Welfare Reform and Work Bill

Baroness Hollis of Heigham Excerpts

Tuesday 12th January 2016 Lords Chamber

[Baroness Hollis of Heigham (Lab)]

My Lords, I want to raise a slightly wider point, as I see the 1% rent cut as the most recent of the attacks on social rented housing. What has triggered my comments is that the Prime Minister announced at the weekend that he wishes to bulldoze sink estates of 1960s tower blocks, where families and the employed had moved out to be replaced—in his words—by “gangs” and “ghettoes”. If that bulldozing is what local communities want, I would cheer him on. Low-rise and higher density housing is what most of us prefer—providing, of course, it remains available for social renting and is not part of social cleansing.

However, anybody who is familiar with the welfare housing of American cities, as I know many of your Lordships are, will begin to recognise his picture. US welfare housing is stigmatised, poorly built and poorly maintained, and if you get a proper job you are required to move on and out. People are therefore locked for life into unsafe streets and unsafe homes. The UK has had a very different history with social housing, ever since it built “homes fit for heroes” after the First World War. Even now, in Norwich, people put carpeting down on public stairways in social housing and carve out flower borders around the base of their flats. In those estates, you do not have a problem with arrears, graffiti or policing. We built some of the best social housing in Europe, which gradually broke the link between poverty and poor life chances in housing. We stayed together, supported each other and policed each other, and that generational stability produced what Nye Bevan called,

“the living tapestry of a mixed community”.

All noble Lords in the Chamber this evening know what makes social housing work, despite the Prime Minister’s comments this weekend. Yes, it is physically decent homes at affordable rents, but also steady jobs, because as Octavia Hill said a century or more ago, you cannot live regular lives on irregular earnings. You want decent homes, decent jobs and stable communities with low turnover. You also need competent management, chasing arrears, responding to the need for repairs and stamping out anti-social behaviour. None of this is rocket science. If that is what the Prime Minister wants, I will cheer him on. However, in my view, his policies are destroying, slice by slice, everything that he says he wants.

What is the point in rehabbing homes if at the same time you undermine the lives of those who live in them? Sink estates are caused by not just the physical fabric but, above all, the social fabric. To that, the Government’s housing policies, including this one, are doing irreparable damage.

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[Lord Elton (Con)]

My Lords, I have a fraction of the knowledge and experience in this field of the noble Baroness, and I am tempted from my seat only by her final remarks and those she made early on. I remind her that this is not the United States and, on the whole, we behave differently here. My experience of right to buy, which is a little greater than my experience in the rest of this field, is that when it started, you could tell which were the right-to-buy houses by the brightly painted doors, the clean net curtains, window boxes and the flowers. Going round the same estates, I now observe that the same doors are brightly painted, with clean net curtains and window boxes with flowers. The whole picture is not as gloomy as the noble Baroness suggested. I make no comment on the rest of her speech, but that makes me listen to it with a little more doubt.

[Baroness Hollis of Heigham]

My Lords, to respond to the noble Lord, the latest estimate is that 60% or more of property sold under RTB is now in the private rented sector, it is no longer occupied by the people who bought it.

[Lord McKenzie of Luton]

My Lords, this debate focusing on six specific amendments has become quite broad and—dare I say it?—welcome. The noble Lord, Lord Kerslake, kicked us off by reminding us of the background to the policy—in particular, pointing out that it is a complete reversal of CPI plus 1%, with its 10-year guarantee, which was introduced only a year ago. The noble Lord, Lord Horam, made the point that Governments may be foolish to offer 10-year guarantees, but one would hope that, whatever the term of the guarantee the Government gave, it would be met, and certainly not broken after just one year.

The noble Lord, Lord Kerslake, reminded us of what the policy as now constituted will actually deliver. Rents will be 12% lower and £2.3 billion per year will be lost to housing associations and local councils by 2020. Given the current structure of housing benefit, we are effectively talking about almost a straight transfer of resources from social landlords to the Exchequer. There is also the prospect of having 43,000 fewer social rented homes by the end of the period. The noble Lord emphasised the importance of certainty for the financing of housing provision.

I will come to the specific amendments on co-operatives in a moment, but the noble Lord, Lord Best, said that there are only three options for housing associations: cut programmes, cut the revenue costs which add value to housing association tenants or reduce surpluses. The Government have got themselves in a bit of a jam by believing that just because authorities and housing associations have reserves, that is free money. That reserve is there to support other activities and the current borrowing of housing associations and authorities. My noble friend Lord Beecham told us about the practical impact of the policies on his authority, and also supported the amendment of the noble Lord, Lord Ramsbotham, on almshouses, which I will come to.

The noble Lord, Lord Horam, reminded us that we have to deal with the deficit. Of course we do, but why do we always choose to do so off the back of the most disadvantaged in our society? Why that route?

The noble Lord, Lord Scriven, made the challenging point: is this dogma or is it practicalities that we are getting from the Government? My noble friend Lady Blackstone asked whether the Government would be honest and tell us what they think the effect of the policy will be. We ought to hear the Government’s view on what this will mean for housing provision over the upcoming period.

We had a fascinating lesson from my noble friend Lord Triesman on long-term annuity financing, which is very long-term with small margins, so changes in revenue streams could easily tip it into not being available.

My noble friend Lady Hollis challenged the PM’s view on bulldozing sink estates and made the point that to make social housing work requires decent homes, decent jobs, stable communities and decent management, and I agree with all that.

Amendments 104C and 104D, tabled by the noble Lord, Lord Kerslake, have the effect of reducing to three years the period of the rent reduction. That would coincide with when the Government tell us that the deficit will be dealt with, but that remains to be seen. From 1 April 2019, or the equivalent date where the relevant years are determined by Clause 21(6)(a), the rent reduction provisions will not operate. Amendment 104E requires that registered providers increase rents by CPI plus 1% from April 2020 and also requires there to be a review of the formula rent arrangements to see whether there are prospects of higher increases or greater flexibility.

We support the need to have as much certainty as possible for the future so that registered providers can develop long-term plans, although we understand that the Government may be coy about supporting anything beyond April 2020. It is presumed that the noble Lord’s amendments would apply to those tenancies to which the rent standard currently applies and not more generally. We also support the requirement for a review of the impact of Clause 21 to see what flexibility might be required to address its consequences.

I think that the way the Bill would operate at the moment is that if there is silence on the year 2020 before we come to the new arrangements, the regulator’s ability to set the rent under the rent standard would come back into play because it is negated by Clause 27 only for when the rent reduction proposals are under way. That would deal with the year between CPI plus 1% for 2020 onwards.

Overall, the effect of the noble Lord’s Amendments 104C, 104D and 104E would appear to be that the base for future rent increases would be higher than the Bill currently provides. The loss of income to councils and housing associations would be ameliorated and the shortfall in the provision of new accommodation would be reduced, to the benefit of those in housing need and to the benefit of the public purse, which would otherwise be bearing the strain. Other things being equal, the housing benefit bill would be higher in the short term than would otherwise be the case, as would the cost to those tenants who meet all or part of their rental costs. Overwhelmingly, the focus should be on getting back on track as soon as possible the investment programme under way as part of the 10-year settlement, which is what the noble Lord’s amendments seem to achieve: therefore, we are happy to support them.

Amendment 108, tabled by the noble Lord, Lord Best, focuses on fully mutual housing co-operatives. Amendment 108A, tabled by the noble Lord, Lord Kerslake, focuses on accommodation which is excepted from the right to buy because of specific adaptations for disabled or elderly people. Amendment 109A, tabled by the noble Lord, Lord Ramsbotham, which covers almshouse charities, was spoken to by my noble friend Lord Beecham. These amendments should be supported.

The case on mutual housing co-operatives has been fully articulated, as one would expect, by the noble Lord, Lord Best. We heard in particular from the Edward Henry House Co-operative in Waterloo. It argues that the financial model for housing co-operatives is different from that of housing associations. They do not keep large reserves. The reserves are kept low because of the member-tenant role in running the co-op. The prospects for driving efficiencies is therefore limited. These co-operatives should clearly be an exception to the policy, as should community land trusts, which are a very small section of the sector.

It is understood that the exemption from the right to buy for adapted properties is not widely drawn. Is it the case that it would not apply to one-off adaptations and requires properties to form part of a development of similar homes and to have some sort of social service or extra care provided on site or nearby for them to be subject to the right-to-buy exclusion? If this is the case, such properties would appear to fall within the definition of supported specialised accommodation, which is the subject of a separate exemption which we are going to debate shortly. The Minister may care to comment on that. This begs the question of whether the right-to-buy exemption should be widened at all—but perhaps this is an issue for another piece of legislation.

The financial structure of almshouses is different again. Residents pay a weekly maintenance contribution, rather than rent, which is less than a commercial rate. The exception the noble Lord, Lord Ramsbotham, seeks is entirely justified, and it is presumed that any impact on savings would be negligible.

We are confronted with six amendments, each of which should be supported. We have had a very robust debate around the thrust of this policy, the problems it creates and the challenges it will create in providing decent housing for people who have no option but to rent.

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[Baroness Williams of Trafford]

That will be £1.6 billion.

[Baroness Hollis of Heigham]

Of £20 billion?

[Baroness Williams of Trafford]

It will be £1.6 billion to provide 100,000 homes for rent.

[Baroness Hollis of Heigham]

So the Minister is saying that £20 billion is set aside for affordable housing, but only £1.6 billion of that £20 billion will be available for social housing to rent. Am I right?

[Baroness Williams of Trafford]

The £20 billion will be invested in housebuilding over this spending review, and £1.6 billion of that will be invested for 100,000 homes for rent.

The noble Lord, Lord Kerslake, makes the point that not many people pay their own rent. In fact, out of the 4 million households in the social sector, one-third actually pay their own rent, and the noble Baroness, Lady Hollis, alluded to that.

Amendments 108, 108A and 109A seek to place some exceptions in the Bill. Perhaps I can offer some reassurances in this area. The Government have made clear our intention to look to continue to accept those types of housing that are currently exempted from the rent standard, subject to determining whether the existing definitions are appropriate in the light of the revised policy. These include specialised supported housing, which provides support for the most vulnerable people and was developed in partnership with councils or the health service. We will bring forward regulations to set out these and any further exceptions needed under Clause 22.

I recognise that many noble Lords are keen to see further categories of housing or provider excepted. Noble Lords, including the noble Lord, Lord Beecham, in the absence of the noble Lord, Lord Ramsbotham, have spoken to amendments that would accept fully mutual housing co-operatives, homes for the elderly or disabled and almshouses. We are equally keen to understand noble Lords’ concerns and are keeping these matters under review. Nevertheless, the Government believe that most providers can find operational efficiencies to manage these reforms, and it is simply not appropriate to except large swathes of housing from the provisions to deal with a few hard cases.

We are also investing in specialised housing for older people, and in the spending review we have committed £400 million of funding to deliver 8,000 specialist homes for the vulnerable, the elderly and those with disabilities through the affordable homes programme, with a commitment to further funding from the Department of Health for specialist accommodation. We will continue to support local areas to meet their local needs by maximising funding flexibility.

I remind noble Lords that while the Government expect providers to make all possible efforts to manage the rent reductions and to plan on that basis, Clause 23 of the Bill allows for individual providers to apply for an exemption from the rent reductions if they face severe financial difficulties. Many noble Lords have alluded to that point. We do not expect providers to budget on the basis that an exemption will be automatically granted; as I said, they should be able to make all possible efforts to manage the reductions.

[Baroness Hollis of Heigham]

Will the Minister agree to the circulation before Report to all Members of your Lordships’ House of a list of the categories of social housing that are regarded by the Government as potentially exempt from the 1% cuts in rent, so that we know before Report exactly who will be affected and who will not?

[Baroness Williams of Trafford]

My Lords, I am afraid that I cannot give that level of comfort to the noble Baroness. As I say, we are very carefully keeping this under review, but I cannot commit to giving her that list before Report.

[Baroness Hollis of Heigham]

I—

[Baroness Williams of Trafford]

If I may finish, all I can say is that we take very seriously housing providers that might suffer financial difficulties because of the reductions. In those cases they will be able, under Clause 23, to apply for an exemption.

[Baroness Hollis of Heigham]

So what the Minister is saying is that the Government will come in after the event, when providers are already on their knees and some of them might be going under, as opposed to letting us know which categories may be exempt by virtue of their particular needs. These providers are offering supported housing, which has not only high physical building costs but high social costs in terms of supporting tenants.

[Baroness Williams of Trafford]

My Lords, exemptions will apply to providers that demonstrate to the Government that they will face financial difficulties because of the reductions. I cannot prescribe from the Dispatch Box who those providers will be; it is for them to come forward to the Government. However, in the main we will expect providers to be able to cope with the reductions.

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[Baroness Williams of Trafford]

My Lords, Amendment 105 seeks to require the Secretary of State to produce a plan within 12 months to offset the impacts of the rent reductions on housing associations and local government. As my noble friend Lord Horam said, that is quite soon after the event.

Many private registered providers are in a strong financial position. Overall, the sector had a surplus of £2.4 billion in 2014, and local authorities had £2.2 billion in local authority housing reserves. However, it may be helpful if I recap some of the amendments made in another place which have been welcomed by housing providers. These include allowing providers with rent levels below formula to increase rent to the social rent rate when re-letting a property—that is formula less the appropriate annual reductions; and providing the Secretary of State with powers, by regulations under Clause 26, to allow rent setting for new tenancies in supported housing at up to 10% above the rate for general-needs housing. This should help providers of supported accommodation for vulnerable people to continue to provide that important housing.

Funding for supported housing is also part of the Government’s wider financial settlement to councils. This includes investing £5.3 billion in the better care fund in 2015-16 to deliver faster and deeper integration of health and social care. This will help councils to invest in early action to help people live in their own homes for longer and help prevent crises, as well as supporting councils to work more effectively together, deliver better outcomes for less money and drive integration across all local services.

Noble Lords have expressed concerns about the impact of these reforms on housing supply. Let me be absolutely clear that the Government remain committed to ensuring that there is housing for those who cannot access the market. The recent spending review further confirmed this Government’s commitment to housing provision. As I said in the debate on the previous group of amendments, we have £8 billion to deliver over 400,000 affordable housing starts; that is the largest affordable housebuilding programme by a Government since at least 1979. This includes around 100,000 homes for affordable or intermediate rent. However, we recognise that the rent reductions may have an impact on some registered providers. That is why the Bill provides for both exceptions to the policy, in Clause 22, and exemptions to the policy, in Clause 23, which we have debated previously.

The noble Earl, Lord Listowel, talked about the impact on child homelessness. I am sure he will forgive me if I say that the impact on the child will be the same as the impact on their family. The whole purpose of both this Bill and the housing Bill is to build a range of different types of houses for a range of different types of tenure, and for the social sector not to gallop out of kilter with the private rented sector, as it has. Of course, those children will grow into young people, and the Government have an ambition to provide 200,000 starter homes for people between the ages of 20 and 40.

[Baroness Hollis of Heigham]

I wonder whether the Minister could rephrase her comment about social rents being out of kilter with the private rented sector. She has heard the evidence in previous discussions: first, that those social rents rose because government required them to rise; and secondly, that social rents are on average about 40% or less of private sector rents. Therefore, the pressure on the housing benefit bill has come very substantially from the increase in the number of properties in the private rented sector. That is completely at odds with the position that the Minister keeps painting: that the justification for increasing social rents is that they are somehow out of kilter.

[The Earl of Listowel]

That is certainly my understanding too: that more and more the poorest people are being pushed into using the private rented sector as the supply of affordable social housing has dwindled. This has led to more insecure housing and, unfortunately, more and more homelessness. Of course, many of these people are parents, and therefore their children become homeless too. Perhaps the Minister might think of writing to me before Report, because I have not given her notice of my question. However, I am listening to what she has to say.

[Baroness Williams of Trafford]

I am very happy to write to the noble Earl. I do not make a judgment about why social rents have, in percentage terms, increased out of kilter with those in the private rented sector. The quantum might be different but, in percentage terms, they are out of kilter with the private rented sector.

[Baroness Hollis of Heigham]

My Lords, essentially, the Minister is saying that it is now acceptable to punish local authorities and housing associations for doing what the Government required them to do.

[Baroness Williams of Trafford]

No, my Lords; I am saying that we need to reset the picture for the social rented sector.

[Baroness Hollis of Heigham]

Does that mean that the Minister did not know a year ago what the effect of the policies would be?

[Baroness Williams of Trafford]

My Lords, I was not the Minister a year ago. However, I get the noble Baroness’s drift. The point is that we now have a majority Conservative Government and this policy has come out of that. I am not saying in any way, shape or form that it is the social rented sector’s fault. I am saying that that is the position in which we find ourselves, due to many different factors. Over the past few years, inflation has been one of the factors driving it up. However, I will correct that if I am wrong, given that I am saying it from the Dispatch Box.

The noble Lord, Lord McKenzie, asked about the guidance to social providers on maintaining surpluses. We feel that it is a matter for the housing association boards to run their businesses as they see fit. It is a well-regulated sector that, to date, has managed its finances magnificently. Boards have been advised to raise any anticipated exceptional challenges with the regulator to discuss any difficulties that they might anticipate.

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[Baroness Williams of Trafford]

My Lords, I have listened very carefully to the comments made by noble Lords this evening in debating the amendments that would extend the exceptions—which we were talking about two amendments ago—to the policy to specified or supported accommodation. I can offer some reassurances in this area at this stage. It may be helpful if I first recap the commitment made in another place, which was welcomed by housing providers, to continue to allow rent setting for new tenancies in supported housing at up to 10% above the rate for general-needs housing. This should help providers of supported housing for vulnerable people to continue to provide that important housing. We will put this in place by way of regulations under Section 26, the power to make alternative provision for excepted cases.

To address the point made by the noble Lord, Lord McKenzie, the Government have also made clear their intention to continue to except those types of housing that are currently exempted from the rent standard, subject to determining whether the existing definitions are appropriate in light of the revised policy. These include specialised supported housing, which provides support for the most vulnerable people and was developed in partnership with councils or the health service. We will bring forward regulations to set out these and any further exceptions needed, under Clause 22 or paragraph 5 of Schedule 2, as appropriate.

[Baroness Hollis of Heigham]

To go back to a question we asked about an hour ago, will the noble Baroness be providing those draft regulations before Report?

[Baroness Williams of Trafford]

I cannot give that commitment at this stage, but as soon as we can make any progress on it we will.

[Baroness Williams of Trafford]

My noble friends Lord Freud and Lady Evans and I have already been speaking to providers and my noble friend Lord Young brought this point up. I undertake that we will continue to speak to providers, but I simply cannot make a commitment from the Dispatch Box at this stage. We are doing all that we can to work with providers.

[Baroness Hollis of Heigham]

I am afraid that is not an accurate statement of where we are. The Minister has known for some time that this is on the agenda. She has known since before Christmas that this issue was coming up. She has talked to the providers; she knows the concern around this House; everyone in this Committee has requested, begged or asked the Minister. She knows what will happen on Report if she does not. Given her consensual style, her willingness to meet providers and her wish to respond to the sense of the Committee, I am sure that she must come back before Report to tell noble Lords what she will do about this, so that we can make a judgment. That would go a long way to abate the concerns which she recognises. If she has to tell the department that it has to change its timescale, so be it.

[Baroness Williams of Trafford]

My Lords, the noble Baroness has been in government and she knows the processes of government. She is right to say that I am a consensual politician, where I can be, but I will not stand at the Dispatch Box and give assurances that I cannot absolutely fulfil. I therefore have to say that I cannot do that but I will be doing all I can to make progress in this area. That is all I can say at this stage.

[Baroness Williams of Trafford]

My Lords, it is different. We are looking at this whole area of provision but it is a different definition. The noble Lord asked whether we could include the exceptions on the face of the Bill. They would probably be too complex to include in the Bill, while regulations would provide more flexibility to effect better the appropriate definitions and make adjustments in due course.

Funding for supported housing is also part of the Government’s wider financial settlement to councils. This includes investing £5.3 billion in the better care fund in 2015-16 to deliver faster and deeper integration of health and social care. This will enable councils to invest in early action to help people live in their own homes for longer. It will also help prevent crises, as well as supporting councils to work more effectively together, deliver better outcomes for less money and drive integration across all local services. We are also investing in specialised housing for older people. In the spending review, we have committed £400 million of funding to deliver 8,000 specialised homes for the vulnerable, elderly and those with disabilities through the affordable homes programme, with a commitment to further funding from the DoH for specialist accommodation. We will continue to support local areas to meet their local needs by maximising funding flexibility.

I think it was the noble Lord, Lord McKenzie, who asked about the combined impact of the social rent reduction and capping the highest housing benefit awards for social renters, in line with caps applicable in the private rented sector, meaning that supported housing will be decimated. Now that I am looking at the noble Lord, I do not think it was him who asked this. But there was a noble Lord who asked that question, because I have written it down. Applying a cap on the highest social rents will mean that housing benefit will no longer subsidise families who take new tenancies in social houses that many working families cannot afford. The new cap will have effect only from 2018 for new or re-let social tenancies signed after 1 April 2016.

The noble Lord, Lord Shipley, asked whether the savings of £75 million were for supported housing. I do not know but I will write to him about it and I can come back to that question on Report, if he wishes. My noble friend Lord Young asked whether we can meet providers, as I think I have said. We have met providers and will meet them again.

Finally, I reiterate that while we expect providers to make all possible efforts to manage the rent reductions and plan on that basis, Clause 23 allows for individual providers to apply for an exemption from the rent reduction if they think that they will face severe financial difficulties.

[Baroness Hollis of Heigham]

Does the Minister think that it will remain private if any organisation comes to the Government saying, “We’re about to go bankrupt—please help us”? Do they think that the organisations will continue to get the confidence of their local authorities, or of the markets or investment? I am staggered by this approach of “Go to your knees, then we may help you out”, as though that is a way in which providers could continue to support some very vulnerable people.

[Baroness Williams of Trafford]

My Lords, providers have a very good track record both in managing their finances and in terms of the housing that they provide, and I do not expect that a housing provider will go to the Government only when it is on its knees. In well-run housing associations, I expect that forward planning would show what sort of difficulties might be coming up and that they might therefore apply for an exemption on that basis. I hope it would not be at the 11th hour, because that is not good financial planning. I hope I have provided some reassurances and that the noble Lord will feel able to withdraw his amendment.