The custodial tenancy deposit scheme run by the Deposit Protection Service has paid less and less interest to private tenants.
The scheme, which physically banks deposits, was designed to be self-funding from the interest on the money lodged with it.
In a Parliamentary question, Labour MP Andy Love, who represents Edmonton, asked housing minister Brandon Lewis about the custodial scheme.
His questions were:
- What estimate DCLG has made of the amount of interest paid to private tenants from custodial tenancy deposit protection schemes in each of the last five years?
- What steps DCLG has taken to ensure that private tenants receive value for money held as deposits in custodial deposit schemes; and if he will make a statement?
Lewis replied: “The interest payments to tenants under the scheme are as follows:
“2010: £418,681; 2011: £199,579; 2012: £120,288; 2013: £82,084; 2014: £59,184.
“The falling figures reflect record low interest rates, and also the changes that were made to the contract after 2010. If I may explain:
“The service concession agreement that was agreed by Labour Government 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.
“If interests were low, then the Government would pay the scheme money.
“As a result of the low interest rates that emerged due to the financial crash in 2008 and 2009, such an agreement left taxpayers liable for a massive shortfall, which was estimated to reach over £30 million by the end of the contract in 2012.
“In May 2010, the Coalition Government inherited this unacceptable situation and looming liabilities for taxpayers.
“As outlined by the Member for Welwyn Hatfield (Grant Shapps) on 19 July 2011, Official Report, Column 828W, following extensive negotiations in summer 2010, we removed the guarantee and all associated liabilities as part of a revised agreement.
“The Government is currently inviting bidders for the new custodial tenancy protection scheme contract for 2016 onwards, and we are asking bidders how and when they could offer tenants’ interest as part of their bids.”
Comments (2)
It always amused me when various agents would argue that responsible agents must use the DPS and why would anyone want to hold the deposits in their own account. The deal that Labour concluded using tax payers money as a guarantee was nothing short of shocking – since when does government financially back private companies unless they happen to be a bank.
A business model that relied on interest rates to make it work, but needs a public cash handout if rates drop, would had me running away in the opposite direction very quickly.
hahaha so its not self funding. Its costing us all £30 million !!! gosh There must be a cost anyalist of the claims and funds held. I understood it was marginal if there was even a problem in the first place ie 50/50 split in awards. I also bet the amounts awarded would not equal £30m.
Perhaps the tenants may have to pay something to have their deposit protected but hang on Labour wont allow any fees to tenants.
Personally I would scrap it completely, if a tenant thinks they are being unfairly treated they can start an on line money claim but that does cost them a little cash and effort but would weed out frivolous claims and focus minds to resolving an issues if it arises.