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With the best summer weather we’ve seen in Scotland and the rest of the UK for years, you may be wishing you’d booked a staycation! But, as is tradition many parents will be planning to take their children abroad for a family break in the sun.
If the family unit remains intact, this may a relatively stress free process.
If, however, parents have separated, the arrangements may cause a few more headaches.
It is a common misconception that the parent who is due to spend time with the children during a holiday period is entitled to take them abroad without discussion with the other parent.
This is misguided. In actual fact neither parent is entitled to take a child abroad without the prior consent of the other parent.
Before booking a trip, it is therefore a good idea to make broad details of what is proposed available for consideration by the other parent.
Once consent has been obtained and a trip booked, the specifics of the trip should then be divulged.
As a bare minimum, flight details and a note of the accommodation in which the child will be staying should be provided.
Emergency contact numbers should also be exchanged along with their passport and any other information including medical insurance documents.
In the event that consent to a trip is not forthcoming, the court can be asked to provide permission.
The Sheriff will require to consider what is in the best interests of the child or children before determining the issue.
The family law team at Brodies is able to provide expert advice in situations where children are to be taken abroad and consent is not forthcoming.
While movement of people is a hot topic in withdrawal negotiations, it may come as a surprise that Brexit could also have an impact on the movement of your pets. The movement of pets is, of course, not a top priority in negotiations; however, as we draw closer to Brexit, we are realising more and more that the UK’s withdrawal from the EU is going to impact on everyday issues that we currently take for granted. If you live in one out of two British households owning a pet, this article is for you.
It’s raining cats, dogs and ferrets
Cats, dogs and ferrets are subject to special legislation due to being particularly susceptible to rabies. Travelling or moving with them within the EU is regulated mainly by EU laws, which requires your pet to be microchipped and to have a valid European pet passport as well as a valid anti-rabies vaccination. This will generally allow an animal to move freely within the EU with its owners.
The same minimum conditions apply to dogs, cats and ferrets travelling to the EU from a non-EU country. In addition, any animal entering EU territory is subject to border checks and, depending on the rabies status in its country of origin, additional health documentation. As the UK is expected to become a third country post-Brexit, travelling pet owners will need to adjust.
On the commercial side, there are strict intra-EU requirements for transporting pets, for example an additional examination just before transportation and extensive health and entry documentation. However, the flourishing illegal puppy trade seems to suggest that import/export controls under the current system are not as effective after all.
Hold your horses
Horses travelling in the EU must have a recognised ID document, and must be free from any equine diseases such as African horse sickness, glanders and equine encephalomyelitis. A Tripartite Agreement between the UK, the Republic of Ireland and France allows for some relaxations in border check and documentation requirements, but only for the purpose of equestrian sports.
For a non-EU country, horse transports are restricted to countries that are free from equine diseases. As for dogs, cats and ferrets, horse transports into EU territory mean border checks and additional health documentation. As the UK is expected to become a third country as of 29 March 2019, the transport of horses between the UK and the EU would become more onerous post-Brexit.
On 26 June 2018 the European Union (Withdrawal) Bill received Royal Assent. The European Union (Withdrawal) Act 2018 provides a legal framework for the UK leaving the EU and the subsequent incorporation of EU law into UK law (which framework may be added to by the Scottish Parliament’s UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill if the Scottish Bill survives the UK Government’s legal challenge to be heard by the Supreme Court in July 2018).
Section 16 of the Act includes provision for the maintenance of environmental principles once the UK leaves the EU and requires the UK Government to publish a draft Bill which, amongst other things:
a set of environmental principles,
a duty on the Secretary of State to publish a statement of policy; and
provisions for the establishment of a public authority with functions for taking, in circumstances provided for by or under the Bill, proportionate enforcement action (including legal proceedings if necessary) where the authority considers that a Minister of the Crown is not complying with environmental law (as it is defined in the Bill).
In this first of two posts we look at the UK Government’s environmental policy post-Brexit.
UK Government consultation
On 10 May 2018 the Government opened a consultation about the proposed Environmental Principles and Governance Bill (the Bill) which is expected in autumn 2018. The Government’s intention is to establish post-Brexit environmental principles for the UK and an independent statutory environmental body to replace the EU’s environmental enforcement mechanisms. The consultation paper also follows up on the Government’s 25 Year Environment Plan published in January 2018. The consultation is open until 2 August 2018.
In the consultation paper the Government summarises the key environmental principles that “…have been used to guide and shape modern environmental law”. Section 16(2) of the Act lists environmental principles that must be included in the Bill, including, amongst others, the sustainable development principle, the precautionary principle, the rectification at source principle, and the polluter pays principle.
Currently there is not one single place where the environmental principles from various sources (EU law, international law, domestic law) are bundled, despite their key role to Government policy. The Government’s proposal will also include a comprehensive policy statement to set the base for the UK’s post-Brexit environmental policy-making and legislation. The policy statement will combine the existing principles derived from different sources into one UK source.
Once the UK has left the EU it will cease to implement EU environmental laws and principles and the UK’s compliance with EU environmental law will no longer be monitored by EU bodies and agencies, such as the European Commission, the European Environment Agency, and the Court of Justice of the European Union. The consultation paper “…explores the functions of a new, independent, statutory environmental body to hold government to account on the environment”. The paper considers the functions, remit, scope and nature of a proposed new governmental body that will be created by the Bill. Key proposals for the new body include that it should:
act as objective and impartial voice for environmental protection;
be independent of government and capable of holding it to account;
have a clear remit, not overlapping with other bodies, and have the powers, functions and resources required to deliver that remit; and
have jurisdiction over environmental areas that are the responsibility of the UK Government and where possible areas of devolved matters, if the devolved administrations wish to take a similar approach.
Since joining the EU the UK has continuously strengthened its commitment to strong environmental policies and laws. The UK Government is proposing a new body which will aim to ensure the UK’s future compliance with environmental principles. The Prime Minister in a speech at the London Wetlands Centre on 11 January 2018 emphasised the opportunity Brexit provides to strengthen and enhance the UK’s environmental protections. The proposed Bill expected for autumn 2018 has the potential to be an important step for post-Brexit environmental law.
If you would like to discuss the issues raised in this post then please get in touch.
This blog was written by Niall McLean, Managing Associate and Hannah Frahm, Professional Support Lawyer both Government, Regulation and Competition.
Many investment funds in the alternatives sector make use of partnership structures, in particular in the private equity, infrastructure and non-core real estate sectors. The tax transparency and general flexibility of such vehicles lend themselves well to the operating models and commercial terms of such funds.
The release of the Panama Papers in April 2016, however, brought to light the use of Scottish limited partnerships as components in certain tax shelter and money laundering arrangements. Since then there has been considerable interest in the UK, and in particular the Scottish press, regarding the use and misuse of such vehicles. The UK Government has conducted extensive investigations over the course of 2017 to seek to understand this phenomenon further and also to understand better the range of legitimate uses of such vehicles.
Within the UK there is a difference in the juridical nature of partnerships, with Scottish partnerships having “legal entity” status but English Partnerships constituting associations without entity status. In the funds sector a combination of such partnerships are often usefully used in layered structures to ensure that a proper separation is achieved between the separate layers and a number of classic fund formation jurisdictions have recognised the utility of these features and have introduced a similar range of partnership vehicles, with and without entity status. Aside from this distinction (and a slightly more stringent disclosure regime for SLPs noted below) there is no substantive difference in the tax or regulatory treatment of partnerships in the UK. However, as noted below, it seems that in some other jurisdictions authorities have tended not to look behind the entity status of Scottish partnerships and this has facilitated their use in disguising ownership of illegally sourced assets.
In April 2018 BEIS published a consultation paper seeking views on a number of reform proposals intended to stem this misuse. The consultation paper reported that there was evidence of recent misuse of SLPs. There was, between 2011 and 2016 a marked spike in the formation of such vehicles which seems only partially explained by new legitimate uses and it seems possible that unscrupulous parties were actively marketing their inappropriate use. This trend appears now to have fallen off somewhat, and one may speculate that increased scrutiny has reduced attractiveness.
However, in the consultation paper the Government also indicated a reassuring understanding of the wide uses and contexts in which limited partnerships are used, in particular in the funds industry, and recognised the economic benefits from legitimate uses. Accordingly, much to the relief of those involved in devising fund structures, the government does not propose to abolish separate legal personality for SLPs. Instead, it is seeking responses to proposals to tighten transparency requirements and to focus on financial crime aspects directly:
It is proposed that all persons seeking to register a limited partnership must confirm that they are subject to AML supervision by an appropriate body. The report found that almost all partnerships formed for legitimate purposes were submitted by law firms or registration agents and this simple measure may provide a helpful barrier discouraging unlawful use;
Views are being sought on two alternative proposals as regards the obligation for a partnership to maintain a connection with the UK:
a requirement to maintain a permanent principal place of business in the UK, which would be confirmed annually in a confirmation statement; or
a requirement to maintain a permanent UK address for service (more akin to the position for companies, but falling short of a full registered office requirement) with this address, and the principal place of business (which could be outside the UK) being confirmed annually.
The ability for limited partnerships to be able to migrate their principal place of business outside the UK has been an important and useful flexibility in enabling funds using UK vehicles (which UK based investors may prefer) to be managed outside the UK (which may be a practical necessity where the desired asset class is outside the UK). A UK principal place of business or registered office requirement would also have the effect that such a fund would fall within the Alternative Investment Fund Managers Directive (creating an unhelpful duplication of regulation with the regime which is the actual management locus). The Private Equity and Venture Capital industry have made these points in their response, encouraging the Government to adopt a route which would fall short of a formal place of business or registered office.
There is a proposal to introduce increased transparency and reporting requirements for all UK LPs. Scottish Limited partnerships have, since June 2017, been subject to a more stringent disclosure regime than is currently applicable to English limited partnerships (their entity status bringing them within the “entity regime for the 4th Money Laundering Directive) and they are subject to broadly the same requirements to disclose “Persons with Significant Control” (PSCs) in the UK registers as UK companies. They must also submit annual confirmation statements confirming certain information. If these proposals are accepted the regime for ELPs will be partially aligned and they will be required to submit confirmation statements annually confirming certain limited information. However, it does not appear to be that case that the PSC regime will be aligned for SLPs and ELPs.
Views have also been sought on applying an accounts filing obligation on all Limited Partnerships (at present only “qualifying Partnerships” are required to file accounts (essentially those with corporate general partners). At present it is possible for a partnership to fall outside the filing requirements if it has an individual or LLP as a general partner (either solely or in conjunction with a corporate general partner).
There is also a proposal to introduce a strike off procedure analogous to the company strike off regime. Whilst an ability to request the removal of dissolved partnerships has long been sought, and would be welcome, the strike off proposals may well give rise to some concern to investors. The effect of striking off a limited partnership will not necessarily be to terminate the partnership if it continues to trade, but rather it could merely remove the shield of limited liability for limited partner investors, leaving them exposed to the liabilities of a general trading partnership. Strike off triggers are linked to administrative failures, particularly where notice is only given to the general partner, may be a concern to investors.
The consultation closes on 23 July 2018. The government intends to introduce primary legislation to implement changes as soon as Parliamentary time allows after the consultation closes.
It was a close call but following huge protests from a surprising mix of consumers, publishers and tech business lobbies (see previous blog here) the EU Parliament voted just yesterday to reject a hugely controversial new copyright Directive proposal.
The proposal was intended to be part of the Digital Single Market initiative but it seemed more likely to create division and even to provoke defiance within the EU and by the affected parties. Indeed Wikipedia in Italy voted with its feet by taking steps to block all user access to its articles in protest against what the radical new proposals from the EU would mean. Perhaps these protests weighed on the minds of the MEPs in deciding yesterday by 318 to 278 to vote down the proposed new law.
Even though the law has been sent back to the drawing board, it is worth recapping on why the proposals were so controversial and provoked such widespread outcry. Particularly as any redraft is likely to strive towards a similar aim. The Directive proposed two key changes which would have radically altered the operation of the internet as we now know it.
Firstly the infamous Article 13 provision would have meant that the bigger platforms for example Google and Microsoft etc. would have required to adopt “effective content recognition technologies” or in other words content filtering systems which would prevent copyright work from being posted on them in the first place. Seem perfectly reasonable? Clearly authors, artists and journalists could have benefitted as they have long suffered from large scale copyright infringement on the internet which they are unable to tackle in any meaningful way, thus arguably losing out on substantial revenue. However just think about it. Whilst the provisions in the Directive were very vague (which was part of the problem) it had been criticised as the thin end of the wedge towards internet censorship, auto surveillance and control of internet users. It will be interesting to see how any redrafted provision attempts to overcome this criticism.
The provision as drafted would have required the platforms to prevent publication if the automated technologies identified any copyright infringing material. However copyright law is complex and there are many possible defences and exceptions which can be applicable. The automated technologies, which are extremely expensive, are not yet sophisticated enough to apply these, which in any event are not based on any scientific logic but rather require application of the weighing of interests and legal tests in each case. Some of these exceptions and defences are for example fair comment, quotation, criticism and parody. It is easy to see why Wikipedia took such radical steps to show its distaste for the proposals as they must frequently rely upon some of these exceptions including fair use.
The other controversial proposal was the so called “link tax” under Article 11. The effect of this would have been to force the same websites and also relevant news aggregators and media monitoring companies to pay licence fees to publishers (some 20 years post publication) for using snippets of text from published articles/news stories. This was criticised as being likely to inhibit or even prevent free linking on the internet. Similar measures have already been tried and have failed in Germany and Spain in their national laws. Indeed the German law is about to be invalidated. Even individuals could potentially not share links without a licence which might even have impeded bloggers!
Also smaller publishers and would be start-ups in the news publication sector often rely heavily on the posting of links to their content as a way to obtain market recognition and draw readers to their sites. These measures may have affected them detrimentally and removed what was a level playing field.
Another possible dangerous side effect was that this measure could result in disproportionately more fake news and propaganda appearing on the web. Such publishers of this type of content are unlikely to want to charge licence fees for linking to their content as their only interest is likely to be getting their ‘misinformation’ out there. There may well end up being no disincentive or ban on free publication links to this material and so the amount of this type of content is likely to rise and have more visibility as a result.
We will now require to wait and see whether the draftsmen can craft something that will satisfy the politicians and the wider industry. However, it will clearly be a significant challenge to find the right balance between protecting the interests of the rights holders whilst avoiding any erosion of freedom of speech and allowing access in line with fair use requirements and the like.
In addition given that the Directive is back to the drawing board the delay in any implementation may mean that Brexit will intervene and the UK will not be compelled to introduce this controversial new law at all.
However, even if Brexit means that the UK does not have to actually implement the redrafted Directive, the global reach of the internet means that any redrafted version will almost certainly have an indirect impact on UK publishers and rights holders.
As we all start to get used to the summer weather that Scotland, and the rest of the UK is enjoying, leisure and hospitality operators want to move quickly to capitalise on the sunshine.
Outside spaces can be utilised for eating and drinking, and cultural events. Children’s play areas can be installed to attract business from families.
Operators want to move quickly and without fuss.
However, some have faced costs and delays due to uncertainties with the planning system. So, for example a recent dispute with a council centred around whether planning permission was required for hot tubs at a holiday park. In another case there were questions over how long a marquee could be erected in hotel grounds without a planning application being required.
The challenge remains that there is no definitive list of when planning permission is required, and approaches can vary between councils. Also, some works might not need planning permission if they are on a house site, but do need it if they are for commercial purposes. The rules are also different for conservation areas and listed buildings. Add to that, the fact that the planning system can be slow to adapt to new trends, this can be frustrating for operators.
In some cases it is possible to apply for retrospective planning permission, but the worst case scenario is that planning permission is refused and building work has to be un-done, with potential lost bookings and refunds.
With the good weather looking like it might be here to stay for a bit longer, getting specialist advice in advance of installing anything new, could protect you from costly delays and lost revenue in the long run.
In May this year the Scottish Government issued a consultation paper on the reform of child law in Scotland.
The consultation paper covers many aspects of child law and contains many proposals that people will have strong views on. The last date for submitting responses to the consultation paper is 7 August so there is still plenty of time for people to make their views known if they wish.
In a short blog it is difficult to do justice to the breadth of reform that is being considered in the consultation paper, but to give a flavour of the matters considered:
– Grandparents’ rights. Should the law include a presumption that children should have contact with their grandparents?
– Siblings’ rights. Many families have complex structures with full, half and step siblings. Should the rights of siblings to have contact with each other be strengthened?
– Complying with contact orders. Recalcitrant parents denying contact are thankfully an infrequent occurrence. When they do occur however, they often pose many difficulties. Should the court no longer have the option of imprisonment as the ultimate sanction for parents in contempt of court? Should the defaulting parent instead be required to undertake unpaid work or attend parenting classes? Alternately is the proper remedy for contempt of court the imprisonment of the defaulting parent and should contempt become a criminal offence?
– Step-parents’ rights. Should it be possible for step-parents to obtain formal parental rights and responsibilities in respect of children by entering into a formal Agreement, signed by either one or both of a child’s biological parents?
– Contact and residence. The terms contact and residence replaced the old terms of custody and access. However there is a perception that the terms contact and residence still suggest that one parent has a better position in relation to a child than the other parent. Should these terms be abolished and replaced with something, such as a “child’s order”?
– The views of a child. Should the presumption that a child aged 12 years is of sufficient age or maturity to form a view be removed, thus allowing the voices of younger children to be heard more easily? Should a new class of professionals, known as Child Support Workers, be created to help take children’s views in litigation?
– Parental rights and responsibilities for all fathers? Currently only married fathers and fathers who are registered as such on the child’s birth certificate have full parental rights and responsibilities. Should that be extended to all fathers, regardless of whether they are named on the child’s birth certificate? Should the person registering the birth of a child be obliged to name both parents?
– Shared care. Should there be a presumption of shared care in child cases? Alternately, should the starting point be the presumption that a child will not benefit from a shared care arrangement?
– Parental alienation. What can be done about this? The term parental alienation is used loosely and covers a broad spectrum of conduct. The consultation paper considers various options. In addition to the options in the consultation paper, perhaps the courts should encourage the active involvement of clinical psychologists in the complex and challenging alienation cases? After all, is alienation really a legal problem?
– Domestic abuse. Sadly domestic abuse often impacts on children as well. Should domestic abusers be prevented from cross-examining the other parent in court? What protections should a court offer domestic abuse victims who have to be in the same court as a perpetrator? Repeatedly raising cases regarding contact and residence is often an extension of domestic abuse. Should that be banned? Should the courts do more to promote domestic abuse risk assessments once a contact and residence case is in court?
– Checklist of factors to be considered before making an order for contact and/or residence. Just now, each case turns on its own individual merits. Should the law specify a list of factors that the courts must consider before making an order for contact and/or residence?
– Alternatives to litigation. Amongst the many options being considered are Family Group Therapy and Compulsory Mediation Information and Assessment Meetings.
The above are just a flavour of some of the important and radical issues being considered by this consultation paper. This is our chance to shape the future of child law for the next 20 odd years. I would once more encourage anyone with an interest in child law to read the consultation paper and let the Scottish Government have your views.
To find out more about the current child law in Scotland visit our dedicated family law website http://www.brodies.com/bfamily/
In September last year, the FCA confirmed its intention to make a reference to the Competition and Markets Authority on the provision of Investment Consultancy Services and Fiduciary Management Services.
If one goes back to the beginning, it is important to understand the terms of the reference issued by the FCA for the two separate, but in reality, closely-related areas of service. The FCA defined the markets in respect of which the investigation was to be undertaken in the following manner.
Investment consultancy services are defined as:-
“the provision of advice in relation to strategic asset allocation, manager selection, fiduciary management, and to employers in the UK”
In turn, fiduciary management services are defined as:-
“the provision of a service to institutional investors where the provider makes and implements decisions for the investor based on the investor’s investment strategy in the UK. This service may include responsibility for all or some of the investor’s assets. This service may include, but is not limited to, responsibility for asset allocation and/or fund/manager selection”.
The main recipients of these services are likely to be pension scheme trustees.
In essence, the FCA is concerned with a number of factors affecting both these markets. These include:-
too much dependency on investment consultants by pension fund trustees. Trustees are required by Pensions Acts to take proper investment advice and there is a concern that they often do not have expertise to challenge investment consultants and assess the quality of advice that they receive. As regards the latter issue, the FCA is particularly concerned that there is not sufficient data available to assess the impact of the advice being given. This extends further to a perception that there is not enough transparency in fees for the industry as a whole. The FCA have characterised this as a weak demand situation;
a perceived lack of competition- as evidenced by possible high levels of concentration in the market with a low level of switching providers;
barriers to expansion into the market by smaller firms as (i) trustees have tended to rely on existing reputation in selecting advisors and (ii) there are difficulties in comparing results achieved by providers;
vertically integrated business models and conflicts of interest by consultants – the concern here centred on the role investment consultants have in recommending fellow group companies for fiduciary management services.
This investigation should also be seen in the wider context of the FCA’s drive to ensure that investors are getting value for money from their advisers and managers and that Investment Consultants have a strong incentive to manage costs appropriately. In effect, the FCA want to ensure that existing providers are constantly challenged to provide a high quality service.
2. Provisional findings by the CMA
The CMA has been releasing Working Papers setting out the progress of its investigation. To date eight Working papers have been published and there does seem to be a trend in these papers towards the CMA forming a view that the market is not working as well as it could. Amongst the views taken by CMA to date are:-
There is probably too much integration between the Investment Consultant market and the market for Fiduciary Management Services. There is in effect too much pressure on pension scheme trustees to buy Fiduciary Management Services from their own Investment Consultants. It would seem that the CMA are coming to the view that more needs to be done to allow pension scheme trustees to consider a wider market for Fiduciary Management Services and to look more actively for the right provider. More work is needed to address potential conflicts where Investment Consultants are promoting their own fiduciary management offering. This might entail greater focus on tendering or greater reporting to members of the scheme- in effect the trustees would be under more pressure to justify how they have selected managers. The CMA is also considering controls which would be placed on Investment Consultants as to how Fiduciary Management Services are sold to ensure the market is opened up to a greater extent;
Some concerns as to the effectiveness of the recommendations as to asset managers made by Investment Consultants. The CMA has come to a view that the recommendations made by Investment Consultants do not lead to performance which materially outperforms benchmarks, particularly after fees are taken into account. Accordingly, it has questioned whether the basis on which claims of performance are made need to be improved and stricter methodology applied as to how performance information is presented. The CMA is also moving to a position of recommending that the manner in which information is presented generally to trustees need to be improved including better fee information, performance metrics and information included in tenders;
As part of the solution to some of the issues that have arisen, the CMA has been considering the level of trustee engagement in selecting and managing Investment Consultants and Fiduciary Management Services. They have considered a number of issues that would equip trustees better to engage with Investment Consultants and Fiduciary Managers including mandatory tendering and/or switching of providers, improvements to governance which might include a higher threshold of matters which trustees need to consider when reviewing the appointment of advisers. Trustees would also be expected to focus on value for money. There might also be enhanced reporting obligations to members which would force trustees on procedures adopted in the appointment process. The CMA also considered whether trustees’ who are more engaged achieved better value for money;
The CMA having examined the market definition for investment consultants and fiduciary management services seem to be coming to the view that, taken as a whole, the market is not highly concentrated but that trends in the market for Fiduciary Management Services may lead in that direction. However the CMA is still considering whether the market for these services is functioning as well as it might and whether the barriers to entry are restricting competition.
The FCA has published its Consultation with regard to how it intends to regulate the activities of claims management companies. Legislation is in the process of bringing these companies with the ambit of the FCA. This is perhaps an industry which has been crying out for more effective regulation for some time.
The FCA has highlighted a number of areas of concern within the industry. These include fraudulent claims, aggressive and misleading marketing practices (the FCA has referred to 2.7 billion unsolicited calls, texts or emails in a 12 month period), poor service and poor controls for those leaving the industry. The impact of FCA regulation could be significant.
The FCA highlights the application of the senior managers’ regime when it comes onto force, the Principles for Business and the application of the Systems and Controls which apply to other regulated businesses.
There will also be extensive Conduct Standards which will apply a “acting in customers’ best interest rule”, impose restrictions on the use of lead generators, impose the need to record calls and apply FCA financial promotion rules. Lead generation rules will mean that CMCs will need to ensure that leads are obtained in line with data protection legislation and privacy and electronic communication legislation with particular requirements for leads generated overseas.
The FCA will also take steps to beef up prudential standards in the industry.
Perhaps this is an area where increased intervention by the FCA is long overdue.
The Housing (Amendment) (Scotland) Bill passed through Stage 3 (i.e. consideration by the whole Parliament) of the Scottish Parliament on 31 May 2018 by 114 votes to nil. All that is needed now for the Bill to become law is Royal Assent which is expected early autumn. The purpose of the Bill is to lessen public sector influence over Scottish housing associations and other registered social landlords. On its face, this sounds like a good thing. No one likes too much regulation, but the changes that will be taking effect need to be considered in a wider context.
The background to the Bill arises from the re-classification in 2016 by the Office of National Statistics (ONS) of housing associations as public sector non-financial corporations. This was bad news for the Scottish Government as it resulted in approximately £3.4bn of debt being suddenly added to the public sector balance sheet.
The solution, effectively mirroring what has already happened in England, has been to bring forward legislation designed to ensure that public sector influence, as exercised by the Scottish Housing Regulator, over RSLs is made compatible with RSLs being classified by the ONS as private sector bodies in the UK national accounts. Bingo! £3.4bn is immediately struck off the public sector balance sheet.
The principal changes proposed under the Bill are:-
Narrowing the powers of the Scottish Housing Regulator to appoint a manager and to remove, suspend and appoint officers.
Removing the need for Regulator consent to the disposal of land and housing assets.
Removing the need for consent to changes to a RSL’s constitution.
The Bill also provides for power for the Scottish Ministers to make further regulations modifying the functions of the Scottish Housing Regulator, although now limited to a 3 year window.
Overall there will be less regulation.
These changes need to be put in the context of wider consultation by the Scottish Housing Regulator on the future of social housing regulation, with a proposed move to risk based regulation, prioritising use of resources available to the Regulator. The final words ‘prioritising use of resources’ is important. There is pressure on costs and the structure proposed is designed to maximise use of available funding.
The consultation papers refers to RSLs giving the Regulator the right type and level of assurance, backed by appropriate evidence, that tenants and other interests are protected. To an untrained eye that sounds again like less direct regulation due to budgetary constraints and more of a self-certifying exercise.
Coupled with the changes proposed through the Housing (Amendment) (Scotland) Bill, we seem to be moving to a structure involving light touch regulation and less ability for the Regulator to take early stage action in the event of concerns over governance or other performance.
I would query the benefit to a sector where funder and investors have placed much reliance on a robust regulatory structure being in place leading to a ‘non-default’ sector. It would be extremely unfortunate if a RSL were to fail in circumstances where this was perceived to be in consequence of, or contributed to by, a lighter regulatory regime being imposed. This would not be viewed positively by funders or investors. In the context of the huge investment currently being made in the sector, this would be an unwelcome development.
If the proposed changes to the regulatory regime as outlined in the Regulator’s consultation are due in whole or part to financial constraints, and the need to prioritise resources, then query if the relevant actions proposed should be focused not on lessening the robustness of the regulatory framework but instead ensuring that sufficient funding is made available. Other regulated entities fund their regulatory through an annual charge, and I wonder if such an arrangement might also be worth considering for the RSL sector given that this is such an essential element of the sector.
Chris Dun is a partner in Brodies LLP who specialises in housing finance, both in relation to debt facilities and private placement and other capital market transactions.