Rt Hon Nick Raynsford

Hansard Debates 19th July 2006

Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): Let me start by drawing attention to my registered interests as chairman of the Construction Industry Council, chairman of the NHBC Foundation, and a director of Hometrack.
I suspect that today’s debate will not be seen as one of the finer moments in the history of housing policy or, indeed, of our democratic processes. A long overdue reform that held out the prospect of radically transforming and simplifying the home buying and selling process, cutting out waste and abortive costs and reducing the scope for failed transactions, disappointment and heartache has been seriously put at risk as a result of cynical, short-sighted opportunism from the Conservative party and a deeply regrettable loss of nerve on the part of Her Majesty’s Government.
Let us go back to first principles. It is no coincidence that the home buying and selling process in England is widely recognised as one of the most stressful activities that individuals and families experience in the course of their lives. At the heart of it lies the curious presumption that prospective buyers should make an offer without
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the benefit of essential information about the property that they are proposing to acquire. That is of course completely at odds with the normal principles of consumer protection.
In theory, the problem is reduced by the fact that the offer remains conditional until the buyer has had the opportunity to carry out the necessary checks to satisfy himself that what he is proposing to buy is worth the amount he has offered. However, that is precisely where so many of the problems that bedevil the system arise. The surveys and searches undertaken for the buyer may well reveal hidden problems or potential risks that may in turn either halt the process or prompt renegotiation of the price, which in itself inevitably means further delay and risk. While all that is going on, the seller may well have second thoughts and either withdraw the property from the market or accept an offer from another source—the infamous practice of gazumping. When that happens, all the costs that the prospective buyer has incurred in surveyors and lawyers’ fees will prove abortive. About £1 million is lost every day in that way, which is just senseless waste.
It is not surprising that many prospective buyers choose not to incur that expenditure but seek to minimise their outlay by not commissioning a survey and relying instead on their lender’s valuation. In consequence, they may well end up with far less basic information about the home they are buying than about even the most ephemeral consumer product. Yet it is often the largest financial transaction in their lives, and bearing in mind the fact that they will have to live with the consequences for very many years, it is clearly an unsatisfactory process.
That is where the concept of home information packs comes in. They would ensure that all prospective buyers have access at the outset to detailed information about the property, its condition, any restrictive covenants that apply to it, and potential planning implications that may affect its value or amenity. In that way, the buyer is better equipped to make an informed decision on whether to make an offer, and if so, how much to offer. Furthermore, the scope for subsequent delay, complications and abortive costs is greatly reduced.
The introduction of home information packs would not only result in a simpler, quicker, fairer and more transparent process, but encourage a more efficient market in which some of the current unjustified costs would not survive. For example, lenders continue to require prospective buyers to meet very substantial costs for the valuation of the property—£350 or more is typical. Yet we know that automated valuation models provide an alternative for a fraction of the cost and are increasingly demonstrating a high degree of accuracy. The introduction of HIPs and a more transparent and competitive market would rapidly accelerate the process of change to AVMs with substantial cost benefits to the public.
The special pleading by the Council for Mortgage Lenders on this subject is one of the more regrettable examples of a defence of vested interests instead of the promotion of the public interest. I am sorry that the Opposition and the Government appear to have given more heed than deserved to its representations.

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There is a very strong case for the introduction of HIPs. Today’s debate should have been about how we can achieve that in the most effective way and with the least possible delay. Instead, we have an Opposition gloating in their ability to frustrate and derail something that is clearly in the public interest, and a Government who are backtracking from one of their manifesto commitments. What could possibly justify that? What are the arguments against HIPs, apart from the vested interests of certain groups, including some estate agents and mortgage lenders who do very nicely out of the current arrangements and do not want changes that will threaten them? There are four arguments against HIPs that should be addressed, although I do not believe that any one of them survives serious scrutiny.
First, there is the issue of cost, about which there has been a great deal of speculation and little serious analysis in the media. The figure of £1,000 has been widely bandied about, with the assumptions that packs will cost that amount to produce and that that will be an added financial burden on home sellers. Neither of those assumptions bears serious examination. Even if the cost to HIP producers were to be £1,000 per pack—most serious commentators believe that it will be significantly less—that is not what the seller would be asked to pay when they put their home on the market. There would be stiff competition to secure the HIP business and the potential commercial benefits that would flow from it, and that would drive down the charges made to individuals commissioning HIPs. A cost of about £350 is much more likely to have been the outcome, with some providers already holding out the prospect of offering the packs for free.
Furthermore, the largest potential producers have already made it clear that they would not charge sellers up front for the packs but would only set the charge against the proceeds of the sale when completed. At the same time, we should not forget that most sellers are also buyers, and any costs that they incur from the HIP would be offset by the benefit they get from the provision of the pack on the properties they are considering purchasing, as well as the removal of the risk of abortive costs for surveys and searches. Then there is the benefit for first-time buyers, which my hon. Friend the Minister for Housing and Planning identified.
The second possible objection to HIPs is their scope. There are obvious balances to be struck. If the home condition report is too comprehensive, there will be cost implications, but if its coverage is limited, its value is reduced if not undermined altogether. The proposals that have formed the basis of the scheme up to now appear to be basically right. They mean to provide the information that could be expected from a mid-range survey, while recognising that, in some special cases, additional information might be required. Whether that is the correct balance could have been further assessed in the course of testing the scheme. Some fine tuning would have been possible in the run-up to introduction and as the scheme proceeded. However, it is clear that neither the position adopted by the Opposition nor that of the Government is credible.
There are few better illustrations of the Opposition’s opportunism than their repeated complaints about the alleged excessive cost of HIPs, swiftly followed by suggestions that, without additional information, the
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home condition report will be worthless. My hon. Friend the Minister rightly made that point.
The Government’s announcement yesterday that the home condition report will not be a mandatory part of the home information pack is equally misguided. Although energy efficiency reports are welcome, they constitute only one relatively small element in the total equation. Few people, if any, will base their decision of whether to buy a property primarily on its energy rating. Yesterday’s announcement is therefore, as the Financial Times rightly observes, almost the worst possible outcome: retaining a significant cost attributable to the need for a visit to survey the property for its energy rating, without getting the benefit of the full home condition report and the economy of scale implicit in conducting both surveys at the same time.
Mr. Michael Wills (North Swindon) (Lab): I am interested in my right hon. Friend’s argument about the energy rating. Does not he perceive its value in changing the culture and the way in which people approach their energy emissions?
Mr. Raynsford: I fully agree that the energy rating is a significant element, but it is only a part of the picture, and the vast majority of people who consider buying a property want to consider several other factors, including structural stability, the location and the property’s characteristics, as well as energy efficiency. There should be a comprehensive report. That is much more cost effective than having two separate surveys. I fear that that is one of the wasted opportunities of the decision not to proceed with the mandatory home condition report.
That leads me to the third objection: that HIPs have not been sufficiently trialled and tested, that there are not enough trained home inspectors, that preparations for June 2007 are behind schedule, and that there is consequently a risk of serious problems and turbulence in the market around the introduction date.
Mrs. Curtis-Thomas: Does my right hon. Friend agree—
Mr. Deputy Speaker: Order. Will the hon. Lady please address the Chair, not her right hon. Friend, even though she wishes to question him?
Mrs. Curtis-Thomas: Of course, Mr. Deputy Speaker. Does my right hon. Friend agree that a benefit of the energy performance certificate is that it will force domestic householders to consider how they expend energy, thus saving money? Would not the home condition report also accrue a benefit from that in that homeowners would be forced to consider other elements and other expenditure in their homes and try to gain equal cost advantage from improving those, too?
Mr. Raynsford: My hon. Friend is experienced in those matters. Indeed, I believe that she is currently training in the process of undertaking home condition reports— [Interruption.] She makes the valid point that the reports are about providing additional information to the public to enable them to make more informed judgments, and the abusive noises from the Opposition Benches imply disrespect towards those who are
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seriously trying to help the public to be better informed about the most important financial decision that most people will make in their lives.
There is ground for concern about the speed of implementation and the adequacy of the number of home inspectors, but the Government’s decision to pull the plug on the mandatory home condition reports is precipitate and wrong. The training of inspectors, although slow to start, has been gathering pace this summer. Indeed, there will be many upset and angry individuals who have invested much time and money in preparation and training for the introduction of the reports. They will feel badly let down. All the evidence that I have gleaned from those with genuine experience of the market shows that the June 2007 date was achievable and that, even if some difficulties had occurred around the start of the new arrangements, they would have been overcome in a relatively short time.
Let me say a brief word about the likely impact on the market. There has probably been more ill-informed speculation, scaremongering and nonsense aired in recent months about that than about any other aspect of the scheme. The suggestion, which has been put about, that HIPs will lead to a massive slump in the market and that 90,000 estate agents will consequently be out of work—incidentally, that was seen as a downside—are, frankly, not worth the newspaper on which they are written.
Of course, there may be some short-term reductions in the number of properties put on the market because, as everyone knows, under current arrangements, some homeowners put their properties up for sale to get a feel for their value, with no serious intention of proceeding to sell. However, by definition, the vast majority of those speculative sales would never have proceeded. So the idea that their withdrawal from estate agents’ windows will lead to a collapse of the volume of sales is unconvincing. The report to which the hon. Member for Surrey Heath (Michael Gove) repeatedly referred is a perfect example of that. If one puts rubbish in as one’s assumption, one is likely to get rubbish out as one’s conclusion.
The factors that determine the overall volume of sales and, indeed, trends in house prices are far more fundamental and reflect wider economic trends. While the Government continue to manage our economy as skilfully as they have done in the past nine years, we should have no reason to fear a serious downturn in the market. On the contrary, the creation of a fairer, better, quicker and more transparent system of buying and selling homes should improve the prospects for a thriving housing market in the years ahead—one in which the interest of the public comes first and the professionals involved are genuinely competing for business in a way that delivers best value for money for the citizens.
I greatly regret yesterday’s announcement that home condition reports will not be a mandatory component of home information packs when they are introduced next June. The suggestion that they can be introduced on a voluntary basis is wishful thinking. The irony behind all that is that, after years of dragging their feet, many of the vested interests who have done well financially out of the current arrangements have come round to accepting that a fundamental reform was inevitable. The more progressive elements in the industry were already gearing up to take advantage of a more open and transparent market in a way that would have brought genuine benefits to the public. It is hardly surprising that consumer voices are the most disappointed today and that the backwoods estate agents and the Opposition are crowing.
I am sorry that the Government, whom I support and as part of whom I served for many years, have made such a grievous error of judgment, which will make it much harder to achieve the fundamental reform to the home buying and selling process in England that is so overdue. I hope that my hon. Friend the Minister for Local Government and my hon. Friend the Minister for Housing and Planning will realise before too long that they have made a mistake, which must be reversed, and that they must introduce HIPs, with the full mandatory home condition report, in the lifetime of the Parliament.