 Rhawn, cymdeithasol peoplewyr ymaici ddwylo'n gweithio ddodog elunag y Llanfwyrdd a Llanfwrdd i Gweithreid, ond yn dal i'r ddonbl ac yn y llunio'r Llanfwrdd yn gweithreid y Llanfwrdd i Gweithreid a Llanfwrdd i gweithreid i'r draffol gyda'r beth, ac mae'n gweithreid i'r ddakwm mwy o phoeddydd a'r dd niyeun rhai o'u replacing cymdeithaeth yr hynny, ac yn gweithreid. Mae'n amser o hynny'n gweithreid ar y cymdeithasol ilwodol i'r gweithreid Agenda item 5, consideration of the draft report on city region deals in private. Are we all agreed? Okay, I thank members for that one and moved agenda item 2, which house amendment Scotland bill and the committee will take evidence on the housing amendment Scotland bill at stage 1. I welcome Kevin Struth and his team, Kevin Struth, Minister for Local Government and Housing, William Fleming Head Housing Services Policy Unit, Yvonne Garwin Senior Policy Officer Housing Services Policy Unit and Hiker Garding Solicitor Scottish Government. I thank you all for coming along this morning and invite the minister to make some opening comments. Good morning, convener, and thank you for the opportunity to give evidence on the housing amendment Scotland bill. I know that when stakeholders gave their evidence on the 29th of November that they expressed broad support for the bill, and I very much welcome that. The bill is a short but essential measure that amends a number of powers that the Scottish Housing Regulator can exercise over registered social landlords. It also provides for ministers to limit local authorities' powers over the RSLs. It is necessary because of the decision by the Office for National Statistics to classify RSLs as public sector bodies. That decision was taken because the ONS judged that some of the powers that the regulator and local authorities may exercise over RSLs amount to public control of RSLs. If left unchanged, it would mean that all new net borrowing by RSLs, which would previously have counted as private borrowing, counted against the Scottish Government's borrowing limits. Therefore, while classification may appear to be just a technical matter, it would have the real and significant consequence of placing a new and permanent burden on the finances of the Scottish Government. One result would be that borrowing by RSLs to support our affordable housing programme would no longer count as private borrowing. It would count as Government borrowing, effectively adding £1.5 billion to our £3 billion investment in the programme, putting at risk our target of 50,000 new affordable homes. The purpose of the bill is to avoid that outcome by ensuring that the powers that the regulator and local authorities have over RSLs are consistent with RSLs being classified as private sector bodies. For the most part, the bill achieves this by amending those of the regulator's powers that ONS has identified as public control over RSLs. It goes as far as necessary to secure reclassification but no further than that. While those changes are significant, the bill leaves the regulator with most of its powers intact, at a point that several stakeholders noted in the evidence to you on 29 November. That includes powers to monitor, assess and report on how well social landlords are performing, powers to set standards on RSLs financial health and governance and powers to undertake investigations and require compliance with enforcement notices. Those and the other remaining powers will allow the regulator to continue safeguarding and promoting the interests of tenants, not least by reassuring private lenders that RSLs remain attractive businesses to lend to. In that respect, it was good to hear George Walker and Michael Cameron say that the regulator's revised powers to appoint a manager to an RSL would have been sufficient to allow the regulator to make each of the appointments to an RSL that it has made in recent years. It is also reassuring to know that the regulator will continue to have the ability to act in such circumstances. I know that tenants and lenders will welcome that. Mr Walker and Mr Cameron recognise that losing the regulator's powers of consent over matters such as disposals and restructuring by RSLs will place a greater onus in RSLs to govern themselves well. It was encouraging to hear Sally Thomas and David Buchbinder say that the sector recognises the extra challenge that it will face and is ready and able to step up to that challenge. Convener, this small bill is intended to safeguard the finances of the Scottish Government and to ensure that we remain able to deliver our affordable housing programme. Stakeholders recognise the need for it and, as you heard, support it. I hope that the committee will also support it and I am happy to answer any questions that you may have. Thank you. That is very health, a quite detailed opening statement and quite a structural approach to questions this morning. It is quite a technical bill and we have some overlap with the questions and some of the content in your statement. We are determined to get as much on the public record as possible and we will move to questions now. Andy Wightman. Thank you, minister. Given that there is no public consultation on this bill, how did the Government consult with stakeholders about its contents and purpose and particularly how did it examine or consult with tenant groups about the potential impact of the bill? As the policy memorandum explained, the narrow focus of the bill meant that a full public consultation on a draft bill would have been disproportionate. Instead, my officials worked directly with the bodies representing the groups that would be affected by the bill, such as tenants, social landlords, the regulator and lenders. We have long-standing arrangements as a Government for involving tenant groups in the development of policies that might well affect them. My officials used those arrangements to consult with tenants around about the ONS decision. Of course, it is implications for RSLs, for the Scottish Government. The first engagement was on 9 August 2016, when my officials briefed the chairs and secretaries of the networks of registered tenant organisations and what they expected the ONS to say when it announced its decision the following month. They briefed the chairs and secretaries at further meetings on 15 November 2016, 21 February 2017 and 12 September 2017, outlining the implications of the ONS decision and explaining why a bill would be required and what it would have to do. Ten notes were provided to all the chairs and secretaries to send on to the individual organisations within their various networks. Tenants groups understood and accepted the need for the bill. Unsurprisingly, they were concerned that the bill may weaken the ability of the regulator to safeguard their interests. Officials explained that very few of the regulator's powers were affected by the bill, and it was just to get over that scenario of what constituted public sector control. Those are the areas that we explained to them that would require amendment. My two regularly meet with tenant representatives convener, and I am sure that the committee in terms of its discussion with groups, like me, found that tenants are generally comfortable with the bill as it stands. That is helpful. You outlined in your opening statement that there would be an impact if reclassification did not take place. I am not sure whether you have anything to add to that. What impact would be that extra finance would come on to the Government's books rather than to the RSLs? Is that correct? Correct. Convener, as I explained in my opening statement, what would happen was that £1.5 billion, which currently is private sector borrowing, would, if it were not changed, come into the Government's book, have a major impact on the delivery of our affordable housing programme, which Members are aware are £3 billion over the course of this Parliament. The purpose of the bill is to avoid that outcome and to ensure that RSLs remain as private sector bodies so that we do not have to deal with the circumstances that I described. That is helpful. Moving on to the regulator, the regulator was put in place in order to provide some regulatory powers over registered social landlords in the public interest. How have you sought to balance the purpose of the regulator and its powers with the need for reclassification? First of all, Mr Wightman used the word balance there. This is not an exercise that allows much scope for striking a balance to be truthful. As I have outlined, it is absolutely imperative that RSLs are reclassified to the private sector. The main means of achieving that is by reducing or removing those of the regulator's powers that the ONS has identified as constituting public control. We cannot escape that, and we are not pretending for a moment that regulation is unchanged here. It cannot be if we are going to achieve the objective, which is to ensure that RSLs remain classified within the private sector. As I said in my opening remarks, the changes are quite limited and are no more than necessary. My officials have had numerous conversations with the ONS and others around about those issues. I would say that your witnesses on 29 November confirmed that the changes that sections 1 and 2 of the bill make are unlikely to impact significantly on how, in practice, the regulator appoints managers to an RSL or removes suspends or appoints members to an RSL's governing body. On the other hand, sections 3 to 7 of the bill will have a real impact on how the regulator operates by removing from it the powers that it has at present to give or withhold consent to proposals by an RSL to dispose of land, restructure itself or change its constitution. In future, those decisions will be for RSLs and their governing bodies acting on their own judgment and due diligence. Those changes are necessary because it is very simplest. The powers that the regulator has at present enable it to act as though it were the actual owners of the RSLs. That crosses the line between what the regulator, as a public body, is able to do in respect of bodies that are classified as private and what is incompatible with the classification. Therefore, we have no choice but to remove those powers and accept that RSLs will be responsible as private bodies for their own commercial decisions in the same way as other private bodies are. I am encouraged by the reaction of the SFHA and the forum that recognise that this represents a new challenge for RSLs, too. Note that the due diligence that they undertake already in preparing business cases for the approval of the regulator and their bankers will stand them in good stead when the regulator no longer has powers of consent over them. Convener, I could go into even more detail on all that if the committee wishes, but I think that the main thrust of Mr Wightman's question was round about balance. As I said, this is an exercise that does not allow very much scope for balance. You mentioned the regulator. The regulator appears to be broadly content with the bill's provisions. However, obviously, there is a concern when the regulator's powers are reduced. There may be unforeseen consequences. How does the Scottish Government intend to work with the regulator to monitor the impact of those changes and make sure that some of the intent behind the regulator is not compromised inadvertently by, as you say, the necessary changes that the bill will make? Convener, first of all, I should say that the regulator is an independent body. It is up to them to monitor the impact of the bill and the effect that it has on tenants and others. However, the committee will also be aware that I regularly meet the chair, the board and the chief executive of the regulator. Of course, they are never backward at coming forward in terms of telling me any difficulties that they may face. I am quite sure that they will draw my attention to any difficulties around that. I will continue to use the regular meetings that I have with the regulator and the regular meetings that my officials have with the regulator to make sure that we continue to liaise around about any impacts that the bill may have. Can I check with the policy intent of the bill that is telling the ONS to reclassify RSLs to the private sector? Is there ongoing discussions with the ONS? Are they content with the bill that is presented that this will allow them to do that? I will bring in Mr Fleming, because he has had the main discussions with the ONS. I think that it would be fair to say that the ONS itself is sometimes not particularly forthcoming about the requirements, but I will let Mr Fleming explain in some more depth the conversations that he has had directly with the ONS unofficially and then I will maybe come back. We have had continuing and pretty extensive conversations with the ONS, partly to understand the rationale for the decision. That means to understand what we need to do to have it reversed. The ONS, when it made the decision, offered to assist us informally at an official level to take us through the process of what we would need to do. We also worked with our DCLG counterparts, who were about a year ahead of us, in doing much the same sort of thing for housing associations in England. In that sense, we have a very clear idea of what is required. We have had a measure of comfort from the ONS, but only from the officials that we work with. They have always been very clear in stressing to us that the ultimate decision is taken by one of the directors in the organisation on the basis of formal recommendation by a committee of statisticians. They will only make a recommendation once the bill has been both enacted and brought into force. We have a high degree of comfort that we are on the right tracks, but the ONS will not give us definitive confirmation until we get to the point where the bill is effective. The ONS wishes to protect its position until the bill passes through Parliament. It would sound that ministers of confidence are relatively high without being complacent in terms of compliance. We cannot be absolutely certain. We cannot be certain that the bill is sufficient to provide for that reclassification. We have a degree of reassurance in terms of the conversations that have been had. That has been reinforced by the recent decision to reclassify associations in England on the basis of measures that are similar to the bill. We cannot be absolutely certain, but I am confident that my officials have done all that they possibly can in terms of liaising with the ONS to get it to the point where we are at. Just one final question from me. There were issues raised at the last evidence session in relation to freedom of information. Is there a gap between the implementation of this bill and the extension of the freedom of information Scotland Act 2002 to RSLs? If so, are you concerned that the environmental information Scotland regulations 2004, which I admit that I am not an expert on minister, might not be applicable to RSLs in this time period? I too am not an expert on that. I will answer your question as best I can. That gap that you describe would depend on the progress that we make with the bill, but our aim is certainly to move as quickly as we can to enable the ONS to reclassify RSLs. If we are able to secure royal assent to the bill by next year's summer recess, we would expect complete implementation during September, paving the way for the ONS review after that time. On the basis of our current proposals for extending FOI to RSLs, we expect extension to take effect on 1 April 2019. If that were to be the case, there may be a gap of six months between the bill coming into force and FOI being extended to RSLs. However, as I said in my opening remarks, the regulator will continue to have an extensive range of statutory powers in regard to RSLs, and it is not immediately clear that the bill will have the effect on EIRs that the commissioner suggested in the evidence that he gave to you on 29 November. I note from his evidence that the commissioner did not commit himself to a formal view at this stage on whether ERIs would cease to apply to RSLs. I am also aware that he wrote on 8 December to himself, repeating his suggestions for legislation, either through the bill or in regulation, to ensure that EIRs would continue to apply to RSLs. As he said in the letter, the amendments that he suggests would be technically challenging. My officials and I would be happy to discuss with the commissioner the effect that the bill will have on the regulator's powers and the extent of the regulator's continuing powers, and, in light of those factors, to explore whether the bill really will have the effect that the commissioner is suggesting. It may therefore be, convener, and I know that I have gone around about weighing this, that there is no gap at all. However, if the commissioner did decide that EIRs could not apply to RSLs once the bill was in force, we would want to find a proportionate means of dealing with that gap of six months or so, and picking up on the evidence that was given by the SFHA and the forum, given to you on this particular point, we might discuss with the SFHA and the forum around voluntary arrangements under which their members would continue to respond to information requests environmental or otherwise during any interim period. That may not be completely and utterly ideal, but, given the length of any gap period, it might be a much more pragmatic way of proceeding, convener. That's helpful, minister. It's worth noting in the information commissioners letter to myself. He does indeed say that he doesn't underestimate the technical challenges of amending regulations via primary or secondary legislation, so it's welcome that there's going to be an on-going dialogue between the Scottish Information Commissioner and yourself in relation to those matters. We'll continue to talk to folk, convener, and I'll come back to the commissioners' own observation about the technical challenge of legislating, and I would question whether such legislation, even if it could be drafted, would be a proportionate response to a temporary problem. That's a good discussion, convener. We appreciate that. We'll move to our next line of questioning. With regard to the regulator's power of intervention section 1 and 2 of the bill, proposed amendments in terms of narrowing the circumstances when a manager can be appointed, narrowing the circumstances in which the regulator can remove or suspend an officer from an RSL, narrowing the reasons why a manager can be appointed, and also introducing a time limit for the manager's appointment. UK finance says that investors who might be contemplating coming into the market in Scotland and who would be more distant from and less familiar with the system might not be able to make that link in terms of the regulatory requirement. That might then put them off in terms of investing. Would you agree with UK finance? I listened very carefully what UK finance had to say at your evidence session, and I appreciate that it may have some lingering concerns over the effect of section 1 of the bill and the definition of failure at sections 57 and 58 of the Housing Scotland Act 2010. I would of course want to reassure UK finance and other individual lenders that failure does indeed cover any failure by an RSL to meet any regulatory requirement imposed by the regulator under the 2010 housing act or any other act. To that end, convener, if I may, I will maybe summarise some of the provisions that there are in section 57 and 58, as amended by section 1. Section 57 would provide that the regulator can appoint a manager where an RSL has failed or is failing to achieve a standard or outcome set in the Scottish social housing charter, meet an improvement target set by the regulator, implement a performance improvement plan approved by the regulator or comply with an enforcement notice issued by the regulator. Section 58, because it deals with financial affairs, is of particular interest to lenders and would provide that the regulator can appoint a manager if an RSL has failed or is failing to comply with a statutory duty imposed in the RSL by the 2010 act or any other act or with a requirement imposed in the RSL by the regulator under the 2010 act or any other act, such as failing to comply with accounting requirements made by the regulator under the 2010 act. I hope, convener, that the summary that I have just given illustrates the extent of the powers that the regulator will continue to have under those sections and that those extend to all of the regulatory requirements that the regulator can make under the 2010 act and other legislation. I understand that UK finance suggested that the explanatory notes might be elaborated to clarify the position. I would certainly be happy for my officials to discuss what kind of clarification UK finance has in mind. I am sorry for reading most of that, convener, but this is highly technical and I want to make sure that the committee has all of the right information to hand. How does the bill seek to ensure that tenants' interests will continue to be protected with the removal of the regulator's consent powers, minister? I am always minded of tenants' rights when we deal with all aspects of that. I have already explained to the committee the amount of communication that my officials and I have with the regional tenant networks and other tenant bodies. I would say that the powers that the regulator retains will still give a substantial measure of protection to tenants, which I am sure that we all want to see. We will continue to ensure that the views of tenants are taken on board in everything that we do. The regulator's powers of consent certainly offered tenants a substantial measure of protection, but they do not operate alone. Rather, they were tied to provisions giving RSL tenants the rights to be consulted about and, in certain cases, to approve significant proposals by their landlords that may well affect them. Those rights gave tenants direct control over matters such as disposal of assets, restructurings and so on. In removing the regulator's powers of consent, we were clear that we wanted to retain and fool all the tenants' rights to be consulted as they are at present. The bill has been drafted to achieve that objective. In particular, sections 3 and 4 provide for tenants to approve of any proposal to dispose of their homes to another RSL. Sections 6 and 7 provide for tenants to approve any proposal to restructure an RSL that would lead to a change of landlord for the tenants or to the RSL becoming the subsidiary of another body. I was encouraged that the forum and its evidence to you were able to confirm that it was happy with those provisions. In effect, they mean that tenants continue to enjoy the ultimate protection of being able to veto proposals on disposals and restructurings if they are not persuaded that such proposals are in their interests. Again, convener, during the course of all this, my officials and I will continue to liaise with tenant bodies. I am aware that only one of the regional networks responded to your call for written evidence and that they were supportive of the bill. You talk about retaining the consultation. Minister, that is important. It has the confidence in having that process and the scope and the power that is in the bill gives them that. However, when we talk about the whole risk and uncertainty, do you think that there are any risks and uncertainty by removing that? As per always, we will listen to what tenants have to say about that. I think that the fact that many have not responded is because folk have seen that this is a bill of a technical nature. It is quite complex as the committee is well aware. It is technical, but it has that huge impact, as I have pointed out. Obviously, when it comes to bills of a technical nature, it is often difficult for folk to get their heads around the implications of what that might mean. It may well be that tenants' bodies in the future feel that there are aspects of that that they may want to have further discussion about. We will do that as we always have done. I am sure that the committee wants to ensure that tenants' rights are protected as much as possible. I am sure that, in terms of the evidence that you took from the regulator at the 29 November meeting, they will have attempted, I am sure, to give you that peace of mind that tenants will continue to be at the heart of all of that. Thank you, Mr Stewart. Clarking team has just helped to remind me to put on the record that we did contact Hugh McClung, who is the lead contact of regional tenants groups across Scotland. He indicated that they were content with the provisions in the bill, so that is quite good to put on. I would not have remembered that, so I am helpful for my client. Mr McClung is never backward at coming forward if he thinks that something is not right. I am pleased that you have put that on the record. I just want to ask a couple of questions about section 8 of the bill that proposes that ministers be given regulation-making powers to further modify the functions of the regulator. The Delegated Powers and Law Reform Committee questioned whether the scope of the power in section 8 was drawn too broadly and considered that, in principle, the power could be framed more narrowly in accordance with the policy objective. It is fair to say that the committee did not have a great deal of comeback on that. UK Finance suggested that there could be a sunset provision and that the power could fall away at the end of this parliamentary term. I wonder if you could give us your thoughts on the Delegated Powers and Law Reform Committee's suggestion about the power being drawn too broadly and that idea of a sunset clause. I have looked closely at the recommendations of the DPLRC. I have also looked at the evidence that was given by UK Finance around sections 8 and 9 of the bill. The committee is well aware that the power at section 8 is a precautionary power that the Scottish Government would only use if the bill in some way did not allow the ONS to reclassify RSLs back to the private sector. The power at section 9 is intended to enable the Government to limit the influence that local authorities can exercise over RSLs to the extent necessary to secure reclassification. Both powers are drawn widely so as to give the Government flexibility in making any adjustments to the powers of the regulator and local authorities respectively. That flexibility may prove to be necessary in securing reclassification, and I would be extremely reluctant to lose it. I recognise, however, that this is not a power that is required indefinitely. Subject to the views of the committee and, as you know, I am always willing to listen, I would propose in line with a suggestion made by UK Finance that both powers should be subject to sunset clauses, which would provide them to laps three years after the bill has received royal assent. I would hope that those clauses would give the committee and UK Finance assurances that the widely drawn powers at section 8 and 9 would exist for a limited period only. I am also happy to confirm for the record today that the Government will use the powers only for the purpose of securing reclassification and only to the extent necessary for that purpose. As to ensure that RSLs continue to operate as they presently do. I understand that the regulator and the forum would support a sunset clause for section 8 and that the SFHA would not object to that either. I do hope that the proposal and my undertaking will address the concerns as expressed by the DPLRC and UK Finance. Thank you. As the convener of that committee, I think that that would address our concerns. I think that that is a very useful answer. I was going to ask you about section 9, but you have answered that already. Thank you very much. Thank you very much, Mr Simpson. I confirm that I have received correspondence from George Walker from the Scottish Housing Regulator Chair and from the SFHA, both indicating sympathies for sunset clause. I think that that is a good direction of travel. I think that the committee will be supportive of that, I suspect. Elaine Smith. I wonder if you could just tell us what your response would be to Inverclyde Council's concerns that the plans to restrict local authority powers and nomination to a maximum of 24 per cent of the board are and to quote unduly restrictive and that they wouldn't allow for the exercise of local discretion for local circumstances. Could you have your thoughts on that, please? I note the interest that Ms Smith took on this issue on 29 November. The ONS highlighted that constitutional arrangement that exists between some local authorities and RSLs may be forms of public sector control. The provisions at section 9 of the bill are needed to address that possibility. I appreciate the concerns that have been expressed by Inverclyde Council at the plans that have been put forward to limit local authority memberships of RSLs governing bodies to 24 per cent. Convener, that limit is necessary. However, to prevent a local authority from blocking any constitutional change in an RSL, that requires a 75 per cent majority of board members. Our discussions with the ONS have made it clear that this limit is unavoidable. It is the limit that has been set south of the border and it is only when it has been set in regulation that the ONS was able to reclassify housing associations there. In those circumstances, I am not able to reconsider the limit. As other stakeholders have pointed out in their evidence, the provisions affect a very small number of local authorities and will still allow for an authority to have significant minority representation on RSL boards or governing bodies. It is also worth noting, convener, that other stock transfer local authorities did not raise this as an issue and that both COSLA and Elacio were content with the provisions set out at section 9. I agree with the evidence given by the SFHA and the forum that a reduction in local authority nominations to an RSL board should not have any impact on local arrangements for addressing homelessness duties. What matters are strong and effective working partnerships between local authorities and RSLs at the operational level. The committee can be assured that I will continue to monitor whether those strong and effective working relationships are happening in Inverclyde and elsewhere. I am sure that, as we move forward in looking at the recommendations that come from the homelessness and rough sleeping action group, working relationships are likely to be a feature in terms of the work that they do. I can assure the committee that I will continue to look and to monitor to ensure that those working relationships as regards homelessness obligations are right. I am sure that the action group will be looking at this in some depth. I have absolutely no doubt, convener, that, as we move forward, the committee will continue to keep an eye on that situation in order that we can move forward in tackling homelessness and making sure that we have that right in every local authority with the co-operation of RSLs. Thank you, convener. Even though others did not, if one authority has raised it, it is still helpful to have your response on the record. Given the technical nature of the legislation, you have made it quite clear that there is no room for manoeuvre in that particular percentage. I agree completely with Ms Smith that it is the right thing to scrutinise on behalf of those folks who feel that this is not the right way forward. However, as I have pointed out, this is the only way to deal with this. We have seen that from what has happened in terms of the legislation and the reclassification south of the border. If we were to attempt to do anything else, we would have made major difficulties in terms of gaining the reclassification that is required. Could I just ask one further point? It is slightly wider, minister, and you have carefully read the question and the evidence that the committee undertook previously. There was a point that I had raised with David Buckbinder about the governance, where he mentioned potentially disruptive individuals or groups having undue influence or control over associations affairs. I questioned him on that at the time. My question is that, given that, that could have been interpreted quite widely, are you confident that there will be good governance and diversity going forward? I think that it would be fair to say that RSLs in Scotland generally have good governance arrangements. We, as you will and quite sure, will continue to monitor what is going on out there. The regulator still has a major role to play in aspects of all that. We will continue to liaise with RSLs as they currently do. I assure the committee that we will continue to monitor what is going on out there. I would be grateful if there were members from here or to any other members, if they have any examples of where they feel that there is no best governance going on. I would really want to know about that. No more questions from colleagues. Thank you very much for your time this morning, minister, and for your team coming along. If there is any other matters that you want to put on the record just now or write to us, feel free to do that before we move into private session. I think that all that is required to be on the record is on the record. I am grateful for the committee's indulgence today. I did have to read a number of bits, but that is quite technical, and I wanted to make sure that you had every aspect of it absolutely spot on right. Thank you minister and your team again. We now move into agenda item 3, which has previously been taken private.