Housing: Spending Review

Baroness Hanham Excerpts

Thursday 4th November 2010 Lords Chamber

[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.