Welfare Reform and Work Bill

Earl Cathcart Excerpts

Wednesday 27th January 2016 Lords Chamber

[Baroness Meacher (CB)]

My Lords, in moving Amendment 82A I hope not to take up much of the House’s time. The amendment requires the Secretary of State to make regulations that would enable tenants receiving universal credit to choose to have the housing element of universal credit paid directly to their landlord.

We debated this matter in relation to an earlier welfare reform Bill and I am aware of the Government’s resistance to the measure. As benefit levels fall drastically under successive rounds of cuts, the need for this provision has grown over time. Until the introduction of local housing allowances, private tenants were able to choose to have rent payments paid direct to their landlord. Currently, social tenants can still request that housing benefit be paid direct to their landlord. However, under universal credit, tenants, whether social or private, will lose this flexibility and thus the opportunity to ensure that their rent is paid regularly so that they can at least be guaranteed a roof over their heads even if they cannot feed their children.

The Government argue that to include housing benefit payments within the universal credit payment promotes financial responsibility and helps prepare claimants for the world of work, when they will need to manage their entire budget without help from the state. Of course, in a perfect world this is a reasonable argument. However, it fails to take account of government policy to ensure that work pays. But this is being done by reducing out-of-work benefits substantially. The result is that it is highly doubtful that any of us in this House could manage to live on out-of-work benefits—pay the bills, feed the family and pay the rent. If we could not do it, why should we expect others far less privileged to be able to do so?

The Government’s attitude to this matter suggests to me, I fear, little understanding of the incredible challenges faced by out-of-work claimants under the regime which has been unfolding since 2010.

I wish to put on record in your Lordships’ House that tenant choice, as set out in the amendment, was supported by the Work and Pensions Select Committee in its report Support for Housing Costs in the Reformed Welfare System published in April 2014. The Select Committee suggests that such arrangements could be available at least for the first few years of a UC claim as a transitional measure. I hope the Minister will be able to respond to that proposal.

There is considerable support for direct rent payments to landlords if claimants request it. In February 2015, for example, the Northern Ireland Executive confirmed that landlords will be paid benefit directly to cover tenants’ rent. The Scottish Government have also indicated their wish to introduce such a provision. Both Shelter and Crisis support it, for obvious reasons.

An important point raised by the Residential Landlords Association is that direct payments will prevent an abusive partner using the rent money for their own purposes, an issue I had not thought of. Partners with a gambling or drink problem too often reduce their families to destitution. In fact, I was very familiar with such problems years ago, although they had rather gone out of my mind. This amendment would provide some protection for such families.

Finally, the Minister will be well aware that this is a big issue for landlords and hence for the adequacy of housing supply for benefit claimants. It seems that this is as powerful an argument for the amendment as the concerns about tenants. Quite simply, if landlords cannot be sure that the claimant will be able to pay the rent on time every time, they would be sensible not to rent their properties out to universal credit claimants. We already have an excess of demand for housing over supply. Does the Minister have an estimate of the expected fall in the supply of properties for rent for claimants in the coming years? Is the Minister concerned that research by the RLA earlier this year showed that 63% of private landlords with tenants on universal credit said that their tenants were in arrears with the rent? How many of those landlords will be willing to risk renting to benefit claimants again? In my opinion, only very few.

I very much hope that the Minister will be able to persuade the Secretary of State to take this amendment seriously in order to avoid a likely catastrophe in housing provision for universal credit claimants, and serious consequences for the children of the many parents who will be unable to cope. I beg to move.

[Earl Cathcart (Con)]

My Lords, as the noble Baroness, Lady Meacher, has just said, under the old housing benefit scheme the tenant had the choice of the payment going to him or directly to the landlord. The Minister said that, under the new scheme, the,

“position is for universal credit to be paid as a single monthly sum direct to the claimant; that is designed to mirror what would happen if the claimant was in full-time employment, when they would be responsible for managing their own funds and paying their own rent”.—[Official Report, 21/12/15; col. 2438.]

In an ideal world that is an excellent idea, but in the real world it invariably does not happen. As a landlord, I can foresee that when the tenant receives the universal credit, the temptation will be to buy the weekly shopping, petrol, clothes and so on, and by the time the rent becomes due there will not be enough money left, so the spiral of debt takes hold. But the Government are adamant that paying universal credit only to the claimant not only will work but does work. Is this experiment working as the Government say it is?

According to a survey conducted by the Residential Landlords Association, it is not. It found that of those private sector landlords who had tenants on universal credit, some 63% had tenants in arrears on their rent—a point just made by the noble Baroness. Of that group of landlords, 85% had contacted the Department for Work and Pensions to have the housing element of the universal credit paid direct to them after eight weeks of arrears, as is their entitlement. More than 57% of that group said that it had taken the department more than five weeks to respond to the request, which means that the landlord is already more than three months out of pocket. I understand that the problem is even worse for social housing, with nearly 90% of tenants in arrears. It is heartening that the Minister said in Committee that,

“we are doing a lot of work now with social landlords to get the problem under control”.—[Official Report, 21/12/15; col. 2437.]

At least my noble friend admits that there is a problem and that the new system is not working quite as planned. Much of this could have been avoided if the rent had been paid direct to the landlord.

In October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefits as a direct result of the decision not to allow payment of the benefits direct to the landlord. Not making the payment direct to the landlord is not helping the landlords and it is certainly not helping the tenants. All the evidence, backed by Shelter, Crisis and the Money Advice Trust, has been that paying it direct to the landlord was popular with tenants, as they were assured that their rent was covered before they decided how else to spend their money.

If the Government really want to make tenants,

“responsible for managing their own funds and paying their own rent”.—[Official Report, 21/12/15; col. 2438.],

what better way than the tenant asking for the rent to be paid direct to the landlord? To my mind, that is the height of responsibility for the tenant: to ensure that the roof over their heads is paid for before deciding how to spend any remaining money.

[Baroness Hollis of Heigham]

My Lords, I strongly support the amendment moved so ably by the noble Baroness, Lady Meacher. This is a real problem. The previous proposals that we were given, and the previous explanations that we wanted to model on the world of work, frankly belonged to a different planet. Those tenants, particularly in social housing, who need housing benefit are not those, for the most part, who are paid monthly. They very often are on ZHCs, have insecure or short-time jobs, or have fluctuating incomes week by week. That is topped up by universal credit. They want and need the security of a home in order to continue often to be able to find the jobs that they want, which would give them greater security. If they seek direct payments to the landlord, why does the Minister think that the Government and the DWP can second-guess what is in their best interest? Why not treat them as moral adults who can make their own judgment? The result that we are already seeing and beginning to worry about is, given the refusal to give alternative payment methods until after six to eight weeks’ arrears, and the time of processing that, we can be talking about debts of more than £1,000, from which tenants never recover.

The alternative is to try to help tenants to find ways to bypass the rigidity of DWP. So we are busy setting up jam-jar accounts and other friends are busy trying to use credit unions in order to bypass the total universal credit going into the bank account where the bank then takes payments for any other outstanding debts or anything else. As a result, HB becomes the last thing to be paid to the landlord. Many are already experiencing those problems. Certainly, one local authority tenant said to me, “Well, I won’t worry about that because that will be the last thing that gets paid. The local authority won’t evict me. It costs them more to send me into temporary housing and, given that I’ve got kids, I can run that risk”. That is the mental framework. She said, “I would be perfectly willing if they took it at the beginning of the month. But if I put it in the bank, it will be gone by the end of the month before I pay the rent”.

I suggest that the Minister responds very positively to this amendment. Where the tenant seeks it, the department should agree that alternative payment arrangement and stop all the futile effort that so many of us are making trying to find ways to loop around the system, to overcome the rigidities of the department, to help tenants avoid what will probably be debts from which they will never recover. I hope that the Minister will take the words of the noble Baroness and the noble Earl very seriously. It is a real problem on the ground.