National Assembly for Wales

Bore da. Good morning. The Chair is unable to attend today's meeting. Therefore, in accordance with Standing Order 17.22, I call for nominations for the position of temporary Chair.

I nominate Steffan Lewis.

I second that.

Seconded. I therefore declare that Steffan Lewis is temporary Chair for the duration of the meeting.

Thank you.

Welcome to the meeting this morning of the Sub-committee on the Regulation of Registered Social Landlords (Wales) Bill. The meeting is bilingual, and headphones are available and can be used for translation from Welsh to English on channel 1. Can I remind everyone to please switch off their phones and any other electronic devices that may interfere with broadcasting equipment? In the event of a fire alarm, please follow directions from the ushers. Apologies have been received from Eluned Morgan and Mark Isherwood. David Melding is attending as a substitute for Mark Isherwood, and we're very pleased that Mr Hedges is attending as well, as a substitute for Eluned Morgan.

Thank you, Mr McKirdle, for attending today. I'd like to begin by asking whether the Welsh Local Government Association agree with the general principles with the general principles of the Bill, please.

Yes, the WLGA do agree with the general principles of the Bill. Local authorities are very aware of the shortage of affordable housing in Wales and are co-signatories to a housing pact between Welsh Government, Community Housing Cymru and us, which sets out some of the key outcomes that, together, we'd like to see achieved during the term of Government. One of those is the meeting of the Government's target of 20,000 additional affordable homes, and we see that this Bill, this legislation, is necessary in order to support the achievement of that target or to remove some of the barriers that may be an impediment to that.

Thank you. Have any discussions taken place between the WLGA and the Office for National Statistics on this—?

Not directly on this topic, no. We've not been in touch directly with the ONS. We've been party to some of the correspondence, but we've not been in direct conversation with them ourselves.

So, you've been party to the correspondence specifically in terms of the reclassification and obviously the extent of local government involvement.

Yes, absolutely, and we've also been aware of those conversations in other parts of the UK.

Okay, thank you. And what steps have local authorities taken in preparation for the Bill so far?

Local authorities have kept up to speed with the proposals. There was a consultation earlier this summer that set out the Government's proposals, so authorities were made aware of that and there were consultation responses. The WLGA, through its networks, have been promoting awareness and understanding and opportunities for authorities to engage around that. There have been some changes that have already taken place in relation to governance at the large-scale voluntary transfer in Torfaen, for example. There are some discussions under way in Newport that I think I'm aware of. So, there's certainly an awareness and an understanding of the scope of the changes that are likely to be required.

And that consultation process that you mentioned—was that satisfactory as far as local authorities were concerned?

Yes. I didn't hear any complaints about either the opportunity to be consulted or the amount of time that was available, so it was satisfactory.

Thank you for that. Mr Melding.

What role does the WLGA currently play in the regulation of social landlords?

The WLGA are members of the regulatory advisory group, which meets typically quarterly to consider matters around regulation and to provide advice to the officials involved and also to discuss policy development matters. So, we've been a member of the regulatory advisory group in all the time it's been in existence.

So, it's through the advisory group and it's basically as, obviously, a well-informed stakeholder in terms of housing.

Just that, yes.

Given the close co-operation that there is between local authorities and various social landlords over really important social issues like homelessness and, as you've mentioned already, delivering affordable housing, how important is the regulation of this sector to you and the general objectives that local authorities have because, ultimately, when we look at things like homelessness, it is the local authority that has the principal duties there?

The relationship between housing associations generally, and LSVTs in particular, and local authorities is very important. There is a set of common objectives, obviously, which are usually in existence operating in the same communities trying to deliver many of the same outcomes. So, it's a key partnership and the relationship between those organisations is really important. I think local authorities view regulation positively in that respect in that, as a key stakeholder in relation to those activities within the area, authorities would typically be consulted in relation to any particular matters around any regulatory concerns or to comment on the relationship as it exists and the forms of partnership that take place. So, it's very important. 

And the changes that are proposed in this Bill—you do not think they're going to have any implications for that sort of fundamental relationship then on the housing objectives, I suppose, in the widest sense of policy?

I think you've already touched on the complexity or the interrelationship of a number of those aspects, and I think that simply in itself—I don't think that these changes within the Bill will undermine that relationship. There are many other mechanisms by which the relationship between the local authority and a registered social landlord are judged and moderated and influenced, not least the—for example, the allocation of social housing grant, which is a decision to be made by the local authority ultimately. So, there are many opportunities to nurture and to reinforce the relationship between local authorities and RSLs.

I suppose that that wider relationship is not going to be fundamentally affected one way or another, is it, by the regulatory changes that are in the Bill, and are largely as a result of the ONS decision?

Local authorities haven't expressed that concern. I think that, whenever there's change, there's always a need to be aware. The WLGA's consultation response earlier on in the summer pointed out the need to ensure that that was the case. But what we're not seeing is local authorities being concerned that these changes in themselves will undermine that relationship.

Okay, because I suppose what we're trying to tease out is that however important the imperative of responding to the ONS indication of what is needed, probably, to justify reclassification—. And one can accept that but still have some reservations or concerns about how to manage the risks that are created. So, any significant risks that we should be aware of—and I use 'risk' in the way of 'and therefore needs to be managed' not 'Oh, gosh, this is a real principal objection to the Bill.' Are there any significant risks you think might now emerge, should this Bill proceed in its essentials into law?

I don't think that the Bill itself presents any additional risks. I think that there are a range of issues that support or are required to be in place in the relationship between the local authorities and the RSLs that we need to be constantly aware of. This is not the only thing that changes. And I think that, since the early days of transfer, those relationships have been tested by a number of things—most recently welfare reform would be something that I would point to—and the relationship between the local authorities and RSLs in terms of understanding and, where possible, mitigating the impacts of some aspects of welfare reform on tenants and prospective tenants is something that's very important.

Similarly, the work to prevent homelessness is a key area that's developed since the early days of transfer. We've had the changes in legislation around that, changes in responsibilities and an increased duty to co-operate on the part of RSLs. And anything that I think has the potential for changing that balance of relationship is something that we need to be very careful about.

Okay. And to look more specifically at the Bill, one of the main provisions, really, is a shift from consent to notification in certain areas, such as the disposal of land and, perhaps even more importantly, any constitutional changes. Do you have any concerns about that and are there some risks that need to be managed in shifting from consent to notification?

I don't think we've got particular concern around additional risk on that issue. I think what there would be clearly a requirement for would be guidance to ensure consistency, and that if there's transparency and consistency around process that authorities can see is being applied across the country, then that would be something that they would take comfort from.

Okay. If I just focus on the constitutional changes, there is a difference in the proposed Scottish legislation that any change to the constitutional structure of housing associations would require the Scottish Government to actually consult on those changes with tenants and to obtain their agreement. Now, that seems a really strong provision that is absent from the proposed Welsh Bill. Do you think the Scottish approach may be a better guarantee for tenants in the face of possible constitutional changes to the way RSLs are structured?

It's not a concern that I've heard expressed here in Wales through any of the discussions that have led us to the point where we are. I think it may be something that is worth considering and the view of tenants would be important in coming to that. But it's not a concern that I've heard.

Would it be fair for me to infer that you've not had discussions with the Scottish local government association?

That's correct.

Okay. The other change, then, or perhaps the next most significant change in terms of the Bill, is a shift from ministerial intervention, or enforcement I suppose is what we should really call it, from the current broader one of mismanagement to something that is considered unlawful. Now, unlawful is a bit wider than illegal—we understand that—but still there is a bit, well, not a bit, there is a significant shift there. Are you concerned about that in terms of the justification for enforcement? 

Again, that's not a thing that authorities have raised any concern around, and I think that to see the regulatory process as just about being intervention, I think, based on my experience, doesn't really look at it in its totality and the extent to which there would be earlier engagement with stakeholders short of that formal level of intervention.  

Okay, thank you. 

Mr Hedges.

Thank you, Chair. Local authorities have had a long time now, those who've gone through stock transfer—and I hold my hand up; I was one of those who campaigned against stock transfer in Swansea, and I'm very pleased that Swansea did not undertake stock transfer, and I think probably its tenants are now, with what's going through at the moment—but how have the local authorities and stock transfer associations developed since transfer took place? 

It's over 40 years since the first stock transfer in Wales, and my impression generally is that relationships have developed well, certainly corporately between local authorities and the large scale voluntary transfers. My experience, as with any organisational challenge, especially where you've got colleagues who perhaps one day were working beside each other and then are in a different relationship the next, is that there can be individual tensions. But that's something very different from the formalised relationships between local authorities and LSVTs, and my impression generally is that those relationships are healthy, those are supportive and, given the size of the LSVTs within each local authority area where that transfer has taken place, they are a very significant partners not just in housing terms, but often in regeneration terms as well. So, there's a need to manage those relationships to the benefit of everyone involved.

Local authorities have a homelessness duty. When they don't have their own housing stock, the only way they can discharge that homelessness duty is either through the private sector or through working with registered social landlords. My understanding is that registered social landlords do not have a homelessness duty. So, isn't there some tension there?  

They have a duty to co-operate with local authorities, which is short of an absolute duty; you're right. There's a lot of work that goes on to support the fulfilment of that duty. The WLGA and Community Housing Cymru have been involved over the last 18 months in developing a framework tool for the discussions in areas where those discussions don't already take place, to check out whether or not those relationships are healthy enough to assist with the fulfilment of the homelessness duty and other functions. So, I think it's not just about the absolute duty, but it's about making sure that we've got enough tools in place to help those conversations.   

Correct me if I'm wrong, but neither of those organisations have the ability to force either side to do anything. 

That's true. 

So, we're relying on the goodwill of every registered social landlord in Wales that has done a stock transfer to continue to work with local authorities. 

And that's one part of the relationship. There are many other parts of the relationship and parts of the business. And it's true that there's no absolute duty, but there's a business interest as well. Registered social landlords will lose money if they're not preventing homelessness within their own tenants and if they're not working with the local authority to assist them. We've got in almost every local authority area in Wales a common housing register system, where each of the registered social landlords have signed up to supplying accommodation, including a proportion for homelessness households. 

Can I tell you that, in Swansea, at least two of the housing associations that are registered social landlords have closed their list for new applicants? I don't know whether that's common around the rest of Wales, but at least two as of this week have closed their list to new applicants. Now, Swansea, fortunately, didn't undertake stock transfer, but nothing is being done to those registered social landlords who've closed their list to new applicants, is there? And what pressure is being put on them, because it's not abnormal for at least two of the three major ones in Swansea to close their list at any one time? 

I think there's a difference between having your list open to new applicants and fulfilling a relationship with the local authority to meet homelessness, and that would typically not be via new applications.

Sorry, but you've confused me. So, people who are homeless don't have to apply.

In the situation where you've got a common housing register, you make a single application to the central common housing register, and then a reply from there, rather than through an individual application to an individual RSL.

So, you're telling me that although an RSL said its list is closed, it's not closed for people who are homeless because they're picking those up off the local authority.

That's my understanding. I'm not aware of the detail of the two cases that you're describing in Swansea. But that would be my general understanding.

I'm not sure. Perhaps you could send us a note on where you get that understanding from, because my understanding is the exact opposite. So, if we could ask for a note on that.

I'm happy to do that.

I have another question. Registered social landlords, be it though stock transfer, have got, by law, representatives of the local authority on it, but other registered social landlords have local authority representatives on them and many have sought local authority representatives to ensure they work better with the local authority. If local authorities no longer have the third representation on these stock transfer bodies, is there a danger that the pressure the local authority can bring gets reduced?

In the Bill, there's a level of 24 per cent of local authority membership. So, it's not the situation that there'll be no local authority membership on the board. And, I think, as I've already said, there are a number of other mechanisms that are features of the relationship between the local authority and the LSVT and other RSLs, not the least of which is the allocation of social care housing grants to support new development, the relationships around preventing homelessness, like I said, the duty to co-operate, and also the framework around any other regeneration schemes or other projects that the organisation may wish to undertake in an area. All of these things will require an interrelationship and a positive relationship with the local authority. So, there are lots of ways of bringing pressure to bear other than simply through board membership, I would suggest.

Well, I would suggest that board membership gives you an opportunity to raise problems at the highest level, whereas a lot of this seems to be—tell me if I'm misquoting you—based on goodwill, people's willingness to work together and everybody being nice, tidy people working together.

And there is still that 24 per cent representation on the board, to raise those concerns at that level.

Could I just intervene on that? The English Act doesn't set a maximum limit. It just says the Minister can set it at what is required by the Office for National Statistics, or is likely to satisfy ONS. Do you think that would be a better way of drafting Welsh law as well, because you could have a third membership, presumably, in England, or even slightly more, whereas we will be fixed at just about a quarter?

Authorities have not raised that as a particular concern, in terms of that proportion. I think, generally, the approach has been taken to do the minimum to satisfy the ONS requirements here, and that's my understanding of how that's come about.

Would I be right again to infer that you've not had deep consultations with your English colleagues?

Not directly, no.

On the law and the differences maybe. Okay.

The last one is on the position of local authorities. From what you said, you believe that in both stock transfer and non-stock transfer areas, local authorities will co-operate very well with their local RSLs.

I think it's a mixed picture, and I think that that can change over time. There are obviously individual issues, where there are tensions that emerge, but there's a relationship to be nurtured and there are advantages to both sides to having a positive relationship. So, generally, I think relationships are pretty good.

When tenants voted for stock transfer, they were made certain promises. One was that the local authority would have a third representation, tenants would have a third representation, and a third representation would be from others unspecified. That is now being broken. Do you believe that any of the other commitments that were made on stock transfer could be broken, and should former local authority tenants now have the right to have another vote—as they've signed up against one set of criteria—on whether they want to go back to local authority control?

I don't think that the Bill, as it's drafted, threatens any of the other commitments that I'm aware of. But what I don't have is a detailed understanding of absolutely every commitment in every transfer agreement. My understanding, generally, was that that was about rent guarantees and around the execution of WHQS work, and perhaps some other arrangements. So, I don't see anything in the Bill that threatens those arrangements.

Sorry, in answer to the second part of the question, but not in this Bill, but this is really the situation—that they were told one thing, they signed up for it. If I'd signed up for an agreement with somebody and they changed one part of it a few years down the line, I'd have concern that another part of it was likely to be changed. I'll rephrase this: should they have the right to have another vote now, as what they've signed up for is not being provided, to go back to local authority control?

That's not an issue that's been raised with the WLGA by authorities where a transfer has taken place.

Thank you. Mr Melding.

The ONS have said they're not going to give a running commentary on the legislative process, but, obviously, if they don't feel the output, the Act, is adequate to justify a reclassification, then they will say so, and then this whole process falls apart. Now, in Scotland, they are intending to provide powers to Ministers to make certain changes, if that is required, to the Act they produce. So, ministerial powers will exist, but only subject to very extensive consultation, which is a way, obviously, of maintaining the integrity of the legislative process, even when there's the threat hanging over you from an albeit independent agency that has responsibility for classification of national accounts. Would you like to see the ministerial powers to change whatever legislation is produced in Wales subject to those sorts of extensive consultations they're going to have in Scotland, or are you happy with the way things are drafted at the moment in the Welsh Bill?

We're generally happy with the current drafting. If that were a proposal that were to come forward, then I'm sure we would be interested in exploring that further.

Okay. Mike.

My last question goes back to something David Melding raised earlier. We have a situation currently that, if a registered social landlord gets into trouble in any way, ministerial action can take place, which can actually create an enforced merger. And we know that can happen because it already has happened in certain places. We also know that, under this legislation, that can't happen. When you get a registered social landlord in any sort of problem, what happens is that the lenders either ask for their money back immediately or push interest rates up to unaffordable levels. We know that happens as well. These are matters of fact—historical fact. Without the opportunity for ministerial involvement, what other method is there when a registered social landlord gets himself into trouble, the board are being told by the management, 'Things are okay and it'll all be alright on the night', and there's nobody to say, 'No, you're going to have to merge for safety'?

I'm not an expert on those matters, but I would imagine that, as I've seen happen in England and elsewhere, the voluntary merger would be the route that an organisation would seek to take when the board becomes aware of the severity of the situation. There would also, I'm sure, be a role for a body like Community Housing Cymru to facilitate discussions between interested parties who may be able to help and support in those kinds of circumstances.

Can I just finish?

You've had two final questions, Mr Hedges.

Sorry, Chair, I'm taking advantage of a very kind Chair.

Putting the whole evidence in one single, encompassing sentence, everything depends on goodwill on everybody's side, and we just hope we don't end up without goodwill.

No. I think that I would say that the structures that are there that wrap around those relationships give comfort to the effect of those relationships. Yes, there is goodwill and everybody wants to see goodwill, but there are sufficient structures there through the regulatory framework and through those other intersections between local authorities and RSLs to ensure that we're not just reliant on the impact of this Bill.

Thank you. Just briefly, to go back to the point on the reduction in the representation of local authorities, I wanted to take in the contrary view to Mr Hedges, and whether that would be an opportunity, do you think, for enhanced tenant participation, because obviously that leaves the door open for a different model and a different means of tenants having a role.

Tenants, certainly—but also I think it gives greater flexibility on the part of boards to recruit in order to address skills deficits or to build skills that are required because of the change of business environment. So, there is an opportunity there to look at skills and see what the requirements of the board would be.

Finally, do you think that the Bill should make specific provision for consultation with tenants before certain events, such as disposals or mergers?

I would see merit in doing that, but only if we were sure that that was something that the ONS would not express further concern about.

Okay. Are there any final, final questions?

I've done my two final questions.

Can I thank the witness for his evidence today? You will receive a copy of the transcript to check for inaccuracies. We'd appreciate your feedback on that. Thank you very much. Diolch yn fawr iawn.

Thank you.

Can we move to a motion under Standing Order 17.42 to resolve to move into private session for items 4 and 6 of today's meeting? Are there any objections? Agreed. We'll move into private session.

Good morning. I'd like to thank the witnesses for attending today's evidence session on the Regulation of Registered Social Landlords (Wales) Bill. Can I just remind you that the translation equipment is available on channel 1 and that there are no scheduled fire drills? So please follow the ushers in the event of a fire alarm. Could you start by introducing yourselves for the record, please?

I'm Matt Dicks. I'm the director of the Chartered Institute of Housing Cymru.

I'm Tom Broadhead. I'm here also representing the Chartered Institute of Housing Cymru, but I also work for a housing association, Melin Homes.

Steffan Evans, project officer at the Tenant Participation Advisory Service Cymru.

Thank you very much. A very nice name, Mr Evans. Can I just start off by asking you three whether you agree with and support the general principles of the Bill, first of all?

I think our position at TPAS Cymru is that whilst in normal circumstances maybe we'd have some concerns about the provisions within the Bill, given the potential consequences of not taking action and not enacting this Bill, we are broadly supportive of the general principles within it.

Well, you know CIH Cymru is the membership body for housing professionals in Wales across tenure. The general consensus amongst our members is that we need to reverse the Office for National Statistics reclassification in order to allow the sector to continue delivering on its social purpose, building social housing and developing safer communities.

I support that position on behalf of the CIH and the housing association sector.

Thank you very much. How well has the ONS decision been communicated in the sector generally, including with tenants?

I think it's certainly been communicated well within the sector in terms of the professional level. I don't think there's any doubt about that. We've drawn on conversations with tenants, our tenant networks, regulation events and had some conversations with tenants at those. But when we've tried to engage specifically on the provisions within the Bill and what the ONS says, it has been more difficult to break through because of the technical nature of it, and I think that's been quite hard to break through to tenants, just about the technical aspects of it. I think there's a general awareness about the Bill, but with regard to tenants, I think, given the nature of it—as I said, the technical nature—it's been difficult to break through and have that conversation with them.

From our perspective, very well, both from the ONS and the Welsh Government, and across the sector. The sector's been talking about it for a very long time. The Chartered Institute of Housing has played a central role in disseminating that information to members through continuing professional development learning opportunities, but also disseminating information as it comes through from ONS and the Welsh Government. The previous Cabinet Secretary has been very clear about his consultation and communication with the ONS to ensure that the Bill in its current form is fit for purpose, if you like, in order to reach that declassification element. So, yes, the communication has been great.

It has been on our radar since the changes were first mooted in England back in 2015. It seemed pretty apparent that the change from the ONS was going to come into Wales a year or so later, so the sector was talking about it at a senior strategic level for a couple of years. In terms of residents, we certainly had discussion, in my experience, with our resident panels and resident groups, but with the wider residents base, I think, it's one of those things that have been too technical, really, to describe adequately to engage with. So, that's why we've done it in more focused groups.

Just to mention—while it's had no direct impact on housing associations' planning at the stage, it has caused uncertainty, and perhaps the length of the process has not helped in that regard. As Tom says, it has been on the agenda for a long time, and it perhaps could have been dealt with a bit more swiftly.

Yes. I suppose, from our point of view, the ONS decision that happened in England came along with other pieces of legislation, such as rent freezing in England, but also the local housing allowance cap was mooted at the time, and the welfare reform changes, and it was part of what was pretty much a perfect storm relating to housing associations. This was one part of it.

So why do you think there was a bit of a delay in acting?

In terms of—?

You were just mentioning that there was a period of uncertainty.

It's a long process coming to this point in terms of reclassification and ONS's role. It's now an arm's-length body and it has taken on the responsibility of analysing the housing association sector's position. But going back, almost to the Housing Act 1996, there have been lots of changes to that, and perhaps there's an element of reclassification taking place all the way back then in order to clarify going forward. We've been through different variants of the Act and different legislation coming down. It might have helped to have done this process a bit more quickly and earlier.  

Okay, thank you. And do you think the Bill should address any other wider issues in the regulation of social housing more broadly? Is this an opportunity to go beyond just the reclassification issue and perhaps look at regulation more broadly? 

I think one missed opportunity here is to consolidate the legislation. You mentioned that the 1996 Act has been amended; well, it's been amended 26 times. It's a piece of Westminster legislation that only applies to Wales and you've got all those amendments made at Westminster and at Assembly level as well and I think there might have been an opportunity here not necessarily to change the law further, but just to consolidate that and to put that in a place where it was transparent and clear for people to read and understand. I appreciate the reasons why that decision wasn't made, because there was a desire to get this done as quickly as possible, but I think there was an opportunity there maybe to look at how we made the legislation more transparent around regulation.

The quick answer is 'no'. The Minister has been very clear, the ONS has been very clear, and it's very clear from the experience of England and Scotland that this formulation of the legislation in terms of allowing declassification is there, and that any suggestion of tinkering with the edges might negate the reclassification or draw back from the reclassification. So, no. 

In terms of legislation, though, I think what this does is put further onus on the relationship with the regulators between housing associations—the regulation and how important that is. It enhances that relationship, and following the Public Accounts Committee the other day about transparency in the sector, it's probably an opportunity to look at that. 

We'll probably go on to talk about the detail later on, but there are elements and concerns—for want of a better word—that can be dealt with outside of the legislation through better partnership and collaborative working. 

Diolch. Mr Melding. 

It takes me onto that point. You've made it clear that you accept the principle of the Bill because of the imperative of securing reclassification, but are there any—? Obviously, the regulatory system is changed in fairly significant ways. What are the risks that need to be managed and could any of those be managed by an amendment to this Bill?

I don't think necessarily anything would need to be put on the face of the legislation. I think one of the risks here is about the need to make sure that tenants are involved and that their voices are heard throughout the process in terms of how organisations are operating, and that's one of the new regulatory standards. Tenants are now expected to be part of the structural planning of a housing association. So, I think that's certainly something to be welcomed. But there might be space—. I know Welsh Government is looking to review one year on after this new regulatory framework in the new year. That might be somewhere where we can look for a bit more transparency around best practice, guidance around what organisations are doing well on that basis, and how that could then feed into some of the changes as a result of this legislation. But I think that stuff could come more through guidance and best practice as opposed to on the face of the legislation.

I perfectly accept your point. The obvious point to make is reclassification—effectively deregulation—and obvious concerns to be raised. From our perspective, we'd say that the principle and the implementation of the co-regulatory approach is embedded within the sector. The sector is focused on that and delivering on that, and, you know, we've had the regulatory judgments down now, and all bar one, I think, housing associations have passed completely, and that particular problem was a small problem. As an organisation, we regularly hold sessions with our members. We have membership events coming up this month with the head of the regulatory board and the head of the regulatory team at the Welsh Government, and we have master classes for chief executives coming up in the new year to pin down the detail of the regulatory framework. So, it's within the culture and within the DNA of the sector, and a lot of housing organisations also have charitable status, so there's regulation from the Charity Commission et cetera, and hoops they have to jump through there. So, whilst we understand the concerns you raise, I think the regulatory framework is there and consistent and really being implemented by the sector.

Yes, I would echo that. The changes that are mooted in the legislation anyway are really going to replace a co-regulation consents process anyway. It's just not the ministerial consents that go with it. We'd expect a lot of things to stay very similar and our approach to the regulators to stay very similar. What it kind of does, I suppose, is enhance the relationship with the regulator in terms of dialogue as you're going along—having conversations beforehand, so—.

Okay. Well, we do shift from a consent model, don't we, actually, so I think it confuses the picture slightly to say that's going to be retained in a more co-regulative system. The Welsh Bill is not exactly the same as the English Act and nor is it the same as the Scottish Bill in some areas. I mean, they are broadly similar but there are a couple of interesting differences. We've already touched on tenants' rights. Now, in Scotland, where RSLs restructured in a fundamental way to effect the constitution of the housing association, there will be a duty to consult with tenants and obtain their consent. That seems to be a very powerful protection of tenants' rights. Would you like a similar provision in the Welsh Bill?

I think our view is certainly that we want tenants to be involved in this process and that the end result needs to be to ensure that there is enough community involvement in how organisations are run. I think an interesting point about boards that's sometimes overlooked is that the Welsh Government's view is that a board member's a board member, be that a local authority board member, a tenant board member or a staff member, a professional individual, but it's more about the ethos of those organisations about how we're taking on community views. So, we'd certainly welcome making sure that tenants were able to feed into that process and how those organisations operated but, at the same time, we'd want that to be developed in a way that was permissible with this Bill allowing—you know, to be enacted in a way that refers to the ONS decision.

Well, the Scottish model presumably does that because they're under the same imperative to change.

Obviously, we haven't had those conversations with the ONS that the Welsh Government have had, but if there is scope there to develop something then that's certainly something we'd welcome.

Okay, right. Your view—.

Just on the very wide point, the Cabinet Secretary has given evidence to this committee saying that he's been in contact with the ONS, as I was referring to earlier, and that the Bill in its current format works in the sense that—

Yes. Well, it's very kind of the ONS to be the legislature. I thought that was our job. [Laughter.]

In terms of—. Sorry—.

The point's obvious, isn't it? We legislate and not the ONS. We realise that they have responsibility for international accountancy standards and we have to be aware of that, but this is a proper legislative process. You can't play the trump card of, 'Well, the ONS won't like it unless we have the Bill exactly as it is now.'

But they're the arm's-length body for interpreting the law, aren't they?

Oh, so they can trump our legislative process.

No, I'm not saying that. I'm just saying that they've interpreted the existing financial rules, as you've said, in the way they have and that the existing set-up of the sector turns it onto the public books. So, you can either look at the financial rules at a Westminster level or we look at the framework at this level and try to adjust it that way.

They've given a view on the duty to consult with tenants and to require their consent on a constitutional change, have they?

Well, my response to that is that, going back to the point I was making on the previous question about the substantive nature of the regulatory framework here and that tenants' participation is heavily imbued in that process—it's one of the 10 regulatory points in the regulatory framework—so the Welsh Government, I think, has captured the essence of the need for tenants to be included in that process—. As I say, the sector is on board with that regulatory framework. Revisiting that, the regulator or the regulatory board is going to carry out a thematic review early next year in terms of the tenants' role in the process.

Okay, so the Scottish Bill is, in this respect, redundant, do you think, in terms of Welsh experience?

I think, going back to the point I was making earlier, if the Cabinet Minister is saying that this Bill can travel through and get the result we want and we're confident—

Yes, well presumably that assurance has been given in Scotland. I'm still slightly perplexed that you think you can just refer to the ONS all the time. The ONS have outlined what needs to be done in terms of reclassification, but there are all sorts of ways of getting to that destination.

On the specific point you're raising about tenants' participation and tenants' involvement, then I think we're happy as an organisation. Our members are happy that that's contained within the regulatory framework as it exists in Wales.

Yes, I'd say that there's no reason the regulator couldn't insist on consultation occurring as part of the regulation process anyway. That would need to be part of the regulation.

But we could do the insisting rather than leaving it to the regulator. That's the point, isn't it?

Sure.

Okay. Well, let's move to another issue, and that's the move just to notify—notify the Welsh Government, or the Minister, to be specific—rather than to have the consent of the Welsh Government. This obviously loosens the regulatory framework over statutory issues like disposal of property and may raise some significant concerns amongst stakeholders. What's your view of this shift, then, to notify from consent?

Our view is that we certainly want tenants to play a role in how those decisions are made. Again, going back to that regulatory framework, there is that expectation now that tenants are involved in looking at services, but also in terms of structural decision making. Some of these disposals are certainly going to fall under a structural kind of decision. So, we'd certainly expect the regulators to be looking to enforce that quite rigorously to make sure that tenants are having their views fed into how that was being made. We don't envisage the legislation leading to a big increase in disposals, but we certainly would want to be reassured that tenants were being listened to as part of that process through regulation.

My experience is land disposal is not a frequent occurrence with housing associations anyway, and, when they do occur, from my organisation's experience, it's been the leasing of a bit of garden space for someone, or a bit of passageway or for tree cutting or something like that—not large tranches of land. In those cases the board have a consent say anyway within the business, and it gets reported, and there's an audit trail. The actual land consents process with Welsh Government is just an administrative process as much as anything else.

Can I just—? Sorry to interrupt, but Mr Hedges, I think, wanted to come in on that point.

Yes. Isn't it true—in England perhaps more than Wales—that a large number of registered social landlords are not just registered social landlords? Many of them have turned into developers, using land they inherited.

That may well be the case, but I suppose, on a wider point that Tom's trying to make, I don't think the sector has a record of just disposing of land and assets left, right and centre. A lot of them have charitable status, a lot of them have governance rules. They have a social purpose, and they are dedicated and focused on that, so—.

I think that we're using the words 'disposal of land' in different ways. Perhaps if I can clarify my position here and the question I'm asking, if a registered social landlord owns 10 acres of land, then uses five acres of that to develop housing for sale, then I would describe that as disposal of land. I think, under your definition, it would just be the housing association using their land for their own benefit. You wouldn't treat it as disposal. Or would you?

I'm not sure what the definition is. I wouldn't personally class that as disposal, no.

That's the point I was trying to make. Housing associations have changed dramatically—sorry, I'll end this point. They've changed dramatically. They used to only do housing, but they've now developed into a whole range of other areas. Social care is one, in some areas, but they've also developed lots—more in England than Wales, but in England they've got bigger, with lots of mergers, and they're doing lots of private development and land development. I think that's the point: should they be doing that without the express support of their tenants?

One thing I'd say: generally, how that's come about is through diversification. So, tenants have set up separate companies in housing associations to deal with that, and that will sometimes take it out of the nature of the regulation and what tenants are after anyway. If it's that side of thing that's regulated, those housing associations will probably look to create private companies anyway. It's not the situation in Wales. I suspect most of those housing associations are either London-based or part of the G18 [correction: G15], where the landownings are worth millions and millions of pounds. I can say that, the areas that we work in in the Valleys, where we retain some landholdings, the land is of little value rather than developable, so it's not something we'd see as part of diversification; it would be affordable housing.

I would say that's the general picture across the UK and the sector as a whole. At the heart of a lot of that diversification is a social purpose that's embedded at the core of all these organisations.

Thank you. Mr Melding.

Okay. In fairness to you, we have heard from other witnesses that disposal of property and land tends to be on a fairly limited basis, and perhaps of the character that has been indicated by the witnesses, but, as Mike has indicated, if you were selling some land, in effect, to meet social housing requirements, then that whole scheme has actually ended up with quite a degree of disposal of property, in effect.

I also accept that there will be general governance arrangements that would be relevant here to decisions. So, is it an area, perhaps, where there should be more explicit guidance? Should there be guidance required on the face of the Bill in relation to disposal of property? This is the big one, isn't it, that could go wrong if we had a much looser—or unintentionally created a looser regulatory system. So, perhaps specific guidance on this issue of property disposal—would that help?

I think it's more to—. I don't necessarily think it needs to be on the face of the Bill, but it needs to be there, as he said, as—

What would be on the face of the Bill is the requirement to issue guidance on this matter, not the actual guidance. Otherwise, they could issue guidance that doesn't contain specifically the issue of land disposal, for instance.

That is something worth considering. Again, we'd be eager for nothing to be in the Bill that impacted upon the ONS's decision. So, that is something to consider. But, in terms of the guidance itself, it's certainly something that we would welcome and we'd want that to include making sure that tenants are represented during that process and the regulator to take quite a robust approach to how it looked at the disposals as part of its decision-making process.

Again, no opposition to guidance in and of itself, but it would have to be caveated by the general points we were discussing earlier about the passage of the Bill and it allowing for the ultimate—

But a requirement to issue guidance on the face of the Bill in this area, that wouldn't offend—I don't suppose it would, anyway—

Well, I don't know. [Laughter.]

—the ONS. It would be the content of the guidance that may be an issue for them, I suspect. And you have repeatedly talked about guidance being an important balance in the new regulatory systems.

Finally, then, from me, there's a threshold change for intervention, which is, broadly speaking in English, moving away from mismanagement as the criterion for a Minister's intervention to something having to be unlawful. 'Unlawful' is a wider concept than 'illegal', so let's make that clear. It's not quite as narrow as some people might think. But what do you think about that shift, and are there dangers there in terms of how we are now going to see regulation working?

I think in terms of our definition of 'unlawful', it's worth remembering that it's this Assembly that'll be able to enact that legislation that sets out what is unlawful or not within those organisations.

So, in and of itself, there's certainly concern there about the regulators having the power to go in and take action, but the Assembly still has that power to enact subsequent legislation, if there were concerns about the way that system was operating. There's still that scope there for us to take action to enact legislation, to provide a clearer framework and clearer guidance on that, if we saw that this was becoming an issue down the line.

But, at the moment, tenants have the protection of quite a wide concept of mismanagement. I mean, it's for you to give evidence, not me, but has this not been discussed by some tenants as an issue of potential concern?

I think the problem at present is that it's not particularly clear what counts as mismanagement. It's not necessarily when decisions are made—maybe there's room here for more transparency, maybe from the regulator, to announce why certain action was taken, but I appreciate there are constraints around confidentiality and certain arrangements. But, because of that, there's a lack of transparency, maybe, at present, so that people know when the regulator will take action. So, if this made it more clear when action could be taken, then that might be a positive step, because there would be fewer grey areas in terms of when the regulator could come in and that would give tenants, potentially, a greater clarity in terms of what action would be taken and when.

Again, I completely understand the concerns you're raising, and it's a pretty obvious and clear point to make, but I go back to two points that I've raised previously. From our point of view, again, the regulatory framework is completely embedded in the structure and activities of these organisations within the sector. And I would say that, before we even reach the stages we're talking about, the regulator would be involved much earlier and that's built into the system already. All housing associations in the sector are completely signed up to that, and that involves tenants' input into that.

But I'm starting to sound like a broken record here, and I know you raised this point, but it's the ONS that has interpreted the rules. Now, the legislation could be changed in Westminster if that's the path we need to go down, but the ONS has interpreted it—them's the rules, if you like—and if we're being told that this is the Bill and the state the Bill has to go forward in, in order for us to avoid that classification, then our position is that it has to go forward.

Yes. Just to reiterate, it is about the sense of relationship with the regulator and making sure that that's properly resourced and robust, and it is an ever-changing relationship that needs strengthening all the time. I'd also say that the lenders have quite a big say in any sort of financial mismanagement—

Yes. That point has been made.

I was going to say to start, first of all, light-touch regulation worked so incredibly well in the banking sector, of course.

But returning to this, we've got a homelessness duty on local authorities—it's a statutory duty on them. Where they've undertaken stock transfer, they cannot carry out that duty themselves; they have to work with the registered social landlords in the area—either the stock transfer one or any of the others—in order to fulfil that duty. Isn't there a danger that the Bill reducing the number of local authority representatives on it could have an unintended consequence of reducing the willingness of some RSLs to help local authorities out in fulfilling a duty that doesn't fall on registered social landlords, as far as I understand?

I suppose, the first obvious point to make is that it doesn't necessarily mean that the stock transfers will reduce the number of local councillors on the board; it just means that they will no longer be able to appoint more than a third. So, a board could take the decision that, in order to ensure diversification, it could appoint individual councillors, through their merit and experiences across their working lives and their lives as elected representatives, to sit on the board.

It is an issue that our members have raised with us, because of the vote that took place in terms of tenants, et cetera, but it's one of those areas where our members say that the necessity of getting the Bill through means that this is something that could be looked at beside that process, and we would expect the large-scale voluntary transfer organisations to ensure that they maintain that relationship with local authorities and ensure that local authorities feed into the process.

Yes. There is a concern there. I suppose there's also an arrangement that local authorities have a statutory responsibility for maintaining the waiting list, which is the relationship with the LSVT and that would've been dealt with through the transfer process. I think one of the reasons why the private rented sector is now also where you can discharge the homelessness duty is to create more options for local authorities in order to deal with homelessness.

Actually, I think it's because there weren't enough vacancies within the public sector and the only way they could actually fulfil their homelessness duty was by discharging it into the private sector, and as they were doing it anyway, the Act actually allowed them to.

The other question I've got is: the Bill breaks the commitment made to tenants when the 11 local authority areas voted for stock transfer, when they were told that the board would be a third, a third, a third; would you accept that that commitment has been broken? And, do you also accept that some tenants would be very unhappy that that commitment has been broken, and there's no reason now why a majority cannot be people not from local authorities and not from tenants on the board, and that tenants and local authorities' views may become less important? And we may go down the English route of some social housing mainly being development corporations. 

I think there are a couple of points to unpack maybe from that. Firstly, in terms of the third, third, third prospect, it's certainly a vast concern, but we've already seen organisations move away from that model. We've already seen certain stock transfer organisations change the way that they operate and change their governance. We certainly want tenants to play a role in the process of deciding how these organisations are going to structure themselves in future, but it doesn't limit or forbid local authority members from being on the board. And I think what's more important is to ensure that community views are represented on those organisations, wherever they come from. It's more about the ethos of those organisations, about how they operate, as opposed to maybe the individuals themselves. But I think you're right: there will be some concern. We've had that from some organisations and from some tenants, so that's certainly something that will need to be worked on as we progress with this legislation and the effects of it.

I don't think there's a risk of us moving to—. You know, your concerns about losing that social focus from this legislation, because even after this legislation, the board is going to have to perform in a way that satisfies the regulator. The regulator is Welsh Government. The Welsh Government expects housing associations to be supplying social housing. Okay, there is diversification going on in the sector—and the Public Accounts Committee inquiry raised some concerns about that—but the overall focus of these organisations has been and still will be the provision of social housing. Whilst that focus remains, I don't think there is that risk that you mentioned about completely losing sight of that. That's why that regulatory standard about ensuring that tenants have a say in the structure of an organisation or an organisation's strategic decision making is so important, because then if that's regulated properly, that means that it's not just tenants on the board that have a say, but other tenants, and organisations need to demonstrate how tenants' views influence the way they operate. I think having that voice strongly enforced will control what organisations do and limit some of your concerns. 

Just to reiterate that, tenant participation is embedded into the regulatory framework; it's one of the key 10 points. And we won't go down the English route because we have SHG; you know, 58 per cent is grant money from the Welsh Government, so the culture isn't there. You know, SHG is a powerful lever in ensuring that organisations are adhering to the regulatory framework. 

To just go back to a previous point, the more general point you were making, the sector in Wales aren't bankers. There's no history or evidence of the organisations having that cavalier attitude and capacity. So, it's the—

That's true at the moment, but they had a very bitter episode in the Netherlands, didn't they, after deregulation, where things really went off-track? There are very particular reasons for that, but we have to apply due diligence here as to what might be a possibility as an unintended consequence further down the line of passing this legislation in its current form. 

My understanding is that the Netherlands scenario still could [correction: couldn't] happen even under the regulatory framework after the Bill would travel through, but I don't know—that's just evidence I've heard. 

But, you know, it's indicative that unpleasant things can happen and unexpected things can happen.

I think the important thing as well here is that all of us remain vigilant and review how regulations are working at regular intervals. There's a review going to be coming up at the end of the year, after 12 months of the new regulatory framework. So, it's about everyone taking an interest in that process and seeing what's worked and what hasn't, and doing that work proactively. As we've mentioned maybe with the ONS, they've waited 20 years until coming to have a look at the sector, and then that's had a big impact and is forcing us to change. So, it's about us proactively looking at what's working because otherwise we're going to wait—. You know, any of those risks can then be identified and the Assembly, Welsh Government, us as a sector and tenants can all take action to stop that. It's about everyone taking a proactive interest in assessing what's working and what isn't within the sector.  

David. 

I was just going to talk about tenant representation, if you don't want to cover the point. Obviously, the number of local authority representatives is now limited, though you've made the interesting point that I hadn't quite grasped that you could still have councillors beyond that if they come from another route. And I wonder if one of those routes could be the right for tenants to nominate a certain number of board members. How would you feel about that?

That's not something we've picked up on, but I guess it's not an idea that's been floated either. So, there's scope there maybe for a conversation with tenants. One of the things that we picked up on in our regulatory networks—. So, we held those back at the start of the summer, asking about the new regulatory framework, what people thought was working well, what wasn't. And that was a mixture of staff and tenants. One of the things we picked up on was that there was confusion within the tenant body about what the role of tenant board members was. Were they there as their representatives on the boards, or were they there as board members that just happened to be tenants? And the Welsh Government's view is that they're there as the latter category, which I think is quite an important distinction, because that means that tenants' views need to come from another source, through scrutiny panels or something like that, as opposed to just those board members. So, I think we certainly welcome any sort of innovation looking around how tenants' views can be put to the board, but it needs to come from the broader base, I think, not just from being on the board itself.

Nothing particularly to add to that. Tom?

No.

And, finally, there's a difference between the Bill before us and the English Act. In England, they've not set a maximum number or percentage for local authority representatives. I presume that's so that they have flexibility in the future, should ONS suddenly decide it's not 24 per cent, it's now 36 per cent you're allowed. If we put 24 per cent in our Bill, then, unless we pass another Bill to change it, that's what it will be forever. So, do you think the English model of allowing the Minister to set that level is a better way of proceeding, because then, obviously, they would just take account of the current requirement from ONS, which could change over time?

They've provided a space for themselves, haven't they, to introduce secondary provisions, and there are some regulations now that have been tabled, looking at local authorities specifically. So, there might be something to be said about that, to give us assurance we don't have to come back and go through this process. So, that might be something that we can learn from, but they're looking at getting some regulations out there already at the moment, so it might be interesting to have a look at what those regulations might be.

Nothing principled against you doing that, if you're able to do that under the ONS reclassification rules, but my wider point would be—

Well, it's law in England. That's what they've done.

But my wider point would be: does constraining almost, in terms of the percentage of councillors, allow for the diversity that boards need to have in developing things going forward? You've mentioned diversification, and the role of housing associations in more diverse activities, et cetera. Would it not therefore make sense in terms of good governance to have the ability to have more diverse skills on the board to govern that?

Sorry, Chair, but some of us would say that perhaps they shouldn't be diversifying in some of the areas that they are, and I think some of us have serious concerns about some of the diversification, and some of us have serious concerns that a lot of it's on the premise that house prices are continually going to rise, and there'll be continued demand for expensive houses. And some of us are not convinced that that is possible over a period. We go through an economic cycle. Despite Gordon Brown's belief saying it had come to an end, we go through an economic cycle.

Thank you, Mr Hedges. I just wanted to ask one point. We've mentioned several times the experiences in England and in Scotland, for good reason. I just wondered what sort of engagement your organisations have had with equivalent bodies in those two countries when considering the Welsh legislation, and whether there was an opportunity to learn from the experiences of tenants in Scotland and in England, for example, on what they think would work, or doesn't work. The points are very well made in terms of the concern of satisfying the ONS criteria, but aside from that, did you have active engagement with equivalent bodies elsewhere?

We've had limited engagement with other bodies. Our director was at that TPAS Scotland conference on the weekend, so I think he had some conversations with them there. And that's maybe something on which we could maybe have those conversations further. But the situation in England was slightly different because of the way that the legislation was enacted. Because it was shoe-horned in on the back of the Housing Bill, it kind of went under the radar slightly. I don't think it had the focus maybe it would have had otherwise, and therefore organisations were maybe engaged with dealing with other aspects of that Bill, as opposed to maybe focusing on the ONS stuff. So, we've not had such levels of engagement with them.

Do you mean within the constituent parts of the organisation?

Yes.

It's a UK body. The policy units are inextricably linked, as you'd expect, on devolved and non-devolved issues.

That's what I was asking, to understand the level of integration. Because, obviously, you're a UK-wide body, the policy units might be completely separate in terms of dealing with devolved jurisdictions and all the rest of it, so I wondered whether—

No, there is—

That is an integrated process.

Yes.

The umbrella body for housing associations in Wales, Community Housing Cymru, which you've probably heard from here already, have been in dialogue with counterparts in England about this, I'm certain.

Any Members with further—?

It would be useful if you could send us a note on perhaps what your Scottish colleagues think in particular about the duty to consult tenants and obtain their agreement on more fundamental constitutional changes, and also why, in England, they've not set an actual figure for the percentage, but have allowed the Minister to have the flexibility to bring in regulations—

I will warn you, my colleagues in London—Coventry, rather—have a penchant for the technicalities of this Bill, much more than—

There is actually one other technical question, you've reminded me—perhaps you'll regret that. [Laughter.] I think, in the Scottish legislation, there's still this issue that, whatever we produce, there may be in a few areas still a requirement to tweak them, or change them indeed, because when ONS—. They've said they're not going to give a running commentary; they're going to wait until the final output. So, I think, in Scotland, they intend to allow Ministers to make those changes to their law—what are often called Henry VIII powers—so they'll be able to change primary law, but they'll have to consult with a wide range of organisations to do that, to get their legislation absolutely into line with the ONS. Now, as I understand it, Welsh Ministers, they'll have the same powers, but they won't have the duty to consult the stakeholders. Do you have any concerns about that difference?

Well, I've only been at TPAS for six months, but, from my experience, Welsh Government actively involves stakeholders before making those sorts of decisions.

Yes, well, there's a difference between goodwill and whether they're required to do it in law.

Yes, so, certainly in principle, that might well be a positive thing. As I said, my experiences are that Welsh Government are actively seeking the views of the stakeholders before changes at present, but I appreciate the point you're making.

I concur with that, with the obvious caveat that we've gone over many times.

Thank you very much. Can I thank the witnesses for your evidence today? As always, a transcript of the record will be sent to you: please check for accuracy and get back to us on that. Thank you very much. 

And with that, we'll go back into private session.