PARLIAMENTARY WRITTEN QUESTION
Tenancy Deposit Schemes (4 June 2014)

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 £30 million 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 Rt. 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 £12.7 million 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.