And the next item is the statement by the Cabinet Secretary for Communities and Children on the Regulation of Registered Social Landlords (Wales) Bill. I call on the Cabinet Secretary to make his statement. Carl Sargeant.

Thank you, Llywydd, for the opportunity to make this statement on the Regulation of Registered Social Landlords (Wales) Bill, which I introduced yesterday.

This Bill addresses issues as a result of a classification decision by the Office for National Statistics. The decision to reclassify registered social landlords as public non-financial corporations effectively brings RSL private borrowing into the public accounts. The Bill sets out provisions that will allow this decision to be reviewed by ONS in order to maintain the current funding arrangements for RSLs here in Wales. RSLs in Wales provide around 141,000 affordable social rented homes in total and played a vital role in meeting the previous Welsh Government’s target of 10,000 new affordable homes. A significant proportion of their development programme is funded through borrowing from the private sector to supplement funding received from Welsh Government. The Welsh Government has committed to providing 20,000 much needed, new, affordable homes during the current Assembly term. RSLs have committed to deliver at least 12,500 of these new homes.

Llywydd, in September 2016, the Office for National Statistics reclassified RSLs in the national accounts as public non-financial corporations. What, at first, might be thought of as a technical, accounting decision, could, in fact, have serious and far-reaching consequences. It means that RSL private borrowing, currently on average £200 million per year or £1 billion over the period, will be classified as public sector net borrowing and score as a charge against Welsh Government budgets. The impact of the ONS decision is significant, and if we don’t bring forward legislation and RSLs remain classified as public sector organisations, funding for them to build homes would have to compete with other Welsh Government priorities. We would need to either increase Welsh Government spend on social housing by around £1 billion during this Assembly term, with serious effects on our existing spending commitments, or to accept that RSLs would be able to provide significantly fewer new affordable homes and not be able to borrow to invest in existing stock. RSL borrowing also supports the positive contributions they make to the communities in which they work, including significant local training, employment, social and economic benefits. There will also be uncertainty for funders who have made long-term commitments to funding an independent RSL sector.

Joyce Watson took the Chair.

The alternative is to take action to enable ONS to reverse their classification decision, which will maintain the current funding arrangements and this is why I have introduced the Regulation of Registered Social Landlords (Wales) Bill. ONS has made similar decisions in respect of social landlords in other parts of the UK. The Scottish Government has already introduced compatible legislation, on a timetable similar to our own, while the UK Parliament has already passed legislation with a similar purpose to cover England, with associated UK Government regulations currently going through the parliamentary process. I’ve worked with the Cabinet Secretary for Finance and Local Government to secure a derogation from HM Treasury whilst we deliver the necessary legislative changes or the ONS reclassifies RSLs to outside the public sector accounting boundaries. The derogation is in place for 2017-18, ensuring there is no budgetary impact in this financial year. HM Treasury have confirmed that Wales will be treated no less favourably than England while the legislation is fully enacted, as it is in Scotland and Northern Ireland. HM Treasury does, however, expect to see progress in bringing forward legislation to enable the ONS to reverse its decision.

The reason for the ONS decision is that RSLs are subject to central and local government control, through provisions that are mainly set out in the Housing Act 1996. Therefore, the scope of the Bill is restricted to dealing only with the controls identified by ONS and to changing them only enough to meet the ONS requirements, while ensuring that the aim of the Bill, allowing ONS to reclassify RSLs and maintain current funding arrangements, is achieved. The Bill makes provisions covering disposal of land by RSLs as well as certain constitutional changes and changes to the structures of RSLs, local authority influence in RSLs, and when the Welsh Ministers can use powers in respect of inquiries, enforcement and intervention in relation to RSLs. I want to be clear: the Bill will not result in an unregulated social housing sector. There will still be robust and effective regulation after the changes it proposes have been made. The Welsh Ministers will still be able to take action when appropriate. We will still retain continuing intervention and enforcement powers and the Bill clarifies the circumstances in which these could be used.

In December 2016, partly in anticipation of the implications of the ONS reclassification, I launched a new regulatory judgment framework and performance standards. Judgments on RSLs’ governance, including landlord services and financial viability, will be published at least annually, and RSL boards are required to submit an annual compliance statement confirming they are meeting the performance standards. Therefore, the regulatory framework remains extremely robust.

The policy proposals and a draft version of the Bill have been discussed with ONS, and ONS has determined that, if the Bill receives Royal Assent in its current form, the totality of public sector influence exercised through central Government, local authorities and the existence of nomination agreements would not constitute public sector control. So, if the legislation is enacted as introduced, ONS will be able to reconsider its reclassification of RSLs here in Wales.

We have been engaging with stakeholders, including tenants, funders, RSLs and their respective representative bodies, since before the ONS announcement last year. We also conducted a public consultation on the proposals. Key stakeholders understand the need for the Bill and have generally given it their support. More importantly, Llywydd, perhaps, stakeholders understand the likely impact of not enacting the legislation that we are proposing with this Bill.

Assembly Members across the political spectrum have been clear about the need to find a solution that enables ONS to reclassify RSLs in Wales back to the private sector as soon as possible. I look forward to working with the committees and Assembly Members as we consider the Bill and make the necessary changes required to safeguard the supply of good, quality, affordable homes here in Wales. Diolch.

Can I thank the Cabinet Secretary for his statement? Indeed, in the light of the Office for National Statistics’ reclassification of registered social landlords into the public sector, the Welsh Conservative Party does believe the general principles of this Bill should be supported. Obviously, we’ll pay close attention to the details in committee, but I think there is a general political consensus that this matter must be resolved. Indeed, I’ve called for an increase in house building and an increase in ambition in house building, especially for the affordable sector, and have made that clear over the past few years, and I welcome this Bill, therefore, as a way to simplify the current process and remove a barrier that has now been brought to our attention, however unexpectedly. Any limit placed on the borrowing of housing associations in Wales would risk the Government’s ability to deliver on its 20,000 affordable homes target, and that would have an adverse effect on the housing situation. So, there is a real requirement to move here.

I do hope that the Government will work closely with ONS throughout the Bill at its different stages. Indeed, we will, at some point this autumn or early winter, hear what the ONS review for England has decided and, of course, the Minister did read out a statement from ONS, but obviously until we know that what we’re doing is sufficient, I think we’re all going to be slightly nervous. So, I’m sure it’s going to be important for him and his department to closely monitor the progress of this Bill.

I think the Bill, obviously, needs to meet the concerns of ONS, so that reclassification is possible, while protecting the interests of stakeholders, especially tenants. I know the Minister has made reference to that in his statement, and I just want to follow up with a few more details that I hope he can respond to now, or when we debate the general principles. The first is the removal of requirement for disposal consent. I note that, when this requirement was actually sought in the purpose of the General Consent (Wales) Order 2009, the Government then said an application to the Welsh Ministers for disposal may be seen as a method of protecting tenants. So, I think it’s logical to ask you how they are now going to be protected if that requirement for the disposal consent is removed.

Then, if I could turn to regulatory powers and enforcement, a change in regulation needs to ensure that there is sufficient confidence, I think, for lenders and investors to provide the funding essential for the delivery of new social housing where central Government is unable to provide the funding itself. This factor was highlighted by the Council of Mortgage Lenders in the consultation, and they expressed concerns that an RSL would have had to have failed before any action was taken against it, which has the potential to damage the wider Welsh RSL sector by increasing perceptions of high risk amongst potential lenders. I’m sure the Minister’s already considered that consultation response carefully, and I think it would be useful if we could hear some of his views and his response to it.

And then, finally, the power introduce a new power to reduce local authority influence over RSLs in Wales. I do note that there’s overwhelming support for this; I think only one local authority said that they couldn’t support this measure. But again, this has been something of a protection for tenants—you know, perhaps the local authority members of housing association boards, and that. So, how is the balance going to be kept to protect the tenants’ interests? But in general, I’m sure none of these issues is insurmountable. We will pay careful attention to the practicalities, but we will offer every assistance for this legislation, if fit for purpose, to proceed.

I thank David Melding for his comments, and I thank him also for indicating that the principles of the Bill will be supported. First of all, on the couple of questions that the Member raised around tenants and tenants’ rights and disposal, the legislation technically does not affect the fundamental commitments made to tenants through our large-scale voluntary transfers, and will still have to deliver and maintain the Welsh housing quality standard, for example. I will give him more details as we move through the process of the scrutiny.

In terms of the leverage of associations, I mentioned earlier the regulatory judgment framework and the performance standards of this, and this is a very powerful tool particularly of interest to the lenders. One is the Welsh Government as a primary lender, and also the private sector. This is something that RSLs are very keen to ensure that there is a balanced approach to, and we are very keen to pursue that on the basis that it is done properly and that scrutiny of these associations is done properly. This will result in the ability to lend long term, which is something that I’m sure RSLs will keep a very good eye on as a business risk to their association.

Finally, regarding local authority representation, there was certainly local authority representation on there. This is, as we move forward, a discussion that we’ll have in terms of how we make sure that the balance is right around scrutiny, tenants’ representation and understanding their ability to influence housing associations. It’s an important point the Member raises, and I look forward to working with him as we take the Bill forward.

As a Plaid Cymru group, we are minded to support at the moment, but, as with the caveats proposed by David Melding, I think it’s important that we see what happens at committee stage and to—[Interruption.] Everybody’s phone is going off today. Gosh.

I just wanted to say that we’d have to look at what happens in committee in relation to the amendments potentially that will be put forward.

I’d want to probe further on whether you are content that there are still sufficient controls in place for Welsh Government under these proposed changes. You mention the regulatory framework for housing associations registered in Wales document, but, for example, performance indicator 2 in relation to tenants is quite—. Well, it’s just one tiny paragraph, and it doesn’t say how you’d demonstrate tenants are effectively engaged. It doesn’t go into detail about what appropriate ways there are for tenants to be engaged, so I’m wondering how you’re proposing to enhance the role of tenants if that is the vehicle for doing so and if it’s not through this particular piece of legislation.

Picking up on the point with regard to councillors, I believe that’s because the councillors who’ll be on any given board won’t have the deciding vote on that particular board. I was wondering whether you could look into the possibility of whether tenants groups or tenants could have that particular role, so then, potentially, you wouldn’t have to reduce it because tenants wouldn’t be deemed to be political. The reason why I think you have to decrease the amount of councillors is because it is deemed as Government control or political control. If you had tenants performing that higher level role on housing association boards, could you do it that way? Could it be a different way of looking at things? I’m not sure whether you’ve done that research. I’m getting my way through the explanatory memorandum, but, obviously, we had it yesterday and we’ve got 134 pages to read, so I haven’t got through it all yet. So, perhaps we can discuss that further.

As we know, the issue with regard to it being in the public domain at the moment would be the borrowing issue. So, this is a wider point about whether you’ve discussed with the UK Government increasing or altering the cap on local authorities’ borrowing, considering the fact that, if it did remain in the public domain, you’d be borrowing off the public purse, and you’ve already got plans in train. So, would you be able to appeal to the UK Government to change their long-standing opposition in this regard? And, if you can, then I will congratulate you.

Can you comment on the removal of disposal consents? In what ways do you plan to make sure that the Tenant Participation Advisory Service will be fully involved in consultation on that particular issue?

When this goes to committee, can we ask the ONS to comment on any potential recommendations so that any potential amendments either by the Government or by individual Members are considered in relation to what the ONS deems to be acceptable? I.e. at the moment, the ONS have said that, as the Bill stands, it would be acceptable, but, in politics, people have different ideas; amendments will probably come forward. How are we going to know throughout that process that the ONS are happy with that, because, of course, you’ve presented a Bill, but you’ve only had a reaction to it as it stands? When we’ve discussed this before on the education committee in the previous Assembly, where we had reclassification of further education and higher education, we did have a private briefing from the ONS, but we didn’t have something on the record. But really, I think, we need to be as open and accountable as possible—so whether the ONS could give the committee dealing with this that type of flexibility and that openness to discuss whether possible amendments would be futile or whether they would be able to consider them appropriately.

At the end of the day, we want to be able to build more social housing, and if changing this means that that happens, then, of course, we think we will be able to support it. But I think it’s about the detail of what is proposed and how we ensure that tenants’ rights are at the heart of all of this.

Before I call the Cabinet Secretary to respond, can I ask people to check their phones?

Thank you, Llywydd. Again, I’m grateful for the Member’s indication of in-principle support for the passage of the Bill, subject to the details. I think the Member’s final point was one of the important ones that she raises, about the fact that the consequences of not doing this have dramatic effects on the ability for RSLs or Government to deliver on social housing. The other details are important, but the principle of the Bill going through is with agreement of the ONS and is with agreement of the Treasury for a certain time period. Otherwise, the risks to our sector are huge.

On some of the details that the Member raises, something that I will give further consideration to as the passage of the Bill moves forward is about making sure that there is proper representation. We did hold a public consultation on the Bill, and responses, as the Member says, were broadly supportive.

The scope of the Bill has been strictly limited, as with what has been delivered in England and Scotland with regard to this. It’s purely for a technical purpose, and that’s what the explanatory memorandum—. I apologise for the Member only receiving that yesterday. That’s the parliamentary process, but I’m sure the Member will get through that. The fact is that, actually, it being a very small Bill we should be thankful for because the explanatory memorandum would be much longer. So, what I’m hoping to do with the technical nature of this Bill is work with parties to make sure that we can get this through as quickly as possible, enabling us, as we and you have said, to deliver more homes for social, affordable landlords in and across Wales.

I welcome this legislation as it will undoubtedly make it easier for social landlords—registered social landlords, such as United Welsh, which is based in my constituency—to deliver on the Welsh Government’s affordable housing target. If there’s one thing we need in Wales and in my constituency and in the northern Valleys and in appropriate places, its affordable housing. I also, it’s worth noting, met recently with the Caerphilly private landlords forum, and they too are keen to see small-scale private dwellings being available and affordable. They found that the UK Government’s policy on tax relief and universal credit has both damaged the availability of them to provide affordable housing, and has actually harmed the affordable housing stock to the detriment of Valleys communities.

Other issues addressed in that meeting were the need for smaller affordable home units of one or two bedrooms. These are the houses that are needed in the communities that I represent, and I’ve raised, in this Chamber in particular, the difference between housing need, where there are people who may not be able to get onto the housing ladder or even afford homes, and housing demand. Those in need often don’t even reach recognition on the demand curve. The focus of planning policy on the latter as opposed to the former has, in my view, resulted in the unsustainable growth of executive housing estates in the Caerphilly basin, built on lucrative greenfield sites, and unaffordable to, dare I say, the majority of my constituents. And what the Cabinet Secretary is trying to do with this policy, with this legislation, is redress that balance, and make available more affordable housing to the people who live in the north of my constituency and need it most. Would the Cabinet Secretary therefore agree that it’s only when we address this real issue of housing need that we can be closer to creating a more sustainable and equitable system that provides affordable homes to those who need them most, particularly those in the north of my constituency?

I thank the Member for his comments and support. The Member is a long-standing member of having views on the planning policy in terms of developments in his own constituency. I agree with the Member that universal credit and other actions of the UK Government have damaged housing and are putting housing at risk and confidence within sectors. This Bill will go some way to redressing the issue of RSLs having the ability to continue to make significant investments into the types of properties that the Member raises in regard to affordability or access to appropriate accommodation the length and breadth of Wales, including his own constituency of Caerphilly.

Thanks to the Cabinet Secretary for his statement today. Of course, we all want to facilitate the building of more affordable homes, as Bethan Jenkins stated earlier. Some of the detail in this proposed Bill does seem slightly potentially confusing. Of course, I haven’t read all of the explanatory memorandum either. In fact, to be honest, I haven’t actually started it. So, I take on board that the devil is in the detail.

Now, the Minister states that RSLs fund a significant amount of their building activity by private sector borrowing. This is somewhat vague, as it doesn’t tell us what percentage of the RSLs’ funding does come from the private sector and hence what percentage comes from the public sector. So, I would ask if it’s possible that he can clarify this. My understanding is that, regardless of the technicalities of the terminology, if a housing association in Wales got into financial difficulties, then it would be the Welsh Government, effectively, underwriting the debt. So, could the Minister clarify this point and whether this actually changes in any material sense under the provisions of his proposed legislation?

Regarding the actual interaction between housing associations and the private sector, we have had recent news, a couple of days ago, about the Principality Building Society making a significant investment, so we know that housing associations are having considerable interaction with the private sector. When Trivallis, which largely operates in the Rhondda Cynon Taf area, undertook their last large-scale development, which was in Aberdare, it was done in partnership with Bellerophon, a private developer. Bellerophon developed private apartments in Cardiff Bay, which then funded the Aberdare social housing development. So, I would ask the Minister: is this the kind of funding model that he thinks the housing associations should be following in future?

Returning to the specifics of the legislation, the disposal of land—this was tackled by David Melding and by Bethan, so we have gone into this. We seem to be moving from a situation where, if housing associations wanted to sell off land, it would require the express consent of the Welsh Minister, to a situation where they only need to notify the Minister. So, given that there is a major housing shortage in Wales and we need to encourage housing associations to develop the land that they have, in what way does it improve the situation for the Welsh Government to make it easier for them to sell off the land, and is there an issue of accountability?

We have touched on the accountability issue, and the issue of councillor representation on the housing associations’ boards. Now, it does seem potentially problematic if you are going to reduce the ability of the councillors to influence the housing associations on their boards. Now, I take on board that you’ve said—was it you or was it David Melding? Somebody said that most of the councils themselves were actually in favour of this, so I’ve noted that. But, again, there is going to be an issue of accountability. So, you yourself mentioned that there will be strong scrutiny of the housing associations, so I would ask how that would actually operate in practice. And I think Bethan Jenkins made the very good point that the tenants’ rights are going to be of paramount importance. And, if you do reduce the influence of the councils themselves, again is it possible to increase the influence of the tenants? I know you’ve said that you’re going to look at that, so, if you’ve got anything else you could add, I’d be grateful.

I thank the Member for his contribution. He started saying that the Act was confusing, and then he said he hadn’t read it, which was even more confusing, on the basis to make an assumption like that—. First of all, the whole purpose of the Bill is to take this off the public borrowing sector because of the amount of money that is borrowed by housing associations. We would top our borrowing commitment in Government, and therefore we’d have to take that money from somewhere else. We’d have to make a decision to invest in social housing and remove that money from health or another organisation. So, this is a really important process, and the consequences of doing that are therefore deregulating a sector. However, I did say earlier on that our framework powers that we have in place give us a very strong position of influencing the RSLs in the way that they operate.

I think the Member, alongside Bethan Jenkins and others, has said about the influence of the boards is an important one, and particularly tenants’ representation. I’ll work with you to make sure that we get maximum support for that as we take the Bill forward. The Member raised also about particular funding models, about Trivallis in particular and the Bellerophon model. I don’t have any views on which financial models RSLs should use, but what I do know is that their current relationship with the private sector is a good one, and we must maintain that longer term, otherwise for the fact, as I said earlier, we will not be building 20,000 more new homes in Wales.

I will give the Member and Members some more detail as we move forward, but, in particular, I don’t have the detail in terms of the division of Welsh Government funding versus private sector funding, but I will let the Member know that in my response as we move forward. But I hope that the Member can bring himself and his party to support the process of this very important Bill as we move forward.

I’m delighted that the Cabinet Secretary is taking prompt action to get round the really unhelpful ruling by the ONS, and, as we’ve seen, legislation’s already been passed in England to ensure that housing associations can go on being able to contribute really important housing for people who cannot afford to buy their own. And certainly in my own constituency, housing associations like Cadwyn, Wales and West and United Welsh have all delivered on new housing and refurbished housing for people in desperate need. So, for example, United Welsh: 40 one- and two-bedroomed units opposite Cardiff prison, which is essential for those who are affected by the bedroom tax. Cadwyn has redesigned an elderly building that was in desperate need of refurbishment for people who need supported living—beautifully done; the architecture really fantastic—and they built, on an old garage site that had been empty for some 20 years, 26 new homes and one commercial unit, all done with really good architectural standards, and high standards of environmental sustainability—much higher than the private sector, I’m sad to say, which is delivering some new homes in the constituency. I just wondered if you, when you’ve got time, having got through this Bill, could raise the building regulations so that the private sector was, at the very least, meeting the standards that our housing associations are meeting because they know that this is the right thing to do.

I think—again, thanking the Member for her support in the process of the Bill—the First Minister, in questions earlier on, alluded to the quality of social housing now compared to 10 or 15 years ago. We are well advanced in this procedure. It is about building for the future, and this is something that this will enable us to do with the clever solutions provided by RSLs and now some local authorities in the building sector of social housing. It’s something that I wish to pursue, alongside my colleague Lesley Griffiths, so that we have the best type of property for the right situations in the right places for people across Wales.