Housing Costs (Reformed Welfare System)

Anne Begg Excerpts

Tuesday 3rd March 2015 Commons Chamber

[Dame Anne Begg (Aberdeen South) (Lab)]

I shall continue the theme of housing: we have had a statement and a ten-minute rule Bill on housing, and this debate is about the Work and Pensions Select Committee’s report on support for housing costs in the reformed welfare system. There are two important debates scheduled for this afternoon, but given that we have had two urgent questions and two statements, our deliberations might have to be somewhat curtailed.

Our report dealt with the series of reforms to housing benefit and other support to meet housing costs that the Government have introduced since 2010. The report was published in April last year, and strangely we have been granted a debate on the Floor of the House today without having received the Government’s response to it. Normally, we would expect a Government response to a Select Committee report to be published before any such debate is granted. We have been waiting for almost a year to receive the Government response.

As I have said, our report was published in April 2014. We have still not received the Government response almost a year later, but that is not for want of trying. In September last year, the Minister for Welfare Reform, Lord Freud, wrote to me to apologise for the delay, saying that although the response had been prepared, the Department for Work and Pensions was still in the process of seeking “cross-government clearance” for it. I do not know whether that means there is a major split in the coalition over the report; perhaps the Minister could fill us in on why the Government’s response has still not made it out of the DWP and into the light of day.

As we still had not received a response by December, I wrote, with the Committee’s agreement, to the same Minister to ask that a response be submitted as a matter of urgency, but I have still not received a reply to that letter. As you know, Madam Deputy Speaker, effective Select Committee scrutiny is hampered if the Government fail to abide by the agreed process. I appreciate that today’s Minister is not the one I have been writing to, but I hope he will engage fully with the detailed and specific recommendations in our report—the Government have failed to do that for nearly a year. The recommendations are important and we hope the Government are taking them seriously.

The report covered a wide range of issues relating to housing costs and the welfare system, but perhaps the most controversial was “social sector size criteria”. We called it that to try to make it sound more neutral; any other form of words can be emotive, because it is called the bedroom tax, the removal of the spare room subsidy or the under-occupancy penalty, depending on one’s political view. However, it is the charge that has meant that social tenants deemed to have more bedrooms than they need have had their housing benefit reduced. The Government said that the aims of the reform were to reduce benefit expenditure, make use of the social housing stock and incentivise people to enter work. We actually agreed that using housing stock more effectively and reducing overcrowding were understandable goals. The question was: were the Government achieving them?

Although it is true that some reduction in housing benefit has resulted, it is not because people have moved house and are now more appropriately housed; it is because many people caught by the bedroom tax—the social sector size criteria—have merely had to subsidise their housing costs from other benefit or other income, and so of course it has saved the Government some money. However, we found that many people whom we genuinely believe the Government did not want to be caught by the bedroom tax were being affected by it, and many of them are vulnerable people. As many as 60% to 70% of households in England affected by the bedroom tax contain somebody with a disability.

The whole idea was that tenants would move to smaller houses, but we found that not enough smaller houses were available across the country. Some people might have been able to move into the private rented sector, which might have been more expensive for them, but even in that sector not enough suitable accommodation was available. Others of the vulnerable group were not able to respond by finding work, because of their illness and their disabilities. We also found that a significant number of people caught by the bedroom tax had specifically adapted homes, which means that it is difficult and expensive for them to move to smaller accommodation. Whoever came up with the idea that they could do so clearly has not been through the process, as I have, of trying to find a home that is easily adapted or has been adapted.

The only option for many people was to remain in their homes and so have their housing benefit reduced. All they could do was make up the shortfall. DWP research has shown that that often meant cutting down on household essentials or borrowing money from family and friends. The reduction in housing benefit was not insignificant for those who had no choice but to pay up—a 14% cut where the tenant was deemed to be under-occupying by one bedroom and a 25% cut where under-occupation was deemed to be by two or more bedrooms. In addition, the deduction is made on the basis of the total rent paid, without regard to the level of housing benefit actually received. Therefore, those in partial receipt of housing benefit would have to pay more proportionately.

The Government’s statistics show that by the end of November 2014 the reduction had been applied to nearly half a million claimants and that the average reduction was nearly £15 per week. We found that this reform was having a particular impact on people with disabilities, including those I have mentioned already: those who have adapted homes; and people who need a room to hold medical equipment or to accommodate a carer—often a family carer. We recommended that anybody living in a home that has been significantly adapted for them should be exempt from having their benefit reduced. We also called on the Government to exempt all households that contain a person in receipt of higher level disability benefits—disability living allowance or the new personal independence payment.

Hon. Members should note our use of the word “exempt”; we wanted those groups of people to be exempt. The Government’s response is to say, “Oh, but they don’t have to pay in any case because they have access to discretionary housing payments.” Given the number of people who are reliant on DHPs, there must be something wrong with the original policy if so many people have to rely on some kind of “transitional” arrangement. But it is not transitional, simply because there are not the houses for these people to move to or they cannot move because of the kind of accommodation they require which does not fit the criteria set down by the Government.

The Government say, as they have been saying for the whole year we have been waiting on their response, that the protection is available through the DHPs. It is true that the Government have substantially increased the funding for DHPs, but those payments are awarded by local authorities to people facing hardship in paying their rent, including tenants affected by the bedroom tax and by the benefit cap, and they are still discretionary. Of course, they are also not meant to be long term, as this is a transitional protection. The other problem is that DHPs are awarded on the basis of eligibility criteria, which each local authority can set itself. That can create a postcode lottery, and we felt it was important that the granting of a DHP should be based on access to the help needed, rather than being dependent on where a claimant lived. As we often say, any benefit or award should be based on need, not on somebody’s postcode.

We were also concerned that some local authorities are taking income from disability benefits into account in the means tests they apply for determining eligibility for DHPs. It may be that individual households would qualify normally for a DHP based on just the raw criteria, but when the means test is taken into account they do not get it. Members in this House have said that it did not matter whether an individual or a family was subject to the bedroom tax because they would always get the money reimbursed or they would be helped out by a DHP, but for a large number of families that did not happen because of the application of this second means test. The benefits that were being taken into account were things such as disability living allowance and personal independence payments, but they are paid to people who are long-term sick and to disabled people to help them meet the extra costs of their disability. They are not meant to subsidise their housing costs. Those extra costs do not go away just because someone has to contribute something towards their rent because their housing benefit no longer covers the full amount.

We recommended that the Government should issue revised guidance to local authorities, making it clear that disability benefits should be disregarded in any means tests for DHPs. As yet, we do not know whether that has happened, and I hope that the Minister can tell us whether that sensible and modest request by my Select Committee has been put in place.

There is also the problem that DHPs were meant to be temporary and transitional. They were never intended to provide a long-term solution, which is why we hoped that certain categories of claimants would be exempt. That makes far more sense than having claimants apply every six months, or every year, for a DHP, or for help towards their housing costs. We are talking about long-term problems. If a claimant cannot move house or find work, why is it that they still have to apply for a DHP?

Local authorities seem unwilling to make longer term awards, so claimants often end up having to re-apply every six or 12 months. Each time a family has to apply for a DHP, they go through anxiety and uncertainty, and they never know whether they will get the award this time round.

We concluded that if DHPs are to continue to be used as the main way of mitigating the hardship that the reforms are causing, substantial levels of funding will be needed for the foreseeable future. Claimants need to be given certainty that long-term awards are available. During our inquiry, we visited some people who were caught in that particular Catch-22 situation and they really were worried about the future.

There is also the question whether there is sufficient funding for DHPs. Although central funding was increased to £165 million in 2014-15, it will go down again to £125 million in the next financial year—a drop of £40 million. During our inquiry, the Government argued that DHPs were sufficient because local authorities had not bid for the full amount of funding that was available, but we believed—this has been borne out by later evidence—that that was because the reforms were at an early stage. Local authorities were still trying to adjust to the changes, and claimants were often not aware that DHPs were available. The DWP’s own research found that 56% of people who had not applied for DHPs were not aware that they existed, but they were as likely as other claimants to report difficulty in paying the rent or being in arrears.

We recommended that the Government should review the whole DHP provision when more detail was available, which it must be by now, and increase the funding, but we now know that that will be reduced. Obviously, there has not been a proper review and, as a result, it will be harder and harder for local authorities to continue to meet the costs of the DHPs that their own criteria say they should be paying out.

I would be interested to hear from the Minister what the evidential basis is for reducing DHP funding next year. Does the funding level take account of actual assessed levels of hardship arising from reduced housing benefit, or is it based only on the amount of DHP that local authorities have been able to distribute so far? What steps are the Government and local authorities taking to inform vulnerable claimants that they can apply for DHPs to help them make up their rent shortfalls?

Another aspect that has arisen as a result of the changes to housing benefit is the introduction of a cap on the total amount of benefits that a household can receive. The current limit is £26,000 a year. It is relevant to housing costs because it is the claimant’s housing benefit that is reduced when they hit the cap.

It is worth noting that almost everybody affected by the cap either lives in an area of the country with expensive rented accommodation, such as London, or are being placed in temporary accommodation because they are homeless. Local authorities often have no option other than to put homeless people in temporary accommodation because of the lack of other rented housing in the area. That problem is getting more and more acute in a number of areas, but temporary housing is normally more expensive than permanent accommodation and claimants can then fall within the scope of the benefit cap.

Local authorities often end up paying the shortfall between rent levels and housing benefit for those affected by the cap through DHPs, so there is in fact no overall saving to public funds. We recommended that the Government should exempt all households in temporary accommodation from the benefit cap, because it seems particularly unjust for those claimants to be affected when they had no choice over where they were housed. We also found that the benefit cap was having an adverse impact on disabled persons and their carers, and that is a particular problem when the carer lives with the disabled person—usually as the parent of a child, but it could be as the adult child of a disabled parent—but they are not considered, for benefit reasons, to be part of the same household. We recommended that the Government should exempt from the benefit cap all recipients of carers allowance in that situation. The Government said that the benefit cap was not intended to push carers into work, but that may well be the effect unless the recipients of carer’s allowance are exempted from the cap. I do not think that the Government anticipated that carers would be caught by the bedroom tax.

We also looked at the local housing allowance, which is the former housing benefit for tenants in the private rented sector. The Government announced reforms to the LHA in the June 2010 Budget, and the Committee published a report that year highlighting our concerns about the implication of the changes. Our 2014 report assessed the impact of the reforms. We concluded that there was a growing discrepancy between average rents and the amount of local housing allowance that households can claim. We found that, as a result, private sector landlords are increasingly reluctant to rent to LHA recipients. Evictions and non-renewals of tenancies are increasing, and the properties that do remain available to claimants are increasingly of poor quality and there are fewer and fewer of them.

We also looked at the impact on homelessness. We noted that, despite homeless statistics being down overall, rises are occurring in areas where demand for housing is high, and that homelessness among those not deemed to be “in priority need” had increased by 9% between 2012 and 2013. In order to qualify as priority need, households need to be vulnerable in some way. We are talking about single mothers or victims of special circumstances, such as a fire or flood, so many homeless people are excluded from the definition. It is therefore not surprising that many people who are homeless are not necessarily showing up in the figures.

We were also concerned about younger people affected by the changes to the shared accommodation rate, which is the housing benefit paid to claimants without dependants who live in private rented accommodation. Basically, it means that they cannot rent a complete flat or house of their own; they can afford to rent only a room. The benefit had previously applied to claimants under 25, but from April 2012, as part of the LHA reforms, the Government extended the SAR to any single claimant under the age of 35 without dependent children. We found that in many areas insufficient accommodation at this level of rent was available. We heard evidence of possible adverse impacts on people with mental health problems and on parents with non-resident children, who would no longer have room to accommodate their children when they came to stay.

We concluded that the extension of the shared accommodation rate to single claimants up to the age of 35 might well have reduced the availability of safe, appropriate accommodation for younger people, some of whom may be vulnerable. We recommended that the Government should assess the impact of this change to the shared accommodation rate. If there was evidence that the change was resulting in some vulnerable young people having to live in situations which were inappropriate or put them at risk, we thought that the Government should consider introducing exemptions for vulnerable people and doing more to increase the provision of appropriate accommodation.

On the face of it, the introduction of universal credit may seem unlikely to affect housing costs, but housing benefit is one of the six benefits that will form part of universal credit. The biggest change in respect of housing benefit is that it will be administered by the DWP directly as part of universal credit, rather than by local authorities, as is the case at present. Universal credit, including the housing costs element, will generally be paid direct to claimants once a month, although exceptions can be made.

For some time now most claimants in the private rented sector have received their housing benefit direct and paid rent to their landlords. However, for social housing tenants, this represents a huge change, as their housing benefit has always previously been paid to their landlords and they have not been faced with handling the significant sums that housing benefit sometimes involves, especially when it is paid once a month.

In a report that we published in 2012 we looked at how universal credit would affect vulnerable claimants. One of the key issues that we considered was the challenge that some vulnerable people would face in coping with direct monthly payments of UC which included their housing costs. To test the impact of direct payment of housing costs on social sector tenants, the Government set up direct payment demonstration projects in six local authority areas in 2012. The findings from the research showed a distinct and significant drop in rent payment rates when tenants first migrated to direct payment. As a result, rent arrears increased, as did the number of tenants falling into arrears. Although tenants adjusted to the new system over time, much of the arrears that had built up in the early stages were not repaid, so total arrears continued to rise. Overall, tenants who went on to direct payment paid 95.5% of all the rent owed, compared with 99.1% who were not on direct payment.

The Public Accounts Committee last week published a report on universal credit that concluded that these findings show that the DWP needs to reflect on how it will tackle the potential problems of paying the housing benefit element of universal credit directly to claimants. As we said about universal credit in 2012, it may work well for the majority of claimants, but it is the vulnerable minority who need special attention and extra support. This is particularly the case when it comes to housing costs because they often represent the largest proportion of a household’s benefit payments. If people fall into arrears and lose their homes, there can be all sorts of dire consequences, particularly for children.

What I have said so far applies predominantly to England and Wales. Since we published our report there has been a referendum in Scotland and the setting up of the Smith commission to look into further devolved powers. My Select Committee has not had time to look at the implications of the Smith agreement and how that might impact on the way in which housing benefit is administered and paid in Scotland. Nevertheless, our report was wide ranging. I have not touched on all the important issues that it covered, but colleagues from the Committee are in the Chamber and they may do so.

In conclusion, we continue to be disappointed that the Government have not been able to provide a response to the very important matters that we raised nearly a year ago. Many of the issues that we identified in April 2014 still exist in the system and some have been exacerbated with the passage of time. I look forward to the Minister’s update on the progress that has been made in addressing some of the concerns that I have raised.

[John Hemming (Birmingham, Yardley) (LD)]

I am pleased to follow the hon. Member for Aberdeen South (Dame Anne Begg), the Chair of the Select Committee. She raises a number of interesting points that were debated in the private Member’s Bill introduced by my hon. Friend the Member for St Ives (Andrew George), the Affordable Homes Bill, which proposed a number of changes to the social sector criteria—the bedroom tax, spare room rent or whatever one wants to call it. One of those changes would, under certain circumstances, automatically exempt people with disabilities from being required to pay for a spare room.

In law as it currently stands, under article 14 of the European convention on human rights, there is a legally enforceable right to get hold of discretionary housing payments. I have achieved that in Birmingham in a couple of cases, by using the threat of it rather than making the application to court. My constituency experience is that in the cases in which we should get DHP, in general we have got it. I agree that we should have an automatic exemption from paying for spare rooms for those people who need them because they have a disability, which is obvious, and those whose homes have been adapted. However, we have managed to get DHP in those cases, and we are getting longer DHP awards following the changes that defined the budget for two-year periods, so some progress is being made.

The other change proposed in the Affordable Homes Bill was that people who said that they wanted to move would not have to pay. Of course, that is between 10% and 20% of people. In fact, I think that the figures for Birmingham show that roughly half those who were originally having to pay for spare rooms no longer have to, although obviously people are flowing in and out of the system. I find it rather sad—perhaps the Minister will take note of this point—that although the Department gets monthly statistics from all local authorities on what is going on with awards of DHP and the like, spare room rent and so on, we do not get up-to-date figures on the situation.

One of the changes introduced in April 2013 was to enable people in the social rented sector to benefit in the same way as those who own their own homes if they want to let out a spare room to a lodger or boarder. Not only would they not have to pay for the spare room, but they could keep up to £20 a week of the additional money. Given that the applicable amount for a 25-year-old is currently around £71.70, £20 a week is quite a lot of money. I believe that only a handful of people in Birmingham have taken that up, but I think that is because people do not know that they can benefit.

I had a meeting last night with care leavers, during which we discussed housing, because it is absolutely critical for them. We discussed how tight their budgets are when they have to live on means-tested benefits, because they have to pay water, gas and electricity bills, so there are great merits in people sharing property in certain circumstances. I advise young people to consider sharing, rather than trying to live alone. They raised a concern that even though they got some priority as care leavers, they were still given only one choice of property—take it or leave it. I think that varies from local authority to local authority, but perhaps more could be done in that regard.

In my constituency advice bureau I get people who are very upset. The last person who was in tears was a constituent who was in overcrowded accommodation; they could not live comfortably in the two-bedroom flat they had. I find it sad that we are still not managing to deal with those who are under-occupying and those who are over-occupying in such a way that councils can resolve the issue. I recently had a case in which a pensioner wanted to downsize from a house but the council was being exceedingly difficult about it, saying, “When you took the house, certain adaptations were made, so we want you to reinstate them before we move you.” Obviously he is not paying the spare room rent, but he is still occupying a house that could be occupied by a family. I do not think that there is the urgency that there should be in local authorities to try to deal with overcrowding.

[Dame Anne Begg]

Actually, there is a need to ensure that people are appropriately housed and that they move, but very little of that responsibility lies with local authorities. The wrong way to go about it is just to take money from people who are over-occupying and would love to move but are not in a position to do so.

[John Hemming]

I personally think that it would be harsh to go around evicting everybody who is under-occupying, although that happens when people try to succeed to a tenancy; they are told that they cannot do so because the property is too big. I do not think that overcrowding is taken sufficiently seriously. Malcolm Wicks highlighted in his memoirs how he argued, when a Labour Housing Minister, for the need to bring in something akin to the current situation.

--- Later in debate ---

[The Minister for Disabled People (Mr Mark Harper)]

I will try to respond to the points raised in the debate but I will also endeavour to observe your strictures, Madam Deputy Speaker, to keep my remarks relatively brief so that the House also has time for the second important debate today. I will do my best to balance the two competing tensions.

First, I will respond to the point made by the Committee Chairman, the hon. Member for Aberdeen South (Dame Anne Begg), about the lack of a response. The Government have the greatest respect for the parliamentary process and engage with the Select Committee. She will know that, with the exception of this report, no response by my Department has taken longer than six months, but I fear that there is a very simple and straightforward answer as to the reason for the delay and I am afraid it will not mean an early response. The Committee report spends quite a bit of time talking about the removal of the spare room subsidy—as we have done today—and the Government response responds to the various points made. As the hon. Lady will know, we have a coalition Government—something I hope will not be necessary after the election—and that, despite our coalition partners having agreed on this policy all the way through the Parliament, they now towards the end of it do not agree. Unfortunately therefore, despite the fact that the response is broadly ready to go, we have not been able to secure agreement across the Government. I am afraid harmony has not broken out and, until it does, the Government will not be able to respond to the Committee. I am probably just as disappointed about that as the hon. Member for Erith and Thamesmead (Teresa Pearce).

[Dame Anne Begg]

While I can appreciate there may be problems on the bedroom tax, would it be possible for the Government to publish a partial response to our proposals, addressing all the other points on which there presumably is agreement across Government? Our Committee had a lot of very interesting things to say on a whole range of other issues.

[Mr Harper]

That is an interesting point. Let me take it away and see whether it is possible to do that in the time remaining. I have explained the reason for the lack of response to the Committee and, as I have said, it is the only report from the Select Committee that the Department has not responded to within six months. I am sorry about that, but the blame does not lie with the Conservatives in the Government; it lies elsewhere. [Laughter.] I am just being honest here at the Dispatch Box.