Welfare Reform and Work Bill (Third sitting)
(Limited Text - Ministerial Extracts only)
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Kate Green
Q 132 Could I ask for your comments on a suggestion made to me that if this legislation precedes as currently proposed, there should in fact be a choice for some housing associations to accelerate the increase and take it in the first year or two, rather than it being 1% per annum? Have you any comments on the pluses and minuses of that suggestion?
David Orr: That would be even more destabilising for most business plans, because what you do is bring forward the reduction in rent, and once that reduction is in, it is there in perpetuity. That would just add to the amount being taken out of business plans, so it is not a helpful proposal.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)
Q 133 Good morning, gentlemen. I just have a few brief questions. For those who are on low incomes, would you agree that the reduction will be beneficial?
Gary Porter: For those who are on low incomes but above housing benefit level, yes, by about 80p a week. For those who earn money but not enough to take them out of housing benefit, no, it will not make any odds. For council tenants, the biggest savers will save about 84p a week. Obviously, if you do not have a lot of money, that extra £1 a week will be a benefit, but there are better ways of doing it.
Mike Donaldson: In L&Q terms, 54% of our residents will not see any benefit at all, because the benefit is to the Treasury—the taxpayer.
Emily Thornberry (Islington South and Finsbury) (Lab)
Before you go on, can I follow this up?
Mr Vara
Q 136 I note what you say about comparability, but you will be aware that between 2004 and 2014, average social rents rose by more than 60% compared with 23% in the private rented sector. Notwithstanding what you said, would you agree that the reduction in social rents will be able to bring some sort of parity between the private sector and the social sector?
Gary Porter: It is the complete reverse. If you force our rents down and allow private sector rents to go up—
Mr Vara
Q 137 Hang on; you say “allow”, but the private sector operates independently. The disparity at the moment is that one has been going up a lot more and the other less so. As I say, look at the figures: between 2004 and 2014, average social rents rose by more than 60% compared with 23% in the private rented sector. Given that this has gone in a certain direction in the past 10 years, if it were to go in the same direction in the next 10 years, clearly one will go up less than the other.
Gary Porter: Private sector rents will go up as a result of this, because there will be less public sector houses built. That will push up the demand in the private sector, which will allow private sector landlords to push their rents up more. That is the way the market works.
David Orr: Sadly, we don’t live in a world that is that simple and straightforward. Social rents going up by 60% is a specific and direct consequence of Government policy to reduce the amount of capital investment in new supply through housing associations, while still wishing to see the same level of delivery.
In the 2010 comprehensive spending review, when capital investment in new supply through housing associations was reduced by 63%, the coalition Government set us a challenge to deliver the same number of new homes or more, specifically by introducing a new rent regime called the affordable rent regime, with much higher rents. That was a Government proposition; it was not asked for or particularly supported by the sector. Having created affordable rents that are designed to be set at 80% of market rates and therefore responsive to what is happening in the market, rebased every time there is a new letting, the Government now want to reduce the rates on those. It is not consistent; that is the problem.
Housing and housing investment is a long-term business. We borrow money and organise finance on a 30-year basis, and that kind of cavalier approach—up one year, down the next; capital subsidy and then changing it to revenue subsidy—plays havoc with the ability of organisations to make the commitments they have entered into.
Emily Thornberry
Q 138 You have been asked a question about those on low incomes and the impact on them of rent going down, and I wanted to pick that up. I wonder perhaps if Councillor Porter particularly might be able to answer this. If rents go down by 1%, will that have an impact on the amount of money that local authorities have available to do repairs, and can you see that having a long-term impact on the service that is available to council tenants?
Gary Porter: Well, yes. Whatever money is taken out of the system will prevent us either, in some cases, from maintaining the homes in the way that we would like to maintain them, or—more importantly from a Government perspective, I would suggest—from building new homes to reduce the long-term housing benefit bill. It will in a few cases have an impact on the ability to maintain homes properly, but I hope that my members would find a way of prioritising making sure that people still live in fit, decent properties. We have a good track record over the past 10 years of improving the high quality of our housing stock, and I cannot see any council easily going back on that. They will make other decisions, other than reducing maintenance, but that will be investment in their value.
Damian Hinds (East Hampshire) (Con)
Q 191 All the panel have talked about low income as a driver of poverty, and that is for obvious reasons. It is almost a truism. First, could you confirm whether it is your understanding that those measures of income will of course still be measured? Secondly and more importantly, when trying to tackle child poverty, should the Government have not just a target but a relentless focus on maximising employment, supporting parents as they increase their hours, particularly through childcare, and making a very significant increase in the legal minimum that people can be paid, ultimately tied perhaps to 40% below median income?
Professor Gordon: The Minister has said that they will still publish the HBAI, and that the Family Resources Survey on which it is based will still go ahead. I do not know whether that will change in the future. Alternative survey data that the UK has to collect as part of the national accounts on expenditure and income have been used in the past. So you will be able to cobble together something, even if the Minister changes his mind about the HBAI, but the UK would become an international joke if it stopped measuring income and low income.
Damian Hinds
Q 192 And what else should the Government be doing?
Dr Callan: We have to hit this in every way, not just education and worklessness, terribly important though they are. I have already mentioned addressing family breakdown, addiction, serious personal debt, mental health and poor housing— anything that is driving children’s poor life chances. So, more.
Alison Garnham: It is a no-brainer. As you said, it is a no-brainer; we need to look at low income, because that is everyone’s common understanding of what poverty is. It is also a no-brainer that we need to look at maximising employment, supporting parents and so on. We used to have to write strategies, and that is what we will lose with the Child Poverty Act—
The Chair
I am sorry. You’re nodding, you’re happy, I have to conclude this in five minutes’ time under Standing Orders and I must give Emily Thornberry the last couple of questions.
Emily Thornberry
In the way that it is being introduced.
Julia Unwin: The way that the benefit cap is being introduced has huge implications for childcare costs, and we know that reliable childcare is the only way for parents to get back into sustainable work. It also has huge implications for housing costs, which will make some parts of the country uninhabitable for people on benefits.
Dr Niemietz: This links back to what I said earlier. It seems to me that the benefit cap is really just a clumsy way of capping housing benefit. There is actually no way in which someone could substantially exceed that cap unless they are in receipt of housing benefit, and probably in receipt of fairly large sums. This is a roundabout way of capping housing benefit, whereas, as I said before, I would have started at the other end. Build enough houses, and you will not need a cap of that kind any more, because rents will fall automatically and housing benefit rates will fall with them.
Damian Hinds
Q 209 I want to ask Julia a quick question for clarification. We were talking earlier about single parents, and we have talked about the importance to tackling poverty of being in work and having access to enough hours. Obviously, a big part of that is ensuring that childcare support is there. You talked about the childcare allowance in tax credits. Can you talk us through your understanding of the full set of childcare changes to come?
Julia Unwin: As I understand it, by introducing a childcare allowance, the Government made big steps to enable people to go back into work. However, by making that part of the cap, we have reduced its value. In some parts of the country, and in London specifically, the costs of childcare have gone way above what can be covered by that allowance.
Damian Hinds
Q 210 Sorry, I was asking about the full set of childcare changes to come: the 30 hours offer in universal credit and so on.
Julia Unwin: The 30 hours offer, on its own, does not provide enough time to enable a parent to work full-time, and the evidence is that that is what you are required to do.
Damian Hinds
Q 211 I am not trying to put words in your mouth, but it is clearly 15 hours more than 15 hours. The subsidised 70% can therefore come on top of that. Is there also a change coming, to the best of your knowledge, in terms of the proportion of reimbursement under universal credit?
Julia Unwin: I am showing my ignorance on the third part of your question. On the first two bits, yes, absolutely. We see those as steps in the right direction and a serious intent about childcare. I am posing a warning about what it might mean in practice.
Damian Hinds
For the record, Chair, under universal credit, the 70% rises to 85%.
The Chair
I am sure we will be hearing more about that over the next few weeks. Dr Niemietz, did you want to comment on that?
Dr Niemietz: That is an issue where I would have started from a different angle by asking why childcare is so expensive in the first place. For a long time the argument has been that we have to raise childcare subsidies to Swedish or Danish levels and the problem will go away but, in terms of total tax spending on childcare subsidies, we are already at Swedish and Danish levels. The difference is in unit costs. Here, it is not just the taxpayer who spends a lot on childcare. It is also the actual user. People pay twice: first in their role as taxpayers and then again in their role as childcare consumers. I would start by looking at the structural drivers of costs in that sector—which those are, I cannot tell in detail, but there has to be something. There has to be a reason that the UK spends more on childcare subsidies than almost all of continental Europe and without having higher usage rates.
Julia Unwin: Part of the reason is that ours is a purchase system, not a provided system. We have a patchwork of childcare benefits and a patchwork of childcare provision. That has turned out to be expensive. To drive high quality will cost in different ways.