Hansard

I am delighted to speak on tenancy deposit schemes in my maiden members' business debate. It is always a pleasure to be involved in a debate about a matter on which a solution can be found. I am sure that members will join me in welcoming to the gallery representatives from the National Union of Students and students from the University of Edinburgh, the University of St Andrews, the University of Stirling, and Heriot-Watt University—I am sure that they have already had an entertaining time.

I became aware of the inadequacy of the current arrangements when students from the University of St Andrews contacted me after losing their deposits because their letting agency had gone bust. I wrote to the Minister for Communities and Sport, who gave the only possible reply, which was that students could pursue the problem through the registration scheme or the small claims court. Neither option was suitable and it was clear that the tenants would never get their deposits back. If a custodial tenancy deposit scheme had been in place, their money would have been safe.

The need for such a scheme is growing. The private rented sector has grown to more than 10 per cent of housing and accounts for more than 230,000 households in Scotland. The sector offers flexibility that meets the needs of students, young professionals, migrant workers and many families. However, it is unfortunate that there is almost acceptance of a poor system in relation to deposits, in which vulnerable tenants, in particular tenants who rent from unaccredited landlords, suffer.

As tenants commonly have to pay deposits up front, unfair deductions or delays in returning deposits can cause debt, threaten tenancies and even lead to homelessness in the worst-case scenario. A tenancy deposit scheme would protect tenants from unfair deductions to deposits and from delays in repayment and could offer dispute resolution services.

In England and Wales, three mandatory tenancy deposit schemes have been in place for more than a year and have been acknowledged to be a success. More than a million tenancies are covered and disputes between tenants and landlords have been reduced to a minimum. In addition, the schemes are entirely self-financing. In a custodial scheme, in which deposits are held by a third party rather than by the landlord, a proportion of the interest from deposits is used to cover the scheme's running costs. There are no fees for landlords and tenants receive a proportion of the interest on their deposit. That is an improvement on the current arrangements for many tenants.

As we know, Parliament is keen on international comparisons. I am pleased to report that similar schemes exist in Ireland, Belgium, France, New Zealand, Australia and Canada.

Having met the National Landlords Association and the Scottish Association of Landlords, I appreciate their reservations about the introduction of such a scheme in Scotland. However, I firmly believe that a custodial scheme that would pay for itself would have many benefits for landlords as well as for tenants. In Ireland, landlords protested that the sector would collapse if such a scheme were to be introduced, but in fact the sector has flourished since its introduction. In England and Wales, the National Landlords Association runs one of the schemes.

In Scotland, with registration and accreditation, the sector is showing itself to be forward looking and keen to meet high standards. I believe that a tenancy deposit scheme could only help to enhance that reputation. It is clear that there are inconsistencies at present in the handling of deposits, and that there is a lack of clarity and understanding of the issue among landlords and tenants. The Scottish Government should act now to use the powers that were left for it on statute.

Although the minister has pushed forward with landlord registration and accreditation, there has been less drive on a deposit protection scheme, albeit that it is also a measure in the Housing (Scotland) Act 2006. Looking back to the passage of the act, it is clear that concerns were expressed that registration and accreditation would not, of themselves, tackle the problems of tenancy deposit dispute. At the time of the passage of the act, there was strong cross-party support. My fellow Fife MSP, Tricia Marwick—with whom, I admit, I do not agree on many occasions—lodged an amendment on the issue. At committee stage, she said

"Good landlords will be perfectly happy with a scheme that will separate them from rip-off merchants."—[Official Report, Communities Committee, 5 October 2005; c 2504.]

Strong stuff indeed. It is therefore a pity that SNP back benchers have not been as vocal on the issue when their party is in government as when it was in opposition, albeit that some SNP back benchers continue to support the proposal. The political argument has been won. The measure was included in the 2006 act because Parliament recognised the need for such a scheme. We should now be pushing ahead and introducing a scheme.

A circular that the former Scottish Executive released in August 2006 said that

"the provisional estimate is that arrangements"

for a deposit protection scheme

"could be operational by mid-2008."

Even allowing for civil service caveats, the intention was clearly that a scheme would be in place by this summer. A tenancy deposit scheme should have been in the ministerial in-tray, but we have instead seen delay in the progression of such a scheme in Scotland. Only now—a whole year since the election—is the private rented sector tenant survey finally under way.

While the Government has lingered, events have overtaken it. The total deposits that are held by private sector landlords have reached unprecedented levels. Shelter Scotland estimates that the amount is about £50 million. However, using the latest Scottish household survey research, the figure could be closer to £80 million. Schemes in England and Wales have been up and running for a year. The Scottish Government can now draw upon that experience, as it can on the research and evaluation that took place before those schemes were introduced.

Recently, the National Union of Students conducted research that found that 33 per cent of students reported unfair delays or deductions from deposits at the end of their tenancies. At the moment many tenants, including students who are going to university in the autumn, are looking for accommodation. It is only fair that those tenants, including students and their parents, have similar protection to that which is offered to tenants, including students, in the rest of the United Kingdom.

A tenancy deposit scheme that is combined with an arbitration service has something to offer to both tenants and landlords. The powers are in place—they are ready and waiting to be used. In the meantime, up to £80 million is being held in the private rented sector without regulation on how it is handled, when it is returned, or who receives the interest from the sums involved, the total of which is vast.

As a first step, a voluntary scheme would at least provide some protection. I welcome a commitment from the minister that he will explore the possibility of providing voluntary access to the existing schemes in England and Wales, before he puts in place a mandatory scheme. That said, the evidence on voluntary schemes is not particularly positive. Although good landlords would join, the vulnerable tenant would still be left exposed. I hope that the minister will take the opportunity of the debate to put on record his agreement in principle to the tenancy deposit scheme and to commit to consulting over the summer to shape what a future scheme or schemes would look like.

A tenancy deposit scheme would be an improvement to the private sector in Scotland. It would not need legislation. It would make a positive impact quickly and deliver a huge benefit for tenants and landlords without disproportionate cost to the Government, tenants or landlords. There is no reason to hold off any longer from providing this valuable security to tenants.