Housing: Spending Review

Lord McKenzie of Luton Excerpts

Thursday 4th November 2010 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I shall follow the now well established practice and thank my noble friend Lady Hollis for introducing the debate. I also thank her for her devastating critique of government housing policies and for exposing the awful hardship—“indecent”, she called it—that the Government will visit on many of our fellow citizens.

We have also heard many other knowledgeable and wide-ranging contributions. From the noble Lord, Lord Greaves, we heard about regeneration issues and the importance of being able to carry forward the regeneration that has happened in the past. We heard from the noble Baroness, Lady Greengross, about pensioners and the need for a cumulative impact assessment. The right reverend Prelate the Bishop of Bath and Wells talked about rural housing, as did the noble Lord, Lord Taylor. The right reverend Prelate also reminded us that, by definition, with housing benefit we are dealing with people who do not have lots of savings because, if they did, they would not qualify for the benefit in the first place.

The noble Lord, Lord Brooke of Sutton Mandeville, reminded us that a welfare reform programme was under way. Indeed, we broadly supported the thrust of the universal credit; we can claim to have initiated it, in part, in government. He divided the world between simplifiers and complicators, but for me it is not whether it is simple or complicated but whether it is fair—that is the important issue.

My noble friend Lady Wilkins referred to the particular impact of housing on disabled people, who are disproportionately dependent on social housing and housing benefit, and talked about how devastating these issues can be for them. The noble Lord, Lord Howarth, took a rather broader view about the need for a better balance of tenure and the need for better design. I agree with him on the second point in particular. The fact that, somehow, poor people should have to make do with rotten design is simply not acceptable.

The noble Lord, Lord Taylor of Goss Moor, made a very interesting contribution about the funding arrangements, how the revenue would work and how housing benefit would impact on it. One of the consequences of intermediate rents is that people able to access housing benefit are likely to be closer to the overall £500 benefit cap, with all the dangers associated with that.

Ensuring that people can access decent, secure, affordable housing should be the business of government. The availability of housing, especially affordable housing, is integral to tackling poverty and promoting well-being. Where and how it is provided influences the shape, cohesion and sustainability of our communities. My noble friend Lady Dean developed this point, as did my noble friend Lady Wilkins.

The need to protect Supporting People was touched on by some noble Lords. I wholeheartedly agree with that. It is a sign of the times that we see that budget as being reasonably well protected when in fact there is a 12 per cent real-terms cut over the period.

The noble Lords, Lord Shipley and Lord German, made reference to the previous Government’s record. Progress has been made: 2 million more homes being built in England since 1997, half a million of which were affordable; and 1.5 million social homes being brought up to a decent standard. But with the number of households increasing by 1.3 million, this was simply not enough—I acknowledge that. Waiting lists for affordable housing are rising. There is an acknowledged requirement to build in the order of 240,000 to 250,000 new homes every year to deal with the existing shortfall and the continuing growth in households.

As we have heard, part of the strain of coping with this has been taken up by a dramatic increase in the number of private-renting households—an extra 1.1 million in the past decade. This has put pressure on rent levels and consequently on levels of housing benefit—my noble friend Lady Hollis stressed this point. It is an issue that, as we should acknowledge, any Government would have to address. Long-term rising house prices and more restrictive mortgage finance, making home ownership more difficult, have added to the pressure. The noble Lord, Lord Taverne, gave us some interesting insights about the need for those who do not access social housing but cannot afford to buy on the open market to have some intermediate arrangements for doing so. There have been shared ownership and shared equity schemes, but an interesting point was raised about whether planning classes could improve matters.

It is against this backdrop that we should examine the Government’s approach. With the focus very much on the private rented sector, the Government were unwise to scrap our proposals for a national register of landlords and for regulation of letting and management agents, designed to give more protection to tenants. My noble friend has examined how the Government’s approach to housing and housing benefit sits with the wider welfare reform agenda and has explained how it undermines incentives to work.

What about the supply side? We have heard of the dramatic cut in resources for the affordable housing programme over the CSR period—63 per cent in real terms. To deliver their planned new 150,000 homes, the Government are relying in part on the availability of an additional source of finance, the so-called “affordable”, but perhaps better named “intermediate”, rents, which are up to 80 per cent of market rents. My noble friend Lady Dean spoke about the need to understand better the model that drives the conclusion that that is deliverable. Can the Minister confirm—I ask her specifically—that, across the four-year spending review period, the funds generated by intermediate rents will be allowed to be used only for more new homes subject to such rents? If so, it would imply that, apart from the programme that the Government inherited from us, there will be no further construction of social homes until at least 2015. How could that be justified?

The signalling of the revocation of regional spatial strategies, together with the delay in producing clarity around new planning arrangements and how the new homes bonus will work, is causing the cancellation of planned homes this year and next. What is being done to address that issue?

Many noble Lords have concentrated their remarks today on proposed changes to housing benefit and the local housing allowance. The noble Baroness, Lady Thomas, spoke about the unseemly haste with which they were promulgated, challenging whether there was sufficient analysis underpinning some of the proposals. Eight savings measures, totalling £2.3 billion by 2014-15, have been signalled in either the emergency Budget or the CSR, with two small reliefs—which I am sure we welcome. Time does not permit me to comment further on all of them. My noble friend has shown how they do not support work incentives and, in the case of the increase in non-dependant deductions and the restrictions on property size for working-age claimants, how they create impossible dilemmas. The uprating of LHA by CPI will over time, as we have heard, open up huge disparities between real rent levels and what will be paid, driving many into poverty. Proposals to reduce JSA claimants’ support by 10 per cent after 12 months are unprincipled and cruel. I hope that they never see the light of day. We heard from my noble friend Lady Quin how perverse the proposals could be in practice.

What has been good about most of today’s debate is that it has shone a spotlight on the realities around housing benefit and the local housing allowance. Too often, the debate is characterised by a small minority of cases of very high levels of payment, generally around London. The reality is that there are about 1 million LHA claimants, nearly half of whom face a shortfall in their rent. Contrary to what one would assume from listening to the justification for these measures, only one in eight housing benefit claimants is unemployed—a point made by the noble Lord, Lord Best, and the noble Baroness, Lady Greengross. The noble Baroness, Lady Meacher, focused particularly on those with mental health and fluctuating conditions and the impact that the 10 per cent reduction in JSA would have on people being migrated from ESA and IB to JSA. It is a source of real worries.

Uncertainties remain about many points of detail. I ask the Minister to deal specifically with just some of them. Part of the thinking of the Government is that housing benefit has fuelled private sector rent increases. What evidence can be adduced to support this contention? On what basis do the Government repudiate evidence from, for example, London Councils, which points to landlords not reducing rents? If the one thing that might encourage some landlords to reduce rent is the reinstatement of direct payment, what is the Government’s view of this? How could it possibly work if housing support is to be included as part of the universal credit? Indeed, how could it work with the proposed overall cap on benefits?

The noble Lord, Lord Best, the noble Baroness, Lady Meacher, and others—and I agree with them—focused on timing. Why is it necessary to introduce the cap on rent levels with effect from April next year and the change to the 30th percentile in October? There is a real risk that some households will be displaced twice within a short space of time, with all the costs and individual traumas that this will entail. The reality is that many households will be making their housing arrangements now, not in full knowledge of what these proposals will mean. They may be making arrangements for their children to go to a local school, to sign up for childcare support, to get a job or to buy a season ticket for travel. It must be right to give individuals the opportunity and enough notice to work out what this first tranche of measures will mean for them and to ascertain whether they will be able to avail themselves of the discretionary housing payments. If nothing else is achieved by this debate, we hope that the Government will give very clear commitments today to aligning the two measures to be introduced in October next year.

Even though the caps may affect only 2 per cent of claimants, estimates show that some 15,000 tenants could lose their home in London. The effect of the 30th-percentile restriction will be much wider, affecting some 83 per cent of LHA claimants. Inevitably, thousands of households will be uprooted from their homes and communities. Families moving out of higher-cost to lower-cost areas are likely to place unplanned calls on local services—children’s services, social services and school places. What assessment of the costs involved has been made by the Government? That point was pressed by the noble Lord, Lord Shipley. What is their estimate of the increased homelessness that will ensue from these measures? As the Government have signed up to compensating local government for additional burdens placed on it, what discussions have taken place with local authorities on how that is to be evaluated? Indeed, how are these issues to be factored into the local government settlement for individual authorities?

There are many more questions. We are embarking on profound changes to a system that will affect the well-being of thousands, driving many into poverty. What definition of “fair” justifies this?

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, I thank everybody who has spoken today and I accept that this has perhaps been a difficult debate on an important subject. I really have to start my response to it by looking at the other end of the telescope from the noble Baroness, Lady Hollis, and some others. The reason the changes have to be made, both to the capital programme and to housing benefit, is precisely that the Government have been left with a huge deficit. There is no point in people sighing and looking at the ceiling; this is a fact. It is also a fact that even if the now Opposition had come back into government, they would have had to face up to the fact that there was a deficit which was going to have to be dealt with. Indeed, Alistair Darling, the former Chancellor, has said that they would have had to introduce very serious measures which would, as I understand it, have been very much along the lines that we have to deal with it—first, to bring the deficit under control and, secondly, to try and put the economy back on a proper basis.

We have had many very detailed questions today and, inevitably, I cannot answer all of them. However, we need to look at what has been happening and why the Government have to take enormously tough decisions to reduce the public deficit. The Budget and the spending review have brought reductions across the piece, not only in the Department for Communities and Local Government. While it is fair to say that our department has had a quite substantial reduction in capital which will affect the programme for the future, we want to try to ensure that local authorities themselves can do as much as possible with the money available without too much direction from the centre. Some of the individual questions that your Lordships have raised will, indeed, be dealt with in due course by local government itself. Localism—the bringing down to a more local level—will in fact answer some of the questions raised.

It is clear that if we do not tackle the deficit, mortgage rates will rise, making housing even less affordable than it is now. The interest payments on £1 trillion of debt would also suck money away from front-line services and future investment. There was mention, too, of first-time buyers. They depend above all on the return to economic and financial stability, which the Government are seeking to achieve through debt reduction and a commitment to abolish the structural deficit. We hope that this will keep interest rates low and improve credit availability.

Despite the fiscal constraints—and despite what was said today in what I thought was a slightly apocryphal and apocalyptic introduction by the noble Baroness, Lady Hollis, for whom I have a great regard, because she produced a forensic speech, as I think the noble Baroness, Lady Dean, said, although it was far more apocalyptic than is necessary—there will still be £6.5 billion of taxpayers’ money put into housing. That includes £2 billion for decent homes. That program will continue and we will therefore have more accommodation coming through which that money has made decent. There will also be £4.5 billion to fund new-build homes over the spending review period. It has been estimated that that will amount to 150,000 homes. That will of course include—I think there was a question about this—the programme instigated by the previous Government. Those properties, amounting to about 60,000, will be part of that. It will also include empty homes which are being brought back into use by this money.

We are also prioritising services to the vulnerable. We had two or three speeches today on the disabled and their difficulties with accommodation. We will still be supporting the elderly, the disabled and the vulnerable with £6.5 billion in the Supporting People programme. That problem is already de-ring-fenced and local government already has access to it. We expect that it will be used for the programme already outlined. There will also be the homeless grant, which is maintained over the spending review period at a total of £400 million, while the disabled facilities grant is being protected over the same period. We are backing local growth and will introduce the new homes bonus, which we have not discussed much today. It will be a powerful fiscal incentive for local government to be able to build and generate the building of new houses.

Today’s speeches have focused mostly on the effects of housing benefit and the likely effects in the future. There is too much experience around this House for me to say that none of the case studies is likely to come about, and I would not dream of doing so. The reduction in benefit will have some impact. However, I am afraid that it will need to have some impact if the deficit is to be reduced, as it has to be. It would be fair to point out that we are currently paying more in housing benefit in one year than we spend on the whole of the police and universities. I think that the amount has actually doubled over the past five years. It was suggested that it has doubled not only because of the increase in property prices but because of the increased number of people in poverty. We will have to control it with the amount being spent on it and bring it back to a level that can be afforded.

We expect about 17,000 households to be affected by the cap in London, while 32 per cent of cases will experience no shortfall at all between their benefit and rent. A third of the properties in London—it will be better elsewhere—will still be affordable to people on the local housing allocation. I agree that housing benefit levels could mean that some tenants may need to move from the most expensive areas, but that is no different for working people who have to move if they cannot afford to live where they want. There are many people of working age who are living out of London and coming into it every day of the week, spending a fortune on travel, because they cannot afford the rents in London. I am sure that it is an extreme example—it is from my own previous local authority, which I represented—but the sum of £2,000 a week on housing benefit is far more than investment bankers earn in a year, and it is coming from taxpayers’ money. There is an equation here which we have to look at as regards the equitability of somebody working and paying rent or a mortgage subsidising to such an extent others who are not in jobs and are on housing benefit. There has to be a rationalisation of that, and some of that will come about as a result of the reductions in housing benefit that we have talked about today.

We are, however, putting transition money in place to support this where it happens. We have provided a substantial increase in the discretionary housing payments budget to allow local authorities to provide additional support where it is needed. Along with the additional £10 million that my honourable friend Grant Shapps announced last week, the Government have committed £140 million of additional funding for local authorities to provide support where they need to manage these changes. The suggestion that people are going to be left on their own to manage for themselves under these circumstances is not correct.

People worried about the changes or who are likely to be impacted by them will be able to get help from their local authorities to renegotiate their rents with their landlords. There is more than a suspicion that rents have risen quite substantially on the back of knowing that housing benefit will be paid. Rents are now very high; they rose substantially during the previous Government’s reign, and that is where we are now with the level that they are at.

[Lord McKenzie of Luton]

I apologise for interrupting the Minister. Is she suggesting that the policy was built around a suspicion about the impact of housing benefit on rents, or was there evidence that supported that suspicion?

[Baroness Hanham]

My Lords, there is a suggestion. I think I will put it like that. There will be help for these people to move to a new property, with the potential for relocation grants for more vulnerable households.

We are also protecting the vulnerable; we have had quite a few speeches about that. We are protecting the homelessness grant with over £400 million. We have also committed £6.5 billion of investment to the Supporting People programme, which will help also with tackling homelessness. This reflects the Government’s commitment to tackling homelessness and to protecting the most vulnerable groups in society.

We intend to support the mortgage rescue scheme so that it can remain open to support vulnerable homeowners. We are also talking to the Council of Mortgage Lenders about the question that was raised on intermediate housing and shared ownership to see whether we can free that up.

The right reverend Prelate the Bishop of Bath and Wells raised the question of rural housing and what can happen there. We hope that rural housing will be picked up by the community right to build, where the neighbourhood will be able to decide what it wants and where it is. That will also help to keep young people and local people in their own home area. We are also keen to see that the decent home programme is maintained; as I say, there is £2 billion of capital to support that.

The noble Lord, Lord Greaves, asked particularly about the former pathfinders and the areas where that programme has been carried out. Our expectation is that the current contracts, where there are any, will be honoured and carried out. Other than that, as he also suggested, access to the money will be from the £1.4 billion regional growth.

I have a few moments to go through some of the questions that I was asked. If I cannot provide the answers as quickly as I should within the next six minutes, I will ensure that I write to all noble Lords who asked them.

With regard to the question raised by the noble Baroness, Lady Thomas, people should not be found intentionally homeless if they are genuinely unable to afford the rent and no other reason is attributable. We intend to keep this practice under review and to reissue guidance if necessary, but the intention is that the support should be available so that people are not made unintentionally homeless.

The noble Baroness, Lady Dean, asked about the key priorities, including the affordable housing programmes and the regional growth fund. In many areas we are focusing on delivering existing commitments; as I said earlier, 60,000 of the 150,000 homes will be those that are already in the programme, and the figure of 150,000 also includes bringing empty homes back into use.

Regarding the equalities impact on affordable rent, which is the other measure of housing that we will be looking at in future, we will be publishing the equalities impact assessment as part of the overall impact assessment, which comes out shortly. The noble Baroness, Lady Wilkins, asked about affordable rent. It is a tenure that will offer people stability where it is needed. There will be affordable rent where there are flexible tenancies, where some people will need life tenancies but others will need only a short time before they move off into other areas. We think that that would be a valuable contribution.

On the question raised by the noble Lord, Lord Shipley, the Department for Work and Pensions, which I represent, will publish a full impact assessment alongside the regulations in November. Much of the impact will depend on how landlords and tenants respond to the changes, so I cannot predict entirely how many households will need to move.

The noble Lord, Lord Best, as I had expected, raised many salient points. I just underline the fact that the claimants of housing benefit of working age are 20 per cent working and 80 per cent not working—I think that those figures were said the other way round.

The noble Baroness, Lady Meacher, was concerned about the assessments for people moving from ESA to JSA. Clearly we cannot comment on individual cases, but the JSA will support people in hostels, often suffering from drug or alcohol addiction, to adjust to new circumstances, and they will be protected by the £400 million homeless grant.

I cannot tell the noble Lord, Lord Howarth, how much I agree with him, for once, on the need to have well designed housing. Perhaps one of the things that we have suffered from most from the 1960s and 1970s has been the delivery of unimaginably awful housing, and I accept that it is important that we see that any housing that is built now is built to a standard that we would all recognise as being for the future.

I think that I have answered the questions of the noble Lord, Lord Greaves, and the noble Baroness, Lady Greengross. If I have not answered all the points now, I will ensure that I do so in writing. I thank everyone who has taken part for their informed speeches, and I look forward to continuing this debate in due course.