Housing Benefit (Amendment) Regulations 2010

Earl of Listowel Excerpts

Monday 24th January 2011 Lords Chamber

In the light of this perversity, there will be worse housing for private tenants, reduced stock for private tenants and deep financial hardship for private tenants, yet there will be increased housing benefit bills, along with reduced incentives to work. This set of policies is an indecent mess, in which the bill, not just in money, but in hardship, stress, grief and distress, will be paid by many thousands of families in this country. I hope that the noble Lord, Lord Freud, will accept the Motion in the name of the noble Lord, Lord Best. I hope, too, that the Minister will, when we consider the welfare reform Bill, be able to accept amendments that will tackle some of the dreadful implications and the false premises that lie behind this strategy.

[The Earl of Listowel]

My Lords, I know that everyone is waiting for the Minister’s response to this debate, so I will be brief. I support my noble friend Lord Best’s Motion, and wish to speak on two issues. One is the availability of social housing and the other is the child protection issue, raised by the noble Lord, Lord Knight, my noble friend Lord Adebowale, and other speakers. I join the consensus of concern in this area.

The noble Lord, Lord German, raised the question of the availability of social housing. Most of us can agree that it is a tragedy that in this country we have failed to invest in good social housing for our people. I visited recently in Walthamstow a mother with a young, six week-old infant who was sharing the house, the bathroom and the kitchen with five other households. We have let such families down badly. I have visited private housing which is being used to fill the gap in Redbridge and some of it is of appalling quality. We have let these families down by not investing and not thinking strategically about securing sufficient social housing supply. The concern, in a sense, is that this will add insult to injury: we have let these families down and we may yet let them down further. I strongly support my noble friend in his call for a considered assessment of the impact of this change.

The noble Lord, Lord Knight, spoke about the impact on children’s services of the migration of families from one area to another. Among other local authorities, he mentioned Haringey. Your Lordships may recall from the report of my noble friend Lord Laming into the death of Victoria Climbié what he discovered about the state of the social services department in Haringey. Among other things, there was a shortage of social workers and a high number of unaccompanied asylum-seeking children entering the local authority, putting an additional and unexpected burden on the children’s services. Social worker managers said that it became like a service production line. Social workers were overloaded and Victoria Climbié’s social worker, Mrs Arthurworrey, had far above her maximum case load. This was the context of what happened to Victoria Climbié and the terrible fate that befell her. I urge your Lordships not to forget what happened in that case.

It would serve the Government’s interests well if they were to consider carefully the impact of these changes on children’s services. If something goes wrong and children’s services become overburdened and social workers cannot answer the needs, the media will understandably be very scathing about what they see as the roots of such problems. It might be unhelpful to the Government in the longer term if it seems that the policy on which they are now embarking might lead to the failure of services and the death of a child or some other outcome. I strongly support my noble friend’s Motion and I look forward to the Minister’s reply.

[Baroness Turner of Camden]

My Lords, it may not be part of our convention to challenge regulations in this way but we are not living in conventional times. We are faced with a determined attempt by the Government to undermine the welfare society with which we have lived since the end of the last war and to replace it with something called the big society—hence the attempt to change benefit provision without regard to what this will mean for many vulnerable people.

This is the case with housing benefit. Many people have been kept from desperate poverty and even homelessness by the existence of this benefit. Among them are many single parents, mostly women, and it is surely in our interests that such women should be able to bring up and support their children. Often they have poorly paid part-time jobs and some of the difficulties that such women and their families face have already been demonstrated to us very dramatically by one of the previous speakers in the debate.

I am a Londoner and I believe that London is a special case. The mayor may have been attacked for some of the statements he made—he was regarded as having over-reacted—but, on the other hand, he has a point. There are many areas of London, including the one in which I live, which have changed dramatically in the past 20 or 30 years. They have been developed and upgraded. I have lived there for 40 years, and it was relatively inexpensive when I moved there, but it no longer is. It is desperately overpriced. Rents are impossible, except for well-off people.

If the arrangement is that benefits in future should be related to the market rent, many people will be unable to afford the resulting rent without the appropriate benefit. Such people will have no alternative but to move. The mayor made that point strongly in his statement. It is true that people will be unable to go on living there if rent is related in some way to the market rate. That would be impossible. A number of speakers have already referred to what might happen in such circumstances and the social results of such an arrangement. People will have no alternative but to uproot and move to different places, where there may be overcrowding and other undesirable effects on their health and that of their families.

For those reasons, I hope that your Lordships will agree at least to support the amendment tabled by the noble Lord, Lord Best. I certainly do and I hope that everybody else feels the same way.

--- Later in debate ---

[The Earl of Listowel]

My Lords, I apologise. I omitted to declare my interest as a landlord. I do so now.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, this has been an important and interesting debate. I commend particularly the noble Lords, Lord Knight of Weymouth and Lord Best, on bringing forward these Motions and securing this debate. I shall try to answer as many as possible of the points raised, but, since there was an awful lot of them, I may not cover absolutely everything.

Perhaps I may first put the debate into context and explain why the statutory instruments are essential to advance the changes that we have planned. Housing benefit increases have been quite startling, as a number of noble Lords have pointed out. During the last 10 years, housing benefit expenditure as a whole has nearly doubled in cash terms from £11 billion to £21.5 billion in the current year. Only £2 billion of this increase is due to caseload. About £5 billion is due to general price inflation, but, most importantly, £4 billion is due to growth in private and social rents over and above general inflation. Private rents for benefit recipients have risen in real terms 10 per cent more rapidly than rents in the general market. These are exactly the sort of increases that we are seeking to contain. Without any reform, expenditure is forecast to be £24 billion by 2014-15.

It was imperative that we acted swiftly to stop the runaway costs of housing benefit, those costs having been allowed to rise without restriction year after year. As we made clear in the June Budget last year, welfare reform savings play an important role in reducing the overall budget deficit. The changes introduced by the statutory instruments alone add up to £1 billion by 2013-14.

We must be fair to the taxpayer. It is not right that families who work hard to pay their own rent have to pay even more so that those on housing benefit can live in homes that they could not think of affording. Some of the rates are extreme. I know that not a lot of people are taking £2,000 a week for a five-bedroom property in central London, but there are some and the current system allows it. Further down the scale, £500 a week is being paid for two-bedroom properties and £370 a week for one-bedroom properties at this year’s rates. The Government’s measures are designed to take this under some control.

One of the measures that we have announced, and which has been widely welcomed tonight, is providing for an additional bedroom for disabled people living in the private rented sector who need a non-resident, overnight carer.

Noble Lords have gone through the other changes, but I shall summarise them. They include applying an overall cap to local housing allowance rates and setting the maximum rate at four bedrooms. Those rates are £250 for one bedroom, £290 for two bedrooms, £340 for three bedrooms and £400 for four bedrooms. That is a little over £20,000 as the top rate. We are also removing the £15 weekly excess, which the previous Administration would have liked to do but did not. I do not think that anyone argues that it is appropriate that we pay people more than they pay in rent. It was introduced to encourage a process of negotiation between those who are renting and landlords, but it does not seem to have had that effect, so there does not seem to be much point in paying those figures.

The final element that we have been discussing tonight is the adjustment of the local housing rate from the median to the 30th percentile. Overall, there has been a lot of scaremongering generally, and a little of that tonight—and some false reporting about the measures, although there has not been that tonight. Some estimates of the number of people who will be made homeless are, quite frankly, ridiculous. It is simply irresponsible to suggest that thousands on thousands of people will be made homeless and will have to leave the capital in droves, as some have said. I welcome the opportunity to put the record straight and to respond to the concerns raised today.

First, I shall address what is essentially a London issue, surrounding the maximum weekly rates of local housing allowance that we will apply from April. They are still extremely generous rates. It is still far more than the vast majority of people pay out—at the rate of four bedrooms and £400 and more than £20,000 a year, a typical family would need to earn £80,000 a year to be able to afford that kind of rent.

These reforms are not about excluding benefit recipients from the nicest areas, as some have argued. We are simply ensuring a fair deal for the taxpayer. The simple truth is that individuals who claim housing benefit according to local housing allowance rules should face similar choices to those people in low-paid work. There is simply no reason why we should see people moving vast distances, and no mass moves out of the south of the country. In all but three of the most central areas of London, at least 30 per cent of properties will be affordable within local housing allowance rates. I shall just explain that figure, because there has been quite a lot of misunderstanding about it. The survey is based on the properties that are not in large occupied by recipients of housing benefit—so it is 30 per cent at least, except in those three areas, plus whatever elements of the housing stock currently occupied by housing benefit recipients that will go on being affordable. So it is a large proportion, although it is impossible to put an exact number on it, because clearly we are expecting prices to move and more properties to come into that category. But a large proportion of houses will remain affordable.

A small number of people in the most expensive places will, of course, have to move, but they will not have to move far, and we will work with local authorities to give those people the support that they need. In central London, 2.5 million jobs are accessible within 45 minutes of travel. Bus fares, although they went up this month, are no more than £1.30 for a single journey so they can go long distances on a bus. Low-income working households mostly pay a rent slightly lower than the appropriate local housing allowance rate. This group living in private rented accommodation is mobile; 40 per cent of them have been in that accommodation for less than a year. It is not unusual for families to move. Indeed, over a quarter of a million people moved out of or between inner London boroughs in 2008-09, which is a point that the noble Lord, Lord German, made.

On the estimates of homelessness that various bodies have put out, it is important not to rely on those estimates if they are based on what landlords say they will do or on early experience. We must look at the shortfalls. After the reforms, 32 per cent will see no change in shortfall, 450,000 households will have a shortfall of less than £10 a week and 35,000 will have a shortfall of more than £20 a week. Not all of those will have to move, let alone become homeless.

One difficulty in writing an impact assessment when there are behavioural and market-based effects is that it is not easy to quantify those impacts, because they involve a complex interplay of behavioural decisions by individual landlords and individual tenants. We are talking about market forces here. Although economic theory would suggest that if a purchaser of up to 40 per cent of a market reduces the amount that they are willing to spend, it will cause rents to fall, it is only in the end through observation that we will be able to obtain absolutely conclusive evidence.

We have had similar concerns raised about our decision to cap local housing allowance levels at the four-bedroom rate but that reflects the kind of housing choices that are made by larger families who are not on benefit. It builds on the restriction introduced by the now Opposition in April 2009 to cap at the five-bedroom rates. Let us be clear: most families not on benefit cannot afford to live in properties with five or more bedrooms. We are reflecting here the choices made by families everywhere.

These measures have been closely scrutinised. We have made available more data on impacts than has ever been the case. Clearly, some people will receive less benefit as a result of the changes but that does not necessarily mean that all of those people will be drastically worse off. The gap between the 30th percentile and 50th percentile can be quite narrow. On average, it is currently £15 a week for one-bedroom properties and £26 per week for two-bed properties in London. In the outer south-east area, the difference can be as little as £8 a week for two-bedroom properties. Clearly, one effect that will happen is that the 30th percentile and the median can start moving together if we do not get the downward pressure that we are trying to impose on the rates. That would actually be bad news for the Government, because we would not lose some of the gains but see a market response as those medians move together, rather than the wholesale disruption that some people have been forecasting. In practice, setting the local housing allowance rates at the 30th percentile merely reflects the choices of low-income households; we know that from the research that we undertook last year.

The noble Lord, Lord Best, told us about the attitude of landlords. Rather than accept his concerns wholesale—although he is clearly a great authority in this area—I would point out that, in the last 18 months, more than 400,000 private rented sector tenants have been claiming, which shows that landlords are certainly prepared to rent to tenants claiming housing benefit. I repeat my point that, at 40 per cent of the market in not all, but many areas, landlords will have no choice but to reduce their rents and give back some of the excess gain that we seem to have seen in this part of the market. We are also giving landlords an incentive by widening local authority discretion to pay housing benefit direct to the landlord, a point raised by the noble Baroness, Lady Thomas. We are not giving this discretion away for nothing and the complex language here was to make sure that we get something for something: that if we are translating a payment stream from, let us say, a triple-B-rated level to a triple-A sovereign income stream, we get something for our money. That is why that is written so carefully.

Because I do not want to run out of time, I will jump to the key thing and I will come back to whatever I can fit in after that. I want to turn to the important issue of the monitoring and evaluation of these changes. I am very grateful to the noble Lord, Lord Best, for his timely Motion. I am very happy to agree to his proposal for an independent review. I make a firm commitment to the House that we intend to commission independent, external research to help us evaluate the impact of the reforms. This review will cover all the areas that the noble Lord outlined in his Motion. I can assure the House that it will be comprehensive and thorough and, of course, I readily agree that the outcome of the evaluation should be presented to both Houses, together with a written ministerial statement. Among the issues that it would cover—these were points raised by noble Lords—will be homelessness and moves; the shared room rate and houses in multiple occupation; what is happening in Greater London; what is happening in rural communities; what is happening in black and minority ethnic households; large families; older people; people with disabilities and working claimants. That is what this review will cover.