Finance Bill

Debate between Graham P Jones and Nick Raynsford

Tuesday 2nd July 2013 Commons Chamber

[Graham Jones]

Does my right hon. Friend agree that the Treasury does not seem to be taking account of evidence which shows that the cost of private renting housing, per unit, is roughly twice the cost of social housing? At that rate, the more reliance there is on the private rented sector, the higher the housing benefit will be.

[Mr Raynsford]

I entirely agree. As my hon. Friend the Member for Birmingham, Erdington pointed out, it is important to support the private rented sector, but it must be helped to do the job it does best, which is providing for people whose incomes are higher than the incomes of those who have traditionally depended on social housing.

The Government have created a problem for themselves by trying to use the private rented sector, with high rents, as a substitute for social housing, with lower rents. That is inevitably a recipe for more dependence on housing benefit. It traps people who are dependent on benefit, which is bad for them, and it increases the bill for housing benefit. What we need are policies that encourage both the growth of a private rented sector for people who can afford to pay a market rent for their housing and will not be dependent on benefit, and, in parallel, the revival of a social housing sector that meets the needs of those who require housing at sub-market rents.

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[Mr Raynsford]

I entirely agree. I happen to be the president of Youthbuild UK, which is one of the bodies that has been campaigning specifically for more effective opportunities for young people, in particular disadvantaged youngsters, to get the training and skills necessary to secure employment in the construction industry. I wholly endorse what my hon. Friend says.

There are benefits in terms of the economy. There are benefits in terms of employment. There are wider supply chain benefits. I am thinking in particular of all the industries that provide the materials, furniture, furnishings and equipment that go into houses when they are built. When people move into a house, they need carpets, furniture and various fittings, and all of that additional demand will be good for the UK economy. There is therefore a real multiplier effect from an expanded house building programme.

It is not just about new homes. As has been said, it is also about retrofitting existing homes that are in poor condition. Here the Government have got themselves into another mess, but not through lack of a good idea. The idea behind the green deal is a sound one: that we try to put in place a mechanism that enables people to borrow the money required to fund improvements in the energy efficiency of their home and they can then pay for that out of the savings they make through reduced bills because the home demands less energy. That is in principle a very good idea. The problem is that the scheme the Government have managed to come up with after quite a long gestation period has proved so complex, opaque and financially disadvantageous that it is at present struggling to get any takers.

I admire the ambition displayed by the Minister responsible for the scheme in trying to get it off the ground. He has put a huge amount of effort into trying to promote it, but as it is currently constituted it is simply not attracting the interest of the British public, and without doing that it will not fly, so we will have a continuation of the problems of energy inefficient homes that are bad for the environment because they pour out unnecessary carbon emissions. That will be bad for the fuel poor who end up paying more for fuel than they need to, and it will be bad for the construction industry because all those potential jobs in retrofitting existing homes will not be taken up.

[Graham Jones]

Does my right hon. Friend agree that it is an indictment of the Government’s shambolic housing policy that they rejected the idea that private landlords should in the near future be forced to implement the green deal and energy efficiency measures in properties? The Government have put that backstop date back to 2018, which allows private landlords still to have houses that do not meet the lowest of energy ratings for many years.

[Mr Raynsford]

I am grateful to my hon. Friend for highlighting that, because it is a cause of real concern that the energy efficiency programmes that were in place have come to an end, and as a result of the introduction of the new ones—the green deal and the energy company obligation programme—the level of activity on energy efficiency retrofitting has plummeted.

I talked to a housing association, active in my constituency, that has done a magnificent retrofit of about 1,000 properties in Charlton. That has hugely improved the comfort of its tenants, who can now keep warm at much less cost. It has improved the appearance of the estate and has won plaudits from everyone, and it was done with a work force who included a number of young unemployed people from the area, who were trained specifically to be able to take up the advantages of employment as part of the scheme. It was an admirable scheme. When I was congratulating the housing association on it, the one and only disappointment came when it told me “Well of course this was funded under the old community energy saving programme—CESP—which made it possible and has now ended. We would probably not be able to do this again if we were starting from scratch today.” That is an obvious problem.

[Mr Raynsford]

The thrust of my whole speech is about the importance of the Government finding more effective measures to stimulate investment in housing in all sectors. That includes bringing empty properties into use, improving the existing substandard housing stock and building new homes that are needed to increase the supply. The case is overwhelming, but, sadly, as the figures cited in this debate so far have shown, the Government are failing to meet the needs. I am not going to go into that in detail, because it has already been covered.

I wish to draw attention to the new homes bonus. It an extraordinary scheme, and our Front-Bench spokesperson made some pertinent remarks about it. It was launched by the Government as, supposedly, the panacea for the problem of opposition among some local communities to new house building in their area. The theory was that if a financial incentive was given to councils and to communities for agreeing to build new homes, we would get a different attitude—we would have enthusiasm for new house building rather than hostility. And so the new homes bonus was launched.

The new homes bonus is a very expensive scheme. As the National Audit Office report demonstrates, it is costing £668 million in the current year, but that is due to rise to £905 million next year, to £1.1 billion in 2015 and on beyond that, because it is a cumulative bonus that is paid for a six-year period. I have given only the individual one-year costs. When we add in the cumulative costs derived from previous years’ awards, we find that by 2018-19—that is six years ahead, so at the end of the six-year period—on current trends, expenditure on the scheme would be £7.5 billion. It is a very, very expensive use of public money, which is mostly taken from local authorities. The Government talk about it as though it is a Government scheme, but they are putting in only £250 million a year, with the rest coming as a top-slice from local government funding.

[Graham Jones]

My right hon. Friend is making a strong argument about the new homes bonus, which is top-sliced from local authorities and given back to those who build. On other policies, such as empty homes and retrofitting, local authorities that have had their income reduced substantially, and are in low-demand areas such as mine and unable to build new homes, encounter a perverse incentive, whereby a slew of issues, such as empty homes and dealing with the private rented sector, cannot be dealt with. The money is simply given to authorities that are cash rich and are building more homes, and it is not really in their interests to build any more because they have got enough money.

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[Mr Raynsford]

My right hon. Friend makes a valid point, and it is a further argument for the serious and thorough evidence-based review of the subject that the Government ought to be undertaking. It is shameful that they are continuing to tinker with this failed scheme at a time when there is such an urgent need for the limited funds that are available to be used to best effect to stimulate investment in housing and to have the beneficial economic effects that my hon. Friends and I have been talking about.

The amendment specifically calls for a review of the operation of REITs and their interaction with the housing market. That is important because the scale of investment necessary to secure the level of house building and home improvement we need will require a combination of public and private investment. We must therefore have measures that encourage more private investment in both private and social rented housing. Institutional investment in private renting has been a bit of a holy grail for many years for people who saw it as a way of ensuring an improved private rented sector driven by responsible investors who would be keen to see high standards of investment and management.

[Graham Jones]

I am grateful to my right hon. Friend for giving way once again. Will he congratulate my local Labour authority, Hyndburn borough council, which has private institutional investors? The council has got a pension company to invest in private lets to the tune of £14 million and is using that capital to regenerate and provide affordable housing for rent for people who need it. Does he not agree that there should be more such schemes in the UK? That flagship programme has appeared on many television programmes and I am proud to say that a Labour authority is doing it.

[Mr Raynsford]

My hon. Friend makes a valid point and highlights the fact that throughout the country, there are a series of partnership agreements between the public and private sectors which are successfully helping to attract increased investment to meet social needs. That is what we need to encourage. I very much welcome amendment 57 because it calls for precisely that: it calls for a review of the REITs programme and how it interacts with the housing market. The thinking behind it is entirely about how we can ensure more effective blending of public and private finance to meet housing needs.

I have gone on quite long enough, so I will let others contribute. I conclude by saying that current policies are not working. We have a stagnant housing market, which is showing very limited signs of recovery. We have massive unmet needs., and we have huge economic problems which should be addressed by an expanded house building programme. I hope the Government will change course.