Universal Credit: Private Rented Sector

Drew Hendry Excerpts

Tuesday 9th January 2018 Westminster Hall

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship once again, Mr Gray. I congratulate the hon. Member for Eastbourne (Stephen Lloyd) on securing this important debate. It is vital that universal credit failures and the opportunities to fix them are highlighted to the Government at every opportunity, in the hope that they might listen.

The hon. Gentleman spoke eloquently about the problems with payments to claimants, which we raised with the UK Government when the Highland Council was a pilot area in 2013. [Interruption.] I hear my former council colleague, the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), agreeing from a sedentary position. This is a cross-party issue, which I will come back to later. The hon. Member for Eastbourne also spoke about the problem with ideologues. I agree that there has been a continued failure to listen. I hope that that will change and that we will get a more positive response from the Minister about actions that could be taken. I will give some examples later on.

[Jamie Stone]

I return to my vast and remote mode. One of the warnings that the hon. Gentleman and I and others put to the Government was that the sheer rurality, distance and sparsity of population would present a special challenge when trying to get private landlords to let property.

[Drew Hendry]

I agree.

The hon. Member for Batley and Spen (Tracy Brabin) spoke eloquently about the issues that she has witnessed. She talked about universal credit being rolled out, glitches and all. I would go further—we are seeing more than glitches in the roll-out of universal credit. I have witnessed it for nearly five years. These are systemic issues. She mentioned that no child should have to experience these effects, which is absolutely right. This is about the people and their families who are affected in their homes. That hits home the hardest when people come to us with the personal stories of suffering they are enduring. That is when we understand why the Government have to listen and do something about it.

The hon. Lady also talked about the pressures on housing stock and the need to support the private rented sector, saying that 66% of private renters have no savings. That is true and is reflected in my experience, albeit anecdotally. People do not have the ability to inject their own cash into the system because they do not have any cash—it does not exist.

The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) mentioned that there are problems that need to be fixed. I welcome the fact that we are hearing that around the Chamber. There is a consensus that these serious issues are hurting people.

The hon. Member for Caithness, Sutherland and Easter Ross talked about rent arrears for councils. Again, I refer to what happened in the Highland Council as a result of this problem.

The hon. Member for Edinburgh West (Christine Jardine) has not yet seen the roll-out in her constituency but is aware that a cold wind is coming. Those of us who have experienced it in our constituencies have seen the devastation that it leaves in its wake.

The hon. Member for Strangford (Jim Shannon) made an important point about the price differential between council housing association and private lettings. He asked who pays the difference. If, as we heard earlier, most people do not have private income to fall back on, who does pay the difference? He also made a telling point about the decrease in the already low number of private landlords willing to rent to universal credit claimants, which is backed up in many other pieces of evidence from around the nations of the UK.

Since Inverness was chosen in 2013 as a pilot area for universal credit, we have lived with the problems of a highly dysfunctional system. Originally, the Highland Council engaged with great hope. There was and remains support for simplifying the social security regime. There were too many benefits in the past and it was too confusing. In local and national politics of all colours, people got behind the idea of a system with a lot less bureaucracy and hassle for claimants. If only that had been the outcome. Instead, universal credit in its current form has gradually shown itself to be a failure. Worse, its continued roll-out has had a devastating impact on claimants—not just the unemployed, but working people, single parents, the disabled and even the dying—particularly through the toxic legacy of debt and rent arrears.

The hon. Member for Eastbourne described universal credit as a car crash. It is, and its corrosive effect is not restricted to claimants. Landlords in both the public and the private sector feel a knock-on effect, which squeezes incomes, reduces the supply of rented properties for claimants and chokes investment in new building. We in the Scottish National party have called continuously for the roll-out to be halted and fixed. Like those in Northern Ireland, we will use the very limited powers we have to try to mitigate the impact, as we have done with other matters over the past few years, and inject a little fairness and dignity into the system. However, it remains almost entirely a UK-reserved issue and needs to be dealt with.

I have been a noisy witness in the nearly five years since the pilot, when I was leader of the Highland Council. We have tried every approach to get the Tory Government to listen. I was joined by the political voices on the council—regardless of political colour, if any—to highlight the misery that was gradually unfolding before our eyes. We set out the alternatives, asked for changes and relayed the experiences, the frustrations and the inevitable wider impact that the roll-out would have if it was continued without fixing the problems, yet our voices were not listened to, and now we are seeing the pattern repeating itself wherever universal credit is deployed.

The hon. Member for Eastbourne mentioned the public sector. As a result of universal credit, the Highland Council has seen rent arrears rocketing to around £2 million —a signal of the misery, but also a noose around the neck of investment in housing. Vital resources are being drained from the council as it picks up the cost of the universal credit failure.

According to a recent report by the Residential Landlords Association, universal credit is now the main reason for private sector landlords seeking to evict tenants. We have heard a lot of statistics this morning, but 29% of landlords have evicted a tenant for universal credit rent arrears and now only 13% of landlords say that they are willing to rent to universal credit claimants at all. According to the RLA, more than 73% of landlords are unlikely to rent homes to someone claiming universal credit, because they are worried that they will not be able to pay.

The Scottish Federation of Housing Associations says that those problems are putting more pressure on public housing; that the administration of universal credit falls short of what its own service standard should be; and that the schedules that associations receive are beset with errors. The federation’s survey found that the standard of communications between the DWP and landlords was erratic, and made worse by the absence of implicit consent in the universal credit full service roll-out. Arrears are much higher among people on universal credit. The federation says that the shortcomings need to be fixed and that a pause is therefore required.

The DWP has not allowed implicit consent, except through MPs. That hamstrings organisations such as citizens advice bureaux and housing associations, meaning that they cannot effectively help claimants to get their entitlements to retain tenancies. The reliance on explicit consent is impractical, especially in rural areas.

There is a growing worry that the design and the benefits of universal credit are not fit for purpose. It should be the objective of any good enterprise, especially a Government, to listen to the experiences of people affected, especially those delivering a service and those who have been asked to partner and make the required adjustments, but neither I nor anybody else in the highlands have witnessed such a willingness to adapt. The problem has spread to other areas. Landlord after landlord, housing association after housing association, council after council, support group after support group and charity after charity have echoed the calls we have made. Every day, new and more troubling examples of hardship and suffering are exposed. Debt and rent arrears mean long-term damage and lasting harm to communities.

Universal credit, in its current form, is designed to create debt by default—it is constructed that way. What kind of Government create the situation where people and families are turned into debtors, with no hope of escape other than eviction, bankruptcy or both? As the hon. Member for Eastbourne pointed out, some welcome changes were made by the Chancellor in his Budget. However, the Chancellor said in his November Budget speech that he wanted to avoid debt for the Government

“not for some ideological reason but because excessive debt undermines our economic security, leaving us vulnerable”—[Official Report, 22 November 2017; Vol. 631, c. 1048.]

He went on to talk about vulnerability to financial shocks. Well, people are facing financial shocks now because of the shambolic handling of universal credit. It should be halted; the messages should be taken on board; and it should be fixed.

--- Later in debate ---

[The Minister of State, Department of Health and Social Care (Caroline Dinenage)]

It is a great pleasure to serve under your chairmanship, Mr Gray.

I congratulate the hon. Member for Eastbourne (Stephen Lloyd) on securing this important debate on the effect of universal credit on the private rented sector. He is a very committed campaigner and I thank him for his work to help us to improve the delivery of universal credit. Universal credit is an important reform and I am pleased to have this opportunity to talk about it, and hopefully to address the issues that have been raised by Members and some of the misconceptions.

As the hon. Gentleman knows, we have been using a test-and-learn approach to universal credit since the beginning. The roll-out of universal credit is a very long one, which is why we have taken that approach—we want to develop the universal credit system based on the evidence we gather as we go along. I thank Members from across the House for their contributions.

The Government are committed to making work pay and universal credit is transforming the welfare system to ensure that it does so. With universal credit, work always pays and, compared with the old system, people spend more time looking for work and find work faster. Universal credit supports people who can work and cares for those who cannot. For the first time, universal credit supports people who are in work, and encourages and incentivises them to progress and earn more.

Members have raised a number of concerns about the impact of universal credit on private rental sector landlords, which I will seek to address. However, we must remember that universal credit is the largest and most significant welfare reform since the second world war. The Government are listening to stakeholders both in Parliament and externally, and we are well aware of the concerns that have been raised. I will try to address some of those concerns today, and to put Members’ minds at rest where I can do so.

First, I will clarify for the House some of the things that universal credit has not changed, in particular for landlords in the private rental sector. Since 2008, housing benefit has been paid directly to claimants by default, and not directly to landlords. That remains the case with universal credit. In fact, currently only 25% to 30% of housing benefit payments are made directly to landlords in the private rented sector. If private landlords want housing benefit to be paid directly to them, they need to ensure that the relevant criteria are met, which are broadly the same as those for a request for direct payment under universal credit.

What has changed is that universal credit is assessed and paid monthly, to replicate the world of work, as we have already heard. Our ambition is to create a welfare system that encourages people to take greater responsibility for their finances, so that they are ready and prepared to move into the world of work. It means that, where possible, we want to encourage and support people to take responsibility themselves for paying their landlord, but of course we want to ensure that the necessary protections and support are in place to allow them to do that.

We know that the majority of people are comfortable managing their own money. However, for claimants for whom that is not the case, we have put in place support to help them. That is why we have the facility, as I have mentioned, for universal credit to be paid directly to the landlord where appropriate.

The hon. Member for Eastbourne asked for changes further to support private sector landlords and tenants—for example to make it easier for private landlords to have rent paid directly to them by the Department for Work and Pensions. We have always been clear that we will roll out universal credit in a way that allows us to continue to make improvements, as Members will have seen in the Budget before Christmas. We have already made a number of changes to universal credit as part of our engagement with the sector, and we will continue to develop our approach based on the feedback and evidence we collect as we go along. It is important to remember that, by Christmas, only 8% of universal credit had been rolled out, and by the end of January it will still be only 10%.

We have made practical improvements. For example, we have simplified and sped up the process for private rented sector managed payment requests, which can now be done by email and on a single form, with no additional information required, and work is under way further to improve that process in the universal credit full service.

We have also improved and updated the landlord information and have made it easier to find on gov.uk. We have another meeting this month with private rented sector representatives—such meetings happen regularly—and we will check whether they can access the information they need. Members have raised that matter today.

[Drew Hendry]

On making it easier for people to get information, there is a long-standing call to reintroduce implicit consent, to allow agencies to assist people with their claims. Will the Minister consider such a reintroduction for universal credit?

[Caroline Dinenage]

We have removed the need for explicit consent. A universal credit claim is the responsibility of the claimant, and implicit consent puts the development of the system at risk. However, it is something that we keep under review.

Some Members may not be aware that we issue a bi-monthly landlord newsletter. Such regular communications and incremental process changes are necessary if we are successfully to introduce this radical and innovative reform, and we will continue to build on them.

We have also made more fundamental changes to make a difference for private sector tenants and landlords. We have recognised that managed payments to landlords in the private rented sector are running at a lower level than expected. We understand that landlords are often small businesses with one or two properties, and that they cannot afford to have rent arrears. That is why we have made three important policy changes for this sector in recent months.

First, in December, as part of the Budget measures, we announced changes to universal credit guidance to ensure that when private sector housing benefit claimants come on to universal credit, we know whether and why they had their rent paid directly to their landlord previously. That will allow our work coaches to determine whether a managed payment to the landlord for universal credit may need to be applied, and will prompt a conversation with the claimant. That change will provide an important safeguard and help to ensure that those who need the support get it from the outset. It will also help to ensure that claimants receive appropriate budgeting support, by providing a further prompt for the work coach to have a discussion with them.

Secondly, we have changed our policy to ensure that when a private rented sector landlord asks for a managed payment to be set up and supplies evidence of two months’ rent arrears, we will implement the managed payment without requiring the claimant’s consent, just as in the old system. That change has already been welcomed by the Residential Landlords Association and shows our commitment to working with landlords to keep improving the system.

Both those changes are designed to ensure that vulnerable claimants who cannot manage a monthly universal credit payment are fully supported, and that landlords receive the rent they are owed.

Thirdly, as set out in the Budget, we will tackle rent arrears by providing claimants with an extra benefit payment equivalent to two weeks’ housing benefit while they transition on to universal credit. We have abolished the seven-day waiting period in universal credit and we have increased the maximum advance payment to up to 100% of a claimant’s indicative award.

A number of Members across the House have spoken about the universal credit monthly payment structure affecting rent being paid to landlords and, therefore, landlords’ willingness to rent to claimants. However, as I have explained, we have systems in place for those who cannot pay the rent directly. It is important that we are fully able to empower those who can be trusted with their own financial affairs. In fact, it would be wrong and insulting to assume that universal credit claimants cannot be trusted to manage their finances.

Members have mentioned reports that some landlords claim they would be unwilling to rent to universal credit claimants, including a recent one from the Residential Landlords Association. Such claims have been made by landlord groups since 2008, when we first started paying housing benefit directly to claimants, but it never seems to have materialised. The evidence shows that the proportion of tenants who are on housing benefit or universal credit has remained broadly consistent for the past 10 years—about 30% of the private rented sector and about 65% of the social rented sector. It would not make financial sense for a business to give up such a large proportion of the market. The way in which universal credit is designed means that landlords would not normally know that a prospective tenant was receiving universal credit. We know that there is anxiety about arrears, which I have addressed, but the fact remains that universal credit is a stable, secure, reliable form of income for claimants and their landlords.

The Department for Work and Pensions regularly engages with private landlords and their representatives. The universal credit team holds quarterly strategic engagement meetings with sector stakeholders, in which it shares the latest updates on universal credit, responds to questions and listens to concerns. Insight from that engagement has already helped us to make numerous process changes to improve interactions with stakeholders. Two examples are the recent changes made to the process for ensuring that managed payments to landlords are put in place where appropriate: treatment under housing benefit and the removal of the need for explicit consent from the claimant.

Department for Work and Pensions staff will continue to work with claimants who have managed payments in place to ensure that they have appropriate budgeting support, and they will remove the arrangements when a claimant is ready. To those private sector landlords who have expressed concerns about renting to universal credit claimants, I say that with the safeguards we have in place, the improved work outcomes that universal credit brings and the personal budgeting support available, such concerns should be groundless.

More attention should be paid to the evidence of universal credit outcomes than to the unhelpful scaremongering of Opposition Members. I can only give in evidence the fact that, in Prime Minister’s questions, the Leader of the Opposition claimed that Gloucester City Homes evicted one in eight tenants—12% of tenants—due to universal credit. That would have been 650 tenants. In fact, it was eight tenants, all of whom had arrears before universal credit was introduced. None of the evictions was as a result of universal credit, and one was because a gentleman had been living in Australia for 18 months.

Universal credit represents a generation-changing culture shift in how welfare is delivered and how people are helped, creating a system that allows people to break free from dependency, take control of their lives, and work. Universal credit picks up from a deeply flawed system and strives to solve problems that were previously thought intractable. In that old system, complexity and bureaucracy so often served to stifle claimants’ independence, limit their choices and constrain their outlook. We have shown with our actions, and have demonstrated here today, that we are listening and learning and are making the changes necessary to implement this historic reform safely, securely and with careful regard to our stakeholders.