Mr Clive Betts
MP for Sheffield South East · Labour · United Kingdom
“I wholeheartedly welcome the Foreign Secretary’s statement, both its content and its tone. I would like to ask about his discussions with our colleagues and allies in other countries who are looking to implement similar sanctions.”
“I offer two congratulations: first, to my right hon. Friend and constituency neighbour, the First Secretary, on her well-deserved promotion—I am sure she will do an excellent job. Secondly, I congratulate her and the Prime Minister for their real commitment to devolution, which I have wanted to see for an awfully long time.”
“I apologise for the fact that—as I have explained to you, Madam Deputy Speaker—I will have to leave straight after my question to chair Westminster Hall. I thank my right hon. Friend for doing this very challenging piece of work. I think that the theme of fairness, for the people who need benefits and for taxpayers, is right.”
“On the other hand, so many constituents with really serious conditions get turned down for PIP, and can get it only if they struggle through the appeal system, sometimes without any help at all. So the system is not fair to anyone at present.”
“When the previous Government let the contract, we were in a situation in which procurement could not properly take account of the past record of companies, and I understand that the Government have now changed that.”
“I will dive very deeply into the question, Madam Deputy Speaker. The Chair of the Committee sends his apologies for his absence; he is presently in a Committee meeting.”
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“We have made recommendations to deal with “fleecehold”, including that the Government should require that permission fees be only ever included in the deeds of freehold properties where they are reasonable and absolutely necessary, although we noted that we could not think of any circumstances in which this would be the case. We have also called on the Competition and Markets Authority to exercise its powers under section 130A of the Enterprise Act 2002 to indicate its view about whether onerous leasehold terms constitute unfair terms and would therefore be unenforceable. Where leaseholders have paid unreasonable fees or ground rents over the course of their leases so far, they should have them refunded by freeholders with interest.”
“Charges such as £3,500 for permission to build a conservatory or making a charge to fit a new doorbell are clearly ridiculous. We have called for permission fees to be limited to the true administrative costs incurred by freeholders. The Government should require this in the lease of new build properties, and legislation should be introduced to restrict such fees in existing leases. Furthermore, the growing practice of imposing permission fees in the deeds of new build freehold properties and enfranchised former leasehold properties is an unjustified intrusion on homeowners that many campaigners have rightly referred to as “fleecehold”.”
“Our view is that existing ground rents should be limited to 0.1% of the present value of a property up to a maximum of £250 a year. On future leases, the Government initially said that they would require those to be set at a peppercorn or zero financial value, but they have since proposed making £10 per annum a standard cap. It is unclear what value there is for the leaseholder or freeholder in requiring a ground rent of £10. We therefore recommend that the Government revert to their original plan to require ground rents on newly established leases to be set at a peppercorn or zero financial value. Although it is fair that freeholders should be able to pass on reasonable costs arising from a change initiated by a leaseholder, many of the permission fees we heard about were plainly excessive and exploitative.”
“The Secretary of State said that “the nature of contract law means legislation cannot change the terms of leases that have already been signed.” However, we found that it would be legally possible for the Government to introduce legislation to remove onerous ground rents in existing leases and retrospective legislation could be compliant with human rights law. Indeed, the Government propose to reduce the premium payable to enfranchise, which will in effect buy freeholders out of a contractual income stream at a discount. There is little difference in principle between altering the terms of enfranchisement and altering ground rents, and both are likely to be equally justifiable in human rights terms. Freeholders would probably need to be compensated, but that compensation need not necessarily be at full value.”
“Taylor Wimpey has apologised and set up a remediation scheme, albeit with limitations, but others have not. Redrow told us that it had introduced 10-year doubling ground rents on 347 properties, with an average starting ground rent of £400 per annum, which would rise to £12,800 in the 50th year, but it has no plans to remedy these leases. There is a growing trend for mortgage lenders to refuse to lend on leasehold properties where the ground rent exceeds 0.1% of the property or will do so. The options for leaseholders with onerous ground rents are limited. We are not convinced by voluntary offers, so what more can be done? One option is to use legislation to amend existing leases. The Government told us initially that they were not able to use legislation in these circumstances.”
“Leaseholders were told that their sale would fall through if they did not complete within 28 days, and that only the solicitor recommended by the developer could be certain to hit the deadline. Consumers must be able to access independent and reliable legal advice when purchasing a property, so we have called on the Government to prohibit the offering of financial incentives to persuade a customer to use a particular solicitor. Concerns were raised about onerous ground rents. Ground rents bear no relation to the level of maintenance or the quality of service provided to leaseholders; that is the function of the service charge. Some developers had imposed 10 to 15-year doubling ground rent terms in the leases of new build flats and houses.”
“We have called on the Competition and Markets Authority to investigate mis-selling in the leasehold sector and to make recommendations for compensation. We know the Secretary of State for Housing, Communities and Local Government has already called on the CMA to do this, and it has refused. We hope our call will act as pressure on the CMA finally to act in the interests of leaseholders. It was concerning to hear several reports from leaseholders that they had been advised, incentivised or required by the developer to use a specific conveyancing solicitor who subsequently did not advise them of onerous terms in their leases. We heard that developers had offered free carpets, free lawns, discounts or other financial incentives to use a preferred solicitor.”
“During our inquiry, we heard several accusations from leaseholders, particularly of houses, that they had been mis-sold their properties. A particular concern of a substantial number relates to their accusing developers of reneging on promises made by the sales teams to allow leaseholders to purchase their freeholds at an agreed price after two years. Leaseholders told us their freeholds had been sold on to third-party investors who are not willing to allow leaseholders to purchase their freeholds at the same price as previously offered. One leaseholder told us that the price of purchasing her freehold had increased from £3,000 to £13,000, and another that it had increased from £5,000 to £40,000. Developers denied they had deliberately misled leaseholders, but the number of near-identical stories reflects a serious cross-market failure.”
“With regard to flats, we are unconvinced that professional freeholders provide a significantly higher level of service than what could be provided by leaseholders themselves. There is no reason why the vast majority could not be held in commonhold. Only the most complex mixed use developments and some retirement properties may continue to benefit from some form of leasehold ownership. We call on the Government to ensure that commonhold becomes a primary model of ownership of flats in England and Wales, as it is in many other countries, and to create incentives—and remove the disincentives—for developers and freeholders to ensure that this happens. It is right to consider tenure for the future, but much of our evidence was from existing leaseholders who want their concerns to be addressed now.”
“The Committee concluded that “too often leaseholders, particularly in new-build properties, have been treated by developers, freeholders and managing agents, not as homeowners or customers, but as a source of steady profit.” At the very start of our inquiry into leasehold reform, we invited 50 leaseholders to meet us in Parliament to talk about the issues that most concerned them. We listened carefully to their concerns, and when at the end of the session we asked them what they wanted us to recommend in our final report, they responded nearly unanimously, “Abolish leasehold”. We have listened. Leasehold is an inappropriate tenure for houses, and we support the Government’s proposals to prohibit leasehold development of new build houses.”
“We received over 700 written submissions, mostly from leaseholders who wanted to tell us about their personal experiences. It is clear there is a great deal of dissatisfaction: onerous ground rent terms; high and opaque service charges; unfair and excessive permission charges; alleged mis-selling of leasehold properties by developers; imbalanced dispute mechanisms; and unreasonable costs to enfranchise or extend leases. In the worst cases, people have been left trapped in unsellable homes. More common are leaseholders with opaque service charges and poor levels of maintenance who have no reasonable means to challenge or query how their buildings are being managed.”
“Member for Worthing West (Sir Peter Bottomley), who I see in his place, and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick). I also see in his place my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders). We also had written evidence from my hon. Friend the Member for Weaver Vale (Mike Amesbury), who during his time on the Committee strongly advocated such an inquiry—he is also in his place—as well as from my hon. Friends the Members for Brent North (Barry Gardiner), for Feltham and Heston (Seema Malhotra), and for Manchester Central (Lucy Powell), and the hon. Member for Pendle (Andrew Stephenson). The Committee has never undertaken an inquiry that has had such an overwhelming response from individual members of the public.”
“I thank the Backbench Business Committee for making time for this statement. Last Tuesday, the Housing, Communities and Local Government Committee published our 12th report of this Session, following a six-month inquiry into leasehold reform. I thank all the members of the Committee, who agreed the report unanimously; several of them are in their places today. I particularly thank Nick Taylor, our Committee specialist, for his excellent work on this technically challenging subject. We are grateful in particular for the work over many years of the all-party group on leasehold and commonhold reform, which has helped to highlight the multitude of issues of concern among leaseholders. It was extremely helpful to have public evidence from the joint chairs of the group, the hon.”
“We feel it is necessary not simply that we have a number of individual recommendations, but that the Government now call on, invite and fund the Law Commission to conduct a more comprehensive review of leasehold legislation as a whole. We have made many other recommendations that I do not have time to go into today, but we look forward to the Government response to our report. Given the weight of evidence we have had from so many individual people—our constituents—up and down the country, we urge Ministers to take our recommendations seriously.”
“The point about the costs of legal action not being recoverable from leaseholders is made in our report, and I welcome the idea of a longer debate on that issue—perhaps once the Government have published their response, so that we can take that into account. We ought to pursue the idea of lease-rental more clearly, because people do not wholly own their properties in the way they think they do.”
“Yes. We called for an investigation into mis-selling, as did the Government. Let us hope that, between us, we get that done, particularly for older people who may not have understood some of the difficult complications with those sorts of properties.”
“Absolutely. It is a complete scandal, and a number of developers have blatantly admitted that they sold on the property and did not tell the leaseholders what was being done. Ultimately, banning new houses from being built as leaseholds solves the problem, but immediately there ought to be a right of first refusal for leaseholders to buy their freehold at a clear and regulated price. The Law Commission is working on that issue, and we support that.”
“We did consider that, and we said that although such voluntary agreements might be a step forward, they were not sufficient and they were not as good as our proposals to restrict leases on existing properties to 0.1% of the value, or £250. Legislation would overturn the current arrangement, and provide a better one for leaseholders.”
“The word “scandal” is absolutely right to describe the way some of these developers have behaved. Hopefully action will follow quickly from the Law Commission’s report, and the Committee will keep an eye on that and press for action, as I am sure will other hon. Members. We must keep reminding ourselves that the companies who have done this are hardly hard up. In the last financial year, Taylor Woodrow made profits of £800 million and Persimmon of £1 billion. Those companies are not relying on that money to keep themselves afloat.”
“We need something simple, and the Law Commission has been asked to consider that issue because something as simple as a multiple of ground rent might not be fair. The freeholders who would get the biggest benefit from a multiple of ground rent will be those who made the largest ground rent charges, and it would be perverse if those who behaved the worst were to benefit in that way. We want the Law Commission’s report as quickly as possible and a formula that is as simple as possible but also fair.”
“There are circumstances where leaseholders can do that—ultimately, they could move to a form of commonhold, although that requires substantial agreement among themselves, and many elderly leaseholders might not want to go down that road without lots of explanation and help. One of our concerns was that there is not much help or publicity about that process, and that issue could be looked at. Service charges are often terribly opaque, and proper information is not provided. The right to challenge is not explained, and challenge through a tribunal is difficult. Another thing that would help is a simpler housing court system, which we hear the Government are going to introduce. The quicker they do that, the better.”
“However, the Law Commission made it very clear to us that it currently does not have the resources in its budget to do that. It would need the Government to offer, and provide, sufficient funding.”
“On the first point, if a leaseholder at a tribunal asks at the beginning for a ruling that, if they win, costs cannot be passed on to the freeholder, the tribunal can so rule. The problem is that many leaseholders do not know about that requirement. The Government could do an awful lot immediately to publicise that. Secondly, on service charges, we recommend that a standard format should be brought in, so that all leaseholders know what to expect and all information is given to them in a proper manner. The Government could publish guidance without having to wait for primary legislation. We hope that they will look at doing that very quickly. On the Law Commission, I do not know how long it would take it to report, but the Government could make an immediate decision to ask it to produce a report.”
“I am tempted to say yes. What we said in the report was that we need to move to a whole new approach, where commonhold becomes the default option for flats, we abolish leasehold for houses, and if we put the sorts of restrictions on ground rents and permission fees that we have been talking about, there will not, ultimately, be any incentive for freeholders and that will drive it out of the market. I think the issue is twofold: stopping it on new properties and removing the incentive for freeholders, so their income streams, which are wrongly obtained now, will not be available in future.”
“We took evidence on that. There are caveats and conditions on human rights legislation. If there is a general good to be obtained, that can outweigh the particular interest of private owners of property. The Government have already got around that on enfranchisement. They have asked the Law Commission to recommend a simple enfranchisement that could mean that the freeholder receives less compensation when the leaseholder enfranchises. In that case, the Government are already considering reducing the value of enfranchisement to freeholders. That is no different from a recommendation to reduce the value of ground rents to freeholders in principle. That probably needs further work, but we had advice that it is possible. There will be a requirement for some compensation, but it need not be full-value compensation.”
“Yes. I too thank the Leasehold Knowledge Partnership for its work. My hon. Friend is absolutely right. Houses are being mis-sold in the first place. Then, when people are in a leasehold situation, they are being charged ridiculous amounts for permission fees for things that should be done anyway without the requirement of the freeholder to say yes. Service charges are put in for services that are often not delivered. Freeholders are making money out of that. We heard examples of freeholders contracting for insurance on the property and taking a percentage contribution out of the money they paid over. Those things are completely wrong. The sooner we can change the system, the better.”
“Absolutely right. I will take that up, and I think we can write directly to the CMA as well. Obviously, the Government will get a copy of the report and will respond. We will make sure that the CMA gets a copy as well and responds to it. This is a scandal. Many people’s lives are being blighted by this situation. We need to do everything we can as quickly as we can to rectify it.”
“Absolutely. We have said that we think there ought to be retrospective changes to the permission charges and the ground rents where they are clearly onerous. The Competition and Markets Authority ought to look at whether those contracts are enforceable, because they are, in many cases, unreasonable. There are two ways we can and should approach that. I am pleased to see that the Minister has sat through this statement on the Government Front Bench, because in the end she is the one who is going to have to deliver a lot of these changes. I think she is hearing very clearly from across the House that there is a real demand that this whole matter be addressed properly by the Government and that they implement the Committee’s recommendations.”
“We made it clear right at the beginning of our report that there should be a clear explanation from the seller of what extra charges there might be for the future maintenance of areas of open space that have not been taken over by the council. If they are to be managed by a private company, its service charge should be open and transparent, but all that information should also be provided right at the beginning. My hon. Friend is absolutely right that this is a scandal. I referred to 700 pieces of written evidence, but every day we are continuing to get leaseholders writing to us, having seen our evidence sessions on the television or read about them on the website, saying, “Me too; we have been badly treated and we want something done about it.””
“I refer the Minister to a sentence in his statement, when he said: “The first provides confirmation that the EU cannot try to trap the UK in the backstop indefinitely”. There are two interesting words there. First, the word “confirmation” is a simple affirmation that there is not any change—it is confirmation, so there is no change. Secondly, the word “trap” implies unreasonable and deliberate action by the EU, so is the Minister saying that if the EU behaves reasonably and there is simply a genuine failure between the UK and the EU to agree on a way forward, the UK could remain in the backstop indefinitely?”
“We will now move on to the Front-Bench speakers. The first is the SNP spokesman, the hon. Member for Edinburgh East (Tommy Sheppard), who will be pleased to know that it is not the Chair’s responsibility to sing him happy birthday.”
“I call the Minister. I hope that she will allow a couple of minutes at the end for the hon. Member for Hammersmith (Andy Slaughter) to wind up the debate.”
“Why can we not have that sort of arrangement?”
“I actually whipped the minimum wage Bill through Committee on that occasion, so I well remember Conservative hostility to it. What the Secretary of State is really promising today is future consultation and future opportunities for votes. Looking behind him, I do not see a great deal of commitment from those Benches to such measures. Why can he not go further? Why can he not agree to put a commitment into the withdrawal agreement and the treaty that the UK will never fall behind EU minimum standards on workers’ rights either now or in future? I know that he has mentioned parliamentary sovereignty and not binding future Parliaments but, historically, Governments have negotiated treaties and Parliaments have approved them and those treaties are binding on future Parliaments until they choose to withdraw from them.”
“I have previously raised with the Secretary of State the Government’s proposal to remove deprivation as an element from the foundation funding part of the local government allocation. Is he aware of the research done by the University of Liverpool and the Institute for Fiscal Studies showing that although deprivation accounts now for only a 4% difference in spending, if we go back before austerity in 2010, in the early years before the disproportionate cuts in grants to the poorest communities, deprivation accounts for more than 10 times the amount of spending? In the light of that, will he review his decision to remove deprivation as a key element of spending allocations?”
“The Secretary of State will be aware that, if the UK were still a member of the EU after 2020, South Yorkshire would again be eligible for less-developed region status because its economy has fallen back against EU averages since 2014. If it were entitled to EU funding, South Yorkshire would receive £1 billion over seven years. So either his announcement today is totally inadequate, or he is going to promise that, under the shared prosperity fund, South Yorkshire will get exactly what it would have got under EU funding if we were still in the EU.”
“Will the Solicitor General give us an assurance that, if there is any change to the legal advice that the Government receive about the withdrawal agreement or any related documents, that advice will be given to this House before we have the opportunity to vote on any resolution to which it might be relevant?”
“It is quite frankly astonishing that the Minister did not mention Brexit in her initial comments, because the company certainly did. Flybmi said that uncertainty around Brexit and the possible costs of needing both UK and EU licences in the event of a no-deal Brexit were factors in its decision to go out of business. Will the Minister now make it clear whether all airlines should be planning for a no-deal scenario and looking at how to get dual licences?”
“I am sure the Minister is aware that, because of other pressures, councils are increasingly unable to address priorities that they would have addressed many years ago. The National Audit Office has shown that spending on road safety and traffic management across the country has fallen by 60% since 2010. Will the Minister accept that one of the most important things he can do is argue for increased funding from the Treasury for local authorities in the next spending round?”
“I thank the Minister for Policing and the Fire Service for the supportive comments he has made about the improvements that South Yorkshire police force has made in the past year. However, it has the legacy issues of Hillsborough and child sexual exploitation in Rotherham to deal with, and each year it has to come to the Government with an application for a special grant. It has been given that, but the grant has to be top-sliced, putting an additional burden on police funding. Will the Home Secretary agree to a meeting with the South Yorkshire PCC and local MPs, involving either him or the Policing Minister, to see whether we can find a better way to deal with these issues in the future?”
“The Secretary of State rapidly skipped over the funding review. Will he confirm that the consultation proposed in December to take deprivation out of the foundation element of the funding review? That would transfer money from deprived areas to non-deprived areas. Is that fair?”
“I probably agree with most of the points about devolution made by the hon. Member for Carlisle (John Stevenson), but I strongly disagreed with his comments about the situation in 2010. It was clear that we had an international financial crisis, and Gordon Brown deserves a great deal of credit for mitigating its consequences on the international stage. That should be put firmly on record.”
“It has happened in my city, where libraries are having to be staffed by volunteers, grass-cutting is done less often and private sector housing officers are not sufficient to bring selective licensing on the scale that we would like. There are cuts to funding for road safety, with bus routes scrapped, and children’s centres and youth centres closed. That is happening in the constituencies and local authorities of Conservative Members, too. What worries me is that as most people do not have family members in care, they see the other council services: parks, buses, libraries, road maintenance and refuse collection. Those are the services that matter to them, but they are the services that are subject to the biggest cuts of all.”
“Sheffield and most authorities have done the right thing by concentrating on care, because they have statutory responsibilities to the elderly, children in care and people with disabilities, but National Audit Office figures for cuts to other services since 2010 show that private sector housing has been cut by 60%, that traffic management and road safety has been cut by 60%, that recreation and sport has been cut by 50%, that libraries have been cut by 30%, and that planning and development has been cut by 50%. Those cuts are hitting communities. In the end, it is not councils that are hit by such cuts; it is communities.”
“Those increases bring in more money in richer areas, of course, and those are the areas that have received the smallest cuts to their grants since 2010. Those two things do not sit well together. Sheffield has seen a 50% cut in grants since 2010 and major cuts to services. Social care services for both children and adults overspent by £15 million last year and will do so again this year. This is not a local authority out of financial control. It has not yet used its reserves, but next year, for the first time, it is planning to do so. Of course, that can be done for only a limited number of years. Many authorities across the political spectrum are in the same position. Care is very important, but there are other services to consider.”
“That is quite a good record. If the hon. Gentleman looks back, he will find that one of the problems was the lack of regulation of financial institutions, but the Conservatives criticised Labour for regulating too strongly throughout that period. I will try to be charitable to the Government by saying that I can welcome some elements of the spending review, including an extra £650 million for social care. However, that has to be set against the LGA’s analysis of a £1 billion deficit in both children’s and adult social care, which will rise to £3 billion for each in 2025. I can welcome the fact that the spending power of councils as a whole will not fall in real terms—there is a 2.8% increase in cash terms—but that is spread differently across various authorities, and is cushioned by increases in council tax.”
“I accept that this is a difficult and complicated job, but the Government need to be very careful that the process does not become seen as an exercise in financial gerrymandering. That would be very sad for local government, as well as for the people we represent. There are two challenges for the period ahead. Let us all stand up for local government and ensure that it does better in the next spending review and has a better allocation of resources. Let us then make sure that those resources are fairly delivered. I am sure that we will have a lot more to say about that in the future, but those are the two tests by which I will judge next year’s spending review.”
“That money needs to be kept in local government, not used to mop up other grants that are going to be cancelled. On the funding review, there is a question of not just the totality of the money, but how it is distributed. I accept that one area’s fairness will possibly be another area’s unfairness, and we will have different views, but taking deprivation out of the foundation element—taking money away from deprived areas and moving it to others—is very difficult to justify. I say to the Secretary of State that this is a serious exercise. I hope that in the end the Government do not get to a point where they use that mechanism as a way of financially manipulating money into Conservative areas, because that is the suspicion among Labour Members.”
“There have been two clear facts since 2010: first, local government has been subject to bigger funding cuts than any other sector of the public realm; and, secondly, within those cuts to local government, the biggest have been in the poorest areas. Those two facts are absolutely clear. Looking ahead, how can we deal with that? First, there has to be a bigger pot of money for local councils in the spending review. The answer is very simple. The Housing, Communities and Local Government Committee has welcomed 75% retention of business rates. It also said that that money should not be used to replace public health and other grants. The money needs to be kept in place and used to help to fund the gap in social care and to reverse some cuts to the other services I have just described.”
“Absolutely right. We hear people start to say, “What is my council doing for me? What am I getting from it? I’m paying a lot more as council tax rises by 6%, but I’m getting a lot less.” We should all worry about the impact on and support for local democracy, and local councils as a whole, if that continues and people think that they are paying money into the system but getting nothing out. There was something very wrong with the announcement of another cut to the public health grant of £80 million in the very week in which the Government promoted their new long-term funding plan for the NHS and said that prevention would be more important in the future. Those two things just do not fit together.”