Housing and Planning Bill

Baroness Hollis of Heigham Excerpts

Monday 18th April 2016 Lords Chamber

[Lord Horam (Con)]

My Lords, this is, I am afraid, an idea that probably looks good in the confines of the Treasury or in the rarefied world of special advisers in No. 10. In the real world outside it does not look so good. The noble Lord, Lord Kerslake, mentioned the late Bob Crow. I recognise, as the noble Lord said, that there is a case for saying that people on a higher income or earning over £100,000 should move out of council tenancy and seek a home of their own, thus leaving one for someone on the waiting list. I understand that argument. It is an important one that we should not forget.

However, this is not the greatest problem that we face. In the case of London, for example, where the housing crisis is most acute, 100,000 properties have been bought by secret offshore companies, pushing prices up for ordinary Londoners, who cannot get access in the way that they need to. I also agree with the noble Lord, Lord Kerslake, that this leads to a lot of administration for a small return. He used the word “inefficient”; we should not compromise on efficiency in administration. I believe in smart government, neither large, nor small; it depends on what you need. We should have efficient government and this in principle does not look like that. A lot of bureaucracy will be involved, a lot of mistakes will probably be made and the returns will be quite small. Should the Government be doing something as detailed as this? Should they not leave it to local government? Frankly, this smacks of the sort of thinking that went into the bedroom tax, which I think that many people regret.

While my noble friend Lady Williams has noticeably been listening throughout—I pay tribute to her conscientiousness and her willingness to take arguments on board—there is a case to be made for Amendment 72, which would leave this matter to the local authorities. I agree with the noble Lord, Lord Kerslake, that we need a higher threshold before it kicks in: £60,000 in London and £40,000 outside are a minimum, frankly. In many ways I would prefer a higher threshold, but that would be a starting point, which is encapsulated in Amendment 77 in the name of the noble Baroness, Lady Bakewell. I also agree with the proposal in Amendment 75; if the administrative costs outweigh what you raise in revenue, it is senseless to go ahead.

Finally, if we do go ahead with this and raise some money the local authorities should keep it to invest in further council housing. That is essential. It should not go into the pockets of the Treasury, which does not need this small amount and it should not get it. The amendments in this group are both fair and sensible, and it is my experience that what is fair and sensible is usually good politics.

[Baroness Hollis of Heigham (Lab)]

My Lords, I very much welcome these amendments, so ably moved by my noble friend and supported by the noble Lord, Lord Kerslake, and the noble Lord, Lord Horam, whose words I thought were very wise.

I must say that I am baffled by the Government’s obsession with council tenants’ incomes. For starter homes, buyers can be on £80,000 a year and still get a subsidy of £100,000 or more to climb the housing ladder into a larger property, and no questions are asked about their income; council tenants, meanwhile, go down the housing snake—they face the bedroom tax mentioned by the noble Lord, Lord Horam, if they cannot compress into a smaller home, while other council tenants, with a family income of £30,000 between two of them, are pushed into market rents. After five or eight years, starter home owners may happily leave their homes to trade up; at the selfsame time, council tenants fear that they will lose their homes to an insecure tenancy. It cannot all be about Bob Crow, as the noble Lord, Lord Kerslake, said—can it? Fair it is not; spiteful, as far as council tenants are concerned, I believe it is.

So I have some questions to the Minister that span this and the next group of amendments. The original impact analysis suggests that the increased income from rent under this policy, before taper, would be wiped out every year by the “behavioural impact”. In other words, tenants will ensure that they do not pay an extra penny if they can help it, so the Treasury will only gain not from increased rents but from “fiscal drag”. That is very speculative. My first question to the Minister, therefore, is: what are the Treasury’s revised net figures with a taper of 20%? Less income perhaps? Less evasion, certainly. Perhaps less fiscal drag, also?

Secondly, what is the estimated admin cost to local authorities of assessing the income of separate family members for those half of council tenants who are not on housing benefit? Where will that information come from? Will it come from HMRC? For hundreds of thousands of tenants, will councils draw on data that are 18 months old? In many councils, these data would be handled by private companies, so what of taxpayer confidentiality—or does that not matter for council tenants?

Whenever people’s incomes fall, they will, rightly, want their rent to be reduced immediately, although they may be slower to report a pay rise. What will it cost councils to collect data on any such income drop, verify it with HMRC, conjoin family incomes, assess the rent and notify tenants and then collect it? What will it cost to do that all over again for that family, perhaps every month or two, when the job goes, the partner goes, their hours go down or their income, as a self-employed person or someone on commission or on a zero-hour contract, doubles or halves from month to month?

At huge cost, as the noble Lord, Lord Horam, said, local authorities will be endlessly chasing rent arrears for, on the one hand, increased rents or, on the other, for failing to credit for reduced rents. Always, they will be three changes of circumstance behind. With tax credits and with the Child Support Agency, we never caught up—half of all lone parents, I found, had more than a dozen significant changes of circumstance affecting their tax credits or his maintenance every year. That required endless recalculation of tax credits and maintenance, which government never managed to handle. I was there. We were foolish and we got it wrong. We have not learned from it. This is what is so exasperating: look at what has happened with the bedroom tax. I checked this figure over the weekend. So far, some councils have recovered just 30% of the increased rent due because of the cut in housing benefit—30% after a couple of years, with 70% still outstanding and half the affected tenants with hugely increased arrears. That is the legacy. That, as a system, was fairly easy because rent and income in those cases were both fairly stable, unlike this mess. If pay-to-stay rent is not adjusted speedily the tenant will suffer and fall into debt, but if the local authority tries to do so it will be unable to cope. Oh, and the IT providers tell us that the IT will not be ready on time either, but that is a minor consideration.

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[Viscount Hanworth (Lab)]

My Lords, I shall speak to my Amendments 77A, 77B and 77C to Clauses 82 and 83. These clauses concern the pay-to-stay regime whereby those whose earnings exceed a threshold level would have their council rents increased. It must be clear that, if a penalty is to be faced by a household whose joint income exceeds a threshold level, there will be an incentive to keep their income below that level. If the pay-to-stay policy is to result in significant revenue, sufficient to defray the costs of administering the regime, the income threshold will have to be set at a very low level. In other words, people on very low incomes will be discouraged from attempting to secure higher incomes. It is extraordinary that such an impediment to earning should be posed by a party that claims to support the workers and the strivers of our society. This speaks of an utter carelessness if not of a naked duplicity.

Two of the amendments in this group propose to set a level-of-income threshold significantly higher than the one contemplated by the Government. Another amendment proposes that the penalty should be subject to a taper to increase step by step with the excess or earnings above the threshold level. I strongly support all of those amendments.

My own amendments deal with some further and possibly minor details of the pay-to-stay proposal. In common with so much of this Bill, the clauses in question are enabling provisions that allow the Secretary of State to determine regulations after the passage of the Bill. Clause 82(1) allows the housing authority to remove an extra rent charge that has been imposed on higher earners when the income has fallen back to a level below the threshold. I propose, in Amendment 77A, that in such circumstances the authority “must” reduce the rent. Clause 82(1) also allows the housing authority to remove an extra rent charge that has been imposed as a penalty on a tenant who has failed to provide information or evidence of their income. The clause proposes that the authority “may” remove the charge when information is forthcoming and it has been demonstrated that the tenant’s income is below the threshold level. In Amendment 77B I propose that in such circumstances the authority “must” remove the penalty.

In Clause 83, we see a provision for an appeals procedure to which the housing authority “may” have recourse. In Amendment 77C I propose that the provision should be mandatory. I acknowledge that it may be costly to establish an appeals procedure and that in these times of economic stringency there is an incentive to avoid such costs. However, the recourse to justice should not be regarded as an optional extra, affordable only in times of affluence. Such an attitude would threaten the very basis of our civil liberties.

[Baroness Hollis of Heigham]

My Lords, the reason for the Government’s proposals on pay to stay was allegedly to reduce the deficit. I hope the Minister and the House will forgive me if I come back and push the Minister yet again on by how much all this will reduce the deficit. I am still not clear.

If I have got this wrong, I am sure that the Minister will be able to correct me. In the original impact analysis, from before the taper was proposed, page 60 on higher-income tenants, says, taking the year 2019-20, by which time it will have bedded in, two or three years down the line, that the additional rental income is expected to be £0.49 billion, less “behavioural impact”—that is, what tenants do about that—and the cost £0.53 billion. So the behavioural impact is greater than the additional rent income. However, there is additional “fiscal drag”, which gives you £0.48 billion. That means that the total additional rental income in 2019-20 is £0.45 billion. So £450 million is the net money allegedly going to the Treasury to reduce the deficit, taking into account just three factors: the rental income, the behavioural effect on tenants and fiscal drag.

When I just asked the Minister—I am grateful for the information—she said she believed that, as a result of the 20% taper, the net effect for the Treasury would be half that figure. That is approximate, but let us say that it is that: £450 million comes down to £225 million in 2019-20. Let us assume that the proposal for indexing by CPI every three years is accepted by the Government, which therefore reduces most of the gain from fiscal drag. Does that £225 million now come down to £150 million, more or less?

However, the elephant in the room has not even been included in that, which is what my noble friend Lord McKenzie and others talked about: the cost to local authorities of administration. That has not been included in these figures. That has also to be deducted before the money goes to the Treasury. What do we expect that figure to be? The noble Baroness, Lady Williams, kindly permitted me to ask the Box for this information. We do not know. We are consulting. We will find out later. Will that be £50 million or £100 million? We know that the local authority administration costs will be huge, we know that they have not been included and we know that they are not in the analysis. How much real money will go to HMT?

We know that the increased rents will be wiped out by behavioural impact. We know that the fiscal drag on which the Government were relying will be modified substantially by any amendment to connect it to CPI, and we know that we have not included the local authority admin costs at all. I stand to be corrected but, on my calculations, this means that the Government will be lucky to clear £100 million a year to the Treasury from these proposals. All this spite, administration, fear, worry, hassle and stigma for £100 million a year to reduce the deficit—this is madness. Perhaps the Minister can confirm my figures.

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[Lord McKenzie of Luton]

Before the Minister sits down, I will ask for clarification on two points. She said that anybody on housing benefit would be outwith the policy. What is the position of a tenant just on the cusp of housing benefit at the moment—but not in receipt of it—who, if charged a higher rent, is brought into the housing benefit system? Will that person then be in the system and immediately out? How is that going to work? Does using taxable income not inevitably mean that it has to be based on some “preceding year” basis, with all the complications of changing circumstances arising since?

[Baroness Hollis of Heigham]

Will the Minister confirm, or say that she still does not know, whether the final net money going to the Treasury after increased rents, the taper, fiscal drag—possibly modified by CPI—and the effect of local authority administrative costs will be nearer to £100 million a year as a contribution to reducing the deficit? Is it, frankly, worth it?

[Baroness Williams of Trafford]

The noble Baroness might find it helpful to watch this afternoon’s proceedings. She put a set of figures to me which mixed up hundreds of thousands with hundreds of millions and it was quite difficult to follow where she was coming from. I do not want it now, but could she reiterate what she asked in writing? I am not trying to be difficult, but I found it quite hard to follow some of the mixing up of hundreds of thousands with hundreds of millions—and, indeed, fractions of billions. So if she would not mind, perhaps she could write to me.

The noble Lord, Lord McKenzie, asked me questions which are quite detailed and technical in parts. He asked me about preceding years—in fact, I will let him intervene, because he probably needs to repeat the question to me.