Baroness Hollis of Heigham (Lab)
My Lords, I will just ask a few questions slightly wider than the amendments tabled. The Minister will know that we have coming towards us a Housing and Planning Bill that will extend extensively the right to buy, treat starter homes as part of affordable housing and seek to both extend owner-occupation and push it further down the income scale to people who, at the moment, are not able to access it in terms of both deposit and repayments. The result of that will almost certainly be greater risk of default and problems in maintaining mortgage payments, a more precarious relationship to the world of work, and periods therefore where these people do not have reliable income.
The questions are very simple. Has the Minister talked to his colleagues in the DCLG about this? Is he aware that the demand for this sort of support will almost certainly increase substantially in years to come? What assumptions is he making about the implications of that money which must be made available, perhaps for long-term loans, to sustain people such as those who are fairly marginal to the owner-occupied market coming into it—possibly with the best of reasons, but none the less they will struggle to sustain their repayments? How much connection is there between this policy of the DWP and the work being pushed by the Minister’s colleague Greg Clark in the other place through the DCLG?
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, I start by responding to Amendment 103A, which would keep the waiting period at 13 weeks. The background to this is well known. Claimants receiving income-related benefits may claim help towards the cost of their mortgage interest payments. Apart from those receiving state pension credit, claimants must serve a waiting period before entitlement to help with mortgage interest begins. Before 2009, the waiting period for the majority of working-age claimants was 39 weeks. In January 2009, temporary arrangements were introduced that reduced this period to 13 weeks. This was to provide additional protection to those who lost their jobs during the recession. At the same time, the maximum value of mortgage for which support is available, known as the capital limit, was doubled to £200,000. In the summer Budget, it was announced that from April 2016 the waiting period will return to the pre-recession length of 39 weeks although the capital limit of £200,000 will be maintained.
This amendment would remove the current broad powers in the Bill that allow the waiting period for support for mortgage interest to be set out in regulations, replacing them with a narrowly defined 13-week waiting period, but I suspect it is a probing amendment. We wish to retain the ability to act quickly in different circumstances, and putting this in primary legislation would prevent that.
Let me be clear about why we help owner-occupiers with mortgage interest payments. The purpose is not to secure their asset or to reduce any outstanding payments owed to lenders. The purpose is simply to mitigate the risk of repossession. The CML now says that it believes the 39-week waiting period will drive repossessions, but it is unable to quantify the number of repossessions. We will work with the CML to assess any such impacts in terms of repossessions, but we do not believe that they will be significant, particularly at the current level of house prices. There is no evidence to suggest that lenders will do anything other than exercise the same degree of forbearance that they did prior to 2009 when the 39-week waiting period was last applied, particularly as we are maintaining the higher capital limit.
Amendment 104 seeks to change the way in which SMI loans are recovered from the equity in the claimant’s home. The intention is that a charge registered by a local authority to reclaim deferred payments for social care would always take precedence over a charge registered by the DWP to recover an SMI loan. As the Bill stands, the Government can require that a loan be secured by a charge over the claimant’s property. Under provisions in the Land Registration Act 2002, charges are recovered in the order in which they are registered. If the SMI charge was registered on the property before any deferred payment arrangement, it will have prior claim to any equity when the property is sold. The legal charge will therefore be subordinate to any existing charges on the property, including the mortgage. That answers one of the questions asked by the noble Baroness, Lady Sherlock.
We envisage that advice would normally be given via a telephone conversation and would cover the following areas: the claimant’s financial position now and in future, their understanding of the terms of the loan, and encouragement for them to engage with any heirs they might have. The delivery of that financial advice will be outsourced to a third-party provider.
Section 34 of the Care Act 2014 obliges local authorities, in prescribed circumstances, to offer DPAs. The intention is that people should not be forced to sell their home in their lifetime to pay for their care. If there is no equity in the property—a subject raised by the noble Baroness, Lady Sherlock—the family would be able to apply for a funeral payment from the Social Fund.
I pick up on the question asked by my noble friend Lord Young. Local authorities are not required to make such an offer where there is a pre-existing charge on the property. Recipients of SMI loans by definition have a pre-existing charge—their mortgage—so in such cases there is no obligation to offer deferred payments. The registering of a charge in respect of an SMI loan does not, therefore, directly interfere with the policy intent of the Care Act.
The noble Baroness, Lady Manzoor, asked about the types of property on which it is possible to secure a loan. Charges can be secured on the claimant’s equity share in shared ownership and on leasehold properties.
I turn back to local authority provision. Local authorities are not precluded from offering DPAs where there is an existing charge so long as they are satisfied that there is adequate security. This means that they may still consider offering deferred payments if, after taking account of the outstanding mortgage, the remaining equity would be sufficient to cover an individual’s likely care costs. It is arguable that in some circumstances the existence of a charge in respect of an SMI may make authorities less inclined to agree to defer payments in such cases. However, it is important to note that deferred payments are available only where the person enters residential care. In such circumstances, payments of income-related benefits cease, including payments of SMI. As the claimant will have no means to meet their mortgage payments, it is probable that the property would have to be sold anyway. I should be clear that the position as I have just described it is not a consequence of changing SMI into a loan; it is inherent in the current system.
Amendment 104A is intended to exempt disabled claimants from the provision that introduces SMI loans and allow them to continue to receive this help in the form of a non-recoverable benefit. The purpose of providing SMI is to protect owner-occupiers from the risk of repossession and allow them to remain in their homes. In almost all cases, these payments are sent direct to lenders rather than to the claimant. When Clause 16 comes into effect, the level of support will remain the same as now—the point made by my noble friend Lord Young—and payments will continue to be sent direct to lenders. Neither lenders nor claimants will see any difference in the way the system works, so exempting any particular group would not have any impact on the level of protection they were afforded. The difference is that under the loans scheme the payments will be recoverable, but recovery will not be sought until the property is sold. So the day-to-day income of disabled people will not be affected.
SMI supports individuals in the accrual of a significant asset. Many taxpayers who are providing that support cannot afford to buy their own homes. It is only fair that this support is recouped where equity is available when the property is sold. I do not believe there is a sustainable argument that people with disabilities should be exempted from refunding some of the equity that the taxpayer helped them to accrue, while other people supported during periods of financial need should not.
The amendment is defective, in that it does not make a consequential amendment that would continue existing SMI entitlement for the group that the amendment is designed to protect—but let us leave technical issues aside.
Lastly, Amendment 104AZA would prevent the Government from changing support for mortgage interest into a loan for those on state pension credit, and allow them to continue to receive help with their mortgage interest as a benefit rather than a loan indefinitely. This would be unsustainable and unfair on the taxpayer. As I have previously said, it is not right that taxpayers, many of whom cannot afford to buy their own home, are subsidising the acquisition of a substantial asset. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides, and the Government will not recover the loan until the property is sold. With pension credit claimants, it is most likely that this will be on their death and therefore will impact not them but the beneficiaries of their will.
Pensioners will have the same access to support that the current system provides, and the Government will seek to recover the debt only up to the level of available equity when the property is sold. In response to questions from the noble Baronesses, Lady Sherlock and Lady Manzoor, I say that any outstanding debt at that point will be written off. Owner-occupation involves the acquisition of a potentially valuable asset that often increases in value over time. It is right and sustainable that the taxpayer reclaims their contribution to this asset.
The amendment would also introduce a waiting period for pensioners before they could receive help with their mortgage interest payments. There is currently no waiting period for help with mortgage interest for pensioner claimants, and it is not the Government’s intention to introduce one.
I cannot go into great detail on the questions from the noble Baroness, Lady Hollis, but to the extent that more support will be required for people, this is a far more sustainable way for the state to provide it than through grants. We are still considering our response to the DPRRC line on whether the procedure is negative or affirmative. With these explanations, I urge noble Lords not to press their amendments.
The Lord Bishop of Durham
I have genuinely been listening to the debate. I believe the Minister did not answer one point raised by the noble Baroness, Lady Sherlock, which struck me as important. The Minister assured us that the financial advice would be independent and outsourced to a third party, but the noble Baroness’s question was not whether it would be outsourced but whether it would be independent of those who would provide the loans, so that independent advice would be separate from the loan giver. I am not sure that the Minister assured us that they would be separate.
Baroness Sherlock
Before the Minister replies, I have a few other questions; perhaps he can answer them together. I thank the right reverend Prelate for clarifying that. Indeed, I wanted to be sure that the advice was independent of the debt recovery under the provisions. I apologise if I missed any of the Minister’s answers—I tried to tick them off as I went along, and he did pretty well, so I thank him for that.
First, can the Minister clarify that anyone in receipt of a qualifying benefit will be entitled to a loan whether they have or could be expected in the future to have any equity, or certainly enough equity to cover the loan? Secondly, if somebody loses SMI and as a result loses pension credit, will they lose access to passported benefits as well?
On the question of advice, the Minister described what subjects the advice would cover but I was not quite sure of the level of personalisation. I would put money on the fact that the pensioner will say, “These are my circumstances—should I apply for this?”. Will the adviser be able to say, “I advise you to do it—yes, you should”, or “I advise that you shouldn’t”, or will the advice be much more general, like the kind of money advice we are talking about in pension schemes? Did the Minister say that it was free to the claimant? I am sorry, I may have missed that. Finally, there was the question on redress for customers in the case of bad advice.
While the Minister is reflecting on those, I will respond to a couple of points made in the debate. I thank all noble Lords who contributed. I welcome the noble Lord, Lord Young, to the debate, and thank him for what I choose to regard as the implied compliment that I had some good arguments earlier in the evening, even if I did not do so well just now. In response to the points he made, I find persuasive the research done for two different government departments that the move to 13 weeks had been effective in holding down arrears and repossessions. That was government-commissioned research. I may be wrong about that but it seemed to be one of the most compelling arguments for not going back to 39 weeks. But presumably the Minister will say that they will monitor and evaluate it, and I will be interested to hear what they say.
Both the noble Lord, Lord Young, and the Minister said that in the case of pensioners the beneficiaries are essentially not the claimants themselves but those who will benefit from their estate, but of course it is often the case that that is not strictly true. I live in Durham, and in County Durham plenty of people have houses which are, frankly, worth not very much at all by London standards, so they have very little equity in them. If this kind of debt prevents them accessing all that equity, it may mean that they will not have equity available to them which they might need to get at for care costs or other non-NHS covered support costs of different kinds. So it does potentially have an impact on the pension in their lifetime, not just on those to whom they bequeath the house.
Finally, I should have reiterated something right at the start. The Minister was kind enough to give his officials the freedom to brief us on the session, and I had a particularly helpful conversation on this area. I know it might not seem like it, since I have rewarded them by coming back with lots of questions, but in fact it has been very helpful and has meant that in this debate I have tried to focus more on how this will work than adopting a more combative style. So I appreciate that and I look forward to the answer to those questions.
Lord Freud
I do my best. On the independence of people providing the advice, it will be independent of those providing the loan.
Lord Freud
Yes, I think that it is likely to be independent of the recovery. Yes—it is now. On the point about passported benefits, we are working to ensure that individuals who are no longer entitled to an income-related benefit as a result of the introduction of the SMI loans will have access to passported benefits. We are scoping out what the advice will look like and what we expect it to cost. Until we start the contracting process, I cannot prejudge whether SMI advice will be free. So that is outstanding.
I think that I have answered most of the points. If not, I will hit the typewriter—the Kremlin uses only typewriters because computers can be hacked. On the point about the number of weeks, I think that the noble Baroness will find that the level of forbearance with 39 weeks was very high and that very limited numbers of houses were repossessed by the mortgage providers, so I think that that will provide her with some reassurance.
Lord McKenzie of Luton (Lab)
My Lords, this amendment requires certain financial and governance arrangements to be put in place in respect of the providers of motor vehicles under Motability arrangements. As we have heard, it is attached to Clause 20, which contains a provision enabling the Secretary of State to recover the costs of administering the scheme under which mobility components of DLA and PIP are made available, on the claimants’ request, to Motability. I understand that the annual charges will be under £1 million per annum and that Motability will absorb this so that it will not be passed on to lessees, but perhaps the Minister will confirm that.
The noble Lord, Lord Kirkwood, and my noble friend Lord Rooker have raised concerns before over the governance issues and in particular the level of remuneration of the chief executive of the operating company. We should acknowledge that Motability has been a major force in helping disabled people to have access to suitable vehicles. Since its creation in 1977, it has supplied more than 3.5 million vehicles and currently has some 637,000 customers—a 1.8% increase on the year.
Noble Lords will be aware—my noble friend spelled this out—that there are basically two separate entities: Motability, which is a registered charity incorporated under royal charter; and Motability Operations Ltd, an entity regulated by the FCA and owned by four major banks. The latter is contracted to carry out the acquisition and leasing operations on behalf of the charity. Each of them publishes extensive annual accounts, the former in accordance with the Charities Act 2011. The latter is financed by a combination of bonds in the capital markets and bank borrowing. Obviously, the main source of income for the scheme comes from individuals who choose to spend either their higher rate mobility component of DLA or the enhanced mobility component rate of PIP.
It will be recalled that the introduction of PIP as a replacement for DLA was discussed extensively during the passage of the Welfare Reform Act 2012, with the prospect of the revised mobility thresholds meaning that some disabled people would drop out of entitlement. Can the Minster please update us on the progress of this, which is due to be completed in 2018? How many DLA recipients have been reassessed and how many have fallen out of eligibility for Motability? One-off transitional support has been introduced for those who would lose the use of their vehicle, and perhaps we can know how many have availed themselves of this. This level of support was said to be subject to review during 2015. Has this happened and what changes are proposed? Was there any consultation with the DWP involved?
It would seem that the operating group is funding the cost of this transitional support via the charity. Does this mean that the costs are ultimately being borne by the vehicle lessees—that is, the very disabled people the scheme was meant to support?
The DWP also provides funding to the charity for the Specialised Vehicles Fund, which enables disabled people to lease a drive-from-wheelchair vehicle. Is it the case that, faced with funding being frozen on an annual basis, Motability has restricted access to the fund and apparently did this without consultation? Can the Minister say whether this restriction was discussed with the department at all and whether it agrees with the approach adopted?
As my noble friend made clear, public funding is involved in these arrangements in various ways: the application of Motability components of DLA and PIP; funding for the Specialised Vehicles Fund; and taxation benefits by way of zero VAT on the lease of vehicles and their sale at the end of the lease period. On this basis, notwithstanding the published report and financial statements, noble Lords are justified in testing matters of value for money, transparency and probity, and we look forward to the Minister’s response.
Lord Freud
My Lords, that was a thoroughly enjoyable debate for this time of the evening. The amendment moved by the noble Lord, Lord Kirkwood, is directed at Motability, which provides vehicles at discounted rates to people whose disability or long-term health condition has a significant effect on their mobility. It is run on a day-to-day basis by Motability Operations, a limited company, and is overseen by the Motability charity.
On the specific questions about Clause 20 that were raised by the noble Lord, Lord Kirkwood, I can say that the Government divert benefit payments directly to Motability but the administrative costs of the diversion have been borne by the Government, who do not have the power to recoup them. Clause 20 gives the Secretary of State the power to make regulations to do so. Such a power would currently apply only to Motability but it is drafted broadly to enable the provision to apply to any organisation running a future scheme.
I can confirm to the noble Lord, Lord McKenzie, that the cost is small—less than £1 million, I think—and Motability has confirmed that it will not change its pricing or the level of service it provides. Therefore, it will have no impact on its members.
The noble Lord, Lord Rooker, asked about information on directors’ remuneration and relevant interests. That is available in the annual and interim accounts of Motability Operations, in compliance with international financial reporting standards. These can be found on its website, which is where I found them on the occasion referred to by the noble Lord, Lord Rooker. Indeed, it publishes information on its board meetings in the same place.
The department meets regularly with Motability to discuss the scheme’s performance. I know that this does not overly impress the noble Lord, Lord Rooker, but as a charity, Motability is accountable to the Charity Commission. It is therefore unnecessary to require Motability to submit the annual report that is the formal subject of the amendment, because the information is there.
I will run through some of the rather surprising number of other issues. On overhead costs, Ernst & Young found that Motability was driving down its overhead costs, while satisfaction was rising. On the monopoly question, we have regular meetings and consider the value for money that Motability provides. The banks own Motability shares but they have waived all dividends and received no profit.
Lord Davies of Stamford
The Minister has moved on rather rapidly. He brushed past the quite important issue of a monopoly without going into it. What seems to arise from this situation is that we have here a government department—the Department for Work and Pensions—which has given a contract on a monopoly basis to a charity, which appears then to have given its business on a monopoly basis to a public company. One could imagine that that structure could easily be used elsewhere. It is a very attractive idea: a nice little number and a cosy arrangement for those receiving the salaries and getting the other benefits from the circulation of public money in that way. That is the basis of the concern about monopoly. Maybe the Minister would like to enlighten the House if I am wrong. It would be interesting to know whether the Government have done anything to encourage competition or to see whether any alternative providers might be interested in getting into this market.
Lord Freud
I was able to say that the department considered value for money and had drawn up this clause to allow for other providers. That is as far as I can go at this stage. Motability is a long-established and very well-loved organisation; that is the current position.
On the second charity, the Motability-run fund is used to support the objectives of Motability and is not government-run. The remuneration of Motability Operations directors, and indeed those of the charity, is a matter to be decided by Motability.
Lord Rooker
Can we just pause there on the charity? I fully accept that Motability Operations is a company and that it is up to the directors what they pay the chief exec, given what the risk is and the competition. The charity is different. This charity is 60% grant-funded by the Minister’s department—to be accurate, it is 59.6%. Does he go back to the Prime Minister occasionally and justify it by saying, “We’re paying out 60% of the money to this charity and, by the way, we are paying the chief exec a lot more than you”? There were supposed to be some rules in Whitehall about people not being paid more than the Prime Minister. I knew that when I was at the Food Standards Agency. We had charities exposed in the Times last week for paying six-figure salaries. It is no good the Minister saying that it is down to the trustees of the charity when the department is funding 60% of that charity, which is not going out collecting money from the public with tin cans. I know that it has other donors—I am not arguing with that—but if it is 60% directly funded by grant from his department, can the Minister really justify it having three people on six-figure salaries, one of them on more than £170,000 a year, and paid for by his department? Is he happy with that?
Lord Freud
There is a key issue about charities having to attract the best people when they are very substantial operations, which Motability is. I know, because I was involved for a period in a foundation in the charitable area, that to attract the kind of people who are commercially competent puts you into that bracket. I have said enough.
Lord McKenzie of Luton
One can understand the argument that the Minister has advanced in respect of the operations entity, but it seems much more difficult to justify the position he has taken in respect of the charity.
Lord Freud
The amounts in the operations are of course much greater than in the charity. Maybe I am overinfluenced by some of my personal history on what people are paid in the commercial world, but the £100,000 to £200,000 bracket in a charitable context for what is now a substantial operation does not seem completely out. You can take two views on charities: either people should work for them for nothing and any money is wrong or you have to attract the very best people. I would think that if you are in that market, those sums are reasonable. That is the best I can do on that issue.
Lord Oates (LD)
Would the Minister accept that there are people in the public sector who run very significant operations, but the Prime Minister and others in the Government have said it is not acceptable for them to be paid more than the prime ministerial salary? How does this differ, given that, as my noble friend and the noble Lord, Lord Rooker, have pointed out, 60% of the funding for this charity is provided by Her Majesty’s Government?
Lord Freud
I should have made clear before that that is not departmental money; it is users’ money that we transfer. That is the reason that the salaries are set by Motability and not by government. Government does get itself into quite a lot of problems because there are areas of commercial endeavour where salaries, bluntly, are much higher than the Prime Minister’s salary. There is a different set of rates in the outside world. I know that the noble Lord, Lord Rooker, is not going to let this one go and I will watch him—from a distance—to see how far he gets on this.
Finally, the noble Lord, Lord McKenzie, asked where we are. It is too early to tell the full picture. This started on a control basis only in July 2015, so I do not have a reliable figure for him. I remind noble Lords that customers who return their vehicle in good condition will get the benefit of up to £2,000-worth of support from Motability, which will in practice allow many to continue to be mobile through purchasing a used car.
Lord McKenzie of Luton
Would the Minister just mind dealing with two residual points? One is about the transitional protection—how that is funded and whether it is dealt with by the charity from contributions to the operating company or otherwise. The second is that the specialised vehicle fund has been frozen for a couple of years, which has obviously had an impact in terms of the opportunity to take advantage of that in an inflationary situation. Were the Government consulted on the changed criteria that were put in place for that?
Lord Freud
I will have to write on that latter point. The funding for the £2,000 comes from Motability itself—the charity—as I understand it, based out of the reserves it has built up. It needs very substantial reserves because the risk in a leasing business is in the residuals, which can be very volatile, even though you are the biggest. You need very substantial reserves, but it took a view that it had some excess which it was prepared to spend in this way. I urge the noble Lord to withdraw his amendment.
Lord Kirkwood of Kirkhope
My Lords, the moment that the noble Lord, Lord Rooker, suggested to me that this was something worth looking at, I noticed that Motability Operations had set up a review of its remuneration committee’s decisions for its executives. The annual report, which has just been published, shows that it has merely tinkered with this. There was a real hope that it would respond to some of the external interest in what it was doing, yet it has come back with some tiny amendments to the remuneration package and increased the co-salaries in the way that I explained earlier.
I think that the Minister should tell his friends at Motability that Parliament is interested in this. It is in Motability’s interests to respond to the need to be more transparent and to be more assiduous in explaining what it is doing and why it is doing it. This will not go away; I will be standing shoulder to shoulder with the noble Lord, Lord Rooker, so the sooner we can get a modus vivendi whereby Parliament shows that there is an interest in engaging, the better that would be for Motability and for everyone else. However, I beg leave to withdraw the amendment.
Baroness Sherlock
My Lords, Amendments 104BB in the names of the two noble Earls, Lord Listowel and Lord Cathcart, and the noble Baroness, Lady Meacher, would address the question of direct payment. Direct payment was the subject of considerable discussion during the passage of what became the Welfare Reform Act 2012, together with deliberations on the frequency of payments and split payments, not to mention jam-jar accounts.
My noble friend Lady Hollis asked about the research mentioned by the noble Earl, Lord Cathcart, from the National Federation of ALMOs and ARCH. It did indeed show that 89% of universal credit claimants were in arrears and that 34% of them were eight weeks in arrears, so they were in receipt of an APA. That is a significant proportion, so there clearly is an issue that they have picked up on about the extent of arrears—hence the question of direct payments.
We know that the Government’s starting point is that in the overwhelming majority of cases they want and expect universal credit to be paid as a single monthly payment in arrears to the claimant. But they have set down criteria for considering alternative payment arrangements in limited circumstances for the payment of the housing element of universal credit, invariably the first in order of priority. The guidance states that when arrears reach one month’s rent the DWP will review the situation, following notification by the claimant or the landlord, and when they hit two months or eight weeks, either the landlord or the claimant can request an APA. There is no automatic right to one because the Government are still clinging to the concept that managing benefits should mirror the choices in managing money that they say those in work have to make.
However, if an APA is in prospect, this would normally start with personal budget support followed by a managed payment to the landlord. The guidance sets out the tier 1 and tier 2 factors which will be considered for an APA. But having theoretical opportunities to have direct payments is one thing; what matters is how the rules are being applied in practice, so perhaps the Minister can help us here. We know that through to 3 December 2015, there have been 287,310 universal credit awards. Will the Minister tell us how many of them had a housing element included and how many have had an alternative payment arrangement? How many requests for direct payment to a landlord have been made by either landlord or claimant and, of those, how many were approved and how many rejected? I accept that the Minister may need to write to me on these points, but it would help us understand the scale of the problem and whether the research that has been identified is in fact representative of the situation for universal credit claimants more broadly.
Amendment 104BA in the name of the noble Earl, Lord Cathcart, seeks arrangements whereby payment of arrears in respect of a former property can be made by direct payment of a current universal credit claim. This has obvious difficulties because maintaining the current home should be the priority. There must be a risk that adopting that suggestion could lead to a round of evictions for rent arrears as arrears build up in a current tenancy in order to satisfy the arrears on a previous tenancy. There could be further complications because a universal credit award may not cover identical households for the current tenancy and the previous tenancy, so it is not clear how it might be apportioned.
Amendment 104B in the name of the noble Earl, Lord Cathcart, and the noble Lord, Lord Best, seeks a power for the Secretary of State or somebody else to supply information relating to any relevant social security benefit to a landlord, depending on the written authority of the tenant. Noble Lords will be aware of regulations enabling the limited supply of social security information to social landlords, which is governed by the Data Protection Act. I understand the potential benefit to landlords of this, but it raises issues of a different magnitude given the sheer number of private landlords, let alone the capacity issue, so I will be interested to know how the Minister thinks that that might be approached.
There may be an issue here with regard to arrears and universal credit, and if the Minister is not minded to accept this amendment, he needs to come back to the House to suggest how the Government are going to go about dealing with this. I look forward to hearing his reply.
Lord Freud
These amendments relate to a number of housing issues, and I will deal with them in the order in which they are listed.
Amendment 104B would enable the Secretary of State to pass information relating to a claimant’s social security benefits to their landlord as long as the claimant had given written consent. As the noble Earl and the noble Lord have stated, knowing that a tenant has claimed a social security benefit will allow a landlord to take early action to ensure that the tenant does not get into rent arrears and jeopardise their tenancy.
As the noble Baroness, Lady Sherlock, said, the Secretary of State already has power to supply some limited information to a social-sector landlord when one of its tenants claims universal credit. This information is shared for the specific purpose of enabling the landlord to determine whether that tenant needs advice, assistance or support in relation to their financial affairs.
The Government recognise that the need for this support might arise because, under universal credit, claimants are now responsible, in many cases for the first time, for handling a monthly budget. Claimants must also use their benefit to pay rent directly to their landlords, something that social tenants were not typically required to do under the housing benefit regime.
However, we do not recognise the need for the same level of support in relation to claimants living in the private rented sector. This is because such claimants will typically already have been responsible for paying their own rent under the housing benefit regime, so will struggle less with the changes introduced by universal credit. In any case, if these claimants require support in relation to managing their finances, it is unlikely to come from their private landlords. We therefore see no need to put additional information-sharing provisions in place.
Lord Freud
Half of those arrears were accrued in the first four-week period. We discovered in the direct payment project that there is genuinely an issue about moving people over in the first three months, and we are spending an enormous amount of energy and effort on pinpointing that. Indeed, we are doing a lot of work now with social landlords to get the problem under control.
I should point out that this proposition would be of greatest value to private landlords, as the social sector is much less volatile. It is not unrealistic to suppose that commercial landlords, like any other small business people, should make a certain amount of provision for bad debt. Rent payments can be made direct to landlords once arrears reach the equivalent of two months, which limits the degree of their exposure.
Amendment 104BB would allow universal credit claimants to request that the Secretary of State pay their housing costs element to their landlord. The Secretary of State already has powers to pay all or some of a claimant’s universal credit entitlement to a third party where it would be in the claimant’s or their family’s interests. In practice, these powers are used to protect vulnerable claimants or claimants in rent arrears by paying the universal credit housing costs element direct to the landlord. However, as I have already said, the default position is for universal credit to be paid as a single monthly sum direct to the claimant; that is designed to mirror what would happen if the claimant was in full-time employment, when they would be responsible for managing their own funds and paying their own rent. The direct payment project showed that after 18 months the rent payment rate was 99%, which was comparable to now. Where there are problems, the department can manage payments and look to use the arrears option.
The amendment would also go further than the current arrangements for housing benefit, whereby the majority of private sector tenants are paid their housing benefit direct. To allow claimants to opt out of managing their own budgets while receiving universal credit would be a step backwards for them and a step away from claimants being job-ready.
I will need to answer the questions from the noble Baroness, Lady Sherlock, in writing, so I will cover those later.
Finally, my noble friend asked a question about Scotland. The Scotland Bill grants powers to Ministers to decide how to make payments but this is not a straightforward thing to do, because universal credit covers people who are in work and out of work and presumably you would not want to make payments to in-work people because perhaps the payments do not cover their rental elements. Therefore, it is a much more complicated issue than people realise when they do not understand completely how universal credit works.
The Government believe that work is the best route out of poverty and that universal credit should help, not hinder, claimants on their journey into employment so that they do not fluctuate in and out of work or go up and down the taper. Paying universal credit as a single monthly payment will ensure that claimants are best prepared for the transition to work and for staying in work. I hope that, on the basis of the explanations and reasons I have provided, my noble friend will withdraw his amendment.
Baroness Hollis of Heigham
My Lords, can the Minister help us? It would be very useful to have this information before we come to Report. The evaluation of the bedroom tax—obviously the Minister will be familiar with it— has just come out in the last three days or so. It shows that over 55% of tenants affected by the bedroom tax were in arrears in autumn 2014, although of course many of them had already been in arrears. Does the Minister have any figures to try to separate out the effect of the bedroom tax on the arrears issue from the move to universal credit and its payment methods? What information does the department have, and is it collecting any? It will be quite hard now, because problems in paying your rent are beginning to layer on top of each other. We will need to disentangle these, if not for this Bill then for the Bill to come.
Lord Freud
I will not resist the temptation of pointing out that there is no such thing as a bedroom tax; it is the removal of the spare room subsidy, and I will be answering a Question on that tomorrow. Interestingly, the direct payments project provided a lot of insight into this issue. It started off with direct payments and then people started taking on the removal of the spare room subsidy as well. I will try to find the precise figures for the noble Baroness, as I am speaking slightly from memory. We found that the people who had learned how to go through the direct payment process were able to handle the removal of the spare room subsidy more efficiently than others. I will aim to get the noble Baroness chapter and verse on that.
Earl Cathcart
My Lords, I am disappointed by my noble friend’s response to these three amendments. He seems to have said no to all three of them and I find that very disappointing. I do not think he has said anything this evening that has given any encouragement to private landlords to take on people who are on universal credit. In fact, he has probably reinforced the idea that one should not take on people who are on benefits, but that is not what my amendments are trying to do; they are intended to get people on benefits to go into private rented accommodation. I do not think that my noble friend has helped at all this evening, but I will read what he has said more carefully tomorrow or over the holiday period. At this stage, I beg leave to withdraw the amendment.