Local Government and Communities Committee, 18 Mar 2009

Meeting date: Wednesday, March 18, 2009

Official Report 300KB pdf

---

Subordinate Legislation

---

Housing Support Grant (Scotland) <br />Order 2009 (Draft)

Agenda item 4 is on an affirmative Scottish statutory instrument. I welcome back the Cabinet Secretary for Health and Wellbeing, Nicola Sturgeon, from whom we are taking oral evidence on the draft Housing Support Grant (Scotland) Order 2009. The cabinet secretary is accompanied by Jamie Hamilton, a policy analyst with the Scottish Government. I invite the cabinet secretary to make any brief introductory remarks.

The draft Housing Support Grant (Scotland) Order 2009 sets out the amount of grant that is payable in the financial year 2009-10. The purpose of the order is to provide grant to any local authority that could not otherwise balance its housing revenue account without raising rents to unaffordable levels. Only Shetland Islands Council, because of its high housing debt, continues to qualify for grant, and in 2009-10 it will receive around £1.4 million, payable in 12 equal monthly instalments. Shetland is an exceptional case given that its debt per unit of housing stock is more than four times the Scottish average level. Without the grant subsidy, its rent levels would have to increase from the current average of about £56 to around £72 a week. Currently, all other councils can balance their housing revenue accounts from rental income.

Do members have any questions?

How did Shetland get into this state of affairs? When 31 other councils in Scotland can balance the books, why does Shetland Islands Council, which has benefited substantially from its oil fund for many years, need the Scottish Government to give it a housing support grant of £1.4 million?

Obviously, I am not responsible for the period over which the council incurred its debt, but I will make a couple of points. First, Shetland's reliance on the grant is decreasing—this year's grant is around £200,000 lower than last year's. Secondly, although Shetland is now the only council that gets a housing support grant, that has not always been the case. Other councils have received support previously but do not require it now.

On the reasons why Shetland is in this situation, the council has indicated that the expansion of the oil industry in the 1970s meant that council houses were required quickly to house the incoming workforce, and it had to incur high levels of debt to pay for the construction. There is a difference between Shetland and other councils in that other councils tend to borrow principally from the UK Government, whereas Shetland's debt is internal, as the money was borrowed from the council's reserves. Nevertheless, the debt charges still fall on the housing revenue account, which is why the account cannot balance without this grant.

So Shetland is lending money to itself, and the Scottish Government is subsidising that, using the general body of taxpayers' money. Is that right?

You would have to ask Shetland about the arrangements. It is a historical position, not something that is current, but I do not think that that changes the situation materially. Other councils have borrowed from the UK Government. The fact is that, without the grant, rents in Shetland would rise to unaffordable levels. That justifies the action that the order is taking.

I can understand why someone might get financial support for borrowing from a third party such as the UK Government—that is what I would call a real debt—but someone borrowing from themselves as part of a book-keeping exercise and then getting financial support to pay their own interest sounds like the sort of financial jiggery-pokery that you might expect from some of the organisations that have come to prominence in the past few months.

I do not think that that is a fair comment. Whatever the reasons for the debt—they predate this Government and they probably predate the establishment of the Scottish Parliament—we have a situation in which, without the grant, tenants in Shetland would bear the burden of unaffordable rents. That is not acceptable.

I have a question on one of my favourite subjects, and it would be remiss of me not to ask it. If Shetland Islands Council were to transfer its stock, would the UK Treasury not write off that debt, thereby sparing us the need to pay a subsidy of £1.4 million a year?

As I am sure you agree, the future of the stock is entirely a matter for the people of Shetland.

Yes, but could you confirm, for the record, that the current deal on the table is that, if the council transferred the stock, the Treasury would write off the debt, which would mean that that money would come from Her Majesty's Government and the Scottish Government would not have to pay for the grant?

I am not sure that that is the case in Shetland because of the different nature of the debt that I explained earlier. The UK write-off applies only to debt from the UK Government.

In other words, real debts, not money you notionally owe yourself. Is that right?

I am not speaking for the council, but Shetland could equally borrow that money from the UK Treasury. The option would be open to the council to do that if it wanted to.

Then it could transfer its stock and get it all written off.

That would be for the council to decide.

Neither of us speaks for Shetland Islands Council, but we have a situation in which, without the order, tenants in Shetland would face rent hikes.

This is an entirely innocent question—

I am sure that it is not.

I assure you that it is. How do you set a fair rent? It occurs to me that people in my constituency are not paying a fair rent because they are already paying more than people pay in the Shetlands. We are working pretty hard to keep it down. I would not want to see a disproportionate hike in Shetland's rents, but how do we set a fair rent?

I will reserve judgment on whether that is an innocent question but it is a fair question. There is no set level of rent that a council must hit before housing support grant can be paid and, as members will no doubt be aware, there is no precise definition in Scotland of what is an affordable rent. The figures that I used in my opening remarks are based on the average rent throughout Scotland, which is £56 a week. Without the support grant, Shetland would be looking at rents around £72. That is judged to be considerably above the average.

I accept that, but in areas such as mine, people are paying £60-odd.

How long are we likely to provide housing support grant to Shetland Islands Council? What period of borrowing did the council establish under the internal borrowing mechanism to build those houses? Was it a 30-year or 50-year period? Does the Scottish Government expect to be picking up the housing support grant for years to come?

On current trends, the grant would dwindle away to zero in about seven years, but it depends on Shetland's finances over the next seven years: if they prove to be better, it will be less than seven years.

Is the figure that the cabinet secretary gave for the average rent—£56—the average weekly council house rent in Scotland?

Shetland's rent is £56; the average council house rent is about £51.

If we did not provide the grant, would the necessary increase cause Shetland Islands Council to have the highest rents in Scotland?

Absolutely. If you did a comparison today, that would be the case.

That concludes our questions, so we move to agenda item 5. I ask the cabinet secretary to move motion S3M-3508.

Motion moved,

That the Local Government and Communities Committee recommends that the draft Housing Support Grant (Scotland) Order 2009 be approved.—[Nicola Sturgeon.]

Motion agreed to.

---

Housing Revenue Account General Fund Contribution Limits (Scotland) Order 2009 (SSI 2009/43)

Agenda item 6 is consideration of two negative instruments. The first one is linked to the affirmative instrument that we have just considered, so the cabinet secretary and her officials may stay for this item. Members have received a copy of the order and have raised no concerns. Do members have any points of clarification on the order?

On the general fund contribution, given the present economic circumstances and the increasing demand for affordable rented housing, did the Government ever consider whether it would continue with the policy?

We have not specifically discussed discontinuing the limit on general fund contributions. Having such a limit is important because it protects council tax payers from subsidising tenants. I do not say that that we would never discuss or consider such a proposal, but we have not done so to date.

There are no other questions, so do members agree that the committee does not wish to make any recommendation on the order?

Members indicated agreement.

I thank the cabinet secretary and her officials for their attendance.

---

Home Energy Assistance Scheme (Scotland) Regulations 2009 (SSI 2009/48)

We move to the second instrument under agenda item 6. Members have received a copy of the regulations and have raised no concerns about them. Do members agree that the committee does not wish to make any recommendation on the regulations?

Members indicated agreement.

---

Civic Government (Scotland) Act 1982 (Licensing of Booking Offices) Order 2009 (Draft)

Agenda item 7 is consideration of a draft affirmative SSI, on which we will take oral evidence from the Minister for Transport, Infrastructure and Climate Change, Stewart Stevenson MSP. I welcome the minister and his officials: Allan Crawford and Jeff Gibbons, who are policy officers; and Jacqueline Pantony.

Does the minister wish to make any brief introductory remarks?

Convener, I am obliged for the opportunity.

The aim of the order is to introduce legislation providing for the licensing of taxi and private hire car booking offices in the interests of public safety and preventing crime. At present, licensing authorities have legislative powers to license the operation of taxis and private hire cars in their areas, but they currently have no powers to regulate the operation of booking offices.

Over the years, the police and licensing authorities have made repeated calls for the introduction of licensing for booking offices, following concerns that such businesses are sometimes used as a cover for illegal activities such as money laundering and drug-related activities. More recently, the number of reports of involvement of organised crime in the trade has increased. Concern has been expressed that, by buying into or purchasing legitimate taxi or private hire companies and vehicles, criminal elements could be provided with the opportunity to launder the proceeds of criminal activity.

Stakeholder consultation in 2005 confirmed widespread support for the introduction of licensing legislation. That has informed our considerations on the scope of the provisions in the order.

The order will introduce a new licensable activity: the use by a business of premises as a place for the taking of bookings for taxis and private hire cars. The legislation will allow licensing authorities to exercise regulatory control over the operation of such businesses for the first time.

The application of the licensing regime will ensure that a copy of any licence application is sent to the relevant chief constable. The police will carry out a fit and proper assessment of any applicant. The enforcement of licensing legislation is a matter for local authority enforcement personnel and, where a criminal offence has been committed, the police.

Introducing the new licensable activity into the Civic Government (Scotland) Act 1982 will allow authorities to regulate the operation of businesses. Where breaches of licences occur, authorities have powers to take punitive action by suspending licences.

I am happy to take questions.

Thank you. I invite members to question the panel.

The fit and proper assessment of applicants for licences is an important aspect of the order. I might be going off at a tangent, but would you be interested in working with the UK Government—given that the matter is reserved— to introduce a similar test for the running of MOT stations? There are concerns that organised criminals also use those as a base.

I would certainly be happy to work with the UK Administration on that matter. I am not sure that I have any specific powers that would enable me to pursue that, apart from powers of persuasion, but it is increasingly recognised that there are some risks in that area of life.

Given the discussions that we have had this morning, I will soon have to ask the clerks to arrange for UK ministers to be at our meetings.

Can the minister give us any more information on the extent of the problem? I know that there is anecdotal evidence from the police, but what problems have come to the fore? What motivated the legislation?

The matter has been under discussion for the best part of a decade, in fairness. There is a pretty unanimous view from the police, local authorities and people in the licensed taxi trade who want to protect their trade from infiltration by criminals that there is a range of associated criminal activities. The laundering of money is one, and the use of taxis to courier drugs around is another. Prosecutions have not been directly associated with such criminal activities in relation to taxis. However, the order, with the support of all who are involved, will enable the trade to return to the kind of trade that can be relied on.

Taxis are often used in rural parts of Scotland to transport children to and from school, and they are used by some of the more vulnerable people in our communities as their only means of transport. Particularly at weekends or at the end of an evening at work, lone women or vulnerable people often rely on taxis to take them home. A high standard of oversight of taxis and the confidence that is built by having such a regime are therefore well worth pursuing.

Is there objective, analysable evidence that specifically says A, B and C? Probably not. It is well recognised that the problem exists mainly in city areas and in certain parts of the west of Scotland. It is not universal. However, now is the time to proceed, with the support of the trade and everyone else.

I am interested in the cut-off point of four vehicles, which is the point at which the order kicks in. I understand from the Executive note why that was arrived at, but are you concerned that those who might have something to fear from licensing might look to diversify, divesting themselves of a larger undertaking and moving into several smaller ones? Will you consider that in due course?

Our consultation was based on a range of two to five vehicles. I absolutely accept that choosing four at this stage, rather than three, two or five, is a judgment call and is not objectively defensible.

However, we can change the provision through secondary legislation. We will monitor its effects and if it becomes clear that four is not sufficiently encompassing we will be entirely happy to come back to the issue—which, of course, is something that we can do relatively quickly through secondary legislation.

I do not want to pretend that we have used some magic formula. It is, as I say, a judgment call, pure and simple.

Returning to Bob Doris's point that only a fit and proper person can have a licence, am I right in thinking that, under the order, the licence relates to the premises or office rather than to the individuals working in it?

The licence is provided to a person—in this context, that includes a body corporate such as a limited company. In that case, all the directors would have to be fit and proper persons.

However, the licence covers not only the people who have the controlling interest in a booking office but a specific location. In fact, it encompasses people who although not formally part of the business exercise some control over it. The purpose is certainly to catch anyone who has control over such an office.

But the licence would not cover everyone who works in the office. Earlier, you referred to security issues with regard to people who use taxis, and those who use them regularly in particular. Obviously the people who work in a booking office have access to such information, but it appears from what you are saying that they will not be licensed.

That is correct. The licence will not cover individuals who are employed in a booking office, but it will cover the manager, the owner and the people who control and are responsible for what goes on in a business.

Of course, duties that are placed on the business will have to be discharged by people in the booking office. For example, all the calls will have to be recorded—not in audio form, I should add, but details such as which driver and which vehicle is undertaking which journey will have to be written down. The member is quite correct to suggest that certain information will have to be protected, but that will be part of the duty to be discharged by the owners of the business. Indeed, that is the case with many other businesses.

Although I welcome the order, I am concerned by comments made on Monday night's "Panorama" by Graeme Pearson, who said that the authorities are finding it difficult to keep up with the many effective ways that criminals are finding to elude detection. The order is intended to tackle what we perceive to be criminal activities that are taking place in booking offices. However, as other colleagues have made clear, such activities might extend beyond the booking office; indeed, we know from various attempts to seize the proceeds of crime that criminals have offloaded money, property and whatever else to other named individuals. In an infamous case that is still going on in Glasgow, the state has paid out legal aid for the defence of a criminal's activities while the individual's estimated fortune of £2.5 million has been farmed off into some bank and cannot be accessed.

Although the order makes it clear that the owners of a licensed booking office will be responsible, what is to stop criminal activities taking place if someone fronts the organisation for another individual? Moreover, are there any controls of individual taxi operators? After all, many booking offices do not employ the taxi drivers directly; instead they hire out taxis or private hire cars to drivers.

One issue is the authority of local authorities to license taxi drivers and private hire car drivers. We are trying to pass legislation that prevents money laundering, but how will we prevent money laundering by people—whether they are asked to drive taxis or private hire cars or to front booking offices—who have cleared all the police checks and whom the police do not consider to be unfit and improper persons to hold licences, but who front organisations that are clearly linked to criminal activities?

Mr Wilson raised quite a lot of issues. I will make the obvious point. His last comment was about organisations that are clearly involved in criminal activity. If such involvement were clear, the reference under the order to the chief constable would give them the opportunity to test whether somebody was a fit and proper person—that is much better than me or any other minister testing that. I made the point that this is not just about the applicant but about whether the applicant controls what is going on. The intention is to catch the controlling person under the provisions.

Implicit in Mr Wilson's remarks were two issues. I was a member of the Justice 1 Committee two or three years ago when it met Graeme Pearson, who suggested—I hope that I do not misquote him—that between 1.5 and 5 per cent of gross domestic product in Scotland came from the drugs industry, so we know that the problem is significant. Will the order magically transform the figure to virtually nil? No—of course not. The order simply provides an additional useful power that the taxi trade wants to be in place, to protect it from being abused by criminal elements.

The order will help, but it is by no means presented to the committee as the final and total answer to an insidious problem. As Mr Wilson properly suggested, the intervention is likely to lead to criminals looking for other ways to launder money. So be it. I am doing my bit and I hope that we will do what we can in other ways.

That brings me back to the point that I pursued earlier. Would it not be better to license people who work in booking offices? Did you consider that?

To be candid, we did not consider that. However, if we saw that as an issue, we would be happy to consider such licensing further. Simply licensing booking offices has a benefit. It is clear that responsibility to run the operation will rest with the person who holds the licence.

Forgive me, convener—I should have said in response to Mr Wilson's questions that taxi drivers and drivers of private hire vehicles are subject to a licensing regime. By making the order, we simply complete the picture.

I promise to be quick. Do people who work in taxi offices need to be licensed? Could the chief constable say that, if known associates of the potential licence holder were disreputable, the applicant would fail the fit and proper person test? People who are in and around licensed premises could be covered indirectly.

Mr Doris makes a perfectly reasonable point. The chief constable is probably in the best position to determine who fit and proper persons are and to maintain an interest in any inappropriate organisations.

The licensing regime creates the power for premises to be visited at any time without a warrant. Visits to unlicensed premises would require a warrant, in the normal course of matters.

Drawing such premises inside the regime has a range of benefits. It makes supervision in a broad sense easier to undertake and it contributes to dealing with various kinds of criminality throughout Scotland.

Members have no more questions, so we move to item 8. I ask the minister to move motion S3M-3507.

Motion moved,

That the Local Government and Communities Committee recommends that the draft Civic Government (Scotland) Act 1982 (Licensing of Booking Offices) Order 2009 be approved.—[Stewart Stevenson.]

Motion agreed to.

I thank the minister and his officials for their attendance.

Meeting closed at 12:45.