Select Committee on Delegated Powers and Regulatory Reform Eighth Report



1.  This is a "first stage" proposal laid before Parliament on 4 November 2002. The purpose of the order is to enable local housing authorities in England and Wales to contract out their housing management functions in a way that does not require them to be in a contractual relationship with those who will perform the functions; i.e. the order will permit sub-contracting, something prevented by the present statutory provisions. The background, including the current statutory position, is explained in Chapters 1 and 2 of the Statement laid with the proposal by the Office of the Deputy Prime Minister ("the Statement").[2]

2.  The Statement is laid under section 6(1) of the Regulatory Reform Act 2001 ("the 2001 Act") and is required by that provision to include details of matters specified in section 6(2) of that Act. The Committee notes that the Statement is deficient in two broad respects. First, there are a number of areas where the Statement is unclear. (For example, under new section 27(6)(b) the approval of the Secretary of State/the National Assembly for Wales ("the Assembly") to the variation of a provision of a management agreement is required only if the Secretary of State/the Assembly so specifies on approving the agreement. Sub-paragraphs 4.6 (c) and (d) of the Statement, however, suggest that approval will be needed in all cases.) Secondly, the information in the Statement is not complete. (We give an example in paragraph 9 below.) As a result, at the request of the House of Commons Regulatory Reform Committee, further information was provided by the Office of the Deputy Prime Minister in a letter to the Clerk to that committee dated 11 December 2002 ("the letter").[3] In considering this proposal we have, therefore, taken into account information contained in both the Statement and the letter.


3.  Section 27 of the Housing Act 1985 ("the 1985 Act") enables local housing authorities, with the approval of the Secretary of State (in Wales, the Assembly) to agree with another person to exercise housing management functions as agent of the authority. It does not enable the agreement to provide that that other person may sub-contract all or any of the management functions. Article 2 of the proposed order will replace section 27 of the 1985 Act with a new section 27 so as to allow sub-contracting by that other person. The provisions of the new section 27 which are of substance are:

  • subsection (5)(a), enabling sub-contracting;
  • subsection (6)(b), requiring the Secretary of State/the Assembly's agreement to variation of certain provisions of a management agreement;
  • subsections (7) to (10), which make special provision arising out of sub-contracting; and
  • subsections (13) and (14), which set out the position of the housing authority.

4.  There is an aspect of these new provisions which the Committee felt was not entirely clear. New section 27(10) would allow the Secretary of State/the Assembly to extend a moratorium period (during which approval is not required to a sub-agreement) if satisfied that approval will not be given immediately after the end of the period to "any sub-agreement" made in the moratorium period. Where there is more than one sub-agreement made in that period, and approval would be given to one or more, but not all, of the agreements, it is not entirely clear whether extension of the period is possible.


5.  The consultation is described in Chapter 12 of the Statement, and further information is provided in the letter (answers 11 to 15). A list of those consulted is at Annex E to the Statement. We note that a period of only 8 weeks was allowed for comment on the proposals (rather than the usual 12 weeks recommended by the Cabinet Office). The Committee, however, takes the view that the consultation was satisfactory.


Burden to be reduced or removed

6.  The Government considers that the position under the existing section 27 of the 1985 Act imposes a burden on local housing authorities. In particular, it prevents them from entering into a form of Private Finance Initiative (PFI) agreement relating to their housing stock. This is explained in Chapter 3 of the Statement. Section 2 of the 2001 Act provides that any limit on the exercise of a person's statutory powers is a burden. The Committee accepts that there is a burden on local housing authorities because they cannot enter into agreements allowing sub-contracting of housing management functions.

7.  Further, paragraphs 3.8 and 3.9 of the Statement explain that the existing arrangement is that the person who carries out the management function for the housing authority acts as that authority's agent. The Committee accepts that this is also a burden on the authority because the principal (the authority) can be liable for acts of the agents.

8.  The Committee agrees that the proposal would remove or reduce these burdens.

Re-enactment of existing burdens

9.  In replacing section 27 of the 1985 Act, the proposed order re-enacts some existing burdens, such as the requirement for local housing authorities to obtain approval before entering into a management agreement. Section 1(1)(b) of the 2001 Act permits re-enactment of existing burdens, but only where the burden is proportionate to the benefits expected to result from re-enactment. Section 6(2)(c) of the 2001 Act requires the Statement to give details of how section 1(1)(b) is satisfied. The Statement omits to do this. Further information is, however, available in the letter (answer 5) as is the explanation for the omission. On the basis of this further information, the Committee accepts that re-enactment of the burdens is proportionate.

New burdens

10.  The proposal also imposes new burdens, in particular the requirement to obtain approval before entering into sub-agreements and the consequential effects for contractors. Section 1(1)(c) of the 2001 Act permits the imposition of a new burden, subject again to the requirement that the burden is proportionate to the benefits expected to result from its creation. Chapter 7 of the Statement and the letter (answers 9 and 10) set out details of how section 1(1)(c) is satisfied. The Committee accepts that the new burdens are proportionate and strike a fair balance (although notes that the recitals to the proposed order need to reflect this position).


11.  Chapter 9 of the Statement deals with the question of necessary protection. The existing section 27 contains two items which might be considered as affording necessary protection for those (notably tenants) who are not parties to the management agreement. First, there is the requirement for the Secretary of State/the Assembly to approve the agreement. This will continue under the new section 27. Secondly, there is the provision which states that the manager acts as agent of the housing authority. Although under the new section 27(14)(b) the authority can escape criminal liability for acts or omissions of the manager, section 27(13) and (14)(a) otherwise retain the principle that for third parties the act of the manager is that of the authority. This is the position under the Deregulation and Contracting Out Act 1994 and the Committee accepts that no necessary protection has been lost.


12.  A main purpose of the order is to facilitate PFI projects. We considered whether a topic that has proved controversial is appropriate as the subject-matter of a Regulatory Reform Order. The Committee takes the view that on this occasion it is. Our reason is that the existing section 27 of the 1985 Act sets out the principle that an authority's housing management functions can be performed by others and the proposed order is merely an extension of that principle.


  1. The Committee concludes that the proposal is an appropriate use of the 2001 Act and meets its requirements.

2   The Statement is available on the Cabinet Office website at  Back

3   A copy of the letter is published in the 5th Report of the House of Commons Regulatory Reform Committee, Session 2002-03, HC 328. Back

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