity. If a rogue landlord is willing to take a chance on a tenant’s not picking up on and reporting a prohibited fee, or to threaten a tenant with eviction when they ask for repairs, why would they suddenly act in a fit and proper manner when it comes to serving a section 21 notice?

During the evidence sessions, the NUS representative made the point that students often do not know their rights. They are often first-time renters and many will not have the experience of looking over a contract or challenging actions that are unlawful, which means that they may not be comfortable taking action against activities such as charging a prohibited fee or serving a section 21 notice. That could be particularly true if the Act required a tenant to take a landlord to court to prove that a section 21 notice was invalid, so tenants may end up leaving under an invalid section 21 notice when there is no reason for them to do so.

Too many rogue landlords get away with outlawed acts because there is not enough enforcement of the current laws that prohibit bad practice. The Government should consider carefully the evidence we heard in last week’s evidence sessions. It is fair to say there was a general feeling that there is not enough enforcement power in the Bill for it to do all the good it could do.

Enforcement could come through several different channels, such as increasing fines to increase the deterrent that rule breakers face, reimbursing a lead enforcement authority or reducing the barriers that tenants face if they report a landlord. Amendment 15 would mean that tenants were safe from retaliatory evictions that could result from reporting a landlord who charged a prohibited fee, for six months after the final notice of the penalty for the breach is served or the appeal is determined or withdrawn.

The amendment arises from what should be a guiding principle of good law making: in introducing new laws and regulations, we should learn from the mistakes of similar legislation and build a Bill that counters those flaws and pitfalls. To ensure that this Bill hits the ground running, it is important to look at other pieces of legislation that govern landlords to see where they have failed in the past.

We must learn from the effect that a lack of protection from eviction had on the repair of properties that were not in a fit or liveable state. As a result of that, tenants ended up living in houses with no protection from draughts, large damp problems and faulty electrics. No one should live in those conditions in this country, but tenants feared that if they complained about those problems, their landlord would serve them with a section 21 notice rather than carry out the repairs. Tenants were left with a choice between putting up with uncomfortable, unsafe and uninhabitable conditions and pressing their landlord to fix those issues when the landlord held the power to kick them out. No one should have to make that choice, because no one should be penalised for wanting a house that is habitable. Similarly, no one should have to make the choice between flagging a prohibited payment and keeping their landlord happy so that they do not get served with a section 21 notice.

To prevent tenants from retaliatory evictions when repairs are necessary, the Deregulation Act 2015 prevents landlords from serving a section 21 notice for six months after the council orders repairs to be made. Although there are problems with the enforcement of that Act, the principle of it acts to prevent retaliatory evictions. In particular, it prevents the serving of a section 21 notice for six months after the serving of an improvement notice, which gives tenants the same protection as they would have at the start of any tenancy. That is an extremely important addition to tenants’ rights, which helps to remove a barrier to self-reporting. There is too little extra protection for self-reporting tenants if the law simply states that the landlord can serve a section 21 notice the second they have managed to fulfil the obligation that they were reported for. That also covers self-reporting tenants who could be subject to retaliatory evictions if they report a landlord.

Just as it was sensible to extend the provisions concerning revenge evictions for repairs in the 2015 Act, it is sensible to learn from the past situation around repairs now and get the Bill right at the first time of asking, by bringing it into line with the thinking of that previous legislation and adding a six-month period in which landlords cannot serve a section 21 notice after a breach of the Bill.

[Rishi Sunak]

The Bill already protects tenants by preventing landlords from recovering their property via section 21 of the Housing Act 1988 until they have repaid any unlawfully charged fees. This approach is in line with legislation that already applies where the “How to rent” guide has not been provided or a landlord has not secured the required licence for a house in multiple occupation, so there is good precedence for our approach.

Further, clause 4 ensures that any clause in a tenancy seeking to charge tenants a prohibited fee is not binding on the tenant, so we do not consider that further provision is needed. The wording of this amendment would specifically mean that if a landlord appealed against the imposition of a financial penalty and this was upheld, that landlord would be restricted from using the no-fault eviction process for six months after the appeal was determined. That clearly is not fair. I therefore ask the hon. Lady to withdraw the amendment.

[Melanie Onn]

I thank the Minister for that response. It is unfortunate that he is not prepared to accept the amendment. It may well be the case that landlords will happily give people back the money they owe them and then still decide that they are troublemakers and seek to serve an eviction notice against them. While I accept the Minister’s comments regarding a landlord’s appeal, I think this is something that he should look at. If the Bill is about increasing and protecting tenants’ rights, this is a prime opportunity to do so. Despite that, I am happy not to press the amendment, but I reserve the right to discuss this issue further on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 17 has been included following a recommendation specifically from the Select Committee during pre-legislative scrutiny of the draft Bill, and I therefore hope that it commands broad support. It ensures that a landlord cannot evict an assured shorthold tenant via the section 21 no-fault eviction procedure if the landlord has previously required a tenant to make a prohibited payment and failed to repay this payment or apply it to the rent or deposit. We agree with members of the Select Committee that this affords tenants additional protection and serves as a further deterrent to non-compliance for agents and landlords.

Similarly, a landlord cannot use a section 21 procedure if they have breached the requirement to repay a holding deposit. This clause is intended to establish a further layer of protection and security for tenants and to act as a deterrent to landlords. The approach mirrors that used to promote compliance with other housing legislation, such as licensing for houses in multiple occupation and the requirements to give tenants a copy of the “How to rent” guide and valid gas safety certificates. I beg to move that the clause stands part of the Bill.

[Melanie Onn]

We have made our concerns around this clause quite clear, and we reserve the right to come back and discuss it on Report. I sincerely hope that the Minister’s intention does work in practice. I think he is applying some of the principles to landlords who would never wish to be in breach of any of this legislation, and he is not considering fully the issue of rogue landlords, who are the ones we are trying to tackle.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clause 18

Duty to publicise fees on third party websites

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 19 and 20 stand part.

[Rishi Sunak]

Thank you, Mr Sharma, for permission to group these three clauses. I will discuss them briefly in turn. Clause 18 amends section 83 of the Consumer Rights Act 2015. Section 83 places a duty on letting agents to publicise their fees and information about redress under client money protection schemes in order to provide greater transparency for landlords and tenants.

In the Government consultation on banning tenant fees, concerns were raised that these transparency requirements do not apply in relation to property portals, such as Rightmove and Zoopla. These websites are often the first port of call for tenants when searching for a home to rent. To ensure that tenants and landlords have easy access to relevant information, this clause extends the transparency requirements to third-party websites. I am sure that will be warmly welcomed.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 21 amends section 135 of the Housing and Planning Act 2016. It makes enforcement of the requirement for letting agents to belong to a client money protection scheme the responsibility of trading standards authorities. That has the effect in non-unitary authorities of moving the enforcement responsibility from district councils to county councils. Trading standards are best placed to enforce this provision due to their role in enforcing other legislation relating to letting agents. The change will ensure better alignment between enforcement of the provisions of the Tenant Fees Bill and client money protection.

In November to December last year, the Government consulted on the implementation of client money protection. I am pleased to say that the majority of the respondents—74%—agreed that enforcement responsibility should sit with trading standards rather than district councils, given their skills and experience. To ensure joined-up enforcement of relevant letting agent legislation, I beg to move that clause 21 stands part of the Bill.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Lead enforcement authority

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 23 and 24 stand part.

New clause 1—Enforcement: costs—

“The Secretary of State shall reimburse—

(a) a lead enforcement authority, where this is not the Secretary of State, for any costs incurred by the authority in the exercise of its duties under section 23 or section 24 of this Act, and

(b) an enforcement authority for any additional costs incurred by that authority in the exercise of its duties under section 1 or section 2 of this Act.”

[Rishi Sunak]

Clause 22 establishes a lead enforcement authority in the lettings sector to oversee enforcement of the Bill and associated letting agent legislation, including the transparency requirements in the Consumer Rights Act 2015, the requirement for letting agents to belong to a redress scheme and the forthcoming requirement for letting agents to belong to a client money protection scheme. Although, in the first instance, this responsibility lies with the Secretary of State, the clause gives the Secretary of State the power to designate a local trading standards authority as the lead enforcement authority. The clause also enables the Secretary of State to make provision, via regulations, to smooth the transition if there is a change in the lead enforcement authority.

In the Government consultation, there was strong agreement from respondents across the sector to the introduction of a lead enforcement authority; 86% of respondents were in favour, stating that this would lead to more consistent operation of the regulatory framework. We consider that trading standards authorities are best placed to act as the enforcers, given their other responsibilities for enforcing requirements on letting agents and consumer protection laws.

We recognise the overlap between the lettings and estate agent sectors and will work with National Trading Standards to ensure that the new lead enforcement authority works effectively alongside the existing arrangements in the estate agent sector. We intend to provide funding to support the setting up and workings of a lead enforcement authority.

Clause 23 describes the duties of the lead enforcement authority. Broadly, those duties are to provide guidance and support to local authorities in England with regard to their enforcement responsibilities in respect of relevant letting agent legislation. The lead enforcement authority will help to develop best practice in enforcement and ensure consistent application of the legislation.

The clause also enables the lead enforcement authority to disclose information to a relevant local authority to enable that authority to determine whether there has been a breach of, or offence under, relevant letting agency legislation. That power will, in particular, enable the lead enforcement authority to disclose information as to whether a financial penalty has been issued against a landlord or agent and thus whether an offence has been committed under the Bill.

We have taken into account feedback from the Select Committee, so the clause now places a duty on the lead enforcement authority to issue guidance to enforcement authorities about the exercise of their functions under the Bill. As discussed earlier, enforcement authorities must have regard to that guidance.

Clause 23 also provides a power for the Secretary of State to direct the lead enforcement authority to produce guidance about the operation of other relevant letting agency legislation and about the content of such guidance. The lead enforcement authority will be able to provide information and advice to tenants, landlords and letting agents to help them to understand the impact of the Bill and other relevant legislation.

The lead enforcement authority’s position as a central point of contact for local authorities will facilitate its duty to monitor developments in the lettings sector and, as necessary, to advise the Secretary of State. That includes the effectiveness and operation of the Bill and associated relevant letting agency legislation and related social and commercial developments.

Clause 24 makes provision for the lead enforcement authority to enforce the provisions of the Bill and other relevant letting agent legislation. We want the lead enforcement authority to play a proactive role in enforcement and to exercise best practice and provide support when it is appropriate and necessary for it to do so.

Individual trading standards authorities will remain primarily responsible for enforcing breaches of the fee ban. However, they may want to ask the lead enforcement authority for support. Alternatively, a local trading standards authority may not be taking enforcement action in line with its duties under the Bill, leaving tenants at risk of unfair loss. The clause gives the lead enforcement authority the power to take enforcement action in such situations.

Where the lead enforcement authority steps in and proposes to take action in respect of a breach, it must provide notice to the relevant local authority. The latter is then relieved of its duty to take enforcement action in relation to the breach, but the lead enforcement authority may require it to provide assistance. Relevant enforcement authorities will be required to report on their enforcement of the legislation and other relevant lettings legislation.

The lead enforcement authority will have a number of investigatory powers at its disposal to enforce the relevant letting agency legislation. As we discussed previously, those powers are laid out in schedule 5 to the Consumer Rights Act 2015, which this clause amends. That includes the power to require information where it reasonably expects that a breach has been committed.

I hope that clauses 22 to 24 stand part of the Bill and, with your permission, Mr Sharma, I will reserve the right to respond after the hon. Member for Croydon Central speaks to new clause 1.

[Sarah Jones]

New clause 1 sets out that both the lead enforcement authority and local enforcement authorities will be reimbursed by the Government for costs incurred in enforcing the Bill. That is necessary because the Bill as it stands will simply not provide adequate resources for proper enforcement. That view is backed up by experts from across the sector. We have already talked about the scale of the challenge, and my hon. Friend the Member for Great Grimsby has talked about the cut in enforcement officers and the—

Tenant Fees Bill (Fifth sitting)

Rishi Sunak Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 12th June 2018 Public Bill Committees

[Sarah Jones (Croydon Central) (Lab)]

It is a relief to come back and see that the Minister has not resigned and followed the advice of his colleagues. I am reassured that he is still here.

As I was saying this morning, new clause 1 sets out that both the lead enforcement agency and local enforcement agencies will be reimbursed by the Government for costs incurred in enforcing the Bill. That is necessary because the Bill as it stands does not, in our view, provide adequate resource for enforcement.

We talked this morning about the scale of the challenge, with 56% of enforcement officers lost since 2009. In our evidence session, the Chartered Trading Standards Institute emphasised the scale of the problem that exists with enforcement, pointing out that more than 50% of the landlords and letting agents that it works with in London are still non-compliant with the rules. Shelter has highlighted the extreme difficulty in assessing the true number of rogue landlords, saying that the number is still underestimated. Another challenge for enforcement is collecting sufficient evidence to secure convictions. This morning, my hon. Friend the Member for Great Grimsby cited the Chartered Trading Standards Institute among others, which has worries about the burden of proof and said that it will scare people off, including trading standards.

The Minister might point to the provisions to stop retaliatory measures that were included in the Deregulation Act 2015, but the lack of progress on enforcing those provisions serves only to reinforce the point. Following scrutiny by the Housing, Communities and Local Government Committee, the Government were forced to admit that overstretched local authorities were not even collecting the data that would allow them to see whether the retaliatory eviction provisions in the 2015 Act have been used. The Government wrote:

“We are currently unable to provide this data as local authorities are not specifically obliged to provide it and the Department does not routinely collect it. However, we recognise that this is an area of concern and we are writing to request this information from local authorities to inform our understanding about the effectiveness of the provisions.”

On that topic, Shelter’s most recent survey of tenants found that a quarter of renters who had a problem serious enough to report failed to report it because they were worried about retaliatory measures from their landlord or letting agent. That clearly demonstrates a failure to give tenants confidence in the policy, and backs up the point that tenants may be too scared to engage properly with the enforcement process to build a strong enough case.

The challenges to enforcing the Bill will come from all directions. We know from evidence that was provided that local trading standards authorities may not have the capabilities or expertise. For example, Shelter has raised concerns about how effectively trading standards will be able to police the use of default payments. Shelter has asked the Committee to explore whether local authorities will have sufficient powers and resources to evaluate whether a default fee genuinely represents a landlord loss, and the kind of guidance that the Government propose to provide to assist authorities in making such determinations. The Residential Landlords Association has argued that trading standards should not enforce the Bill at all, and that the responsibility should rest with environmental health departments.

Three concerns have caused us to table the new clause. The first is about getting the numbers right. We have serious concerns about the numbers being thrown around by the Government about how much it will cost to enforce this at a local and national level, as well as the confusion over how financial penalties will be calculated by enforcement authorities.

We have significant doubts about the Government’s argument that the cost of enforcement will be fiscally neutral for local authorities by year 2. The Government have been forced to admit that that will not be the case for year one. The £500,000 allocated by the Government for enforcement in the first year feels as if it was plucked from the air, with similarly little thought. It is unclear whether that figure will change if authorities’ costs are higher than estimated.

The very thin detail on enforcement costs first provided to the Select Committee in November as part of an impact assessment argued that the cost to local enforcement authorities would be £150,000 per annum. The Government’s assumption that the enforcement would be self-funded from year one was rightly questioned by the Select Committee, and the Government duly committed to providing additional funding to local authorities. In the full impact assessment published last month, the Government amended their assessment of expected costs to local authorities in the first year to £300,000. That is a significant jump from their assessment in December. The impact assessment also states that the Government assume £200,000 in set-up costs for the court system, thus reaching the £500,000 figure. However, they appear to contradict themselves in the explanatory notes to the Bill:

“We estimate that local authorities will incur a new burden in respect of enforcement costs in year one of the policy only and we estimate this to be no more than £500,000.”

Assuming that the £200,000 earmarked for the courts in the impact assessment actually goes to the courts, will the Minister confirm whether local enforcement authorities will be getting £300,000 as indicated in the impact assessment, or £500,000, as indicated in the explanatory notes? There is also confusion over whether that money is the maximum authorities will receive or whether the Government will fund the actual costs, and we note the use of the word “estimate” in the explanatory notes.

We had concerns about how the Government arrived at the year one figure before the Committee sittings began. They increased during the evidence sessions last week, when the Minister asked outright for any analysis that the Local Government Association had done on how much funding should be allocated for year one. It then emerged that the LGA had been asked for that information, but had been given just one week to provide the figure. I have a great deal of respect for the ability of the LGA, so if it cannot turn that request around in a week, I doubt that many others could.

It seems astonishing that the Government could still be unclear as to how much this crucial part of the Bill is likely to cost, and I worry that they are pulling numbers out of the air. If the Minister will not accept our new clause, will he explain how the Government arrived at this figure—and, indeed, what the correct figure is? If he cannot share the evidence now, will he write to the Committee? The key point is that, whether it is £300,000 or £500,000, it is simply not enough. As the LGA has rightly pointed out, that amount split over 340 local authorities is a laughable sum of money when we consider that the average budget for one council trading standards team is more than £650,000.

The confusion over costs extends to what enforcement authorities can charge as penalties. As we discussed earlier, the Government have so far left that open, suggesting that local authorities can take into account the need to cover the costs of their enforcement functions when setting the level of the financial penalty. As the Select Committee pointed out, that is a departure from the usual principle that penalties should relate principally to the gravity of the wrongdoing. The decision to fund enforcement from year two solely by fines risks creating a bizarre situation where enforcement areas with a lower level of offences require higher fines to cover their authority’s costs. The same logic goes for areas where the most successful preventive enforcement is happening.

Our second concern is about the pressures on local trading standards authorities. The Chartered Trading Standards Institute rightly pointed out:

“Resource is, without question, the pervasive issue which will determine the efficacy of the Tenant Fees Bill.”

However, as we have already emphasised, the pressures on local enforcement authorities are increasing at a time when budgets are stretched to an unprecedented degree. Some of the new burdens taken on by trading standards include enforcement around, as my hon. Friend the Member for Great Grimsby mentioned, the sale of knives, as well as the use of wood burners, which is related to the Government’s clean air strategy. The effect of that pressure is being seen in the private rented sector. It was pointed out on Second Reading and since then by many organisations that there is already legislation that requires letting agents to advertise their fees, but it is simply not enforced.

The fact of the matter is that after the first year, and probably during that year too, the money recouped by fines will be completely insufficient to pay for any semblance of an effective enforcement system for the Bill. Trading standards authorities will be in a vicious circle, with an inability to enforce due to inadequate resources that then leads to the funding stream getting even worse that then leads to the enforcement getting thinner, and so on and so forth until nobody is bothering to enforce the measures at all.

There is much evidence from across the sector that that will be the case, and the Government are simply ignoring it. The London Borough of Newham says that it does not consider that moneys recovered through the civil penalties will adequately cover local authorities’ enforcement costs. The Chartered Institute of Housing points out the danger of a funding gap, as well as the risk that councils will need to invest in additional resources without being able to guarantee a particular level of financial return. The Association of Residential Letting Agents argues:

“Unless specific funding is set aside for the sole purpose of enforcing these new laws, we will see the same lack of effective enforcement of the ban on tenant fees as has been demonstrated on the transparency rules under the Consumer Rights Act 2015.”

Citizens Advice says:

“The legislation in its current form is reliant on Trading Standards, which we believe risks rogue agents continuing to charge fees. The lack of capacity facing local Trading Standards means many will struggle to take on additional enforcement duties without support.”

We ask the Minister the same thing on fiscal neutrality as we did on the figure for first-year costs: he must provide evidence, either today or in writing, on how the Government arrived at that assumption, or accept our new clause for the Government to reimburse the costs. To force local authorities to pick up the bill for something his Department has not costed properly would be unacceptable.

Thirdly, we are concerned about lead enforcement authority and the pressures around information. The Bill rightly allocates a lead enforcement authority to help streamline and co-ordinate enforcement work—something that has been pretty much universally supported. However, the same questions remain about the resourcing of that body. The Select Committee recommended that the lead enforcement authority should be tasked—and, importantly, given funding—to launch a nationwide awareness-raising campaign, to promote the legislation to tenants. In its oral evidence last week, the Local Government Association again pointed out the need for a high-profile, national campaign to remind tenants of their rights and remind the sector that fees are outlawed. The need for that is made much more pertinent by the fact that Shelter’s tenant survey, which I discussed earlier, found that more than 20% of renters who had a problem that was serious enough to report failed to do so because they were not aware that they could raise it with their local council.

Unlike their other financial estimates, the Government have at least been consistent in expecting the costs of the lead enforcement authority, in line with similar lead bodies, to be between £200,000 and £300,000 a year. It is unlikely, however, that that will be enough to ensure that any significant awareness campaign is run. There is a big question mark over the ability of the lead enforcement agency to do sufficient work to spread awareness of the changes made by the Bill—and awareness is crucial to its success. As with my previous points, I ask the Minister either to support our new clause or provide details about how such an awareness campaign would be funded, perhaps through his Department.

My final point is about the pervasive disincentive that the Bill as currently proposed would create. As I have set out in detail, experts from the Chartered Trading Standards Institute, the LGA and various local authorities agreed that funding through fines will not cover the cost of enforcement if it is done properly. One of the most frustrating aspects of the Bill is that that will ruin any chances of good preventive work being done. Initial fines of up to £5,000 will not give authorities the resources or incentive to do proper work to prevent breaches. As authorities themselves point out, if trading standards enforcement activities are effective, civil penalties will rarely be charged. That is because most intensive activities of council officers concern monitoring practices and working with letting agents to comply with the law. That creates what the Select Committee called a

“pervasive disincentive for authorities to engage proactively”.

I hope that the Minister can offer us something constructive on that point. He will admit that nobody wants this important piece of legislation not to deliver what we want it to deliver. If he will not support the new clause, will he agree to look at ways to finance activity where authorities can demonstrate that good preventive work is keeping convictions down, and come back to us with a proposal to that effect on Report?

I re-emphasise the scale of criticism about the provisions in the Bill for enforcement. The Chartered Trading Standards Institute said:

“The central concept that enforcement of the ban will be self-funded from the proceeds of civil penalties recovered by trading standards is completely erroneous.”

I urge the Minister to look again at this core part of the Bill and, if he will not support new clause 1, will he agree, at the very least, to provide the information we request and consider what else he could introduce on Report to improve the situation?

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

We believe that the new clause, which essentially provides a blank cheque to local authorities, is not the right approach. Given that my day job is Local Government Minister, of course I am minded to ensure that local authorities have the resources that they need to carry out their various functions adequately. That is what I spend most of my time doing. The provisions in the Bill are intended to be self-financing. Local authorities will be able to retain any moneys recovered through financial penalties for future housing enforcement. That ensures that they are better incentivised to undertake enforcement activity. We believe that that incentive impact and behavioural change is important and helpful.

I draw Committee members’ attention to the consultation, where it was generally agreed that ongoing costs would be met from enforcement. We heard from landlord and agent representatives last Tuesday that they, too, thought that would be sufficient, but that some initial funding as seed money is needed in year one for familiarisation and adjustment with the new regime. Indeed, the Government agree about that, which is why we intend to provide additional funding of up to £500,000 in year one of the policy, to support implementation and education. That figure has been arrived at through consultation and analysis together with several local authorities and officials in the Department to arrive at a bottom-up estimate of what overall costs might be. We are also committed to providing funding for the lead enforcement authority of up to £300,000 a year to support its important role of providing guidance and support to local enforcement authorities.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clause 26 stand part.

[Rishi Sunak]

Clauses 25 and 26 are reasonably straightforward definitional clauses. Clause 25 defines “letting agent” as

“a person who engages in letting agency work”

and goes on to define such work as

“things done by a person in the course of a business in response to instructions received from…a landlord…or…a tenant…seeking”

to let or rent a property. The definition of a letting agent excludes a person who carries out letting agency work under their employment contract, as we would not want to capture such people under the Bill. It also excludes legal professionals who are under instruction in a similar capacity.

Clause 26 defines various expressions used in the Bill. For example, as we discussed in our first sitting, it defines “tenancy” as

“an assured shorthold tenancy…a tenancy which meets the conditions”

regarding letting to students, or “a licence to occupy”. I commend the clauses to the Committee.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26 ordered to stand part of the Bill.

Clause 27

Consequential amendments

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

The clause makes consequential amendments to the lead enforcement authority’s enforcement functions in respect of relevant letting agency legislation: section 87 of the Consumer Rights Act 2015; section 85 of the Enterprise and Regulatory Reform Act 2013; article 7 of the Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc.) (England) Order 2014; and section 135 of the Housing and Planning Act 2016. That legislation relates to transparency requirements, membership of a redress scheme and membership of client money protection schemes respectively. Its effect is to require the relevant enforcement authorities to have regard to any guidance issued by the lead enforcement authority. The duties of those authorities under the relevant letting agency legislation is to be subject to the provisions of clause 24, which provides for enforcement of the legislation by the lead enforcement authority.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28

Transitional provision

[Sarah Jones]

I beg to move amendment 16, in clause 28, page 19, line 33, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

[Sarah Jones]

Amendment 16 would deliver an important and achievable result for more than 4 million households currently in a private rental contract. Along with its consequential amendments 17 to 19, the amendment seeks simply to speed up the pace of the changes that the Bill will deliver. As we draw towards the end of this Committee sitting and prepare to discuss the European Union (Withdrawal) Bill, it is fitting perhaps that that we set about talking about the transitional period.

We believe that the transitional period set out in clause 28 is correct. Landlords and agents will need time to come up to speed with new rules and to review the elements in their agreements with tenants that will subsequently cease to have effect. Labour Members, however, argue that a year is an unnecessarily lengthy period. Among other issues, a lengthy transition period may see unscrupulous landlords and agents charging excessive fees through loopholes, such as default fees, in a rush to extract money as quickly as possible before the law changes.

In opposing the amendment, the Government might cite concerns about the capacity of enforcement authorities to develop the requisite skills and learning properly to enforce the Bill. If they truly do have those concerns, they should look again at our proposals on enforcement. When the underlying issues with an overstretched trading standards system are so serious that the National Audit Office is warning of a direct threat to the consumer protection system’s viability, a six-month difference will not change much. I fully expect the Government to highlight the need for proper consultation with landlords and tenants to ensure that they are properly briefed, which is absolutely right, but there is no reason that work cannot start before clauses 1 and 2 come into force. The Government have been clear that a strong deterrent effect will be provided by the penalties and convictions described in the Bill. We have already set out in detail our concerns about enforcement, but we agree in principle that, if enforced effectively, the penalties will be a clear deterrent. If the Government are confident about their deterrent, surely the Minister will agree that landlords and agents will be motivated quickly to come to terms with the changes they will need to make. If not, will he tell us which specific measures he expects to take up to a year to put in place?

As we have previously pointed out, a Labour Government would have introduced the Bill years ago. The cumulative total of the money lost to tenants through the Government’s reluctance to do likewise has likely been millions. We owe it to all private renters to bring the Bill into force quickly.

We will shortly discuss the issues posed by the wording of clause 32 and the merits of our amendments 20 and 21. I will not go into too much detail here, beyond pointing out that clauses 1 and 2 are not currently included in the provisions that will come into force on the day on which the Act is passed. As we will hear, clause 32 is problematic, as it allows the Secretary of State to choose the day when the full Act, including clauses 1 and 2, will come into force, and it currently sets no limit on how long he or she might delay that decision. We believe that the combined uncertainty over the effective start date and the year’s delay proposed in clause 28 would be unacceptable to tenants. If the Minister does not support the amendments, will he set out a clear timetable, either now or in writing, for how that year will be used?

The amendment is not onerous. It would not cause disproportionate hardship to tenants, agents, enforcement authorities or the Government. What it would do is ensure that tenants get more quickly the fair deal they were promised which, I think we all agree, is something they deserve.

[Rishi Sunak]

Clause 28 deals with how the prohibitions described in clauses 1 and 2 will apply in relation to agreements that were entered into before the commencement of the relevant parts of the Bill. Upon commencement, the fees ban will apply to all new tenancies and agreements between agent and tenant. The transitional provisions in clause 28 mean that for a period of a year the ban will not apply to tenancies the terms of which were agreed prior to commencement. Similar transitional provision is made for agents’ agreements with tenants.

The amendments that we are considering seek to reduce that transitional period from a year to six months, and we do not believe that that would be fair on landlords and agents. Although most fees are charged at the outset of a tenancy, some landlords and agents will have agreed that tenants should pay other fees at a later stage. Tenants will have signed a contract accordingly, and we need to allow time for landlords and agents to renegotiate those contracts to ensure that they are not unfairly penalised.

Data from the English Housing Survey 2015-16 shows that 48% of tenants had an initial tenancy agreement of 12 months and 39% had an initial agreement of six months. Reducing the transitional provision would mean that more landlords and agents with pre-commencement tenancies—tenancies that were entered into before the legislation came into force—would be at risk of not being able to renegotiate their contracts, and would be responsible for fees that their tenant had previously contractually agreed to pay. That strikes me as retrospective and does not seem fair, and we do not seek in the Bill to unfairly penalise landlords and agents.

We recognise the importance of having a clear date when the ban on fees applies to all tenancies, and we know that tenants are eager for the ban to come into force. That is why the Government have revised their position from that reflected in the draft Bill, which had no end date for when fees could be charged in pre-commencement tenancies. The transitional provisions as drafted here mean that all tenants will see the benefit of the fees ban a year after it comes into force. Unlike the proposed amendments, they ensure that agents and landlords will not be significantly financially affected retrospectively, and will have an opportunity to review their contracts during that transitional period. I therefore ask the hon. Lady to withdraw the amendment.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 28 deals with how the prohibitions described in clauses 1 and 2 will apply in relation to tenancy agreements that were entered into before the commencement of the relevant parts of the Bill. As we have just discussed, the fees ban will apply to all tenancies, but the clause provides for a transitional period of one year during which the ban will not apply to what we call “pre-commencement tenancies”—tenancies the terms of which were agreed to prior to the commencement of the ban. After one year, any term of a tenancy agreement that breaches the fees ban will not be binding on the tenant, regardless of the date on which the tenancy agreement was entered into. Any payment accepted by the landlord and not returned within 28 days will then be a prohibited payment.

--- Later in debate ---

[Rishi Sunak]

Clause 29 deals with the financial provisions of the Bill, which we have already discussed at some length, so I shall be brief. The Government intend to provide funding of up to £500,000 in year one of the policy to support local authorities in implementation and up to £300,000 per year for the lead enforcement authority.

Clause 30 deals with the application of the Bill to the Crown. The Bill will apply in relation to the tenancies of those Crown interests that are capable of granting an assured shorthold tenancy but the Crown will not be criminally liable for any breach, as is customary. I am pleased to tell the Committee that the Queen’s consent has been granted.

Clause 31 sets out the territorial extent of the Bill, which is, in part, England and Wales, and in part, England and Wales, Scotland and Northern Ireland. As the Bill will apply in relation to housing in England only, and housing is a devolved matter in relation to Scotland, Wales and Northern Ireland, the latter perhaps requires some explanation. The amendments made by clauses 6(6), 7(4) and 24(10) apply the investigatory powers set out in schedule 5 of the Consumer Rights Act 2015 to authorities enforcing the provisions of this Bill. In line with that Act, they therefore have UK-wide extent, although the application of this Bill is England-only.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Clauses 30 and 31 ordered to stand part of the Bill.

Clause 32

Commencement

[Melanie Onn (Great Grimsby) (Lab)]

I beg to move amendment 20, in clause 32, page 21, line 17, leave out from “force” to end of subsection (1) and insert

“on the day on which it is passed.”

This amendment would bring the Act into force on the day it is passed.

--- Later in debate ---

[Rishi Sunak]

We, like many tenants, are keen for the legislation to come into force as soon as possible, but we have to strike a fair balance between protecting tenants and allowing landlords and letting agents adequate time to become compliant with the legislation. The ban is not about unfairly penalising landlords and letting agents or driving them deliberately out of business. Letting agents should be reimbursed for the services they provide, but that must be by the landlord rather than by the tenant.

If commencement began the day the Bill was passed, as the amendment suggests, letting agents would have no time to renegotiate their contracts with landlords, which would have an adverse effect on their business model. We propose that there should be a fair period—a few months—to allow for that renegotiation and adjustment to happen. We are also taking steps now to engage with landlord and agent groups to ensure that they are taking steps themselves to prepare for the legislation coming into force. I ask that the amendment be withdrawn.

[Melanie Onn]

The Minister says he is keen for the legislation to be brought into force, but he does not seem to be taking decisive action, other than offering us a few months, which is particularly imprecise. It is unrealistic to suggest that letting agents cannot start negotiations when they know that the Government’s stated intention is going through Parliament.

[Rishi Sunak]

I gently point out that the Government’s approach is to have a precise date, and allowing them a few months to decide enables them to do that. The amendment specifies that the Bill would come into force on Royal Assent—that parliamentary process could take place be on any particular day—whereas the Government’s approach is to allow some time after Royal Assent so that they can set a specific day for all communications and so on. That provides the sector and tenants with greater precision than having an indeterminate day that is out of the control of Ministers, Government or anyone else. The hon. Lady’s amendment would result in the parliamentary timetable deciding the date of enforcement.

[Melanie Onn]

I am confident the Minister will have the ear of the Leader of the House when it comes to enacting the Bill. He says that he is confident that the sector will be provided with certainty and that that will happen within a matter of months, but perhaps he could prescribe whether it will take six, eight or 10 months.

[Rishi Sunak]

At least a few months.

[Melanie Onn]

The Minister is ready to say a few months. I reserve the right to return to the issue, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.

Clause 33

Short title

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 33 sets out the short title of this legislation, which is to be the Tenant Fees Act, and as such I hope it will stand part of the Bill.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

New Clause 2

Transferable deposits

“The Secretary of State may by regulations made by statutory instrument amend paragraph 2 of Schedule 1 to make provision which enables a relevant person, at the conclusion of a tenancy, to transfer all or part of a tenancy deposit from the landlord or agent with whom that tenancy was held to a second landlord or agent”.—(Sarah Jones.)

This new clause would enable the Secretary of State to provide for a tenant to transfer their deposit from one landlord to the next when moving tenancy, rather than needing to find the money for a new deposit before the old one had been refunded.

Brought up, and read the First time.

[Sarah Jones]

I beg to move, That the clause be read a Second time.

The new clause seeks to build on the positive outcomes we all hope this Bill will have for tenants by allowing for much-needed changes to the tenancy deposits system. The new clause seeks to resolve the problem faced by large numbers of tenants whereby deposits are charged on new tenancies before the deposit from a previous tenancy is returned, costing significant sums of money every time a tenant moves. There is no need for such a situation to occur, and members on both sides of the Committee support looking at ways of solving it.

As we pointed out last week, it would fail tenants and be a waste of our time if we sat here and allowed through a Bill that simply reinforced the status quo. We have said repeatedly that we welcome the Bill’s ban on agency fees. We urge the Government to go further to resolve other significant up-front fees faced by private renters.

The most significant up-front fees are tenancy deposits, which I remind the Committee are significantly higher than agency fees, often running to several thousand pounds. We have already touched on the issue of the six-week cap for tenancy deposits, but I ask the Government one more time to look at that cap before Report and to think about what we could do. A lower cap would have a measurable benefit for tenants. There are options that the Minister could consider if he really wants to make provision for what he calls “high-risk tenants”.

--- Later in debate ---

[Mr Robert Goodwill (Scarborough and Whitby) (Con)]

If I may briefly interject, the hon. Lady identifies a problem, which came through in the evidence sessions, that affects landlords as well as tenants. The frustration of having a deposit locked up with the current landlord that cannot be given to the new landlord is a problem. However, now is not the time to address it. Indeed, the hon. Lady said that we should look at ways of solving the problem. Were we to try to do that in this Bill, we could end up delaying the introduction of legislation that everyone agrees will be of great benefit to tenants, because a lot of consultation would need to be done. We would need to look at situations where, for example, the tenant misleads the new landlord that all the deposit will be released when in fact there might be some deductions.

I absolutely sympathise with the feelings expressed, but I hope the Minister will not allow this issue to delay the Bill. Although I sympathise with the hon. Lady, I am sure many on the Conservative Benches will not be able to support the new clause at this time.

[Rishi Sunak]

I am delighted to say that I agree with both the hon. Member for Croydon Central and my right hon. Friend the Member for Scarborough and Whitby. We fully support and encourage innovation in the tenancy deposit sector. We know that it can often be difficult for tenants to raise funds for a deposit at the outset of a tenancy, especially if they are moving from one property to another; indeed, that is partly the motivation for bringing forward the Bill.

In the Government’s response to the Housing, Communities and Local Government Committee following the pre-legislative scrutiny, we emphasised our commitment to assess the merits of alternatives to traditional security deposits and promised to report our findings to the Committee. The Government responded only in May, so I hope Members will forgive me when I say that the work is not quite completed, but it is in process.

We have been exploring this issue for a while, including in the 2017 consultation on banning letting fees. It may interest hon. Members to know that my Department, like many others, offers an employer-backed deposit scheme to civil servants living in the private rented sector. That works in the same way as a season ticket loan, allowing employees to borrow from their salary up front to pay for a rental deposit and repay it from salary payments over the course of their career. Many private businesses, such as Starbucks, take the same approach, and we definitely encourage more to do so.

I am pleased to say that in May the Minister for Housing and Homelessness held a roundtable with my hon. Friend the Member for Broxbourne (Mr Walker), who has been passionate about this issue, along with the three deposit protection schemes and Shelter, to explore further how existing tenant deposit protection was working and what further innovation was possible. I am pleased to say that, as a result of that preliminary work, the Minister has been working much harder to progress the issue and will convene a formal working group with the deposit schemes and key representatives from tenant and landlord groups to explore it further.

There are still many things that need to be considered, as was highlighted by my right hon. Friend the Member for Scarborough and Whitby. For example, the key concern with deposit passporting is ensuring that landlords are still able to recover any damages at the end of a tenancy. There is a great deal of technical complexity that needs to be examined. That would involve understanding the percentage of the deposit that could be passported, and when and how liability for providing a tenant with the relevant prescribed information about where their deposit is protected should be passed from one landlord to another.

We certainly need to consult the sector and get its input before implementation. We are also keen to explore other alternatives, aside from passporting, such as payment of deposits by instalment. I hope hon. Members can see that the Government are taking this issue very seriously. My hon. Friend the Minister has already convened groups and is continuing to convene working groups to examine this issue and figure out a way forward. With that in mind, rather than delay this legislation, I call on the hon. Lady to withdraw her new clause.

[Sarah Jones]

I have listened to the Minister’s response, and I am glad that there are working groups, roundtables and other such things looking at these issues. As a former senior civil servant, I know well the line that there are still many things that need to be considered, which can be used to push things into the long grass so that they never get completed.

I take the point from the right hon. Member for Scarborough and Whitby that we do not want to delay the Bill and that we need to look at these matters properly, but I urge the Minister to speed up the working groups and roundtables and to try to come forward with something. If he did, I am sure he would have the support of the Opposition. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 3

Report on operation of Tenant Fees Act

“The Secretary of State shall within a period of 12 months from the date of commencement of this Act and annually for the four years thereafter lay before Parliament a report on the operation of this Act, setting out the number of breaches of sections 1 and 2, the number and amounts of financial penalties levied by enforcement authorities, and the number of criminal prosecutions commenced and concluded in each 12-month period”. —(Melanie Onn.)

This new clause would require the Secretary of State to report annually for five years on the effect of the Act

Brought up, and read the First time.

--- Later in debate ---

[Rishi Sunak]

I rise for potentially the last time, to discuss new clause 3. I am pleased to tell the Committee that we do plan to monitor the implementation of the Tenant Fees Bill through continued engagement with key stakeholder groups representing landlords, agents and tenants, as well as through wider intelligence from agencies such as the lead enforcement authority and trading standards, which will enforce the requirements of the Bill. Unfortunately, however, we believe the new clause is unworkable.

We would not be able to identify all breaches of sections 1 and 2, as the new clause suggests, as we will be encouraging tenants to challenge their landlords and agents directly in the first instance if they have been charged prohibited fees. Indeed, we want landlords and agents to rectify breaches first, without the need for an enforcement authority, and it would of course not be possible or practical to record every time that that type of informal enforcement and rectification happened.

With regard to the number of financial penalties and criminal convictions under the ban, that information will, owing to the reporting requirement that already exists in the Bill, be captured by the lead enforcement authority anyway. Those agents and landlords who are banned from operating will also be captured on the rogue landlord database. Local housing authorities also have powers to include persons convicted of a breach of the fees ban on that database, as well as people who receive two or more financial penalties within a year for any banning order offence.

I hope that that reassures hon. Members that we will be tracking and reviewing the effectiveness and enforcement of the ban. We do not think it is necessary to prescribe further reporting requirements on the face of the Bill, but we will consider how to make the information available, especially regarding the lead enforcement authority. We will review the legislation within five years, in line with normal parliamentary and scrutiny practices.

--- Later in debate ---

Question proposed, That the Chair do report the Bill to the House.

[Rishi Sunak]

I gather that we are bringing proceedings to a conclusion, so if I may, Mr Sharma, I will briefly put on record my thanks to you and Mr Bone for your distinguished chairmanship of the Committee; to your team of Clerks for keeping us all on track and ensuring we followed due procedure; to the Whips for ensuring that we were all here on time and did what we were told; and to my fantastic team of officials, including those who are giving up valuable swimming and cocktail time to be with us today, which I very much appreciate. Indeed, I put on record my thanks to all hon. Members for their valuable and insightful contributions, and especially to Opposition Members for the constructive and good-natured way in which they have engaged with the topic. I look forward to continuing those debates in subsequent stages of the Bill. I make one final apology to the daughter of the hon. Member for Stockton South for depriving her party of her father’s presence.

Lastly, I put on the record my thanks to the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for South Derbyshire (Mrs Wheeler), who of course could not be with us to take the Bill through the Committee, but who put in an extraordinary amount of work in the months leading up to this point to ensure that we were discussing what I am sure we all agree—whatever our individual differences on certain points—is an important piece of legislation addressing a very important topic. She deserves enormous credit for her diligence and hard work in getting us to this point. I know we wish her well, not just at home but with all the other work she is doing to ensure that we bring fairness to the private rented sector, and we look forward to seeing her back soon.

Question put and agreed to.

Bill accordingly to be reported, without amendment.

Tenant Fees Bill (Third sitting)

Rishi Sunak Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[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.

[Melanie Onn]

Does the Minister have any evidence that that is cheaper?

[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.

--- Later in debate ---

[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.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[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

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[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.

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[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.

--- Later in debate ---

[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.

--- Later in debate ---

If the Government not only make holding deposits explicitly permissible but encourage their usage to become ever more widespread, that is a problem. Similarly, by making it clear what the maximum can be, the maximum could simply become the norm, as with regular deposits. We know, and have been warned by groups in the evidence sessions, that unscrupulous letting agents and landlords might, on the enacting of the Bill, seek gaps in the legislation to recoup their losses when they are restricted in what fees they can charge. Leaving any room for a charge, when there is no clear need, has the potential to undermine the Bill’s aims.

[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.

[Melanie Onn]

When will that guidance be provided?

[Rishi Sunak]

It will be soon. The hon. Lady will be pleased to know that—

[Melanie Onn]

Will the Minister give way?

[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.

[Melanie Onn]

Was the phrase the Minister intended to use “in due course”?

[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.

[Melanie Onn]

How many days, on average, are holding deposits held for?

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

Question proposed, That the clause stand part of 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 Excerpts

Committee Debate: 2nd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[The Chair]

I am going to let the Minister have a go now.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

Q Thank you, Mr Bone. And thank you very much, both of you, not only for being here this morning, but for the time that I know both of your institutions have spent engaging with the Department in formulating the legislation. I very much appreciate you sharing your thoughts and insights to help us get to where we are today.

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.

[Rishi Sunak]

One of my colleagues has a follow-up to that question.

[Mr Robert Goodwill (Scarborough and Whitby) (Con)]

Q I live in North Yorkshire, so the trading standards authority is North Yorkshire County Council, but Scarborough Borough Council is our borough, which is a long way from Northallerton and from some of the trading standards officers. Will the boroughs and districts be able to step up to the mark? Should a disproportionate amount of the £500,000 be made available to the districts and boroughs where we do not have unitary authorities, or will it be difficult for those authorities that are not already trading standards authorities to step up to the mark? They are well involved in housing—we have one of those areas where the housing has to be brought up to standard. Will that work?

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.

--- Later in debate ---

[Rishi Sunak]

I can wait until the end.

[Melanie Onn]

I would like to come in.

--- Later in debate ---

[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 Thank you, Mr Bone. Alex, you gave an example of people receiving multiple fines and your view that that did not act as a deterrent. Are you aware of what happens and the potential penalties in this legislation for a repeated offence?

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 But in terms of the deterrent effect, the ultimate penalty for a landlord who breaches the legislation is an unlimited fine and a lifetime ban. Do you agree that that has a pretty significant deterrent effect?

Alex McKeown: It is a significant deterrent.

[Rishi Sunak]

Q Thank you. You also talked about phoenix companies, and the idea, which I completely agree with, that people should not be able to circumvent legislation by setting up as a phoenix company. Have you read clause 13 of the Bill?

Alex McKeown: I think I have; is this the one that says you can hold the directors—

[Rishi Sunak]

Q In the interests of time, clause 13 specifically addresses the point you raised and makes it clear than an officer or member of a corporate body can also be held liable for a breach of the ban, both for unlimited fines and for banning orders. Does that deal with your concern?

Alex McKeown: To a degree, but the burden of proof is beyond all reasonable doubt.

[Rishi Sunak]

Q Given that it is a very significant sanction, that seems appropriate. But do you think that the principle that an individual cannot avoid prosecution is dealt with?

Alex McKeown: To a degree.

[Rishi Sunak]

Q Councillor Blackburn, you talked about training for trading standards and local authorities; are you aware that the Department is planning a series of roadshows, over the summer in particular, to address all these issues and to talk to local authorities about the enforcement of private rental sector legislation and regulation? Would you welcome that engagement with the sector?

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 It is not so much new, but perhaps new for you. I appreciate that you welcome it, and that is good.

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 I look forward to that. Lastly, on the lead enforcement authority, which we have not had the chance to discuss much today, I understand that the sector has previously welcomed the role of the lead enforcement authority. It is being funded with a few hundred thousand pounds as well. I would like your thoughts on whether that is a valuable addition to the enforcement landscape and whether it can play a role in helping both trading standards and district councils to enforce the legislation.

Councillor Blackburn: Yes.

Alex McKeown: Absolutely.

[Rishi Sunak]

Q Is there anything in particular you would like to see from that body, to help you do your jobs?

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 Do you think that model works well?

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.

[Rishi Sunak]

Brilliant. Thank you very much for your time.

[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.

--- Later in debate ---

[Richard Graham]

Q It does. My question was whether you support that and think it is a good idea. Is that a yes?

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 Thank you to all of you for joining us today. You have all been working with the Department extensively in helping formulate the legislation, not least by providing input into the guidance that is currently being formulated. I really appreciate your help there, and I guess congratulations are in order. You have all campaigned for a long time on this issue, so I am sure you are delighted to see it come into practice. Thank you for your broad support for the aims of the Bill.

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.