Welfare Reform and Work Bill
Lord Kerslake Excerpts(8 years, 10 months ago)
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The Earl of Listowel (CB)
My Lords, having six weeks ago spoken to a mother who had just moved into a refuge with her daughter and granddaughter, and heard from her about the years of abuse she had experienced in her family home, I am very grateful to my noble friends, noble Lords and the Minister for the announcement that he has made today.
Lord Kerslake (CB)
My Lords, I declare my interest as chair of Peabody and president of the Local Government Association. I support Amendment 50 and wish to speak specifically to Amendments 53, 61 and 63. I will keep my comments brief as I am conscious of the hour.
I add my welcome to the movement and the moratorium referred to by other noble Lords. This is a demonstration of the Government listening and acting, which I welcome. I reinforce the importance of taking early decisions and not using the whole year for the review process, not just because of the uncertainty for existing schemes but for investment in new schemes that are so desperately needed.
Amendment 53 follows on from the debate we had in Committee, when we debated the very abrupt move from the 10-year plan of CPI plus 1% for rent increases to a four-year period when there would be a 1% reduction per annum. We had a considerable debate on what the impact of that change of policy would be. In tabling an amendment in Committee, I was ever hopeful that after the four-year period the Government might return to the original 10-year plan. However, the noble Baroness, Lady Williams, made it clear that that was not the Government’s intention and that they would take a decision on future rent movements in four years’ time. Given the difference of view on this issue, with the Institute for Fiscal Studies clearly saying that there will be a loss of housing association new build as a result of this policy and the Government’s view that the figure will be absorbed through efficiencies and reductions in surpluses, it seems to me imperative that an evaluation is undertaken before policy is set in four years’ time. I emphasise that it should be an evaluation, not simply monitoring the existing policies, and that that evaluation should be independently commissioned.
There is plenty of precedent in government for doing this—for example, with the new homes bonus, where such an independent evaluation was produced and published, and, indeed, influenced government policy on the bonus going forward. It is good practice for government when they introduce such a significant change to not just monitor the impact of that change but to evaluate its impact in the widest sense. That is why I think this amendment is so important. I would like to hear from the Minister what the Government’s view of this is but also how they expect to assess this impact.
Amendments 61 and 63 come together because they relate to social rents and affordable rent. I take very seriously the debate we had yesterday on the Housing and Planning Bill, and particularly the Minister’s view that we should do everything possible to maximise new housebuilding in this country. I endorse that view, whatever that new housing happens to be. This issue is specifically about new build schemes and the flexibility there has hitherto been for setting rents at the commencement of those schemes. This relates not to the viability of the housing association but to the individual schemes. It is why I have tabled the amendments which perhaps require a bit of elaboration.
When a housing association considers its investment programme in new supply, it looks at two things. First, it looks at its wider viability as a housing association and the risks attached to the scale of the programme it is undertaking. The second thing is to look at the viability of the individual scheme before it commits to it. In some cases the scheme will be highly viable and profitable and would go ahead regardless of this rent reduction. In other cases there will be schemes that were not viable before and with the rent reduction would most certainly not be viable now.
However, there is a small but important group of schemes which are on the margin of viability, with risks that are evenly balanced. Having the flexibility to start the rent at a slightly different point at the time the scheme starts will crucially influence whether those schemes go ahead and whether they do so now. This is the particular issue that I am focused on. It will not be a big cost but the numbers could be important. Given the crisis that we face on housing, “every little helps”. I hope that Ministers will hear this point and retain that flexibility. The small cost that is involved will be far outweighed by the confidence it gives to housing associations to go ahead with their schemes. I urge the Government to consider this carefully.
Baroness Hollis of Heigham (Lab)
My Lords, I have a brief comment and a brief question.
I support everything that the noble Lord, Lord Kerslake, has said. On Amendment 53, I urge the Minister to take seriously the need for housing associations to be able to plan their building programme and their revenues more than three to four years ahead. The viability of their bank covenants depend on that, and, therefore, their capacity to manage new investment. If there is a query as to whether this 1% rent reduction will be continuing in three years, in whatever form, there will be a serious question mark over the Government’s ability to meet their goal of affordable housing through the social landlord sector.
I urge the Minister to take that amendment very seriously. Some of us have been engaged in negotiations with banks worried about there being no direct payments and therefore tenants having to pay rent out of their UC. They were worried that this would destabilise the rent roll and asked if they could refloat their loans at X, Y or Z. Some of us have already been through that and banks are quite willing to inflate a risk in order to get the revenue returns they would like to see on their covenants. Therefore, the more predictability the Minister can give us, the better. I hoped we would have a clear line, and that after 2019-20 this would stop. If it does not, housing associations and local authorities will have real difficulty in managing their business plans.
Like everyone else I welcome the one-year suspension of the 1% rent reduction in the social rental and supported housing sector. Can the Minister tell me how that will end? Does he expect to notify the House by virtue of an SI? In other words, will he say to the House that from this point on this accommodation will, as a result of this review, be expected to have a 1% rent reduction? Will the Government claim financial privilege, given that it will be a financial measure, so that this House will find it very difficult to discuss it and, possibly, ask the other place to reconsider?
Lord Freud
There will be a review, which will look at how we fund. We have given ourselves a year to come up with that, so clearly they can look to that in the medium term. However, I have already said that we accept that it is urgent to make sure that their immediate concerns are taken off the table, and we are working to make sure, as we look forward to a more fundamental review, that those protections in that short-term period are in place.
Lord Kerslake
The proposal with regard to the exemption and flexibility for the regulator in those difficult circumstances is entirely welcome. Although it does not go as far as I sought, it is a very helpful move indeed, so I thank the Minister.
Lord Best
My Lords, this has been an excellent debate. Many thanks to the noble Lord, Lord Shipley, my noble friends Lord Listowel and Lord Kerslake—I was pleased to hear him say that he welcomed the announcement by the Minister—and the noble Baroness, Lady Hollis, who may have been satisfied to some extent on the process. We should have a chance to debate these things in the future. I thank the right reverend Prelate the Bishop of Durham, who told us about the work of Framework, a typical housing association, which is feeling very nervous and which, I hope we are pretty well fully reassured, will not go out of business as a result of these measures—that will just not happen. I also thank the noble Baroness, Lady Manzoor, my noble friend Lord Ramsbotham, for championing the cause of the almshouses, the noble Lord, Lord Young of Cookham, for joining in very helpfully; and the noble Baroness, Lady Warwick. She continues to feel fearful but I hope that she gained the distinct impression that it would be a bad idea to hold back on the basis of thinking, “The Government will probably let us down; the rents won’t meet what is required”.
For some years I chaired one of the housing associations—Hanover, which runs the most extra care housing schemes in the country. I thought to myself, “Knowing what I know, would I say to my board that it is too risky to go ahead with an extra care scheme in these circumstances, because by 2018 we may find that there is no money on the table and we will go out of business?”. I would say from the chair, “Let’s go for it. I don’t believe we’re going to be put out of business”, but I fully accept that some of my fellow board members might take a more cautious view. That is the anxiety that remains until the Minister is able to come up with something that has a watertight guarantee. However, his words tonight were as reassuring as we could expect them to be.
I echo the Minister’s tribute to the many organisations that have beaten a path to his door. I am sure that they were much more influential than myself or anyone else in this House because they bring the real experience of the front line through to the ministerial office. I am delighted that he is deeply committed to engaging those same organisations in the process that now follows to find a permanent solution.
However, best of all, I am very pleased that the Minister has been able to announce that, while the review takes place and Ipsos MORI comes up with its research, with the providers being part of the process of finding a permanent solution, rents can be increased by CPI plus 1% in these schemes. That will keep the wolf from the door. I have pleasure in begging leave to withdraw the amendment.
Welfare Reform and Work Bill
Lord Kerslake Excerpts(8 years, 10 months ago)
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Lord Kerslake
Lord Kerslake (CB)
My Lords, I rise to move Amendment 104C. In doing so, I declare my interest as chair of Peabody and president of the Local Government Association. I will also speak to the other amendments in this group that have been tabled in my name, so I hope that noble Lords will bear with me if this takes a little time. I also support the amendments in this group tabled by other noble Lords.
These amendments are all consequential on the Government’s new policy, announced in the July Budget, that social rents should be reduced by 1% per annum in England for the next four years, starting in April 2016. It is therefore appropriate that I say a few words about this policy as background to and rationale for the amendments I have tabled. The policy represented a complete reversal of the previous coalition Government’s policy, announced as part of the 2013 spending review, that rents would rise by the increase in the consumer prices index—CPI—plus 1% for a period of 10 years.
It is instructive to note that this formed part of the infrastructure report Investing in Britain’s Future, which accompanied the spending settlement report. The joint foreword to that report from the Chancellor and the Chief Secretary to the Treasury began:
“Britain at its best is a country that invests in the future”.
In his speech introducing the report to the other House, the Chief Secretary said:
“Our housing associations have told me that they can do more. To do that, they need certainty on rents, alongside public investment. So today I can provide both those things: I can guarantee that social rents will be set at the consumer prices index plus 1% out to 2025”—
note the word “guarantee”—
“and I can provide £3 billion more capital over three years from 2015 to deliver 165,000 new affordable homes”.—[Official Report, Commons, 27/6/13; col. 467.]
Baroness Williams of Trafford
My Lords, I think I explained that the Government do not intend to take action on the private rented sector. In fact, the private rented sector being in a healthy position in terms of supply can only be good for the housing market. With those comments, will the noble Lord feel sufficiently reassured to withdraw his amendment?
Lord Kerslake
My Lords, first, I thank the Minister for her comprehensive response. I also thank my noble friend Lord Best, the noble Lords, Lord Beecham, Lord Horam and Lord Scriven, the noble Baroness, Lady Blackstone, the noble Lord, Lord Triesman, the noble Baroness, Lady Hollis, and the noble Lord, Lord McKenzie of Luton, for their helpful and supportive comments on the issues I raised in these amendments.
I will make a few points in response to the Minister. First, I was very clear in my presentation of the amendments that I recognised that government had determined the big picture of policy, and that we were therefore talking about appropriate amendments here. On that point the noble Lord, Lord Scriven, is correct. I have sought to set out a number of practical and realistic amendments that the Government could consider.
On social rents, it is worth saying that, yes, they have risen above inflation, but that has been a direct consequence of intended government policy to raise social rents. They have not gone up because of some wilful act by housing associations or local authorities; precisely because it is a controlled area, it comes from government policy. Previous Governments of different political persuasions have acknowledged the need to raise rents so that they are closer to market rents. Indeed, the affordable housing product introduced by the last Government was up to 80% of market rent. Therefore, there has been a clear consensus policy by Governments to raise social rents, and that is why they are as they are.
My second point is that in respect of new housing supply in the social sector, there is what is often called the three-legged stool: a combination of private borrowing, rents and government grant. Each of those needs to be clearly calibrated to deliver the best possible results. As the noble Lord, Lord Triesman, says, confidence about long-term returns is absolutely critical to this. That is how you get cheap private finance into the system. That is why I felt that the 10-year policy was an enlightened and sensible one that would encourage the development of new infrastructure. Because of the compelling demands of the welfare reform savings that the Government need to make, they have chosen to depart from that policy. The key question is, how do we get that confidence and certainty back into the system so that we can maintain the maximum level of supply? I have to tell noble Lords that there is clearly uncertainty in the sector about what will happen at the end of the four-year period; it needs to be addressed in a very clear way, and that cannot wait until 2020.
I am very reassured by the Minister that the exceptions, as we must now call them, will be considered sympathetically. It would perhaps help if it could be made clear how many of the exceptions we have proposed through the amendments will be covered by what the Government intend. I moved an amendment on housing specifically constructed for disabled and elderly needs. That is a crucial area, and we must keep the level of supply going. My noble friend Lord Best has identified other areas where this is critical.
Clearly, efficiencies can be made in housing associations. Anybody who suggests otherwise is being unrealistic. The key question is what you do with those efficiencies, and whether they are used to reinvest or to cover other government policies. We are left still with the question, raised by a number of noble Lords, of the balance between revenue savings and capital investment for the long term.
My last point concerns who benefits here. I was clear in my speech that two-thirds of tenants, not all of them, will benefit. The reality is that the bulk of the savings from this policy will benefit the Chancellor. That piece of arithmetic cannot be denied.
I welcome the debate we have had on some very important issues. I will withdraw my amendments in the light of the discussion and will return to some of the issues I have raised at a later stage.
Lord Kerslake
My Lords, I support this amendment. I will keep my comments short because my noble friend Lord Best covered very well the key issues. I shall make a small number of points. First, this housing supports people who are most at risk and most in need; that is, domestic abuse refuges, homeless hostels and shelters for frail, older people. Secondly, some housing associations have made a very serious investment and commitment to this form of housing. If we do not accept these properties, the effect would be to penalise those who have taken the bold steps to make this sort of provision.
The noble Lord, Lord McKenzie, referred to Riverside, with which I have also met. Its calculation is that the rent reduction will result in an overall loss of income from Riverside-supported housing schemes of £2.3 million per annum. Crucially, by 2019-20, nine schemes will be pushed into becoming loss-making schemes. A housing association that has done the right thing and has invested in crucially needed, supported housing will face significant losses in its operation of that housing.
Thirdly, an already fragile set of services will become more so. In that context, it is almost certain that housing associations burned on this occasion will not invest in the future. We will put at risk a crucially needed new supply of housing to meet these needs. Something that was previously marginal will become unviable and we will therefore see the consequences of this down the track.
Like my noble friend Lord Best, I cannot believe that this was an intended consequence of the Government in their rent reduction policy. This amendment addresses the issue head on and seeks to put it beyond doubt for those housing associations which have already invested in this type of accommodation or which plan to invest in it.
The Lord Bishop of Rochester
My Lords, when I added my name to the amendment in the name of the noble Lord, Lord Best, I did so in the naive belief that we might be pushing at an open door. I still maintain that belief because I hope that the Minister will reassure us on some of these matters. I, too, cannot believe it was intentional that we would be threatening to undermine the housing provision for some of the most vulnerable people in our society. The two noble Lords who have just spoken have made many of the points which I would have made, and others have been made earlier this evening.
I underline our commitment as a society to these very vulnerable groups, which includes the frail elderly and the other groups who have already been mentioned. In many ways, we have a moral responsibility as a society to provide for these people. In addition, there is a much more self-interested argument. The investment we make in this kind of housing, as has already been hinted at by one or two other contributors to our debate, prevents other costs which are far harder to control and which would roll out in the future if this kind of provision was placed in jeopardy.
Mention has been made of housing providers having surpluses and so forth. But in this particular part of the supported-housing world, very often we are dependent on small providers—charitable providers—which do not have that kind of background or those resources on which to call. I have grave concerns about some of the small charitable providers that are part of this bit of the sector and whose financial viability could be called into question and made very difficult. These organisations work with people with very complex and high support needs where margins are already very tight.
As has already been indicated, this policy change would come in at the same time as the LHA changes. Montgomery Court in my town of Rochester provides an extra care scheme for frail elderly people. We estimate that with the LHA cap, it would lose £65 a week per unit. These kinds of schemes are often very dependent on high staffing levels in relation to the support provided. It is precisely the sector where very good policies around minimum wage and living wage are likely to increase costs for providers in a way that might not be the case in other sectors. We find these providers potentially being hit from a number of different sides at the same time. At the very least, we need clear estimates of the impact, not just of one policy but of a range of policies which could come to bear on these organisations within a short space of time.
Mention has been made also about undermining the confidence of providers in investing in new provision. Again referring to extra care places for frail elderly people, in Kent where I live we have fewer than 500 such places. The estimate is that we need 10 times that amount by the end of this decade. That is a significant increase and those specialist providers will need to have serious confidence if they are to make that kind of investment.
As has already been indicated, these two amendments draw upon a definition which has already been established. It seems to me that there is a logic and consistency in building on that. At the end of the day, although we have been talking about the viability of organisations, this is about the provision for people and for some of the most vulnerable people in our society. Therefore, I, with others, hope to hear encouraging words from the Minister in her response.
The Earl of Listowel
My Lords, I am concerned that the Government’s proposal may reduce the supply of housing or cause what housing is available to be of poorer quality. I go back to my earlier concerns about the poorest families. In her response, will the Minister give an assurance that this will not have the effect that I am concerned about, will not make more families homeless and will not lead to poor families living in poorer conditions and less well-maintained homes? I look forward to her response.
Lord Kerslake
My Lords, I shall speak to my Amendments 110A and 110B. I am conscious that we are reaching the end of a long process, so I shall keep my remarks short. These amendments go to a specific issue that needs addressing. They focus on giving flexibility and excepting social rent reductions for two types of new supplier: affordable rent suppliers and social tenancies. That does not address the whole of the issue that I spoke about earlier because the social housing model involves cross-subsidy. When housing associations look at new supply, they look at two things: their investment plan’s overall viability and the viability of individual schemes. For schemes that are less profitable and more marginal, rent is crucial.
There is shared recognition in this House about the need for new supply of all types, including social housing. By giving flexibility by excepting new supply from the rent reduction policy and giving flexibility in the starting rates for these properties, it is very likely that some schemes that would have been put on the back-burner because of viability will go ahead. These amendments will cost very little because new supply is less than 2% of existing stock and therefore the cost in terms of benefits is very small, and the gain, in terms of new supply at the margin, will be considerable. These are two small amendments that will address the issue of new supply, give flexibility at local level to make decisions on rents and tip schemes that would otherwise not have been viable into viability and enable them to be built.
Baroness Evans of Bowes Park
My Lords, I shall start by addressing Amendment 110, which was tabled by the noble Baroness, Lady Sherlock, the noble Lord, Lord McKenzie, and the noble Earl, Lord Listowel. It would in effect reverse the summer Budget measure of applying a four-year freeze to housing benefit local housing allowance rates from 2016-17.
Between 2000 and 2010, expenditure on housing benefit doubled in cash terms, reaching £21 billion per year. If left unreformed, by 2014-15 housing benefit would have cost taxpayers £26 billion per year. This measure to freeze local housing allowance rates for four years will build on the reforms introduced in the last Parliament, which saved £4 billion and continue to deliver savings of around £2 billion a year. Savings from freezing local housing allowance rates are estimated to be around £655 million for Great Britain over the four-year period of the measure.
I will set out the process for setting the local housing allowance rates and what we already do to monitor the levels in comparison with market rates. Within DWP, local housing allowance rates are monitored each year to assess any divergences between the rates and local rents. Each autumn, the rent officer services provide DWP with rental data for all broad rental market areas for the 12 months up to the end of September. This is used to review the rates, and in the past two years has been the basis for identifying which rates should be increased by the targeted affordability funding.
If any changes are needed to secondary legislation, such as setting out a schedule of which areas and rates might be increased by the targeted affordability funding, they need to be carried out during the autumn and laid before Parliament, observing the requisite timescales before the amendments come into force before the LHA determination date at the end of January each year.
I should add that the Secretary of State has the power to review the local housing allowance rates or to provide in regulations for the maximum housing benefit to be an amount other than these rates. These powers have been in place since the LHA scheme was introduced and were reinforced in the Welfare Reform Act. Noble Lords will be aware that this measure has already passed through secondary legislation and been agreed by the Delegated Legislation Committee in the other place. The order was not prayed against by Members of this House and was therefore not subject to a debate. I reassure noble Lords that, alongside the LHA rate, we will continue to publish at the end of January, as we have done previously, the 30th percentile of market rates in each area. The noble Lord, Lord McKenzie, asked about his figures. They are broadly right in terms of the figures that he asked about.
The first step is for a provider to determine what would have been the rate of formula rent for that social housing—I apologise to noble Lords; I do not think this is quite right. I have not responded to the question from the noble Lord, Lord Kerslake. Typically for me, I appear to be missing a page. I will now turn to Amendments 110A and 110B, tabled by the noble Lord, Lord Kerslake. I am grateful to him for bringing forward these amendments and giving me the opportunity to explain to the Committee the approach that the Government are taking regarding rent-setting for new tenancies.
Schedule 2 to the Bill sets out how maximum rent should be determined during the four years of rent reductions for tenancies that were not in place at the beginning of 8 July 2015. Different rules apply to existing and new social housing and affordable-rent housing, and they are set out in paragraphs 1 to 3 of Schedule 2 respectively. Rents for new social housing, excluding affordable-rent housing, may be set up to the social-rent rate. It may be helpful for me to explain in slightly more detail how the social-rent rate is calculated, which is set out in the Bill in paragraph 1(4) of Schedule 2. The first step is for a provider to determine what would have been the rate of formula rent for that social housing at the beginning of 8 July 2015. The Government’s intention is to set that out in regulations that will mirror the formula for 2015-16, as set out in the rent standard guidance and the Government’s guidance for rent. In this way we have sought to make the 1% rent-reduction policy work in a similar way to existing policy in so far as we can.
Noble Lords will be aware that formula rent takes into account relative property values and local earnings, the size of the property and an overall rent cap. Local circumstances are therefore taken into account in determining what the rate of formula rent is. Once determined, the social-rent rate is found by then applying the appropriate annual reductions. But we do not think it appropriate to continue to allow providers of new general-needs housing the flexibility to set rents at up to 5% above formula. That flexibility was only ever intended to be taken up by general-needs housing providers on an exceptional basis and is now out of step with the Government’s policy for rent reductions, which necessitates a more tightly-controlled approach. As I have explained, the social-rent rate will be closely aligned to the previous formula-rent policy, which took into account local conditions. Local property values and local earnings are in fact built into the formula.
For new tenancies of affordable-rent housing, paragraph 3 of Schedule 2 provides that the rent payable by that tenant should be set at no more than 80% of the amount that would be the market rent for that property, and that in the following years a 1% per annum reduction to that maximum rent applies. But this is a maximum rent, and guidance regarding other factors of rent setting, including local factors, remains in place. Housing which may be let on the affordable-rent basis will be identified as such by regulations under paragraph 4 of Schedule 2 to the Bill, and I can be clear that our intention is that this will reflect existing policy regarding properties that may be let at an affordable rent.
Welfare Reform and Work Bill
Lord Kerslake Excerpts(8 years, 11 months ago)
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Lord Kerslake (CB)
My Lords, I declare my interests as chair of Peabody and president of the Local Government Association.
My amendment is very similar to the other two amendments in this group, and I will not repeat what I think was a very compelling argument made by my noble friend Lord Best. What I would like to do this evening is focus on three key reasons why I think that the Government should reconsider their approach to this issue. The first reason is the rising level of homelessness, the second is the quadrupling of the number of people who will be caught by the cap and the third is the inadequacy, as my noble friend Lord Best has said, of the discretionary housing payments fund.
Let me deal with the issue of rising homelessness first. My noble friend Lord Best referred to the recent report by Shelter. This report found that the number of children in temporary accommodation is at a seven-year high. The total number of people in temporary accommodation from the period of July to September 2015 was 68,500. That was a 12.5% increase on the year before. So we are clearly experiencing a significant rise in the levels of homelessness. The effect of this will be that, this Christmas, Shelter estimates that some 103,000 families will be in either bed and breakfasts, hostels or temporary rented accommodation. That will be a very grim Christmas for those families. Of those families, something like one in four are living in a different area from the area that they previously lived in. That means that they are away from their children’s schools and family support. In London, that figure is one in three. This is a very significant issue that is growing in its scale and impact.
The second issue I referred to is the number of people who will be caught by the cap. As has already been said, that number is likely to quadruple, adding an extra 90,000 people. Therefore, there will be two effects on the issue that we are speaking about, and that in turn will impact on the financial consequences for local government. It is important to say that the people involved here do not have any real choices. The circumstances they face—losing their shorthold tenancies or family break-up—will undoubtedly lead them to a position where they need to move and move quickly. Similarly, local authorities will have little choice, given the limited accommodation that they have available to them to put people into temporary accommodation, even though the management costs of that accommodation are higher. So we face the situation where there is likely to be rising homelessness, a quadrupling of the numbers caught by the cap and people, through having no great choices of their own, needing to go into temporary accommodation with higher costs.
In the past, the response has been that the discretionary housing payments fund will cover this. The evidence produced, again by Shelter, suggests that that is unlikely to be the case. We know that, in London, the scale of the costs through the DHP funding is already around £4 million. It has been calculated by Shelter that for one local authority alone, Tower Hamlets, this could add a further £2 million per annum in terms of costs. I do not believe that the discretionary housing payments fund will be the answer to this issue. It will squeeze out the other reasons why local authorities need to use this fund. They will therefore be faced with a choice of either compelling families to move further away so that the cost is lower or, alternatively, dipping into resources that they have for other purposes. We will face an increasing squeeze on those local authorities that they will not be able to cope with.
The Minister may say that DHP funding is rising. Indeed, it is. It will rise from £165 million this year to £185 million in 2017-18. However, it falls to £140 million in 2021. Therefore, this fund goes up, but it goes down again, whereas the pressures that I have spoken about are inexorably rising. A simple way out of this issue is to exempt families in temporary accommodation, as has been proposed. This recognises the reality that there is little choice and that, if we ignore this issue, we will increase the pressure on local authorities to a point where it will damage the finances of those authorities and the prospects of those families.
Lord McKenzie of Luton
My Lords, I speak to Amendment 86, which is in my name and that of my noble friend Lady Sherlock. I also speak in support of Amendment 73 moved by the noble Lord, Lord Best, and Amendment 90A in the name of the noble Lord, Lord Kerslake. As we have heard, regardless of whether the benefit cap has played a role, local authorities remain legally obliged to rehouse families who are demonstrably homeless through no fault of their own, are vulnerable in some way or are in priority need for rehousing.
Families will be placed in temporary accommodation while a council decides whether it owes them a rehousing duty and then until a settled home can be found. For some families, the wait for rehousing can be considerable. I note that the noble Lord, Lord Best, has a 39-week grace period. I understand that that is likely to be sufficient in the overwhelming majority of cases but not in all cases, particularly in London. While in temporary accommodation, councils charge families rent to cover their own costs and expenses, and this is commonly paid for by housing benefit. In some cases, councils have to top up additional costs out of their own funds or, as we have heard, the limited pot of discretionary housing payments.
Temporary accommodation is generally leased by local authorities from the private sector at a premium, placing a considerable burden on them. Councils are already struggling to secure enough temporary accommodation as a result of the combined effect of limited funding and a shortage of self-contained accommodation. This is already leading to an increase in bed-and-breakfast use or people being rehoused away from their local area. The lower benefit cap will increase demand for homelessness services and exacerbate the pressure on the local authority supply of temporary accommodation. With more homeless families affected by the cap, local authorities are likely to be forced into further subsidising the cost of temporary accommodation. This will be difficult for cash-strapped councils, increasing the incentive to place families in the cheapest areas far away from their support networks.
It will also make it harder to permanently rehouse homeless families, as the benefit cap will make alternative housing options unaffordable. For larger families, even social housing will be subject to the cap. The policy therefore risks the perverse scenario in which families are made homeless because of the benefit cap and trapped in the limbo of temporary accommodation by the benefit cap at the expense of the public purse. The amount that can be reimbursed through the local housing allowance is limited to £500 a week, which means that other costs over and above that amount must be met by local authorities. In some cases, this will come from funding for discretionary housing payments, but often the necessary funds will have to come from elsewhere, given that DHP funds are in such short supply in the context of seemingly insatiable demand.
We know that the Government have declined to collect statistics which might help them measure the extent to which any purported savings from capping household benefits are simply being shifted on to local authorities in the form of additional homelessness costs. Our honourable friend Emily Thornberry MP sent freedom of information requests to every local authority in London over the summer and the findings throw doubt on the idea of the cap as a savings measure.
In the first year following the introduction of the cap, London councils spent a combined total of £19.2 million supporting households which had been hit by it. In the second year, this rose to £23.3 million altogether. Some boroughs spend more than 80% of their total DHP allocations on supporting capped households, and in most boroughs the proportion is increasing each year. To date, local authorities in the capital have spent almost £47 million in DHP funding as a direct result of the benefit cap and it is likely that this is just the tip of the iceberg in terms of the overall costs involved. Reliance on temporary accommodation is a significant driver of these additional costs.
As we have heard, across London more than a quarter of households currently affected by the benefit cap are living in temporary accommodation and in some boroughs it is much higher. In Waltham Forest, apparently a staggering 58% of capped households live in temporary accommodation. This compares with less than 1.5% of the overall population of people claiming housing benefit. The disproportionate presence of families in temporary accommodation among households affected by the cap is a huge issue for local authority spending. It is also a real source of human misery as, increasingly, councils are having to house homeless families in temporary accommodation outside their area, and sometimes many miles away from their support networks and their children’s schools.
Our amendment would exempt newly homeless households from the benefit cap. This would allow councils to continue to procure nearby temporary accommodation and make it easier for them to move households into affordable accommodation. It will also help councils focus their DHPs and their own budgets on homelessness prevention. If the Government are serious about cutting back on public expenditure associated with the benefit system, and in targeting the benefit cap at families in a position to make choices about where they can afford to live, it is hard to see why they should argue against exempting homeless families being housed in temporary accommodation.