My Lords, it is a privilege to be a co-sponsor of this proposal, so ably introduced by the noble Baroness, Lady Hayter of Kentish Town, and spoken to by the noble Earl, Lord Caithness. The noble Baroness has far greater knowledge of regulation, which goes back a long time. Especially on the regulations of bodies, that surpasses anything that I could do.
I am a fellow of the Royal Institution of Chartered Surveyors; I have been a member for 48 years and was at one time chair of one of its expert panels. I am also an RICS-registered valuer. Although I am semi-retired, I still pay a subscription to the RICS. I am governed by its rules and its requirements for continuous professional development, and so on. I must make it absolutely clear that the views I express are my own and are not to be taken as any statement by the RICS on its policy, or as its acquiescence in any way with the conclusions that I draw. Although I have spoken at length with the RICS, my views are essentially my own.
I will give your Lordships a few facts. The RICS has a membership of 130,000, 20% of whom are foreign-based. It has international and national status. It sets standards of technical compliance in areas of valuation, measurement, physical assessment and methodology of appraisals in many areas. It does that within a framework of ethical and competence standards, backed by disciplinary powers over its own membership. Other bodies and sectors have frequently and voluntarily adopted the standards that it sets. It has members who survey the ocean floor and others who auction fine art; such is its range and scope.
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It should be noted that, as the noble Baroness, Lady Hayter, mentioned, RICS does not have reservation of title or function, either of the label “surveyor” or of any sole dominion over the many areas in which its members operate. Core to this is freedom from political and sectoral commercial influences, along with powers of self-regulation. These form the bedrock of trust and confidence in markets across the world and sit behind the inward investment to the UK property market, which is one of the most fluid and effective anywhere. Remove those factors and there is little to distinguish the UK from jurisdictions which seek to control areas such as the judiciary, press freedoms and citizens’ rights of association.
There is much at stake. The noble Baroness referred to James Sparrow, the chief executive of Savills UK and Europe, Middle East and Asia. He tells me that the annual investment in UK commercial property alone is worth £60 billion—a figure I mentioned earlier. Half of that is inward investment from abroad and most of it is through the advice of RICS members and their firms. We also have a substantial residential loan book, supported by valuations, in the main from RICS registered valuers. What other profession makes that level of contribution to national wealth?
All this, as we have heard, could be affected by the Secretary of State’s step-in powers in Clause 213—a perceived, if not actual, loss of independence. Arguably it is a disruptive power for an appointee of the Secretary of State to review at any time, as we have heard, for any purpose—presumably including technical
standards—under their terms of reference and sole discretion. The Secretary of State is by definition not politically neutral, so would never be seen as coming to the situation with total objectivity. That is simply how such step-in powers from any Government of any persuasion anywhere else in the world—and now here in the UK, as we see from this clause—will be interpreted.
A great deal reputationally hangs on this. It affects the image both of RICS and of UK plc at home and abroad for investor confidence and an orderly rules-based system. Even more significantly, it affects the ability to offer candid advice based on expertise and experience and to speak truth to power. It is worth pointing out what a huge influence in soft power abroad, as well as international generators of revenue to this country, companies like Savills and other UK-based but internationally focused firms of general practice surveyors are.
Clause 213 also sets a wider precedent for government intervention. By precedent, I mean it could affect any similar body and, by specifically referring to “governance”—the Long Title, on the very frontispiece, refers specifically to governance—of RICS, it proposes Secretary of State powers on a matter that, as far as I know, constitutionally should be between a chartered body and the Privy Council. In the absence of better justification, it is necessary for me to ask the Minister if Secretaries of State generally are to become the gatekeepers on matters of chartered body governance in priority to the Privy Council. If so, what public discussion has taken place about that process?
As to the genesis of the matter, the Government’s actions and other things that led up to this state of affairs, I will skip the chronology to focus on four points. First, it is clear that there has been insufficient departmental appreciation of the differences between such things as critical fire safety in terms of building resilience—the building’s ability to withstand that sort of event—the safety of residents in the face of fire-related hazards and the risk assessment criteria for secured lending. All of them have different technical, ethical and policy criteria.
Secondly, I observe that the reaction to the RICS decision on EWS1—the protocol for dealing with external cladding systems which led to the freeing up of a mortgage logjam—in December 2021 and its guidance to valuers that month was followed by the Secretary of State’s public comments on taking powers vis-à-vis RICS in the following month. Four months later there was the inclusion of these measures in the Bill, then at Clause 186, as introduced. These all took place after the noble Lord, Lord Bichard, had been appointed and before he issued his report. I question the propriety and timing of such a potentially prejudicial intervention.
Thirdly, I gather that the noble Lord, Lord Bichard, discussed his review’s terms of reference with the department from inception, regularly updating it on progress, and that the department expressed its satisfaction with the manner in which things were unfolding—and indeed, with the outcome. The expectation—I believe this is common knowledge—was that the clause would probably be deemed unnecessary and be withdrawn. It
was not, and it has remained for poorly defined reasons that are difficult to conclude are now either necessary or were ever well founded.
Fourthly, the Government need to understand how the timeline and sequence of events appear to the outside observer. It does not look good and neither does Clause 213 appear a necessary, desirable or proportionate response to whatever it was that triggered this in the mind of the Government. The department seems to believe that RICS somehow governs and controls property markets. If that is the belief, this is a wholly mistaken concept. It fails to understand how markets operate or the role of this professional body in setting technical norms, laying down standards and advising on the use of analytical tools in property which facilitate the opening up and transparent operation of markets by other players.
In the context of purely technical issues, which generate core facts and inform appraisals, and set alongside the normal interpretation of “public advantage” and “proper standards of conduct”, these are never likely to wholly sit ad idem with what a government department has across its desk any given moment. There is a necessity for give and take within departments and recognition that there is a mutual understanding of the importance of professionals being able to offer their views to the Government without fear or favour, with the Government of the day respecting that but acknowledging that, ultimately, they make decisions on public policy as a democratic political exercise at their own political risk.
RICS technical standards are built up painstakingly over decades—I was going to say hundreds of years, but the techniques change rather more rapidly than that—by observing market sentiment and the fundamentals of transaction analysis. These are not rules set by the RICS simply for its own arbitrary convenience so much as observation and codification of how people interact in markets and other property-based relationships, especially those having regard to the fiscal, legal and other similar considerations set by other institutions, wider society, and, most principally, central government itself. To challenge these because a Government of the day may disagree with a professional standpoint is to risk market disarray and to create doubt, mistrust, and, ultimately, investment chill, as we have heard already. I sense that there is also some notion that this independent, self-funded, member-driven body should now be beholden in some way to reporting to the Department for Levelling Up, Housing and Communities. When responding, can the Minister confirm, categorically, whether that is intended—and, if so, on what justification—or else that it is not intended?
Governance and policy, as well as public versus private interests, seem to have been mixed up here. The Government may not have thought this through, but, assuming they have, I can only assume that there is some other metric at work. Despite the efforts of my noble friend Lord Bichard to ensure that the department was satisfied with what he undertook and that it approved all his conclusions—and, furthermore, he has been retained by the RICS to ensure that the institution delivers on what it has promised—the
department seems to continue to find fault with the processes and makes no secret of implications that it might take other unspecified action if necessary. As we have heard from the noble Earl, Lord Caithness, it would be entitled to do that under common law—and at any time.
Personally, I would prefer the views of my noble friend Lord Bichard, as the reviewer, on what is happening in the RICS—as well as his views expressed to me on the coherence, good order and progress with which things are proceeding—rather than those of a department standing outside that process and, seemingly, wishing to involve itself in some sort of micromanagement while building a negative picture of how the process is unfolding.
The Minister explained in her letter to me of 22 January 2023—following five separate requests by me for an indication as to the policy justification:
“The clause does not change the regulatory status of RICS. It makes clear in law that the Secretary of State may commission a review by an independent person as to whether the RICS is operating effectively while maintaining the ability for the Institution to operate independently from Government. We are not seeking powers to respond to the findings of future reviews because we cannot pre-empt the outcomes of independent reviews. If any further action is required, this can be considered fully upon reflection of the review report. It will also be for the RICS as an independent body to consider the findings and respond accordingly in the public interest”.
However, her letter did not explain the policy justification that I had asked for; it did not inform me why the Secretary of State requires to intervene on governance in particular. If the absence of powers to follow up on findings is intentional, why do we need this clause at all? After all, the RICS, having just had two reviews in quick succession, is indeed considering and acting on its findings, but this still does not seem to be good enough.
The noble Baroness, Lady Hayter, reinforced the point about the willingness of the RICS to conduct its own independent reviews—as it should—but that does not prevent the Government making their own views known at any time, as indeed they should. However, they need to work with the RICS, as they have always done in the past and they claim to want for the future; it is something that the RICS itself clearly welcomes. Yet this should not be done by undermining its objectivity and independence, and, certainly, not by way of suggestions of other forms of action; that is simply inappropriate. Despite the Minister’s and officials’ protestations that the Government want to work with the RICS, that the RICS is of great importance to their plans and that they wish the RICS to be a strong and confident organisation, that is not how the body language reads. So the Government need to explain the circumstances in which this power will be used, and to confirm that it is reserved for specific instances of serious misdemeanour and will not be held as a general threat hanging over the head of the RICS in respect of any issue, great or small, they might happen to alight on, or, indeed, decide to generate from within. Will the Minister give me that assurance? Will he confirm what rules and trigger mechanisms will apply to the proposed power, and if he cannot do so now, can he write to me, copying in other noble Lords, before Report?
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I conclude, as have the previous two speakers, that Clause 213 is unnecessary, undesirable, inappropriate and capable of generating more damage than it procures benefit. It is discriminatory in that it singles out the RICS for special treatment in circumstances where nearly every one of its areas of activity has at least one other participant body or organisation over which the RICS has no member regulatory function. Whether this makes it a hybrid Bill is something I have pondered; but I am not expert on this, and it is difficult for me to pronounce on such a matter. Like this Parliament, much is held together by conventions, mutual trust, and the wish to share information and to transact other than through letters of the law. The RICS certainly needs to consolidate its reputation. It has been through a period of turmoil—let us make no mistake about that; that is a matter of common knowledge—but it is on the road to putting things in order, and, with the aid of my noble friend Lord Bichard, I have every confidence that it will achieve that. However, Clause 213 is capable of much wider mischief, which will not, ultimately, be in the power of the Secretary of State to put right, if, as I suspect, it goes wrong. So I support the noble Baroness, Lady Hayter, that the clause has no beneficial purpose in the Bill and should be removed.