Grand Committee

Tuesday 3rd March 2026 Grand Committee

Tuesday 3 March 2026

Arrangement of Business

Tuesday 3rd March 2026 Grand Committee

Announcement

15:45

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

My Lords, as is customary on these occasions, I must advise that, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Immigration and Nationality (Fees) (Amendment) Order 2026

Tuesday 3rd March 2026 Grand Committee

Considered in Grand Committee

15:45

Moved by

[Lord Hanson of Flint]

That the Grand Committee do consider the Immigration and Nationality (Fees) (Amendment) Order 2026.

Relevant document: 50th Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Home Office (Lord Hanson of Flint) (Lab)]

My Lords, this fee order sets out the immigration and nationality functions for which a fee is to be charged, and the maxima amounts that can be charged in relation to each of those functions. In the order, we propose a number of changes that will facilitate government policy. Fees charged by the Home Office for immigration and nationality applications are an essential part of the department’s funding settlement.

This order will increase fee maxima across a number of chargeable functions, including those for the new electronic travel authorisation—ETA—and entry clearance as a visitor for visas valid for a period of more than 12 months. It will also include a visa on a route to settlement, a settlement visa, naturalisation and registration as a British citizen or as one of the specified other categories of citizenship, and certain nationality-related services. I should explain that the actual fee levels that are to be charged for those seeking to enter or remain in the UK are not being changed in this order. Any changes to the fee levels will be made through separate legislation and will be accompanied by a full economic impact assessment.

In laying this order we have sought to provide clarity to Parliament, and indeed to the public, about our intention to increase certain fees when parliamentary time allows. These are as follows. We will increase the fee maxima applying to an application for an ETA from £16 to £20 in order to facilitate a subsequent increase in the chargeable fee to £20. This will be by negative resolution in the event of those fees being brought forward. The fee maxima for entry clearance as a visitor for a period of more than 12 months will increase from £250 per year to £253 per annum. This will allow the Home Office to increase the fee for a two-year visitor visa from £475 to £506. We are increasing the fee maximum for visas on a route to settlement from £3,600 to £3,635. This is to facilitate a subsequent increase to the fee applications by other adult dependent relatives of a British citizen, or a person with settled status who wishes to join their family in the UK. That will rise from £3,413 to £3,635.

In this order, we are amending the fee maximum for settlement applications from £3,600 to £3,635 in order to align with the changes to the fee maximum for visas on a route to settlement, reflecting, I hope, the connection between these two chargeable functions. The fee maxima for naturalisation as a British citizen or as a British Overseas Territories citizen and registration as a British citizen or other nationality status will increase from £1,605 to £1,709 and from £1,500 to £1,540, respectively—all subject to parliamentary approval. This will allow us to increase the fees for naturalisation and registration as a British citizen by adult applicants to the new maxima levels. We are also increasing the fee maxima for nationality-related services by 6.5% to support a subsequent increase in relevant fees to the new maxima level. This will include the fee for a certificate of entitlement of right of abode, which will increase from £589 to £627.

To be clear, we have announced our intention to increase the fee levels later this year, but they will not be increased until we lay separate legislation—the immigration and nationality fees regulation—which will be subject to approval by both Houses of Parliament. These changes will facilitate the generation of additional income for the migration and borders system, which will in turn support the broader funding of the system, reduce reliance on the general taxpayer and support the delivery of government priorities. With that explanation, I beg to move.

[Lord Cameron of Lochiel (Con)]

My Lords, I thank the Minister for introducing the order. The principle behind the changes that he has just outlined is well-established. Since 2003, under the then Labour Government, successive Administrations have accepted that immigration and nationality fees may be set above administrative costs in order to contribute to the wider operation of the system. We have consistently supported the view that those who use and benefit from the immigration system should make a fair contribution, reducing the burden on the taxpayer.

As the Minister outlined, the instrument is a precursor to proposed increases in the maximum fees that may be charged across a range of products. The ETA will rise from £16 to £20, visit visa maxima will be uprated, the cap for limited leave and settlement will increase, and nationality-related maxima, including naturalisation as a British citizen, will rise. With the exception of the ETA, these increases are 6.5%.

The impact assessment suggests that setting fees at these maxima could generate around £1.8 billion over five years. That is significant revenue in the context of a system whose annual costs run into many billions. The Government argue that demand for visas is relatively inelastic and that modest increases do not materially reduce volumes. If that assessment is robust, it provides a rational basis for the approach.

In our view, two issues merit scrutiny. First, the ETA increase represents a 25% rise. Has any assessment been made of the impact on visitor numbers? Why was £20 judged the appropriate level? Given the acknowledged uncertainty in the modelling and potential implications for tourism, including in Northern Ireland, it would be helpful if the Minister could update the Committee on any evaluation that is under way and confirm when its findings will be published.

Secondly, how will the additional income be used? The Government have committed to reducing migration and tackling illegal entry, yet the costs of irregular migration remain substantial. Will the revenue primarily fund those pressures, or will it deliver tangible improvements in efficiency and border security? Does the Minister anticipate further increases in the near future?

In closing, we support the principle of the order and will not seek to divide the Committee. However, it is right that we seek assurance that higher fees will support a system that is not only self-sustaining but demonstrably more effective. I look forward to the Minister’s response.

[Lord Hanson of Flint (Lab)]

My Lords, I am grateful for the broad support of the noble Lord, Lord Cameron of Lochiel, for the principle behind the order. I am grateful for his generous support for the direction of travel that we are undertaking. He has asked two specific questions, which I will try to answer for him.

On the ETA scheme, we are increasing the fee maximum to £20, rising from £16. As he said, that is an increase of around 25%. Moving from £16 to £20 will put us in line with the American fee and the pending European fee. In general terms, it is a reasonable amount of resource.

The noble Lord asked whether that will have an impact on tourism, particularly in Northern Ireland. Last week, I answered questions in the House on the Northern Ireland ETA. We have had discussions with the Northern Ireland tourist board to look at the impact of that, because many people enter the United Kingdom in Northern Ireland via planes to Dublin from America or other ports. We discussed that in detail. We are introducing ETAs in Northern Ireland to enhance our ability to screen travellers upstream. People who arrive in the United Kingdom, including those travelling from Ireland into Northern Ireland, will need an ETA, in line with the UK’s immigration framework. I genuinely do not believe that a £20 fee is going to deter someone from visiting the great city of Belfast, the Mountains of Mourne or the Giant’s Causeway, or, in a wider UK context, from visiting London and seeing all the sites that we have here. It is a reasonable fee for people entering to pay. Although it is a higher fee than the 6.5% general fee, it is a reasonable fee and it brings us in line with other partners.

The noble Lord asked the perfectly legitimate question of what happens to the money that the Home Office makes on the application fees. The Home Office does not make any profit from the fees, in line with the charging principles set out in the Immigration Act 2014. Fees for immigration and nationality services are set in consideration of the costs of processing an application, the wider costs of running the migration and border system, and the benefits enjoyed by successful applicants. Any income from the fees set above the costs of processing goes towards funding the wider immigration system.

The noble Lord will know that, in the past year, we have put additional staff into processing asylum claims and into border control. Through the then immigration Bill, on which the noble Lord gratefully served and offered good scrutiny, we have established a new border command and new border scrutiny. We have put in place the work that we are doing with the French, the Belgians and the Dutch on border control. We have done the work with Germany. We have passed the immigration Act. All of that is still a cost to the system, and any surplus made from the application fees will go towards that and stop us having to have recourse to the Treasury for additional funding.

The Home Office believes that it is right that a greater share of the cost of operating the system is borne by the applicants who directly use it, rather than funding being provided additionally through HM Treasury from general taxation. The figure mentioned by the noble Lord is a considerable sum of resource. That will be used entirely within the Home Office for funding what will be, I hope, a strong and important immigration system.

Motion agreed.

Rent Officers (Housing Benefit and Universal Credit Functions) (Modification) Order 2026

Tuesday 3rd March 2026 Grand Committee

Motion to Take Note

15:57

Moved by

[Baroness Thornhill]

That the Grand Committee takes note of the Rent Officers (Housing Benefit and Universal Credit Functions) (Modification) Order 2026.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee

[Baroness Thornhill (LD)]

My Lords, noble Lords can tell from me advancing to the wrong place that I have never done anything like this before. It shows that this is something about which I feel absolutely passionate, from my role as the housing spokesperson for the Liberal Democrats and from my own experience as now patron of a local homelessness charity in Watford, New Hope, which I hope I helped not only to survive but to thrive during my time as the elected mayor. This issue is close to my heart.

I have been asked to give a few apologies to the Minister. The noble Lord, Lord Best, and the noble Baronesses, Lady Lister and Lady Tyler, all wished to speak today but are unable to do so due to genuine, legitimate commitments elsewhere.

I start by looking the Minister square in the face and saying that I know she understands this issue and that I know where her heart is. I am doing this because I feel that there are real issues here that are not being factored into the Government’s assessment and financial considerations. That is where I am coming from.

Local housing allowance is not just an abstract welfare lever; it is the mechanism that decides whether people can pay their rent or lose their home. Freezing it again is not fiscal housekeeping—that is where I am coming from today. It is a political choice that knowingly widens the gap between rents and support until families fall through it. A freeze—that is what it is—does not freeze rents, eviction notices or hardship; it freezes help and support while everything else keeps rising.

16:00

How did we get here? Local housing allowance was designed to reflect the bottom 30% of private rents. That link has been systematically dismantled from 2011 through caps, below-inflation uprating and then—the most damaging decision of all—a complete freeze between 2016 and 2020. Meanwhile, rents were rising year after year. That period matters because that was when the system tipped from strain into crisis. When the Government reset LHA in April 2024, it was not a solution; it was damage control. As the Joseph Rowntree Foundation said at the time, it was

“a necessary correction after years of policy drift—not a fix for the underlying problem”.

A one-off reset achieves nothing if we immediately allow the same drift to resume, which is what I fear is happening here. We look for some reassurance from the Minister that that is not the case. Freezing LHA again simply recreates the conditions that caused the crisis in the first place.

Nowhere is that clearer than on affordability. At current LHA rates, only 2.7%—I repeat for emphasis: 2.7%—of private rented properties are affordable. For households relying on LHA, the affordable market has almost vanished, and obviously more so in certain parts of the country. In practical terms, in a search of 100 homes, around 97 are simply out of reach. Crisis has been blunt about this, saying that housing support now “bears little resemblance” to the real cost of renting. When fewer than three homes in 100 are affordable, “affordability” has ceased to be a meaningful concept.

What does this mean in real life for the families out there who are low-waged and struggling to make ends meet? As has been said, when LHA falls short, people do not absorb the difference and make adjustments; they make harsh, relentless choices between essentials. They cut back on food, they ration heating and they fall behind on council tax—how I know that—and energy bills. They borrow, juggle and go into arrears—not because they are irresponsible but because there is nothing else to give.

Shelter has repeatedly warned that people cannot budget their way out of unaffordable rents. These are not poor decisions; they are survival strategies. They only delay the inevitable, because when the shortfall persists, as it surely will, arrears grow, landlords lose patience and eviction follows. Even in the new Renters’ Rights Act, arrears in rent is still one of the grounds for eviction.

That brings me to the point that I think the Government are keen to blur. The wonderful title of this take-note Motion makes my point: freezing local housing allowance is not a technical adjustment and it is neither neutral nor passive. It is a deliberate policy choice taken in the full knowledge of what will follow. The Government know that rents will continue to rise, although I am sure the Minister will tell me that there has started to be a slow up—I try to follow the trends. They know that freezing LHA widens the gap and, because we have already lived through it, that this leads to arrears, evictions, homelessness and—this is one of my key points—higher costs elsewhere in the system. Calling it a freeze makes it sound almost accidental, but it is not. It is an active decision to withhold support while costs rise, knowing exactly who will bear the consequences. This was not the intention of the original policy, which we would support.

The consequences are written clearly in homelessness figures. Since the freeze period began in 2016, homelessness pressures have risen relentlessly. Over 134,000 households —that is a fairly large town—are now in temporary accommodation, including 176,000 children, the highest number ever recorded. Thousands of families are stuck in bed and breakfast accommodation for weeks and months, and there is now growing evidence that some of them are stuck for years, despite everyone knowing how damaging that is for children. It is the same story with rough sleeping: it has risen from 1,800 people in 2010 to 4,800 on the single night when we do the sleeping-out count—again, the highest figure on record. As Crisis has said very plainly,

“when housing support falls behind rents, homelessness rises—the link is direct”.

Local authorities see this daily. The Local Government Association has warned that freezing local housing allowance

“undermines homelessness prevention and pushes councils into far more expensive crisis responses”.

This brings me to the Government’s preferred defence: the public finances. Freezing LHA, in my view, is not fiscal responsibility but fiscal displacement. It moves spending from prevention to crisis—from predictable support into the most expensive parts of the system. Councils are now spending an eye-watering £2.8 billion a year on temporary accommodation alone. The LGA has said that this is money spent

“reacting to failure rather than preventing it”—

and, I would add, at premium rates.

I think it is important to acknowledge the new crisis and resilience fund, which I believe is worth £1 billion this year—but in a sense we can add that to the list of the costs of this policy. I would like to ask the Minister whether discretionary housing payments, which I believe were also £1 billion, are additional new money. Does she deem that this will actually be sufficient? We are also told that housebuilding will solve this: “We need more homes, especially social homes”, and so say we. But I think we must be living in la-la land if we think that supply is going to change quickly enough to impact on rents and house prices. We hear this repeated time and again, yet I have seen academics saying that this will never happen and that it is actually a policy con trick. Supply takes years to affect rents, if at all. People cannot wait years—children cannot wait years. Even in a better market, we would still need LHA, which is essential for people on the lowest incomes, and linked to rents. People cannot pay today’s rent with tomorrow’s houses. Affordability is collapsing now.

We are also told that renters’ rights and tribunals will protect tenants. To a degree, there is real positive stuff there, but tribunals judge market rents, not affordability. A market rent is not the same as an affordable rent. We are also told that rising local housing allowance benefits only landlords. I struggle with that one. It sounds more like a slogan than a policy argument. Are the Government actually saying that landlords should not receive legitimate rent for accommodation that they are providing? But homelessness benefits no one, except those who are actually charging the state—and I include the Home Office here—eye-watering sums for emergency accommodation. We have even had instances of the Home Office competing with councils to obtain temporary accommodation and councils bidding against each other.

If this freeze continues, the outcome is already predicted: renters on housing benefit will be worse off, thousands will be pulled into poverty and tens of thousands more pushed into severe hardship, including tens of thousands of children. This is not an unintended consequence but a foreseeable result, and that is what worries me most. It is cost-shifting, not cost-saving: it might save money on DWP top lines, but it is shunting the cost somewhere else. I would like to hear from the Minister whether the Government factored in all these consequential costs when making this policy decision.

I genuinely believe that the sensible course is clear: stop the freeze permanently and relink local housing allowances to real rents so that the system works as was intended and homelessness is prevented rather than paid for. I think there is a moral case but I also believe there is a fiscal one. I beg to move.

[Baroness Pinnock (LD)]

My Lords, my noble friend Lady Thornhill set out the case for the Government to rethink their decision to freeze local housing allowance. She set it out superbly, with all the consequences that will occur as a result of a further year’s freeze on local housing allowance. I want to paint a picture of what that means to families in the small town in Yorkshire where I live and where I am an elected councillor.

You would not say that where I live is the richest of places on the planet; all the information indicates that some parts of my town are in the bottom 10% of the deprivation scores and most of the town is between 30% and 40% in the deprivation scores. That is the general picture of the town. It is a Victorian town with lots of Victorian terraces, two-up, two-downs, some back-to-backs—if anybody in London knows what that means—and the sort of places that open straight on to the street.

I looked this afternoon at a private-rented two-bed property—that means a two-up, two-down—and it is £750 per calendar month, or £173.05 per week. What is the local housing allowance for that part of Kirklees Council? It is £120.82. What that means is that families are having to find £50 a week extra. If they qualify for LHA, they are already not well off, and they are having to find £50 a week for that property. That is the cheapest I could find. I found another one, also a terrace, slightly larger but still a two-bed, and the rent is £825 a month, or £190 a week, so there will be a much bigger difference.

I understand where the Government are coming from, because the housing benefit bill has zoomed upwards. What my noble friend and I are arguing is that it needs a total rethink. I know that the Minister would not want what I have just described to be the case, and that equally, the country cannot keep spending billions of pounds on housing benefit. Some of us round this table in the Grand Committee know that this is one of the consequences of right to buy. If you live in a council property or a housing association property, the difference will not be as high, and most council house rents match local housing allowance. That is the background problem. How we solve it, I do not know, but the Government need to put their mind to it.

16:15

I represent these families, and if you are a family living in a Victorian terraced house and finding £50 or more each week to make up the difference in your rent, there are consequences. The consequences are that people have to use the food bank, because that is where those people go to feed their families; there is the cost to the council of crisis payments; and there are the school uniform exchanges that have been set up. I chair a charity that helps families with their water bills and I know, from the applications that are made, that rent and council tax are almost always at the head of the problem. As my noble friend said, there are consequences of the policy that is being pursued. How we should deal with it is via a total rethink of the way people on low incomes are able to afford their homes, and the answer has to be for more families to have the choice not to be in the private rented sector.

With those few words giving a local example and saying what happens where I am, I hope that I have illustrated the case that my noble friend was making. I know, because I can see the Minister’s face, that she feels the same way about this as we do: it is finding the solution that is the difficulty.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Thornhill, for opening this short debate. Let me say at the start that His Majesty’s Opposition support the principle behind the instrument before us. It reflects a careful exercise of the Government’s statutory powers. The order will ensure that local housing allowance rates, which determine the housing support paid to universal credit and housing benefit claimants, remain at the level set on 31 January 2024 for the 2026-27 period.

While we believe that the decision behind the order is sensible—and I would argue, the only way—we also recognise that concerns have been raised, including by the Secondary Legislation Scrutiny Committee, about the impact of freezing rates in a context of rising rents. Both noble Baronesses put that case very eloquently. According to figures from the DWP, rents have increased by 14% since the LHA was last increased in April 2024, and over 50% of people in receipt of either housing benefit or universal credit see a shortfall between the cost of their rent and housing support. I say again that the noble Baroness, Lady Thornhill, eloquently set out her case and the noble Baroness, Lady Pinnock, added her own facts and interesting anecdotes. She went on to say that we cannot carry on spending as much as we are, with which we all agree.

The question that we all come back to is what to do about this. I will refer later to the two-child limit, which is perhaps a black cloud hanging over us all, but can the Minister set out what other measures of help are available for households facing squeezed budgets? Can she explain, particularly for me, the thinking and the policy behind the crisis and resilience fund—the so-called CRF—which will, as I understand it, incorporate the old discretionary housing payments, though not in Wales? I would like to understand the difference here between the CRF and the DHPs, or how they interrelate. By what mechanism will those who are most in need be targeted from now on? What role is there for local authorities?

In her speech, the noble Baroness, Lady Thornhill, referred to houses and homes. She is quite right, because lowering rental levels is surely a priority to help with this particular issue. The Government have said that homes, and building more homes, are a priority. They have stated publicly and clearly that they need and wish to build 1.5 million homes by 2030. If that were the case, it would increase supply, which would, in turn, decrease rents. With that, comes decreased demand, and I suppose the theory is that each house will therefore demand less rent. Where are these new homes? We are more than 18 months into this Government. What progress is being made? This strikes me as being a vital element of this order. The evidence shows that fewer homes are being delivered per year now than the maximum that the last Government managed in a year, which I happen to know was 240,000. I look forward to the Minister’s response to these and other points outlined by the Committee.

This order must be seen in a wider context. We must bear in mind public spending and the welfare policy under this Labour Government. Since 2010, successive Conservative Governments have sought to reform and target welfare so that it acts as a genuine safety net and encourages people into work. With the introduction of universal credit, the central focus was ensuring that the welfare bill was affordable to the taxpayer. We have now set out a plan to deliver £47 billion-worth of savings over the next Parliament; around £23 billion of that will be from non-pensioner welfare reforms, reducing waste and tackling the rising debt. I must make it clear that we will and we must continue to protect those who are genuinely and most in need.

This Government’s approach has been rather different. They have dramatically increased welfare spending, including the breaking of fiscal promises and presiding over higher public debt and taxes. More worryingly, their decisions seem to have been shaped by short-term political pressures, rather than by clear and disciplined fiscal frameworks.

The most notable example of this is the Government’s decision to remove the two-child benefit cap—a policy against which they previously whipped their own MPs. As the Committee will be well aware, this cap was introduced by the previous Conservative Government in 2015 as part of a broader effort to ensure fairness in the welfare system. Indeed, Labour’s own leader initially refused to scrap it, even withdrawing the Whip from MPs who voted to end it and treating it at the time as a tough but necessary choice. Yet in an abrupt reversal, the current Chancellor and Prime Minister abolished the two-child limit in the 2025 Budget at an estimated cost of more than £3 billion, stating:

“We on the Labour Benches do not believe that the solution to a broken welfare system is to punish the most vulnerable”—[Official Report, Commons, 26/11/25; col. 397.]


children. Those are well-meaning words, but that is a stark departure from Labour’s earlier position and one that flies in the face of its own fiscal constraints.

The U-turn came at a time when the Prime Minister’s net favourability happened to be at its lowest. This is irresponsible decision-making. The Government’s expansion of welfare spending has led to higher taxes and long-term pressures on the public finances, with the UK continuing to borrow well over £100 billion per year to fund day-to-day spending. The noble Baroness, Lady Thornhill, might bear this figure in mind because reducing it is surely a massive challenge and a must do to make a real difference through massive savings, which will, ultimately, feed through into alleviating local pressures to help the least well-off. Surely this is one thing that must be looked at with more urgency.

To be clear, we do not believe it is fair to raise the two-child limit. This is because many families in work make the decision to live within their means, including making decisions about the size of their families. These same families lose out when additional funding is provided to those out of work who decide to have more than two children. I am aware that the Bill will soon come before the House and that we will have the opportunity to debate this matter all too soon—it might even be next week—and we will continue to press the Government to ensure that housing support, and welfare more broadly, are sustainable and fair. We must make every effort to support individuals and families into well-paid work and not increase dependence on benefits.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Thornhill, for introducing her Motion. If that was the first time she has done so, I commend her on how clearly she set out her case. I thank her for giving us the opportunity to debate the incredibly important subject of housing support. I also thank the other noble Lords who have contributed. For clarity, the order sets local housing allowance rates from April for 2026-27. In his Written Ministerial Statement on 26 November last year, the Secretary of State confirmed that LHA rates would not increase for 2026-27 but would be maintained at their current levels.

The noble Baroness, Lady Thornhill, and the noble Viscount, Lord Younger, have come at this from the perspective of fiscal inheritance. The fiscal inheritance is not a defence, but it is a reality. I remind the noble Viscount that this Government, when they arrived, were not immediately able to make choices to tackle many of the problems that had been left. Frankly, this was a target-rich environment; there were challenges right across the environment. Our public services were falling apart, our roads and houses had not been supported, and benefits had been frozen or put below inflation for many years, from the coalition Government all the way through until this Government took over. So there are some really significant challenges. That is at the heart of what the Government had to do: we had to make some very difficult choices across the piece on spending, and I will try to explain why.

A key driver of high rents is the lack of housing supply, which is an issue for the whole country, not just for those who get help for their housing from the social security system. The noble Baroness, Lady Pinnock, set out the challenge that we are all facing: a significant amount of money is being spent. The Government are prioritising action in the longer term; if we focus only on the short term, we will never be able to address this issue. I will come back later to some of the specifics that have been asked about.

We have therefore committed to build 1.5 million homes in England this Parliament, which includes the biggest increase in social and affordable housebuilding in a generation. We aim to build 300,000 social and affordable homes, and the whole programme is backed by a record £39 billion investment. We know that in many cases it takes a long time to build the homes we need, so we are committed to a whole-system approach to unblock the barriers to building and to address productivity in the housebuilding sector. The noble Baroness, Lady Thornhill, is right: people need housing support now.

To illustrate the point made by the noble Baroness, Lady Pinnock, the DWP continues to spend around £37 billion a year on housing support, and over £13 billion of that is support in the private rented sector. She is right that these are huge sums, even in the context of the social security budget. The Committee may be aware that the last LHA increase in April 2024 cost £7 billion over five years. These are significant sums, so when the Government have to make choices, they have to look very carefully at each individual element of the choices in front of them.

LHA rates are reviewed every year by the Secretary of State, and a range of factors were considered before he decided not to increase rates. He looked at the rental markets across Great Britain. The noble Baroness, Lady Thornhill, is right that rental inflation is slowing: it was over 9% in November 2024 and, by last January, it was down to 3.5%. But the fact is that there are still housing affordability challenges, which are particularly acute in some areas of the country.

Given the challenging fiscal context, the Secretary of State also considered broader social security and wider cross-government priorities, including on homelessness, ahead of Budget decisions. He chose—and he was right—to prioritise certain measures that had a key impact on poverty and living standards. Reducing child poverty is a core manifesto pledge for this Government, and we intend to deliver on it. Removing the two-child limit—we will debate this in more detail next week, and I look forward to debating it with the noble Viscount—will lift 450,000 children out of poverty in the final year of this Parliament. That will rise to around 550,000 alongside other measures set out in the child poverty strategy, such as the expansion of free school meals.

I take the points made by both noble Baronesses about the challenges. If people have gaps in their rent, something else has to go. However, people’s incomes have to be seen in the round. Their incomes are formed not just by the amount of money being given for housing but the amount of money being given to support their children and whether they have to pay for all meals or can get free school meals. Therefore, the Government are making choices, and all these things have to be seen in the round.

16:30

For example, for those families who will benefit from lifting the two-child limit—I think there are over half a million of them—their awards will be £5,310 a year higher. That is a significant investment in the family finances, and we have to look at that quite carefully. The Government chose to prioritise that, and, as we always said we would, we showed how it was going to be paid for. We did it because it was the right thing to do.

People need income across the piece to cover all their housing costs, so we are increasing the national living wage to £12.71 an hour from April 2026, which again will benefit 2.4 million workers. We are delivering the first sustained above-inflation increase in the universal credit standard allowance since it was introduced, which will benefit millions of people from April.

We are also trying to cut people’s costs. We are cutting energy bills by an average of £150 from April, expanding the warm home discount to nearly 6 million households and investing £15 billion through the warm homes plan to upgrade 5 million homes, helping families save hundreds of pounds on bills and lifting up to 1 million households out of fuel poverty by 2030. We are also investing in reform of the system and getting more people working through our Get Britain Working strategy.

In addition, at the Autumn Budget, a housing measure was introduced to address work disincentives for people living in temporary and supported accommodation. Currently, as the noble Baroness will know, the interaction between universal credit and housing benefit can discourage people from work if they are living in that type of housing. From autumn this year, the DWP will reduce the financial cliff edge for that cohort when they are moving into or progressing in work, to ensure that work pays when they increase their income and that people are always better off in work.

The Secretary of State also considered what other funding was available to support people with housing costs. The DWP funds local authorities—which we believe are best placed to assess local need—to help support people to meet a shortfall in rent costs or to help to move properties. This is currently delivered through discretionary housing payments. As the noble Viscount, Lord Younger, mentioned, from April in England, the crisis and resilience fund will replace the household support fund and incorporate DHPs, streamlining support into a single fund. We are investing £842 million a year—that is £1 billion including the Barnett consequential for the devolved Administrations —to reform crisis support. This new fund is the first multi-year crisis support fund, which will make a real difference to local authorities’ ability to plan how they can give support to those who need it. The Scottish Government launched their version—

[Baroness Thornhill (LD)]

Can the Minister clarify that this will be a different way to use what was previously DHP rather than additional new money?

[Baroness Sherlock (Lab)]

I will come on in a moment to try to answer the specific question. If the noble Baroness will give me one second, I move to that point, because I want to explain how it will work. I thank her for nudging me.

I will look at a number of the questions that were asked. The noble Baroness mentioned the Crisis report saying that only 2.7% of properties were affordable. For clarity and for the record, the Crisis report looked at newly advertised rents, which are typically higher than those for continued tenancies. Although the report highlights the cost challenge of moving to a new tenancy, we do not think it accurately represents the whole picture. LHA rates are based on confirmed rents for sitting tenants rather than the advertised rents. I am not challenging the broader issue; I just wanted to make that clear for the record.

The noble Baroness also mentioned the impact on homelessness. As we all know, the causes of homelessness are multifaceted and are driven by a range of factors, both personal and structural, but the relationship with social security is clearly one of those factors. The DWP has worked closely with the MHCLG on the national plan to end homelessness, which is driving sustainable change and addressing the root causes of homelessness. We explicitly considered LHA rates against homelessness goals. We are committed to working together with the MHCLG and the Treasury to keep LHA rates under review—I hope that gives the noble Baroness some reassurance.

However, we also know that too many people are living in temporary accommodation and that local authorities are under pressure, so we want to prevent homelessness in the first place. We are investing £3.6 billion in homelessness prevention and rough-sleeping services over the next three years, as well as the removal of the two-child benefit cap, increases in universal credit, and other measures. We are delivering the increase in supply of social and affordable housing.

On food poverty, which was mentioned by the noble Baroness, Lady Pinnock, we have announced action to transform our food system to ensure that it delivers access to affordable, healthy food. However, we are engaging routinely and regularly with stakeholders to understand the key priorities. We have also taken the step of expanding free school meals to all those on universal credit, which will in itself lift 100,000 children out of poverty by the end of this Parliament.

Briefly, before I come on to the crisis and resilience point, the Government have committed to building 1.5 million new homes. That is a stretching target, which is what we intended it to be. We are backing that up with a record £39 billion of investment to kick-start social and affordable housebuilding at scale across the country.

[Baroness Pinnock (LD)]

I am sorry to interrupt the Minister, but I feel very strongly about the use of the phrase “affordable housing”. Affordable housing is, by definition, not affordable. The broad definition of affordability for rent is 80% of the market rent, which, for most people, is not affordable—but social housing at social rents is. I would love the Government to erase “affordable” and just talk about 300,000 homes for social rent. That would make a difference; I hope the Minister will agree.

[Baroness Sherlock (Lab)]

The 300,000 target is for both social and affordable housing. I would be very happy to share the noble Baroness’s views with my colleagues at MHCLG to make sure that they reflect on them, if that is okay with her, as that policy is probably above my pay grade.

On the question asked by the noble Viscount, Lord Younger, the real challenge is that, if we do not get a whole-system approach on this, we are never going to unblock the barriers to building and addressing the productivity issues in the housebuilding sector. We are, therefore, working really closely with industry—including developers, housing associations and local authorities—to try to get a step change in this area. We have already taken some significant steps to address the planning issues that were holding back the supply of housing. Within months of coming into government, we published our revised National Planning Policy Framework, and, in December, we launched a consultation on further reforms to the framework to unlock additional housing supply.

The noble Viscount also asked about what will happen to vulnerable people. Let me explain what is happening there. At the moment, there is something called the household support fund, and, separately, there are discretionary housing payments. Both of these are short-term funds; the DWP gives the money to local authorities to pay them out. The household support fund was only ever done for six months at a time, and it was never clear that it would be done again for the following six months. DHPs, however, were set for a year at a time. There were, therefore, two separate, short-term discretionary schemes with different purposes and different sets of rules. Just to complicate things, they also often went to different tiers of local government.

Instead, we are creating the crisis and resilience fund, which is a single, multi-year, streamlined fund. It will eventually replace both the household support fund and DHPs in England from 1 April 2026. The key is that people can plan for crisis and resilience support longer down the line. To ensure that there is a transition from where we are now to where we are going, discretionary housing payments will be replaced by the housing payment strand of the crisis and resilience fund, which will, for the first two years, simply mimic what discretionary housing payments do now; it will carry on in the same way. In Wales, DHPs will continue to be maintained and delivered, while Scotland has developed its own alternative for that—as this is a devolved issue—which it launched in 2024. So our intention is that that is what will happen.

The £1 billion includes the element for the housing strand but we are working closely with local authorities so that, by the time we get to year 3, we can look at how that can be done. Also, they will be able to top this up if they want. I recognise, in the context of all the challenges they have faced, that some local authorities do this at the moment because they want to put more into housing.

I hope that that is helpful. I would be very happy to answer any other questions.

[Viscount Younger of Leckie (Con)]

Thank you; that was very helpful. May I have some further clarification? Will the CRF, therefore, combine the needs around housing with the needs around budget expenditure for those individuals who are targeted for help? I am thinking that local authorities—if it goes through them—will want to look at each case as it comes up. They will want to look at the housing issues and the expenditure issues and combine the two, which would make sense if that were the case.

[Baroness Sherlock (Lab)]

Of course, there are still issues about tiers and responsibility. One of the challenges is that local government reform is going on, which is one of the reasons why we need to make sure that we work with local authorities so that, by the time we get to that point, we have taken account of that. But this is the housing strand within the CRF—the CRF does other things too; it does not deal only with housing. The housing strand, however, is there to deal with support for those whose housing needs are supported through the social security system. I hope that is okay.

The noble Viscount also asked me who makes the decisions, and it is the local authorities. We believe they are best placed to make informed judgments about relative priorities and needs in their area, but we engage with them regularly through regular forums and we publish guidance on both schemes.

I hope that has picked up the questions that all noble Lords have asked. I am always very happy to be interrupted. If I have not, I will look through Hansard, and I will be happy to write if I have missed anything.

To conclude, we really must continue to provide support towards rent costs for those who need it, including the most vulnerable. However, we will have to balance that with challenges in other areas and with the needs of the taxpayer. In the current challenging fiscal environment, measures with the greatest impact on government goals in the area of poverty have been prioritised. That is why we are investing in social and affordable housing, as well as removing the two-child limit to lift children out of poverty—which, by the way, I do not regard as a cloud hanging over anyone; it is a wonderful opportunity to lift children out of poverty, and I am proud that the Government are doing it. That was a little parenthesis. We are also fixing the work disincentive for vulnerable people living in temporary accommodation and supported housing.

Once again, I thank the noble Baroness, Lady Thornhill, for giving us the chance to discuss this important issue, and I hope that she and the Committee can understand the reasons for the choices we made.

[Baroness Thornhill (LD)]

What I do understand is making difficult choices, and I often say it is a difficult position to be in—well, I would like to be in it, but I do not underestimate the difficulty of it.

I thank my noble friend Lady Pinnock who, as always, brings it slap down to reality and where we are; she is great at that. I also thank the noble Viscount, Lord Younger of Leckie—I never doubt his sincerity or the logical way in which he presents arguments and asks questions. He has today confirmed why I am at this end of the table and not that one—but hey ho.

I agree with the Minister that one of the issues today is short-termism; very often, it is from election to election, and it has absolutely been responsible for all the mess she has had to pick up. It has to be said that we are very much in tune with many of her aspirations and we wish them well. Unfortunately, however, we cannot see two, five, seven or 10 years into the future, so we do not know what will happen in the meantime.

It has been helpful to hear the Minister outline everything today, but I am still not convinced that this does more than move the money around. Let me put it this way: I wish the Government had made another choice. I just looked at the figures the Minister gave. She said it was £7 billion over five years, but if it is £1 billion a year for the new and old funds, that is £1.25 billion over a year, and it is £2.8 billion a year in temporary housing. So I am still not convinced that it all adds up, but I am sure that in a metaphorical smoke-filled room somewhere, the Minister has a sheet and she is saying, “Okay, that’s the right decision” because of whatever. I think we just have to hope that things improve in the future.

The Minister mentioned the reality of renting and keeping things in touch with what actual rents are. I therefore urge her to talk to her colleague, the noble Baroness, Lady Taylor, about the database that was promised in the Renters’ Rights Act, because rent levels are meant to be on that database, and that will be a very helpful part of it. During the passage of that Act, I was very pro the database, but it seems that a lot of things have been shoved into the long grass a bit. The database is a valuable tool. The proof of the pudding will be what happens in the future, and we hope for the sake of those tens of thousands of children and families that the Government are correct. I thank all noble Lords for their contributions.

Motion agreed.

Committee adjourned at 4.44 pm.