Housing Benefit (Wales)

Geraint Davies Excerpts

Thursday 1st May 2014 Westminster Hall

[David T. C. Davies]

It does hurt. However, I think the Select Committee worked well. The issue was potentially controversial, yet we managed to get a certain amount of agreement, some of which the Government will have to answer. I welcome the fact that the Select Committee, politically divided as it is, can work so well together, and I am grateful to the Committee members here today.

One thing that I think we can all agree on is that the cost of housing benefit is unsustainable at the moment and that changes must be made, although we may differ about how those changes should be made, what their impact will be and how people affected can be helped.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the hon. Gentleman accept that 70% of the growth in housing benefit costs, which have doubled to about £20 billion in the past 10 years, is due to private sector rents and that the strategic response should be house building rather than clubbing the poor?

[David T. C. Davies]

I am trying to stick to the facts as I saw them on the Select Committee. To be fair, the first fact that the hon. Gentleman presented is correct. Personally, I agree with him that house building is one solution. In Wales, that is obviously a devolved responsibility for the Welsh Assembly. Hopefully, the hon. Gentleman and I agree that the Welsh Assembly could and should be doing a lot more to increase house building within Wales. The costs at the moment are about £25 billion a year. About 250,000 people in Wales receive housing benefit—about 8% of the population.

The Committee focused on two areas of Government policy. The first is the changes related to under-occupancy in the social rented sector, sometimes called the spare room subsidy and at other times referred to—incorrectly, in my view—as the bedroom tax. The other is the move towards direct payments, which also raised concerns across political parties. We took a lot of evidence from various witnesses, including the housing associations, representatives of landlords and the TaxPayers Alliance, which made an interesting contribution and which I hope is welcomed back to Select Committees in future.

The policy that we discussed came into force in April 2013, but it is probably worth mentioning that the same rules had been introduced for the private sector in 1989 and re-emphasised by changes made to housing allowances by the last Labour Government in 2008, so it was not as new as people might have thought. As all Members here will know, tenants had their housing benefit reduced by 14%, an average of about £12 a week in Wales, for having one extra bedroom, and by 25% for having two extra bedrooms.

At the time of the report, the Government estimated that 40,000 tenants in Wales lived in households with one or more excess rooms, representing 40% of those eligible to be affected. That was the highest proportion of any region in the United Kingdom, so we would like the Minister to provide us with any updated figures that he has on how many working-age tenants of social housing in Wales continue to live in properties with excess rooms and how many have been successful in downsizing.

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[David T. C. Davies]

I had better not get into a conversation across the room about it, but that figure would certainly be worrying. It could be even worse in Wales, anyway.

As I am about to mention, one concern of ours was that Wales’s rurality and the lack of available housing there will make the issue much harder to deal with there than in London. Although personally, I absolutely support what the Government are doing, as I shall say at the end, I recognise that a tailored approach may be needed to the different problems that may arise in different areas.

[Geraint Davies]

The numbers are that some 40,000 people are affected in Wales, against about 400 units that can take just one person. In other words, this is not a strategy to help occupancy levels; it is simply an attack on the poor, who have nowhere to go.

[David T. C. Davies]

I do not accept that it is an attack on the poor.

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[Sir Roger Gale (in the Chair)]

Order.

[Geraint Davies]

Will the hon. Gentleman give way?

[David T. C. Davies]

Yes, but one of the hon. Gentleman’s colleagues made the point earlier that everyone wanted to speak in the debate, and another dropped a hint about my concluding in a moment, which I was about to do. I will give way one last time, but then conclude, so that the hon. Gentleman and others can entertain us.

[Geraint Davies]

The point is consistently made, “Well, Labour did it in the private sector so why can’t we do it in the public sector?” The reality is that the market delivers a large number of flats for single people because there is a demand, but the public sector has been focused on units with two or three bedrooms for families with children. It is simply not appropriate to say that the measure should be force fed to the public sector. There is nowhere to move the people to.

[David T. C. Davies]

I am not sure that I would accept that argument, but I am grateful that, in signing the report, the hon. Gentleman accepted the fact that the current situation is completely unsustainable. We cannot afford to go on doing what we have been doing. That was agreed by all members of the Committee in the report. He may have alternatives in mind, which he will want to put forward in a minute.

I thank the hon. Gentleman and all members of the Committee for the way in which we dealt with a potentially controversial issue and for coming up with a unanimous report. I look forward to the Minister furnishing us with answers. I should put on the record that I am not trying to duck any responsibility: speaking in a personal capacity, I support Government policy on this issue absolutely. I take full responsibility for the policy. I always believe that there is room for improvement in anything that any Government do and the points I have made should be seen in that light. But, personally, as Member of Parliament for Monmouth, I support the Government and look forward to the Minister’s response.

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[Mrs James]

I thank the hon. Gentleman for his intervention. He is very fortunate, because that is not the pattern that we are seeing in the urban areas, the cities, of south Wales. I will come to some figures later and try to demonstrate the effects that the policy is having on the local authority and the ever-increasing problems that the legislation is creating.

Already, 30,640 homes that are part of the available rented housing stock in Wales are beyond the reach of people on housing benefit. I got these figures from the Chartered Institute of Housing. It estimates that already more than 30,000 homes that are part of the available housing stock in Wales are outside the reach of people who are seeking other homes or cheaper homes or wanting to downsize because of the legislation. In fact, 89% of tenants in Wales will see their benefits cut, and the loss will be on average £8 a week or £416 a year—before we even take the bedroom tax into consideration. Significant amounts of money are disappearing from people’s daily budgets. I know that that is popular in some areas and will make many readers of certain tabloid newspapers feel better, but if they had to live with the reality of it all, they might feel differently about it.

The proposals make a complete travesty of the rented housing sector. We are constantly being told that they are justified and that the Government are attempting to encourage mobility in the social rented sector, strengthen work incentives and make better use of social housing. My response is that they are not doing any of the above, and I seriously doubt whether they ever will. The policies do not encourage mobility in the social rented sector; in fact, I believe that they are creating a dependency on the substandard lower end of the market, regardless of the condition of the homes available for rent at an affordable price. The policies certainly have not strengthened work incentives. Many tenants I come across are suffering from housing-related health problems and are so overwhelmed by their housing issues that seeking work is not an option. They are absolutely ground down into depression by the problems that they face.

It is worth pointing out that the social housing sector simply cannot meet the demand for good-quality, up-to-standard housing when there are insufficient numbers of smaller properties to move tenants into. The Government have wrongly assumed that moving tenants to smaller properties is an easy option. The reality in Wales is that a vast percentage of local authority housing stock consists of traditional three-bedroom properties. That is a direct result of the post-war boom in house building, when properties with three or more bedrooms were needed to accommodate families, which were traditionally larger than they are today. In the 21st century, families have changed, housing needs have changed and there is a clear shortage of smaller one or two-bedroom properties for families to move into. Even when smaller properties are available to rent, they may be unsuitable for the needs of those who seek homes.

I hope that the Minister can provide me with some figures on a matter that the city and county of Swansea has come across. For more than 20 years, its policy has been not to house children, disabled people or elderly people in flats on or above the second floor, for the good reason that there have been tragic accidents in the past, which have been frightening for tenants. It is not deemed proper to house those with mobility problems or children on upper floors, where they have to deal with stairs, balconies or windows at a height. Has the Minister looked at the issue, and can he tell us how many other local authorities are in a similar position? I applaud the city and county of Swansea, because the policy is an eminently sensible one. Obviously, however, it reduces the available housing stock.

A Labour party freedom of information request showed that councils will be unable to help 19 out of 20 families who are affected by the bedroom tax. The figures from the 37 local authorities that responded suggest that 96,000 families will be hit by the bedroom tax, but there are only 3,688 one or two-bedroom council properties available for families who wish to move to avoid the tax. The entire exercise is proving similar to moving the deckchairs around on the Titanic; it is not a good idea when many other more pressing issues need to be addressed. I would be happy to work with the Government on those more pressing issues in our communities. We seem to be pursuing the policy just for the sake of making things look better, and it is simply not working.

Benefit claimants are being treated as though they were part of some sort of social experiment that is being undertaken to appease certain sectors of the community. We already know the outcomes. The policies do not work. They punish and condemn those who are dependent on benefits, and they do not remotely encourage improvement or change for the better.

Before I finish, I want to touch quickly on discretionary housing benefit. We have heard about other local authorities that do not seem to be having a problem and that are quite happy with the situation, but we have a small shortfall in Swansea in the money that is coming in. Currently, the shortfall is some £1,200, which sounds great, but I am concerned that the combined funding from the Department for Work and Pensions and the Welsh Assembly Government is not enough. If the situation continues, we will see an ever-increasing burden on the local authority and its finances. In Swansea, there were 3,198 applications for discretionary housing payment in 2013-14. The local authority awarded 1,871 discretionary housing payments, but it refused 1,327. It is pretty clear that there is a funding gap. In addition, the discretionary housing payment is awarded only for a maximum of 52 weeks. I echo the request of the hon. Member for Ceredigion for further clarification on the future of the discretionary housing allowance.

The housing benefit changes have adversely affected almost all claimants in Wales.

[Geraint Davies]

My understanding of the overall figures—I do not know whether the Minister is interested in this—is that 40% of tenants in Swansea, or 1,949 people, will now have to pay the bedroom tax. I understand that 1,230, or 63%, of those people have gone into arrears since April.

[Mrs James]

I thank my hon. Friend and colleague in the city and county of Swansea for that contribution. We are in a horrendous situation, which has left those in our communities who are least able to defend themselves reeling. I have a horrible feeling that it is only the tip of the iceberg, and that other nasty policies will soon come along to make those people’s lives even more difficult than they are now.

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[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a pleasure to serve under your chairmanship, Sir Roger, as it is to speak in this debate. Indeed, it is a pleasure that the No. 1 conclusion in the report makes the case for rent controls in the private rented sector. That was an amendment that I suggested when we were deliberating over the report, and it received the support of the majority of the Select Committee, for which I am extremely grateful.

The under-occupation penalty for recipients of housing benefit in the social rented sector is the signature regressive social security policy of the current UK Government. Labelled the bedroom tax, in Welsh it is called the treth llofftydd—when there is a hashtag in Welsh on Twitter, we know we are in trouble.

The bedroom tax, as the Select Committee Chair, the hon. Member for Monmouth (David T. C. Davies), said, is part of the UK Government’s efforts to reduce the housing benefit bill. I, too, pay tribute to his chairmanship. It is a pleasure to be a member of the Committee and to work with him. He is extremely fair to me as the single Plaid Cymru member of the Committee. Despite his persona in the Chamber as a ferocious, right-wing beast, he is a very kind Chairman.

The UK Government, of course, have a three-prong strategy for reducing the housing benefit bill. First, there is a cap on benefits, which the official Opposition now support, with additional regional elements, should they form the next Government. Secondly, the annual uprating of welfare payments is pegged at 1%, which means that there are real-terms cuts to social security support every year. Thirdly, there is the bedroom tax, or under-occupancy penalty.

Despite all that, in its response to the 2014 Budget the OBR projected that housing benefit expenditure will increase by £1 billion by 2018-19. If they have time, I ask Members to read that report on their way back on the train this evening. Page 146 states:

“The largest driver of the rise in spending on housing benefit has been caseload growth in the private rented sector.”

The report goes on to say that the trend towards renting is driven primarily by the huge increase in house prices, which means that young people are unable to afford to purchase their own home. Only those who are supported by their parents are able to afford a deposit. The last bit of page 146 states:

“The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth relative to rent inflation. This explanation is supported by DWP data, which suggest that almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.”

That makes my case for me. The key reason for the increase in the housing benefit bill, which we will see despite the regressive policies introduced by the UK Government, is spiralling rents in the private rented sector.

The Financial Times reported in 2012 that rents had increased by 37% since 2007, and it projected a 35% increase in rents over the following five years. That was before the housing bubble that we are now experiencing, with the OBR projecting that house prices will increase by 9.2% in the third quarter of 2014 alone. The OBR envisages a 30% increase in house prices over the next five years. When we couple those statistics with stagnant wages, it is unsurprising that more and more people in employment are falling into the trap of requiring housing benefit. Often when we discuss this issue, people miss that housing benefit is an in-work benefit; it is not for people who are unable to work but for people who are working now.

House prices are projected to reach 2008 pre-crash levels by 2019, which means we are in a greater boom and bust cycle than we were in 2008. As wages are stagnant, the bubble is being fuelled by increased debt. We are living in worrying times.

[Geraint Davies]

Will the hon. Gentleman acknowledge that bank lending to businesses is 30% down since 2008 but that bank lending for mortgages is beyond 2008 levels? House prices are going up, rent is going up but real wages are going down. When interest rates go up, we will have a sub-prime debt disaster on our hands.

[Jonathan Edwards]

The hon. Gentleman and I are singing from the same hymn sheet. We were promised a rebalancing of the economy and a move towards business investment and exports, but we are seeing the same old boom and bust policies that have been the hallmark of the UK economy for many decades. The danger is that the boom and bust on this occasion might be even more serious than that built up in 2008.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

I thank the hon. Member for Monmouth (David T. C. Davies), the Select Committee Chair, and I feel that it is a great shame that the Minister, who is a Liberal Democrat, supports a pernicious and wicked policy.

The two grounds on which that policy has been proposed are under-occupancy and housing benefit. As for under-occupancy, only 10% of housing in the social sector is under-occupied. In the private rented sector the figure is 15%, and in the owner-occupied sector it is 49%. There is no case. The reason why occupancy levels in the public sector are so efficient is that, after tenants die, the housing is recycled. The tax is punishment for families whose children have grown up and left the house. Two and three-bedroom houses are rightly provided for families in need with children, not for single people. When the children grow up and leave for college or wherever, the family is then punished and asked to move—but where? Nowhere. We know the figures. There are 40,000 affected households in Wales and 400 units to move to, so those people have no choices. The rule is just a tax on the very poorest who are already on housing benefit.

The average cost is £728 per household. The Labour party goes on and on about the average household in Britain losing £1,600 under the Tories, but we do not make much mention of the fact that it is the poorest who have been clubbed the hardest, because that £728 is being taken from the very poorest. It is no surprise that, as I mentioned with reference to Swansea, 40% of people are being hit by the rule, and 60% of those are already in arrears. People are being moved from poverty to destitution, and that is a disgrace. The occupancy case does not stand up: there is not a problem and there is nowhere to move to.

The housing benefit case does not stand up either. Housing benefit has doubled from £10 billion to £20 billion in the past 10 years, and 70% of that increase is simply due to private sector rents, because not enough housing is being built. If we move people—I am referring to Swansea figures again—from a three-bedroom home to a two-bedroom one and from the public to the private sector, the rent goes up 50%, so the housing benefit goes up: it is counterproductive. The rule is a mean, wicked attempt to recover from the poorest some of the deficit that was caused by the failure of the bankers. It is a nasty, unpleasant Tory tax, and the accomplices, including the Minister, are the Liberals. It is disgraceful.

People are being pushed into the hands of payday loan sharks. Wonga has given £800,000 to the Tories. It absolutely stinks. I know that people are being kind and saying, “This is not working properly; don’t you realise what is happening here?” My view—it is clear from the evidence—is that all the rule was about, all along, was hitting the poorest hardest, to be able to afford making the rich better off.

The other evidence is the fact that pensioners have been let off the hook. Why? Because they vote, and it would be politically unacceptable to do otherwise, although the under-occupancy rate is obviously higher among the very old. I am not promoting the idea that the bedroom tax should be applied to pensioners, because the whole thing is pernicious and awful; but why was it choreographed in that way? The answer is obvious.

As for universal credit, there are three huge computer systems—for HMRC, the Department for Work and Pensions with Jobcentre Plus, and local authorities—being crushed together. As for the idea that that will not generate the inevitable catastrophe that always happens in public sector IT, the cost will be picked up by the most vulnerable people, at greatest risk, who rely on meagre benefits and will then have to go to food banks. This is a disaster waiting to happen. Do the Tories and Lib Dems care? No, they do not. It is a complete disaster and disgrace, and I look forward to the day when we can vote it down for ever.