The politics of HIPs

For several years now, when speaking at home information pack (HIP) seminars for conveyancers, I have begun by stressing that an understanding of HIPs requires an appreciation that they have little to do with the practicalities of conveyancing, logical rationale, or even common sense. HIPs are essentially a political construct. Therefore you cannot apply normal logic to predict whether they will proceed, or what form they will eventually take.

My overriding concern, when speaking on HIPs, has been to ensure that small conveyancing practices have understood the danger that they pose to their future.

Unfortunately, an over-long run up to HIPs and a poorly-handled introduction had led to most small practices deciding that HIPs can be faced 'as and if they ever happen'. I believe that is a potentially critical mistake, and that practices which ignore or underestimate the threat are gambling with their future.

However, what politicians give us they can take away or change '“ overnight if they see the need (last July's decision to 'downgrade' the HIPs most important component, the home condition report (HCR), is an obvious example).

Critical change

When Ruth Kelly, secretary of state for communities and local government (CLG), made her emergency statement to the Commons on 22 May '“ only nine days before HIPs were due to become compulsory '“ she outlined a number of policy changes. One of those changes, in particular, may have a critical influence over the fate of HIPs and has not been appreciated by many HIP commentators. This is the decision to postpone the start date for compulsory HIPs to 1 August.

Was the delay necessary?

Given the obvious embarrassment it caused, Ms Kelly's decision to delay was a surprise, as a June start would have been possible. This could have been achieved by initially separating energy performance certificates (EPCs) from the rest of the HIP; starting HIPs on 1 June and then allowing EPCs to be phased in regionally, once each region had sufficient domestic energy assessors (DEAs).

Alternatively, the government could have stuck to the 'big bang' approach and had HIPs (without EPCs) start on 1 June throughout the country, and include EPCs in all HIPs later, once there were sufficient DEAs nationally, say, on 1 December. (This 'split' approach would have had the added advantage of accommodating the provisions of the recent consent order made in the RICS judicial review '“ one of the reasons given by Ms Kelly for the postponement).

Background

Before attempting to look forward it will help to establish some salient points leading to the current position.

HIPs are the result of two Labour general election manifesto commitments. In 1997 their manifesto promised to improve the home purchase process (although it mistakenly identified gazumping as the problem), whilst in 2001 their manifesto was more specific, promising to introduce 'a new sellers' pack'. Election manifestos contain promises that are expected to increase the party's popularity and to win votes.

Ms Kelly arrived at Westminster in the Labour landslide of the 1997 general election. Since then she has had an impressive series of promotions from Tony Blair, including becoming the youngest ever member of his Cabinet. Being a 'Blairite' has been of considerable help to her political career.

Two weeks before her House of Commons announcement last month, Blair eventually named 27 June as the date for passing the keys to Number 10 to Gordon Brown.

It was said that Kelly (an economist by training and a former economic secretary to the Treasury) had asked for Brown's assurance that he was behind HIPs before making her House of Commons' statement last month, and that she had received it.

Whilst Ms Kelly may be a Blairite, her junior minister, Yvette Cooper, sits on the other side of Labour's internal divide. Her husband, Ed Balls MP, is one of Brown's closest allies and is the economic secretary to the Treasury. The Brown reshuffle may well see Kelly moved (or possibly removed) and replaced by Cooper.

Had HIPs gone ahead on 1 June, then Gordon Brown would have come to power and been faced with a fait accompli. As it is, I believe it could be critical for the future of HIPs that Kelly's two month postponement has put their start date squarely into Brown's premiership and his sole control.

Brown and HIPs

Mr Brown has provided very few (if any) statements on the record regarding HIPs. Whilst he has apparently expressed support for EPCs (what sensible politician would risk the wrath of the green lobby by opposing them?) he is reported to be 'lukewarm' on HIPs.

When I recently discussed Brown's approach to HIPs with the Department of CLG, I made the point that I assumed that the government's spending on HIPs to date was tacit evidence of the Treasury's (Brown's) support for the policy. I was surprised to be told that HIPs spending had been funded entirely from the CLG's budget, not from the Treasury. Hence, spending to date on HIPs provides no basis for a presumption that Brown is necessarily supportive of them.

Brown's new image

Brown's rise to PM before the deferred start date for HIPs is important, because I believe this will present an opportunity for him to use HIPs as a means to create the image he wishes to cultivate.

Brown has worked hard of late to indicate that he will not govern presidentially. He has striven to cast off his dour, humourless image and to take on the public persona of a humble, caring, listening and responsive leader '“ someone not afraid to admit to past mistakes (especially other people's). In short, he needs to demonstrate that he is his own man '“ and is not afraid to break with past Blair policies.

Loss of face

The considerable embarrassment caused to the government by last July's degrading of the HCR to a voluntary HIP component (a step which effectively ended any sensible arguments that HIPs would be consumer-friendly or would give buyers easily understood information), was exceeded by the loss of face caused by the recent, eleventh-hour postponement.

HIPs have already shown themselves to be accident prone. Brown will therefore be well aware of the 'risk factor' HIPs represent. After August he must accept responsibility for their consequences.

HIPs' economic consequences

An early internal review under Brown of HIP policy is particularly likely, as one of the most forceful arrangements against HIPs is their possible damage to the housing market. A reduction in the number of homes offered for sale (which the CLG accepts will happen) has been predicted to have effects well beyond the residential property market.

House purchases stimulate the home improvements, furnishings, and a wide range of related market sectors. It was the worrying report from by the influential Oxford Economic Forecasting last July (when HIPs were expected to cost £700'“£900) that predicted that compulsory HIPs could lead to both a drop in national gross domestic product and a rise in unemployment.

This report was thought to be at least partly responsible for Kelly's decision, a few days later, to degrade the HCR (leaving some 4,400 trainee home inspectors with little prospect of work, apart from producing EPCs).

Brown's choices

If Mr Brown accepts that HIPs (in their current, watered-down and less expensive form) could still risk harm to the economy, then he may feel compelled to act. He now has a month as prime minister in which he can decide whether to allow the policy to continue on its course and do nothing new; or to bide his time but act before full implementation; or to scrap HIPs before they are due to start.

It could be to Gordon Brown's political advantage to axe HIPs before August. This could be his opportunity to show he was willing to take a fresh look at his government's policies and act decisively, without being shackled to a discredited and risky Blairite reform. This could be one of the first demonstrations by Brown that he can be his own man.

However, as Brown has already made it clear that he has a long 'to do' list (although housing is, apparently, near the top), he may delay any decision on HIPs until he has settled in at Number 10, and wait until the first phase of HIPs (for homes with four or more bedrooms) has begun in August. This would provide him with feedback which he could use to justify discontinuing the policy. He could then scrap HIPs before they affect the majority of the market.

The EPC (which must go ahead for all properties by 2009, being based on legislation from Brussels, not Westminster) could then continue as a stand alone document, to be provided either at the outset of a sale (or letting) or at any time before contracts are exchanged.

Third way

Then there is the third option '“ that Brown might allow HIPs to start on 1 August and the further two stages of implementation (for three bedroom homes and, finally, for all other homes) to proceed. The number of accredited DEAs is expected to reach 3,000 (the trigger for all homes to be brought into the HIPs net) well before the end of the year. This means that by December we could have compulsory HIPs for all qualifying homes sold in England and Wales. HIPs will then become an established feature of our national home sales process '“ regardless of whether they actually deliver any practical benefits to homebuyers.

Choices and consequences

What is the most likely of the three choices I have outlined for Brown? This could already be clear by the time this is published, but my expectation is that Brown will have his immediate sights set on bigger things, and HIPs will be allowed to proceed.

I believe it is vital that high street practices, in particular, are aware of the potential damage HIPs can cause us. All residential conveyancers should therefore be preparing now to deal with HIPs (and this will mean more than signing up to an online provider), and regard it as a bonus if the new prime minister acts to spare us the necessity. The potential cost to small practices of being unprepared, when HIPs start, is too great a risk to be worth taking.