Welfare Reform and Work Bill

Debate between Lord Curry of Kirkharle and Baroness Manzoor

Monday 21st December 2015 Lords Chamber

[Baroness Manzoor (LD)]

My Lords, I shall speak to my Amendment 104, which is fairly self-explanatory. I am grateful to the noble Lord, Lord McKenzie, who is not in his place, for adding his name to it. It relates to loans for mortgage interest.

As we have heard, from April 2018, proposals set out in Clause 16 will mean that owner occupiers in receipt of income support will receive the offer of a loan secured on their property to help them to meet their mortgage interest payments, rather than a benefit, should they need it, to stay in their home. If there is insufficient equity to repay all the loan and interest, any remaining debt will be written off.

Age UK is right to say that we need to understand more about the people who will be affected and their likely response to the new proposals. For example, will it be possible to place a charge on all types of property, including leasehold property, those in shared ownership and sheltered housing? How will the system work if people have other loans secured on the property or have already taken out an equity release plan?

The Government have already said that they will make regulations about advice to claimants before claimants take a loan. That is welcome, but can the Minister clarify who will provide the advice and who will pay for it? Will it be free to claimants, and will it be independent and impartial, with no conflicts of interest—as the noble Baroness, Lady Sherlock, mentioned? How will the Government ensure that they do not create perverse incentives for the provider? Will the Minister also confirm that the financial advice given to claimants will be independent of the lender?

However, the purpose of Amendment 104 is to determine at what point any outstanding loan or mortgage interest, as proposed in the Bill, is paid off. I understand that the loan will be repaid when the property is eventually sold, rather than having to be paid off when the person receiving the loan gets back into work. However, there may be a series of other debts to be paid on the house when it is sold, the most obvious being the mortgage. It is therefore important to understand in what order creditors line up—i.e., who gets paid first, second, third, et cetera—and where the new mortgage interest loans sit in that queue.

My amendment focuses specifically on where it sits in relation to any outstanding payments for social care that may need to be paid. Under the Care Act—although not yet brought into force—a person can defer payment of their social care bills to the local authority during their lifetime, with the balance being paid off through their estate after their death, i.e., primarily through the sale of their home. My amendment seeks to clarify whether loans for mortgage interest or the deferred payments are paid back first. We on these Benches strongly believe that it should be the deferred payments, as this is money for the local authority which is vital to funding future social care needs. Will that be the case?

The Government also need to show that they are committed to helping people to meet the costs of social care by not delaying the implementation of the Care Act, a Lib Dem achievement in government. My amendment states:

“The regulations must provide that where—

(a) repayment of the loan is to be made based on the proceeds of sale of the person’s home, and

(b) the person has an outstanding deferred payment agreement under section 34 of the Care Act 2014 (deferred payment agreements and loans),

the repayment of the loan may not be settled until any amounts payable to the local authority under the deferred payment agreement have been settled”.

Otherwise, of course, the money just ends up with the Treasury, with no recourse for local authorities to recoup any moneys due to them for other people who might need help and support with social care costs in the future.

[Lord Curry of Kirkharle (CB)]

My Lords, I shall speak to Amendment 104A. I very much support the intentions of this Bill, but, of course, there are inevitably special cases that would be adversely affected by a change of this magnitude. The Government have been very clear in their intentions for this change, and I commend them for that. What I seek to amend, however, is not the principle of the clause, but its application. More specifically, I seek to amend this clause so that those who are in receipt of disability living allowance, or carer’s allowance and income support, are exempt from this change so that they can continue to receive support for mortgage interest as a benefit, not as a loan.

This clause was initially brought to my attention by a friend who attends my church. This man purchased a house in 2006 and was financially stable and secure. However, two years into his mortgage, he was diagnosed with a detached retina, which rendered him blind. As a consequence, he has had to cease working. He has been entitled to support for mortgage interest, due to being in receipt of disability living allowance, and carer’s allowance, as his wife is now his carer. With the help of SMI, his mortgage would have reached completion in 2030. At this point, he planned to downsize, using the extra equity to pay off other loans accrued since he was diagnosed as blind to equip his house as a result of his disability. However, the implications of the proposed change from interest support to a loan mean that 12 years’ worth of interest and a small capital contribution will need to be repaid. If interest rates stay as they are for the whole period, my friend, on top of his mortgage, will have to pay the Government back £63,000, the sum contributed by SMI as a loan, and £15,000 for the 5% interest on the interest owed each year. As I said earlier, I am in support of the clause in principle, but strongly urge the Government to reassess and reconsider applying the changes to those who are on disability living allowance.

My friend will be for ever incapable of working, and so would never be able to repay the loan. It is not right that such a burden should be placed on him and others like him—he is not unique—who receive disability living allowance. This change could potentially result in my friend losing his house and being forced to move into government housing, which would ultimately cost the taxpayer much more. Have the Government fully assessed the long-term implications of this? Surely, a successful policy is not one that saves money in one area, only for more to be spent elsewhere.

In conclusion, I repeat that I support the aims of Clause 16, but feel that it is entirely inappropriate for those on disability allowance to be treated in the same way as those on jobseeker’s allowance. The assumption is that those on jobseeker’s allowance will eventually get a job and be able to pay their mortgage in full themselves and also to pay back the loan. Those on disability allowance, however, might never be able to pay it back if they are for ever prevented from working. On these grounds, I urge the Government to reconsider the wording of Clause 16 and allow those on disability allowance or carer’s allowance to be exempt from the changes.