Vulnerable People (CSR)

Debate between Andrew George and Annette Brooke

Tuesday 9th November 2010 Westminster Hall

[Andrew George (St Ives) (LD)]

It is a great pleasure to speak under your chairmanship, Mr Crausby. I am particularly pleased to have secured an opportunity to debate the effects of the comprehensive spending review on vulnerable people.

Some of the issues that I raise may well be raised in the more specific debate on housing benefit in the main Chamber this afternoon. For the purpose of this debate, I want to define the terms to which I have referred. The debate is, in effect, about the impact on vulnerable people of not just the CSR, but the Budget and the various departmental announcements that have been made and which underpin the context in which the CSR was announced on 20 October.

By “vulnerable people”, I mean not just those in need of specific state support who are unable, through a learning disability or other forms of disability, to manage alone, but those who may become vulnerable or find themselves in significant need, housing stress, homelessness, hardship or debt. The effects to which I refer cover a wide range of policy areas. Of course, I do not intend to cover all areas of government, although vulnerable people are likely to be affected by a wide range of policies, but I am keen to cover access to housing and housing benefit; welfare, including the support and benefits for unemployed and disabled people; care for adults and children; and public transport and access to it.

By way of background, it is worth noting that no self-respecting political party would have undertaken, in the lead-up to the last general election, the kind of measures that have been proposed since, because of how our political system works. However, we all knew as we went into the general election that Britain had the largest deficit in peacetime history, the largest structural deficit in Europe, that £120 million a day was needed to service the interest on that debt and that £1 in every £4 that the Government spent was borrowed money. We entirely understand the need to put right the public finances, which is the background to this debate and the CSR.

I would like to acknowledge a number of achievements. From the Liberal Democrat Benches, it is worth acknowledging that, despite the rather austere circumstances, we have secured outcomes from coalition agreements of which I believe the coalition can be proud. I am referring to the policies of taking the lowest earners out of tax altogether, which I know will be ratcheted up over the coming years until the figure is £10,000 before tax applies; restoring the earnings link for pensioners and a guarantee of uprating with a triple lock; the pupil premium and the early years premium, particularly for vulnerable children; the pay protection for low-paid public sector workers; capital gains tax for top earners; and the banking levy to help to pay for many of these measures. I was also pleased to hear of the Treasury’s intention to make a concerted effort to tackle tax evasion and fraud, which is essential to ensure that we get the balance right in where the finances are found.

Also by way of background, it is worth acknowledging that the Chancellor of the Exchequer repeated a theme throughout the CSR statement on 20 October—one that I entirely applaud. For example, he said at column 951 that

“those with the broadest shoulders will bear the greatest burden”.

Equally, he said at column 956:

“A civilised country… protects the most vulnerable”.—[Official Report, 20 October 2010; Vol. 516, c. 951-56.]

Protecting vulnerable people was a theme repeated throughout the statement, and I loudly applaud both those objectives.

The purpose of this debate is to ask whether that laudable and agreeable objective is achieved by the combined efforts of Government policy. If not, will the Government review their policies and make the necessary adjustments to ensure that those with the broadest shoulders do bear the greatest burden and that the vulnerable genuinely are protected? I doubt that, in the tribal warfare that often masquerades as debate in the House, we will do anything other than divide on pre-determined lines on the assessment behind those questions, but we can call on other commentators to contribute to the debate.

As we know, the Institute for Fiscal Studies disagreed with the Treasury’s claim. I am pleased to see the Minister in her place and I look forward to her response to the debate. I am sure that she will respond to the IFS assessment of the combined impacts of the CSR and the Budget. The IFS disagreed that the overall package of tax and benefit changes was progressive. Carl Emmerson, acting director of the IFS, said that

“our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way.”

The IFS emphasised the problems involved in estimating the distributional effect of changes in public services. It welcomed the Treasury’s attempts to model those, but noted its finding that the public service spending cuts announced in the spending review were regressive.

Equally, the Financial Times described the spending review as

“a gamble given the continuing weakness of the recovery”,

but supported the decision to cut spending, provided that growth in the economy returns. The Times said that, broadly speaking, the priorities chosen by the Chancellor were correct but that the changes could be “very painful” for the poor. The Guardian also commented that the spending review was “a major gamble”—I shall return to that concept—at a time when economic conditions have deteriorated. It said that, furthermore, the cuts would be focused on the sick, the poor and working parents. The IFS commented that the cuts in overall public spending over the spending review period would be the deepest in real terms since the second world war and that cuts in spending on services would be the largest since the four years beginning in 1975.

As I said, housing benefit measures will be debated this afternoon in the main Chamber. Two primary changes are being made next year. The first is the capping of local housing allowance for each property, which will be implemented in April 2011. That has been a primary focus of political debate and comment in the House and elsewhere, although it will impinge on a relatively small number of properties and households. For example, just 139, all in London, receive in excess of £50,000 per annum; 11,233 are in receipt of more than £20,000 per annum, some 10,000 of which are in the London area. In Cornwall, which, as hon. Members might expect, I will discuss in a moment, 40 households are in that category. The measure would save £65 million.

What concerns me most particularly is the impact on rural areas such as Cornwall—but not just Cornwall. A focus of my comments will be the reduction in the percentile market rates used to calculate local housing allowance rates from the 50th percentile—the median—to the 30th percentile of local rents, which will be implemented in October next year. The Department for Work and Pensions estimates that that will secure annual savings of £425 million.

The nature of the debate in the media gives the impression that housing benefit is paid mainly to people who are unemployed. Because of the “tabloidisation” of the debate, the implication is that the work-shy are in receipt of housing benefit and need to be encouraged by stick rather than carrot to find work. In fact, only one housing benefit claimant in eight is unemployed. I should add that, in future, the effect of the uprating of housing benefit according to the consumer prices index rather than local rents will place further significant downward pressure on housing benefit and may well result in shortfalls between rent and the housing allowance that people are given.

The Secretary of State has made it clear that the intention of the Department is to use housing benefit to force rents down, and I can understand the logic behind that, which is that housing benefit, because of the sheer volume of those who receive it, has an inflationary impact on the rental market, particularly the private rented market. However, not all areas will necessarily respond uniformly. The changes may well work in some rental market areas, but I am not convinced that they will work in them all.

For example, according to figures published in The Guardian on 30 October, outside London, Cornwall will be the hardest hit by the changes. Indeed, 11,180 households —one third of all households with employed people in receipt of the benefit—will be affected. There will be a significant shortfall between their housing benefit and the rent that they will pay.

In Cornwall, there is a significant shortfall right now between the median rent as assessed previously by the rent office—now by the Valuation Office Agency—and what housing benefit should be in Cornwall, and therefore between the housing allowance that will be available to tenants and what is available in the market on a week-by-week basis. It is very rare indeed that a new property comes on to the market that is actually within—either on or below—the median rent as assessed by the valuation office. Most rents fall above it, and therefore the shortfall has to be made up by the tenant, who may be on a low income or on benefits.

In Cornwall, 57,109 people claim housing benefit; 12,972 are of working age but not working—they include those in receipt of income support or jobseeker’s allowance—and about 12,000 are of working age and are working, or are on a non-passported benefit or employment support allowance, previously incapacity benefit, or contribution-based jobseeker’s allowance. A similar picture is painted by one of the larger social landlords. Penwith Housing Association tells me that about 60% of its tenants are on housing benefit. More than half of those who are of working age are indeed working, and are in receipt of either partial or full housing benefit support to cover their rent.

Yesterday, Cornwall council published some information on the likely impacts on the local community of the various changes to housing benefit. Its assessment is that the reduction of the market rental from the 50th percentile—the median—to the 30th percentile is likely to have the biggest impact. It says that 10,500 households are experiencing a shortfall between housing benefit and the rental, and it is unknown what the likely impact will be on them.

The council has not yet made a calculation, but it believes that a larger number of households will experience a significant shortfall between the rent and the housing benefit available. It anticipates that tenants who will ultimately be evicted because they can no longer meet their rent payments as a result of the shortfall will be found to be intentionally homeless, according to statutory interpretations, and therefore not eligible for assistance from the local authority. There will be an increase in demand for social housing in some areas, and the impacts on local people will be significant indeed.

We are very lucky in Cornwall to have the Cornwall Residential Landlords Association, which is a responsible and well-organised band of private landlords who, collectively and individually, provide an excellent service to the local population. They look for clear signals from the Government. I believe that the Government are looking at increasing the availability of direct payments to landlords in certain circumstances. Where that is done, preferably on a voluntary basis with the agreement of the tenant, it may help to lever rents down because the landlord will have a cushion of reassurance that the payments will come to them. However, the pressures and difficulties that will be experienced between landlords and tenants will intensify as a result of the cuts.

The problem in a market such as Cornwall’s—this applies to many other areas where there is also a vibrant tourism economy—is that landlords have alternatives that, frankly, on many occasions, will give them a far better income and greater certainty that they can recover the property. Many take up those alternatives. Many landlords will leave the marketplace and go for the much easier option of gleaning their income from the tourism sector.

The situation in Cornwall is not quite like the urban or suburban situation that I believe the Government have envisaged, whereby the alteration in the housing benefit arrangements and assessments will result in a levering down—a crow-barring—of the rentals in the private rented sector. It is not anticipated that that will happen in a place such as Cornwall, so I hope that the Government will look overall at this measure and consider that having a roof over one’s head is absolutely vital for many families. We are talking about working families who are simply seeking security in life from which to get to work, school their children and establish some kind of family security. This is about penalising people not because they are unwilling to work but simply because they are poorly paid, and I am sure the Government have no intention of doing that. I think they would like to ensure that work does pay.

Looking at the situation in Cornwall, which is, I understand, the same as in North Norfolk and other such rural settings, most analysts consider that there will be few new properties coming on to the market in the 30th percentile or below. Opportunities will be restricted, landlords will be given other options, and there will be instability, overcrowding and a possible cutting of corners, with families having to move and working families under greater stress. The problem with the proposal in the housing benefit reforms to extend the single room rent to people under the age of 35 is that there is little of that type of accommodation available in many rural areas, and planning policies seek to restrict what is often referred to as “bedsit land” in some smaller towns. On the one hand we have the Government, through their planning policies, giving local authorities the right to restrict the extent to which parts of small market towns are, as they see it, ghettoised by these bedsit arrangements, and on the other hand they have a policy that seeks to encourage that, through the housing benefit system.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

Does my hon. Friend share my concern that when there has been a partnership break-up, the option of only a single room allowance up to the age of 35 might prevent good quality contact with children?

[Andrew George]

My hon. Friend makes a very good point about one of the great difficulties that occur when there is family break-up. I fear that as a result of these kinds of measures we might get more family break-ups, because of the stress and pressure under which families might be placed. In our constituency surgeries, we all see families in that very sad situation. We see single parents “without care”, as they are sometimes rather unfairly described, who find themselves wanting to have contact with their child or children but being unable to do so because of their very constrained circumstances. This policy will only make that situation worse.