The Deposit Protection Scheme, which provides a custodial service, is the only scheme to have received taxpayers’ money in the last ten years.
It received over £30m by the end of its first contract in 2012, and is now getting £12.7m.
The figures were confirmed in this parliamentary exchange:
Jeremy Corbyn: To ask the Secretary of State for Communities and Local Government how much funding each tenancy deposit protection scheme has received from the Government in each of the last 10 years.
Kris Hopkins: The tenancy deposit protection schemes are operated by private companies under service concession agreements with my Department. All the schemes are designed to be self-financing.
The service concession agreement that was agreed by the previous Administration with the custodial tenancy deposit protection scheme contained a guarantee that the Government would meet any shortfall arising if approved fees were not covered by the interest on deposits held.
As a result of the low interest rates that emerged due to the financial turmoil in 2008 and 2009, this agreement left the Government – i.e. taxpayers – liable for a shortfall under that guarantee which was estimated to reach over £30m by the end of the contract in 2012.
In May 2010, the coalition Government inherited this unacceptable situation and looming liabilities. As outlined by my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps) on 19 July 2011, Official Report, column 828W, following extensive negotiations in summer 2010, the guarantee and all associated liabilities were removed as part of a revised agreement which also incorporated a payment of £12.7m and a four-year extension of the original agreement.
This is the only payment which has been made by Government to any of the tenancy deposit protection schemes.
“Jeremy Corbyn: To ask the Secretary of State for Communities and Local Government how much funding each tenancy deposit protection scheme has received from the Government in each of the last 10 years”
TDS came into force in April 2007, 7 years ago. Am I alone in wondering what was going on between 2004 and 2007? I thought TDS was something dreamt up by Yvette Cooper in February 2007 and have clear recollection of the urgent emails required to plug the gapping holes in legislation that had onerous consequences for Agents.
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I think you are confusing the initials. The legislation that made provision for compulsory usage of Tenancy Deposit Protection (TDP) was included in the 2004 Housing Act. Then, following a lengthy procurement process the 3 successful schemes eventually became available from (April) 2007. The 'problems' and inadequacies of the legislation drafting became apparent after mandatory usage commenced but had nothing to do with the contractual issues which were caused by (Govt controlled) interest rates. TDS is the TDP scheme founded by RICS, ARLA & NAEA.
Total waste of Parliamentary time asking the question really as the information was lodged in the House of Commons library two years ago.
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The confusion goes right back all those years when Tenants' Deposit legislation was being referred to as the Tenancy deposit scheme. I had to point out that the deposit does not necessarily belong to the Tenancy which was the 1st draft I ever saw and suddenly had the task of writing changes to a software system designed to correctly identify individual deposits received from joint and several tenants. It was all well and good having 3 years of procurement but to ignore the practical considerations until 6 weeks before the legislation became compulsory was simply inept.
As you have a strong and detailed knowledge of this eromallid, is there good reason why pre April 2007 deposits didn't need protecting? It wasn't anything to do with the ingeneous and imagnitive ways some notable firms had found to deposit large sums of Clients' money was it?
In respect of what happens in the big house, much of it is petty point scoring for no reason other than to establish credibility ahead of next year's job reviews. The rudeness, arrogance and dishonesty of character and motivation I have witnessed first hand from Westminster leaves me with little respect for them, however I regard their ignorance of the practicalities of our industry really quite shocking.
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Where does the £42m payment come from? The Parliamentary reply clearly states that there was a renegotiation of the original contract which reduced the Govt. assessment of taxpayer liability of possibly £30m in return for a one off payment of £12.7m and an extension to the original contract until 2015?
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At the time schemes were created by Labour, no one foresaw that interest rates would fall so low for so long as a result of 2008.
Now they are, schemes who were awarded contracts cannot be expected to do a good job and promote deposits to be held in custodial schemes, which offer the best protection for a tenant, at a loss.
Effectively, the taxpayer is paying money towards ensuring tenants deposits are protected – a good use of money in my opinion. The alternative is to charge agents to use the insurance backed alternative. Everyone across the political spectrum including Generation Rant want monies held in custodial schemes. If that happens, then the cost will go up unless the Bank of England raise interest rates. The structure of deposit protection is long established, so this question was indeed a waste of parliamentary time.
Surely the issue is about the terms of the contracts agreed with the 3 schemes by the last Government , not the fact the that the current Government has honoured them.
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Come on Eric, it is unlike you to have such an open dig at your potential customers.
I see a strong opportunity to engage with Generation rent to show them that professional agency is here to help them. I can quite understand how being fleeced for multiple administraion fees for properties, that in practical terms are unavailable, might cause considerable feelings of rebellion in me. I am therefore a bit surprised you aren't recognising the opportunity to work with Generation rent to idenify rogue practice and Rogue Agents.
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I think you misunderstand. I was referring to the organisation 'Generation Rent' who claim on their website "renters often get hit with spurious fees supposedly covering administration, inventory, references, guarantors, deposit protection, maintenance charges and credit checks"
I am not referring to prospective tenants – our disclosure of fees was highlighted by one TSO as 'best practice'. We are at the forefront of trying to influence change for the better.
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Eric I know how much effort you are putting into the cause and it was my suggestion that you are best placed to deal with the angry mob. More than anyone else you are best placed to point out that 90% of us all are good honest folk with fair and transparent fees and like them, those who are suffering at the hands of rogues, we want to stamp out mal-practice.
You can point out to Mr Inalather that you can personally demonstrate a campaign against the bottom feeders of our industry and so are motivated to help people like them.
Helping Generation Rent understand the difference between Professional and Rogue Agency is something only a few are motivated to achieve, very few have your eloquence and ability to make a point well.
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I find it hard to believe that a company that based their business model on interest rates hadn't considered what they might do in the event that those very rates may go down at some point, other than to ask the government of the day to bail them out when their plan failed! Had they planned to pay money INTO the public purse if interest rates had gone up?
It doesn't amaze me in the least that no one at DCLG had the wit to notice either.
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Isn't is strange how none of the Professional firms needed to earn interest on the Clients' deposit account prior to 2007. Suddenly we are being told that it was all about the interest or lack of interest on the cash on deposit.
Pre 2007 a typical RICS firm traded away the income from the Client Deposit account in return for free business banking.
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It seems obvious they did, which was why, confronted with a Govt demand for a free to use 'custodial' TDP scheme based on income from interest rates (which Govt controlled) that the contract with the provider included a proviso whereby if interest rates were lowered below a certain threshold, the taxpayer was obliged to cover the shortfall. Without that there wouldn't have been a custodial scheme.
I also believe I am right in saying that above a certain interest rate level there is the provision to recompense the tenant, who until determined otherwise is the rightful owner of those funds.
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It doesn't seem very 'free' now does it? its cost the taxpayer £42.7m already with the likelihood of more bailouts to come.
It begs the question that if the DPS custodial scheme can't work without public funding then why was it allowed? there are other ways to make a custodial scheme work albeit not free.
Then again its doesn't surprise me that a labour government wouldn't have spotted the difference between 'free' service and a publicly funded political statement.
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You clearly can't read can you?
under that guarantee which was estimated to reach over £30m by the end of the contract in 2012.
then:-
following extensive negotiations in summer 2010, the guarantee and all associated liabilities were removed as part of a revised agreement which also incorporated a payment of £12.7m and a four-year extension of the original agreement.
ONE PAYMENT OF £12.7m as a result of the GOVERNMENT DETERMINING AN INTEREST RATE OF 0.5% WHICH WAS THE ONLY INCOME THAT A FREE TO USE SCHEME WOULD RECEIVE
So, not only can't the journalists read copy, but neither can the lettings industry.
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eromallid, I stand corrected, I've had some read the markings on the screen to me and I now see that we've had to bail them out for £12.7m not £42m.
But the public purse IS still being used to support an international PLC.
And please don't bother to reply if you can't keep a civil tongue in your head.
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