General matters

Craig Whittaker Excerpts

Tuesday 21st December 2010 Commons Chamber

[Craig Whittaker (Calder Valley) (Con)]

Let me take this opportunity, Mr. Deputy Speaker, to wish you and all Members of the House, as well as its staff and their families, a very merry Christmas and a happy new year.

In April 2008, the previous Government introduced the local housing allowance as a new way of calculating housing benefit for tenants in the private sector. The allowance is paid directly to the tenant, who should pass it on to the landlord as rent. The housing allowance and direct payments to tenants allow prospective tenants to “shop around” with their allowances, but following the introduction of local housing allowances more than 41% of private landlords—an increase of 4%—are not letting to tenants who receive such allowances, mainly because of the lack of a guarantee that rents will be received. The greatest difficulty facing many landlords with local housing allowance tenants is their inability to obtain rents. Currently, when tenants are in arrears, landlords must wait for a minimum of eight weeks before they can request direct payments.

I recently attended a meeting of the Calderdale landlords association in Calder Valley. The picture that was painted was of a sector in meltdown. No fewer than 350 properties belonging to the members of the association who were present at the meeting are in danger of being withdrawn from those receiving local housing allowances, entirely owing to the lack of guarantees.

In far too many cases throughout England, tenants move in, pay the first month’s rent, and then do not pay for two months. Leaving arrears, they then move across the border to neighbouring local authority areas and repeat the process. Then, of course, they move on again. Many pay only three months’ rent in 12 months. The cost to landlords is getting out of hand, and the practice is keeping rental charges far too high. Honest, decent people who pay their rent on time are subsidising many people who do not. A landlord who contacted me recently said that in a portfolio of 15 houses, seven tenants were more than two months in arrears, and five of them had moved on owing well over £1,000 each in rent. The cost to landlords of pursuing back rents is also expensive, and landlords incurring that additional expense often have no chance of receiving any money at all. As a result, many landlords do not pursue back rents, as by doing so they would only add to their losses.

At a time when supply should be increasing to meet increasing demand and take advantage of higher rents, stock levels in the sector fell by 2.7% between the first and second quarters of the year. As a consequence, not only is supply much tighter, but rents increased at a rate of 2.3% over the same period because supply is so much lower than demand.

Other issues in the sector are causing a decline in stock levels. The taxation system provides little incentive for investment in accommodation; we should allow the private rented sector to be treated in the same way as businesses. The system is also failing to identify vulnerable people who, even under the current arrangement, should be eligible for direct payment of their local housing allowance to their landlords. Many tenants are failing to manage their finances properly, falling into rent arrears and having their tenancies terminated. The safeguarding processes that exist are failing. Many landlords are reporting that rents have not been paid this month, as some tenants are choosing to spend their housing allowance on Christmas rather than paying their rents.

The solution to the crisis that is starting to develop is quite simple. The Residential Landlords Association, Shelter and Crisis all agree on two specific points. First, their tenants—who consist overwhelmingly of claimants of local housing allowance—say that they would prefer the allowance to be paid directly to their landlords. That would help people to manage their finances, and would reduce the temptation to use the allowance to pay other debts rather than paying rent. It would also provide tenants with security so they could be sure that the rent had been paid and there was no chance of losing their home.

[Jack Dromey]

The hon. Gentleman’s heart-rending appeal on behalf of landlords is very interesting. Will he join me in extending similar concern to the 67,000 families in the midlands facing an increase of an average of £9 a week as the consequence of £1.8 billion being taken out of housing benefit by his Government—families who can ill afford to pay £9 a week extra?

[Craig Whittaker]

I thank the hon. Gentleman for that intervention. I am sure he will agree that it was the previous Government who brought in the housing allowance, which is hindering the progress of the private rented sector and stopping investment in it, as I mentioned.

The rule by which the local housing allowance can be paid directly to landlords only when claimants become eight weeks in arrears should be replaced when a sum of one month’s rent falls into arrears for 14 days. That would prevent tenants in difficulties from getting further into debt. Allowances should also be paid calendar-monthly in advance, in line with normal rental payment practices.

For a system that was set up to give people their own choices, its failure is producing a system where rents are on the rise because of the shortage of housing in the sector and because of those who do not pay their rent and buck the system. That is without question increasing rents in the sector. That is not fair, it is not sustainable and it needs to change.

--- Later in debate ---

[Neil Parish (Tiverton and Honiton) (Con)]

Thank you very much, Mr Deputy Speaker, for your Christmas generosity in allowing us an extra minute to speak. I wish you, all Members and those who look after us so well in the House a very happy Christmas.

Members have spoken about court closures, racing stables and winter tyres. My hon. Friend the Member for South West Norfolk (Elizabeth Truss) talked about the wonderful food in Norfolk, and I could not let this opportunity pass without saying not only that is Norfolk food good, but that Devon food is excellent. With one’s Christmas pudding, one must have some Devonshire cream and make sure that one has some grass-fed Devonshire lamb and beef to go alongside it—perhaps a bit of turkey too.

I rise to speak about heating oil, another matter very important to rural constituencies. My constituency is 40 miles long; it starts on Exmoor and ends up in the sea at Seaton. There is a huge rural area within those boundaries, and many of the villages and hamlets there have no mains gas supply. Their only alternative to electricity for heating is oil. That is why the postcode lottery on what people pay for heating oil must stop.

During business questions last week, I made the point that during November and early December, crude oil prices went up by 17% and that the price of heating oil went up by 70%. There is no justification for that. Within rural areas, there are many old properties—some are farm houses, some are small cottages—and they are difficult to insulate with modern insulation and expensive to heat. People need more fuel to heat them, and if we lump on to that the huge increase in price, a lot of the heating allowances for poorer people just do not go very far at all.

About 2 million properties rely on heating oil; they are mostly in rural areas and 828,000 of them are in England. Recently, as I said, there has been a spike in oil prices that could add as much as £540 a year to the average family’s heating bill. The price of heating oil tends to rise gradually in the winter months, when demand is at its highest. A home owner might use anything between 2,500 to 4,000 litres of oil. Price rises during winter are unavoidable, but the price rises that we have seen cannot be justified simply by supply and demand.

[Craig Whittaker]

Does my hon. Friend agree with my constituents who have contacted me in the past couple of days to express the real suspicion that the supply of oil is being held back to inflate prices artificially, with the companies knowing full well that the average UK home that uses oil can store only up to 60 days’ worth? In effect, those homes have to buy oil when winter is at its worst.

[Neil Parish]

My hon. Friend is absolutely right. Furthermore, some oil companies unscrupulously deliver oil at a very high price and hold back on deliveries under contracts that are sold at a lower price. The issue really needs to be sorted out.

That brings me neatly to my next point. Crude oil accounts for 48% of the cost of heating oil. The largest next component, accounting for 45%, includes the cost of distribution and marketing. The refining process accounts for only 7%.

The average price of a litre of heating oil in Northern Ireland, which has had some of the worst of the recent weather, is 48p per litre, or 52p in Belfast—and given that weather, the cost of delivery and getting the tankers to the houses would be among the greatest. The average price in the south of England at the moment is 80p per litre, while in the middle of England it is 68p, in Wales it is 67p and in Scotland it is 64p per litre. What justification is there for someone in the south of England having to pay nearly twice as much as people in Northern Ireland? During the same period, the price of petrol at the pumps has gone up by only 10p per litre.

I say clearly to the Business Secretary that it is time that we did something about the situation. At the moment, he is considering establishing the position of an ombudsman to consider food prices and whether supermarkets’ buying power is too great. I urge him to get on with that as quickly as he can. I do not know whether he wants to go down this route, but I suggest that having an adjudicator or ombudsman for heating oil might provide some sort of solution to the problem that I have outlined. I am not thinking of a huge bureaucracy but of somebody people could contact to ask why their heating oil is so expensive in their parts of the country. Those companies would have to justify what they are actually charging. At the moment, there is misery being made out of cold weather and some people have no source of heating other than oil fires, Agas and boilers.

As I said, many houses are difficult to heat and insulate, and people are having to pay an extra price before Christmas. The Government cannot just stand by on this matter. All hon. Members probably believe in some form of market forces, but in this case those forces are being used to drive up the cost of fuel unjustifiably. As I have said, weather conditions alone cannot justify what is happening because Northern Ireland has had some of the worst weather in this period, yet it has some of the cheapest fuel. We must ensure that constituents who use oil to heat their houses, wherever they live, pay a fair price for that fuel and are not held to ransom by either the oil companies or those who deliver the oil to houses.