2013 12 – Parliament Notes

Parliament Notes

By Dick Barry

Pickles Responds To Corbyn

In the last issue we published Jeremy Corbyn’s proposals of 15 October to improve conditions for private sector tenants. The following day the Communities and Local Government Secretary Eric Pickles announced a limited number of measures to address what he perceived to be some of the problems faced by tenants. He began his Ministerial statement saying: “I am therefore today announcing a package of further measures to help millions of hard -working tenants get a better deal when they rent their home. These measures will give tenants the know-how to demand longer-term tenancies, stable rents, better quality accommodation, avoid hidden fees when renting a home and demand better standards.” The measures are fourfold:

Ensuring high-quality accommodation.”I have set out today that we will develop a code of practice on the management of property, in the private rented sector. This code of practice will set out what landlords, letting agents and property managers should do when providing tenants with homes to live in. It will make clear that it is their responsibility to maintain the property to an acceptable standard to prevent tenants having to pay for repairs out of their own pockets. Tenants have a right to live in homes that are safe and well maintained. We will undertake a review into how we can ensure tenants are satisfied that their homes are safe and healthy and what standards of hygiene and sanitation they can expect and how they will be protected from damp and excess cold. We will consider the scope for requiring landlords to repay rent where a property is found to have serious hazards. This will include considering extending local authorities’ ability to recoup housing benefit through rent repayment orders, so that taxpayers’ money is not used to support landlords who provide sub-standard property.”

Protecting tenants from rogue landlords.”Tenants must feel able to raise concerns or complaints with their landlords about the homes that they live in, and they must be able to do this without fear of eviction. We will also work with local councils to share best practice on the prosecution of landlords for housing offences. This will make clear the importance that local authorities demonstrate that such offences have a real impact on the lives of tenants.”

Cutting costs for tenants.”A Tenants’ Charter, published today in draft, will tell tenants what their rights are, what to expect and what to ask for and what to do if they have any problems. This will explain the flexibility which exists to enable tenants to ask for longer tenancies and promote awareness among tenants of what to expect, including on the transparency of letting agents’ fees. Greater transparency will help stop unreasonable practices and unfair charges by letting agents, and would-be tenants will know the full costs before they sign up to any contract. We will also develop a model tenancy agreement , by early 2014, which will simply and more clearly set out the rights and responsibilities of tenants and landlords alike and help tenants to understand which clauses should be in every agreement, which are optional but standard and which are unique to that property. We have already directly encouraged those bidding in the second round of the Build to Rent fund to support longer-term tenancies. We will shortly lay before Parliament the secondary legislation setting out the conditions compulsory redress schemes must meet. All letting and management agents will be required to belong to such a scheme. This will ensure that complaints about their service can be investigated by an independent person. A complaint could be made where the agent had not made clear what fees would be charged and, where a complaint was upheld, the redress scheme could require the agent pay compensation to the tenant.”

Supporting good landlords.”We know that the majority of landlords in the private sector are good landlords who have excellent relationships with their tenants and who maintain their properties. We want to ensure that all tenants have this same level of service and the same standard of property. We also know that there are some bad tenants out there; we will work with landlords to identify any improvements that can be made to the eviction process, so that the law-abiding landlords have confidence that they can get their property back if a tenant stops paying the rent and which will provide them with more confidence to offer longer tenancies. We recognise that many buy-to-let landlords will be prevented from offering longer tenancies because of restrictions in their mortgages. We will be holding a mortgage lenders summit to identify the barriers to lenders agreeing to longer tenancies and consider how lenders can make it easier for landlords to offer longer tenancies that benefit families.”

Increasing the supply of rented housing.”Increasing the supply of rented housing will provide more choice for tenants and more competition between landlords, which will in turn deliver longer tenancies, stable rents, more professional landlords and better properties for people to live in. This is why we have introduced the £1 billion Build to Rent fund, and we are offering up to £10 billion in housing guarantees, to bring more developers into the market, and build homes specifically for private rent. These will be high-quality developments that will drive up standards in all areas of the sector. To ensure delivery, quality and affordability, we have appointed a specialist private rented sector taskforce precisely to promote those two schemes to the wider industry. We are also encouraging local authorities to promote purpose-built rental schemes on their land holdings and via the planning system. We are supporting hard-working tenants while ensuring that good landlords are not penalised by the introduction of unnecessary red tape and rooting out the rogue landlords and letting agents that all too often give the sector a bad name.”

Hard-working individuals, hard-working families, and now hard-working tenants. Is the term infinitely elastic, or does it stretch just as far as “hard-working hamsters?” Pickles disguises the absence of any new, potentially effective, policy, with a regurgitation of existing legislation topped up with meaningless froth; promises to do something in the distant future. His statement is littered with phrases such as, “we will undertake a  review”, “we will consider the scope for”, “this will include considering”, “tenants must feel able to”, “we have already directly encouraged”, and “letting and management agents will be required.” He identifies good landlords and bad tenants and, almost as an afterthought, refers to rogue landlords in the very last sentence, as if he doesn’t wish to upset them. There are serious problems with some landlords and letting agents that require urgent attention. These are set out in Jeremy Corbyn’s Bill, but Pickles prefers to put these on the back burner. His proposals are simply an attempt to reinforce self-regulation. They will do little or nothing to help desperate tenants.

Pickles also failed to reveal the true comparative costs of benefits in the UK. To be fair, it wasn’t in his remit but nevertheless it needs to be said. The coalition focus is on out of work benefits – skivers against strivers – when these account for a small proportion of total benefit spending. ‘A Survey of the UK Benefits System, IFS Briefing Note BN13’, published by the Institute for Fiscal studies in November 2012, included a detailed analysis of benefit spending in Great Britain for fiscal year 2011-12. It showed that total benefits spending was almost £201 billion. Of this benefits for unemployed people totalled £5.164 billion, the lowest spending area by a long way. Housing benefit, Pickles area of concern, was £22.736 billion, the largest part of a benefits bill of £41.8 billion for people on low incomes. Welfare caps now in force, including limits on housing benefit, ought to reduce that but they will make life very difficult for many households in the private rented sector as rents continue to rise and incomes fall.

More than 40% (42.29%), or £85.011 billion, of total benefit spending was accounted for by benefits for elderly people, which included state pension spending of £58 billion. But this is a no-go area for the Tories and, presumably, Labour, who recently declared they would be tougher than the Tories in dealing with those who “linger on benefits”. Rachel Reeves, the new shadow work and pensions secretary, has said that the longer term unemployed would have to take up a guaranteed state job offer or lose their benefits. Is Rachel Reeves a magician? With 2.49 million unemployed, where are these new jobs for the lingerers to come from? And how will the policy affect the 1.36 million people working part-time because they can’t find a full-time job? Wouldn’t they love to have guaranteed full-time work?

Hinkley Point Jobs? Not If You’re British.

In his statement of 21 October on the deal arranged with EDF and a Chinese consortium to build twin 1.6 gigawatt nuclear reactors at Hinkley Point in Somerset, Energy and Climate Change Secretary Ed Davey said that the construction phase of the project would create “up to 25,000 jobs for skilled workers and 900 long-term jobs during the 60-year lifespan of the plant”. Cameron reiterated these figures in media interviews in the days following the announcement. He described the deal as good news for Britain, implying that much of the work would be taken up by British firms.  However, a week before the announcement was made, EDF, 85% French state owned, was absolutely clear that most of the 25,000 jobs would not go to British workers. The vast majority of the construction work is in high-tech engineering where EDF believe the UK has lost its capability. According to a Guardian report of 15 October, Ken Owen, commercial director for nuclear new build at EDF Energy said: “There are 90 contracts to deliver the job, excluding the muck shifting and enabling work. Two—-marine works and civils—-are traditional UK strengths. The other 88, that’s the world of manufacturing and erection”.

Davey arrives at a 60-year lifespan of the plant by adding together the 30-year lifespan of each reactor. Most nuclear reactors in the UK have had their ‘natural’ lifespan extended, largely because of the need to maintain base-load capacity. Hinkley Point  will not come on line until 2023 at the earliest. No nuclear station in the UK has been completed on time so it’s hard to see Hinkley Point  reversing that record. The Government have said all along that no nuclear reactors will be built with a state subsidy, but a guaranteed, incentivised ‘strike price’ of between £89 and £93 per megawatt hour, about twice the current market rate for electricity, is a subsidy under another name. The Government are gambling that the costs of other energy sources will continue to rise, making Hinkley Point seem a bargain. But if they don’t the British taxpayer will have been conned by EDF, a company who wouldn’t let a British nuclear construction company anywhere near their reactors back home. But this is the kind of foreign invasion beloved of Tories.

State-Owned Railway? Yes, Please. But Not British.

In a debate on the future of the East Coast Rail line on 12 November, Labour’s Sharon Hodgson  outlined the success of the nationally owned Directly Operated Railways (DOR) who took over the franchise in 2009, following the withdrawal of the privately owned National Express. The Government are intent on re-privatising the line, with the franchise opened to bidders but to the exclusion of DOR. The following are some key extracts from her speech.

“This is the people’s railway. It is delivering real improvements for our constituents, unencumbered by the primary purpose of having to pat dividends. That is not to say that Directly Operated Railways is squandering millions on such trivial things as improving the experience of their customers and therefore winning more of them; it is also chipping in a lot of money to the Exchequer. By the end of this financial year, it will have returned £800 million to the Treasury and put the rest of its surplus of nearly £50 million back into the service. It of course gets the lowest rates of public subsidy of all the train operators, except London commuter services.”

“The Minister will say that decisions should not be taken on the basis of ideology, and to an extent I agree, although I must of course confess to having a default opinion when it comes to ownership of public services. However, the returns to the Treasury and the improvements in services provide the business case in support of our argument that the line should remain directly operated. Perhaps that is why nearly half of Tory voters oppose the Government plans…..As if the west coast main line shambles, which cost taxpayers £55 million, was not bad enough, the contract extensions for other franchises – the Government have had to negotiate them so that they could bring forward the east coast main line tender – will cost taxpayers millions more in lost revenue. For example, First Great Western paid £126 million in premiums last year, but will pay only £17 million next year, as a result of the extension terms it has been given by the Government.”

“How ironic it is that many of the probable bidders for the service are subsidiaries of state-owned railways. Eurostar and Keolis have confirmed that they will team up to bid for the franchise. As the Minister will be aware, these two companies are majority-owned by the National Society of French Railways – SNCF – which is France’s state-owned operator. Arriva, which already operates so many franchises, including the Tyne and Wear Metro in the north-east, and has received much Government investment over the past few years, will probably throw its hat into the ring. It is of course owned by Deutsche Bahn. Abellio, which, with Serco, runs Northern Rail trains in my area, might well be tempted. It is a part of the Dutch state-owned rail operator. The Government are quite happy for the east coast main line to be run for the public benefit – just as long as the British public do not benefit.”

The Big Six: Who’s Responsible?

Control over energy prices by the ‘Big Six’ is a potentially explosive political issue, so it was appropriate that it was raised on 5 November by Labour’s Huw Irranca-Davies. Welcoming Economic Secretary Nicky Morgan to her post he said: “Is she aware that last year wholesale energy prices rose by 1.7%, but energy bills by 9%. Is it not time that the Government stopped defending the big six energy companies and actually call for a freeze on prices while we reset the energy market?” In her reply, Morgan said “It was the last Labour Government who created the big six. We started off with 20; they left us with the big six”. This must rank as the most ignorant Ministerial reply ever.

The big six – British Gas, EDF Energy, E.ON UK, npower, Scottish Power and SSE – were created with privatisation of the energy sector in 1990. They were not created by Labour from 1997, but following the election victory in that year a number of new energy companies entered the market so that currently there are 27 gas and electricity suppliers. Morgan’s point, one assumes, is that Labour did nothing to reduce the big six’s control over the market as between them they continue to supply over 90% of domestic customers. The respective share of each of the big six is as follows: British Gas – 20 million business and domestic customers; EDF Energy – 5.7 million domestic customers; E.ON UK – 5.3 million domestic customers; npower – 6.5 million business and domestic customers; Scottish Power – 5.2 million domestic customers; SSE – 9.6 million domestic customers.

A more level playing field is required, but Government plans to achieve this, which amount to little more than encouraging customers to switch supplier, are inadequate, so the ‘Big Six’ will continue to exercise a dominant control over the market. We need to reset the energy market, breaking up the vertically integrated ‘Big Six’ companies through a total separation of generation and supply, introduce transparency in accounting methods that make it easier to see how prices are set, and reduce the ‘Big Six’ share of the market by facilitating easier entry for smaller companies. And, crucially, the homes insulation programme must continue to be funded, either by a green levy on customers or through a tax-payer funded government scheme.

Reducing energy demand is as important as ensuring there is adequate energy supply. The green levy, officially known as the energy companies obligations scheme (ECO) uses a £47-a-year levy on all energy bills to pay for insulation in low-income households. To date this has accounted for 98% of the energy saving measures installed this year. The energy companies, under fire following the announcement of another round of tariff increases, are now saying that they could reduce tariffs if the ECO was abolished. But as it accounts for a mere £47 of an average annual bill of £1400 plus, it is an offer that the Government and customers can afford to refuse.

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