Housing Benefit

Alex Cunningham Excerpts

Thursday 10th March 2011 Westminster Hall

[Alex Cunningham (Stockton North) (Lab)]

I am pleased to have an opportunity to contribute to the debate. I congratulate my hon. Friend the Member for Aberdeen South (Dame Anne Begg) who chairs the Committee. This is the Committee’s first report and she has led us well to some excellent conclusions. I will concentrate my comments on evictions and homelessness, which I believe will affect many people in my Stockton North constituency, as well as across the north-east of England and beyond. The Government’s proposed cuts will, of course, have that result.

It is worth remembering some of the things that we heard while taking evidence. The Committee took extensive evidence from many organisations and interested parties on the subject. We took much evidence from Shelter, which—among other things—told us that 147,000 families with 250,000 children and 20,000 households with people over 60 would be put in serious difficulty by the proposals, and that is not just financially. The Mayor of London estimated that there would be a 50% increase in homelessness in London, costing £78 million for the 5,000 households in the city that could be placed in temporary accommodation.

There is more—much more. Nearly 3,000 people in the small borough of Stockton-on-Tees will lose out by at least £7 a week thanks to the changes. Most of those people are in my Stockton North constituency rather than in Stockton South, which is represented by a Conservative Member. To some people, £7 is not a lot of money. However, that can represent food on the table for a family for two or three days. Large families are particularly vulnerable to the changes proposed by the Government and could face temporary homelessness, especially in central London. There will also potentially be an increase in poverty, including child poverty.

I make no apology for referring time and again to Shelter, which is one of the most credible organisations that I know. It, along with other organisations, has expressed concern that the number of households living in overcrowded properties will increase as a consequence of the reforms. According to Shelter’s written evidence, 1 million children are living in overcrowded conditions across the country, which is not only a problem for large families. Shelter also estimates that 72,000 families with 129,000 children may be forced to move out of their existing homes and that children will be uprooted from schools, which impacts on their education and social development.

It is likely that the reforms will lead to a significant movement of local housing allowance claimants from higher to lower rent areas. Those areas are likely to be relatively deprived and lacking in job or training opportunities, transport links, good schools and so on. The reforms have other wide-reaching effects, which can only add to the considerable burden on already stretched local authorities and on resources such as schools and doctors at a time when local authority spending is being decimated by the Tory-led Government. In the Stockton borough, there is a 28% cut in grant over the next two or three years, most of which is front-loaded.

My hon. Friend the Member for Brighton, Pavilion (Caroline Lucas) mentioned that it is important we do not detach housing benefit from the broader issue of affordable housing provision and the difficulties for first-time buyers, especially in London and the south-east—although it is a problem across the country. The Government say that they will build 150,000 new affordable homes over the next five years, but that is less than a third of what the country actually needs. I recognise that Labour could have done much more in government to secure more adequate provision of social housing, but it is important to recall that, when we came to power in 1997, we were left with a £19 billion maintenance backlog by the previous Tory Government. I often wonder what the picture would be today if we had been able to spend that £19 billion on building new homes.

The Tory failure to fund the upkeep of social housing meant that hundreds of thousands of families were living in substandard and even dangerous conditions. Through our decent homes programme, council-owned homes have been fitted with more than 700,000 new kitchens, more than 500,000 new bathrooms and more than 1 million new central heating systems. More than £33 billion—£21 billion of it from central Government—has been invested in social housing, and we have reduced the number of non-decent social homes by 1.5 million. Yes, that created tens of thousands of jobs, but those jobs have now gone, forcing more people out of work and making them dependent on the kind of allowances we are debating today.

The Committee made a series of recommendations around the issues aimed at getting a balanced approach to change, and the Government responded just over 24 hours ago. Apart from the stark statement that the Government consider the estimates made by witnesses to have been exaggerated and that, in any event, the extra £190 million of funding will meet the challenges, however great, the response offers limited consolation to the people who will be most affected by the changes. Like others, I am not sure that the £190 million will go anywhere near to meeting the transition costs and other challenges. Paragraph 30 of the response states:

“If landlords reduced rents by £10 a week there would be a significant reduction in the number of customers in receipt of Housing Benefit under the Local Housing Allowance Scheme that would face a shortfall.”

There are two problems with that. First, I remain to be convinced that the claimed downward pressure on rents will happen, regardless of the number of people in receipt of that benefit. Secondly, why should families and individuals who have so little to start with have to face cuts in their weekly income for some politically motivated reason that I fail to understand?

Yes, I have heard the arguments, such as those made by the hon. Member for Woking (Jonathan Lord), who has left the Chamber, about it being unfair for people on benefits to live in the same or even better homes as people in employment. However, we surely do not accept the Daily Mail-type rhetoric that suggests the bulk of families on benefits are wasters and scroungers. They are not, and it is time we saw evidence of the care that the Government claim to have for our most needy. The Daily Mail line is disproved best by Shelter’s evidence that 0.01% of the entire local housing allowance caseload is represented by households claiming the maximum rent available.

Apart from the welcome decision to see sense and abandon the punishment of people on jobseeker’s allowance by fining them 10% of their housing benefit for being unable to find a job within 12 months, I am disappointed by the Government’s response to the report, which contains a set of recommendations put forward with the full agreement of the Select Committee. We have had a very thin response, indeed. As the Government’s programme is rolled out and the experts who gave us evidence are proven to have had well founded fears, I hope that the Government will take corrective action quickly and not allow a new underclass to be left deeper in poverty and struggling to find a home.

[Dame Anne Begg]

I wonder whether, with my hon. Friend’s experience as a local councillor, he has been able to quantify how much extra it may cost local councils to deal with the homelessness that will arise as a result of the Government’s proposals, and, indeed, the increase—perhaps return—of the bed and breakfast, which will be the only alternative that many people will have, as a result of being forced out of their homes?

[Alex Cunningham]

I do not currently have the specific details relating to Stockton-on-Tees, but I know that there are anxieties about everything, from how the council will deal with housing benefit in the future, to how it will deal with the people who are going to lose their jobs, as its responsibility is removed. It expects a considerable influx of people into the housing department seeking accommodation and further help. Whether that will be available, I do not know, and that is all the more reason why, as the Government have been proved to have been wrong on this issue, they will need to take quick action and correct it.

--- Later in debate ---

[Steve Webb]

The hon. Lady has said that proxies can be used, which means that we can identify categories of people to whom additional concessions should be made. That is what we did with the extra bedroom for the carer. The report specifically mentions people who need an extra room for a wheelchair. People on certain rates of disability benefit will almost certainly have a wheelchair but live in a house that can accommodate it; others will live in houses that need another room for the wheelchair. Rather than trying to categorise everyone in the same way, the flexibility of the discretionary system allows us to cater for those differences.

I was pleased to hear the hon. Member for Westminster North say that we have to work within our resources. That was a heartening comment, because every pound spent on another recipient or on further delays and concessions—on everything that has been asked for today—comes either from someone else covered by the housing benefit system or from our contribution to tackling the deficit, which is one reason for the reforms.

The hon. Member for Stockton North (Alex Cunningham) said that it is a difficult time for local government, implying that the Government just fancied cutting council budgets by 25% because of what he called an evil Tory-led, or Liberal Democrat-Conservative coalition plot. We all knew that this would happen, because substantial cuts in local government were coming down the track anyway. It is important to acknowledge that that is the backdrop against which we are operating. This is not an environment in which there is money kicking around. It is not as if we can resolve all these problems and delay tackling the remorseless rise in the housing benefit budget. Every £1 billion that goes on housing benefit every year is £1 billion that the low-paid, hard-working taxpayers, who are our constituents, will have to find.

[Alex Cunningham]

There would have been cuts under a Labour Government as well, but they would have been spread over a longer period of time. Does the Minister not accept that the pressure on local authorities today in dealing with all the inquiries from people who are worried about the Government proposals is just adding to the strain that they are under at a time when they are losing staff and more people are coming through their doors?

[Steve Webb]

As the hon. Gentleman has said, local authorities are making plans to reduce staff over the coming years. Some local authorities have chosen to frontload more than is necessary—more than is proportionate to the cuts that they have had—for their own political reasons. Nobody disputes that this is a difficult financial environment for local government; it is. Part of the problem is that spending has been allowed to get so out of control that we have had to rein it in rather rapidly.

--- Later in debate ---

[Steve Webb]

I have a feeling that it might have been the previous Government, in whom the hon. Lady was a Minister, who introduced the rent-a-room rate. The point about the rent-a-room scheme is to try to make better use of the housing stock. I will not dwell on the social housing overcrowding measures—they are in the Welfare Reform Bill and are not the subject of this report—but I will say that much of what the Government are trying to do is about recognising the limitations of the existing social housing, private rented and owner-occupied stock, and making better use of it.

We have here a classic example. Rather than pay a 29-year-old single person the full housing benefit for a flat of their own, we could pay them housing benefit that enables them to live in a spare room in someone’s house, which would be good news for the person who owned that house, would free up the one-bedroom flat and would save the taxpayer money. I have no idea why the hon. Lady opposes that idea, unless it is on the grounds that it is better value for money. [Interruption.] I am sorry, but I have not given way. I am trying to manage my time, because we have covered a very wide range of topics.

I have covered the fact that accommodation does not need to involve HMOs, and I have raised the rent-a-room scheme. As soon as I talk about, “living with family”, everyone will throw their hands up in horror and say, “You can’t possibly expect people to do that,” but there are diverse circumstances. For example, there is a set of people in their late twenties who live at home with their parents—I think they are called the boomerang generation. For them, it is a rational thing to do, and it enables them perhaps to save up for a deposit on a house. There is also a set of people who live close to family and have a good relationship with them—there are lots of caveats to that—to whom we pay housing benefit for the full rent on a one-bedroom flat just for themselves, when they have family down the road who could accommodate them at no cost to the taxpayer. At a time when money is tight, asking them to consider that option seems entirely rational and a sensible way to use the existing housing stock.

The hon. Member for Aberdeen South spoke about the housing market in her own constituency. I do not think that anyone is saying that all housing rent inflation is about the LHA. I do not think that I have ever said that, and I am not aware that any of my ministerial colleagues have either. I do not dispute for a second that in Aberdeen and other places local market factors drive up rents. However, it is clear that rising real rents are part of the story. In response to Professor Steve Wilcox, whom I know well because I have written papers with him, our breakdown of the growth in housing benefit between different factors suggests a significant role for rent growth. Let me just take Members through how we get to that.

In the past decade, between 2000-01 and 2010-11, the cash increase in spending on housing benefit was £10.5 billion. It is worth reflecting on that £10.5 billion increase over 10 years, and there is no sign of that increase easing off. With another billion, another billion and another billion, doing something does not seem particularly deplorable. Out of that amount, £5 billion is straight inflation—what we would have expected on the strength of inflation—£2 billion is real terms social rent growth, £2 billion is real terms private rent growth, £2 billion, right at the end of the period, as the hon. Member for Westminster North said, is case load growth, and about £500 million is the child benefit disregard. Real rent growth, therefore, is not only about the LHA, but it is a significant contributor to the growth in spending.

The challenge for us, as a Government, is whether to just sit back and take it, letting private landlords go on increasing rents above inflation year after year, and saying, “Yep, that’s fine, we’ll pay that,” without trying to put a brake on it. That is where CPI comes in. I have seen the projections. If CPI is done for decades, it of course has the sorts of effects that were described in the Shelter research mentioned by the hon. Member for Stockton North and, I think, the hon. Member for Brighton, Pavilion, who has now left us. CPI is not for ever. We have said that CPI on the LHA rates will be introduced in 2013, and will be reviewed at the end of the comprehensive spending review period in 2014-15. At that point, we will look at the impact, but what CPI will do is put a brake on the expenditure. Housing benefit expenditure is like a runaway train—nothing seems able to stop it—and we have to try to get the housing market to structure itself differently, rather than keep feeding the runaway train.

[Alex Cunningham]

If, as the Government say, CPI is the only fair way to determine increases in the future, is the Minister suggesting that they will go back to an unfair system at some point?

[Steve Webb]

No. The hon. Gentleman, possibly with my help, might be confused. We have already had lengthy debates on CPI as a measure of inflation for uprating benefits, and our judgment is that it is the most appropriate measure of inflation. What I am talking about here is what we do to the LHA rates in 2013. We will put a brake on them rising faster than inflation for two years, and at that point we will look at the impact. That is all I am saying. We are putting in place a mechanism that will cause a pause in that remorseless rise, and I have heard almost nothing in this debate about how we will tackle the growth, apart from building more houses, which is vital—in the past year, we have had the lowest rate of private house building on record, or certainly for a very long time. The argument appears to be, “Lie back and take it,” but that is not the action of a responsible Government.

My hon. Friend the Member for Cardiff Central raised the issue of broad rental market areas, which is relevant in the CPI context. If LHA rates are to be subject to CPI, ideally the broad rental market areas should not move around because the base figure subject to CPI would not be clear. The broad rental market areas must be frozen at the point at which one goes to CPI, and the question is what they would be at that point. My hon. Friends the Members for Cardiff Central and for Cambridge (Dr Huppert) have properly highlighted the problems with the city of Cambridge and the wider area of Cambridgeshire, and although there have been changes to the BRMAs around that area, the idea is that they will be fixed in 2013. My hon. Friend the Member for Cardiff Central mentioned coterminosity with local authorities, in relation to Wales, and that is one of the options being considered. It is an option that has a number of attractions. In London, it would mean that the BRMAs were smaller, and the affordability figures would therefore be within a tighter geographic area. We would be unlikely to make significant changes this side of 2013, partly because every time the rules are redrawn, another set of gainers and another set of losers are created. So, we would rather do that at the point of moving to CPI in 2013.

Local authority boundaries are not without their own problems. Many of my Liberal Democrat colleagues represent seats in Cornwall. Cornwall is now a unitary authority and the whole of Cornwall would be one BRMA—I think that BRMAs can be smaller than that. My colleague who represents Land’s End, my hon. Friend the Member for St Ives (Andrew George), and my hon. Friend the Member for North Cornwall (Dan Rogerson) might have views about the interchangability of their two areas. There is no simple solution, but we are certainly looking at local authority boundaries in response to the points that my hon. Friend the Member for Cardiff Central has raised.

Universal credit has been mentioned, and it was asked whether housing benefit would go in at a flat rate. The details of that will be discussed more in the Welfare Reform Bill Committee, but my certain understanding is that the intention is not simply to have a “so much for housing” number in the universal credit. I think that the approach will be much more tailored, but I am sure it will be discussed much more fully in the Committee.

On the under-occupation rules, it was asked whether people would be moving from three-bedroom houses to one-bedroom flats. The data show that about three quarters of the under-occupation in the social rented sector is by only one bedroom, so the move from three bedrooms to one bedroom would represent perhaps a quarter of the change. The impact might not be quite as great as I think the hon. Member for Westminster North suggested, but we have just published some more data on that.