Housing and Regeneration Bill

I shall continue from the point where I was interrupted by that very exciting vote. Perhaps I may assure the noble Baroness that there is no need for the amendment because objective 10 already applies to this clause, as it does to every function of the regulator. However, she asked why we need these subsections in their current form. The clause imposes a very stringent test on the regulator. It is necessary to clarify what ““proportionality”” means in terms of enforcement, for example, as opposed to standard-setting or information, which is why the clause is there. Taken together, this clause and objective 10 provide that the regulator must seek to regulate in a manner which minimises interference and is proportionate, and that when the regulator decides to take enforcement action, he must give particular consideration to all the issues mentioned in subsection (2) of this clause. I turn to Amendments Nos. 110XB and 110XC, which concern mismanagement in relation to social housing—a very important issue. Perhaps I may briefly describe what ““mismanagement”” is. It is about how the affairs of the registered provider are conducted. In most cases, it will relate solely to the registered provider’s management of its social housing, but the mismanagement ground could apply, for example, to general financial mismanagement which is not directly linked to social housing. It covers standards under Clauses 191 and 192, other breaches of Part 2 and misconduct issues. It is important that ““mismanagement”” is considered not just to be mismanagement of social housing—that is, breach of Clause 191 standards—otherwise, the regulator would have to sit on its hands when faced with serious financial problems in an association. We do not want that because there might be a risk of insolvency of the provider, which would not be in the interests of protecting assets or tenants. Moreover, wider governance issues could also ultimately have an impact on tenants, and that is why we want the regulator to catch such issues early. It also needs to be able to challenge mismanagement on other non-social housing issues, such as the failure to submit accounts. As it is important that the regulator tackles issues such as that quickly, probably by an enforcement notice or a penalty, it will rely on accounts to be assured that the provider remains financially stable. Failure to provide correct information may be an early sign of serious governance problems. The amendment would make that harder to challenge. I want the regulator to be able to take proportionate early action to avoid mismanagement of social housing, financial and other affairs. Amendment No. 111ZZA seeks marginally to change the definition of mismanagement in Clause 274. That definition includes at the moment breaches of standards, breaches of any requirement set out in Part 2, and improper or inappropriate behaviour. Mismanagement and misconduct are existing crimes for action by the Housing Corporation in the Housing Act 1996. The formulation in this Bill is designed to cover the same circumstances as in that Act, but the main difference is that we have included misconduct within the overall definition of mismanagement. That is why the words ““conducted improperly or inappropriately”” form part of the definition. Misconduct could, for example, include tolerating serious mismanagement of staff and not keeping proper financial records. There is an important difference between conduct that is improper and that which is inappropriate. ““Improperly”” means conduct contrary to law, rule, convention or propriety in relation to the conduct of the business, while ““inappropriately”” means in a manner that, while not necessarily improper, is not appropriate having regard to all the circumstances. An example of this might be poor judgment of risk: making risky investments or failing to carry sufficient insurance. That is behaviour inappropriate to the task in hand—what has to be done in order to safeguard the situation. We need the definition because such actions would not be covered by ““improperly””. I agree that ““inappropriately”” is a fairly general term, but it does have an interpretation. I hope, therefore, that it is proper and appropriate to include both of these expressions. I think that I have now responded to all the amendments in the group.