General matters

Jack Dromey Excerpts

Tuesday 21st December 2010 Commons Chamber

[Jack Dromey (Birmingham, Erdington) (Lab)]

I congratulate my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) on initiating the debate on winter tyres. I should like briefly to say something about the impacts and benefits. The impact on the economy of what has been happening over the past seven days has been enormous. Last weekend, the retail sector in Birmingham, which was suffering gridlock, lost a third of its anticipated business. Distribution and logistics companies in the midlands such as DPD and TNT, which serve retail and manufacturing industries and Royal Mail, have had immense problems in discharging their responsibilities at their busiest time of the year. Royal Mail itself has had to take on an additional 7,000 employees. I pay tribute to the remarkable postmen and postwomen out there in all weathers serving this country well.

The impact has also been felt in terms of accidents. Last weekend, the ambulance service in Birmingham had 3,000 calls in one day—Saturday—many of them about very serious accidents that occurred as a consequence of the appalling weather that hit the city.

Increasingly, the problem is that citizens are struggling to get where they want to in Britain—even to admirable counties such as Suffolk and Norfolk. The benefit of winter tyres is therefore absolutely clear. Sadly, we no longer have the tyre industry in Britain that we once had. At its height, Fort Dunlop in my constituency had 15,000 employees. There is still the aircraft tyres factory that employs 400 people; it is a highly successful company. Britain no longer has mass production of car tyres. However, we still have the Michelin factory in Stoke and the Goodyear factory in Wolverhampton. I know both factories very well and visited them personally when I was deputy general secretary of Unite. Both have the capacity and technology to manufacture winter tyres. If we were to promote winter tyres, as we must, given the chaos of the past seven days and the certainty that we will have further bitter winters of the kind we are encountering at the moment, the benefits would be enormous for our economy generally and for the motor manufacturing cluster in the midlands, employing 150,000 people, in particular.

My hon. Friend the Member for Birmingham, Edgbaston is absolutely right to raise this issue, because winter tyres will save money if insurance companies incentivise; she is right when she says that that would be the thing to do. The evidence from continental experience is that that would save them money in reduced insurance claims. It would save lives and it could create jobs. Let us hope, therefore, as we wish this House a very merry Christmas, that this is the last winter in Britain that we see this lack of winter tyres. The future must lie in people being smart, buying British, buying winter tyres, saving themselves money, and being able to get to admirable places such as Suffolk and Norfolk.

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[Craig Whittaker (Calder Valley) (Con)]

Let me take this opportunity, Mr. Deputy Speaker, to wish you and all Members of the House, as well as its staff and their families, a very merry Christmas and a happy new year.

In April 2008, the previous Government introduced the local housing allowance as a new way of calculating housing benefit for tenants in the private sector. The allowance is paid directly to the tenant, who should pass it on to the landlord as rent. The housing allowance and direct payments to tenants allow prospective tenants to “shop around” with their allowances, but following the introduction of local housing allowances more than 41% of private landlords—an increase of 4%—are not letting to tenants who receive such allowances, mainly because of the lack of a guarantee that rents will be received. The greatest difficulty facing many landlords with local housing allowance tenants is their inability to obtain rents. Currently, when tenants are in arrears, landlords must wait for a minimum of eight weeks before they can request direct payments.

I recently attended a meeting of the Calderdale landlords association in Calder Valley. The picture that was painted was of a sector in meltdown. No fewer than 350 properties belonging to the members of the association who were present at the meeting are in danger of being withdrawn from those receiving local housing allowances, entirely owing to the lack of guarantees.

In far too many cases throughout England, tenants move in, pay the first month’s rent, and then do not pay for two months. Leaving arrears, they then move across the border to neighbouring local authority areas and repeat the process. Then, of course, they move on again. Many pay only three months’ rent in 12 months. The cost to landlords is getting out of hand, and the practice is keeping rental charges far too high. Honest, decent people who pay their rent on time are subsidising many people who do not. A landlord who contacted me recently said that in a portfolio of 15 houses, seven tenants were more than two months in arrears, and five of them had moved on owing well over £1,000 each in rent. The cost to landlords of pursuing back rents is also expensive, and landlords incurring that additional expense often have no chance of receiving any money at all. As a result, many landlords do not pursue back rents, as by doing so they would only add to their losses.

At a time when supply should be increasing to meet increasing demand and take advantage of higher rents, stock levels in the sector fell by 2.7% between the first and second quarters of the year. As a consequence, not only is supply much tighter, but rents increased at a rate of 2.3% over the same period because supply is so much lower than demand.

Other issues in the sector are causing a decline in stock levels. The taxation system provides little incentive for investment in accommodation; we should allow the private rented sector to be treated in the same way as businesses. The system is also failing to identify vulnerable people who, even under the current arrangement, should be eligible for direct payment of their local housing allowance to their landlords. Many tenants are failing to manage their finances properly, falling into rent arrears and having their tenancies terminated. The safeguarding processes that exist are failing. Many landlords are reporting that rents have not been paid this month, as some tenants are choosing to spend their housing allowance on Christmas rather than paying their rents.

The solution to the crisis that is starting to develop is quite simple. The Residential Landlords Association, Shelter and Crisis all agree on two specific points. First, their tenants—who consist overwhelmingly of claimants of local housing allowance—say that they would prefer the allowance to be paid directly to their landlords. That would help people to manage their finances, and would reduce the temptation to use the allowance to pay other debts rather than paying rent. It would also provide tenants with security so they could be sure that the rent had been paid and there was no chance of losing their home.

[Jack Dromey]

The hon. Gentleman’s heart-rending appeal on behalf of landlords is very interesting. Will he join me in extending similar concern to the 67,000 families in the midlands facing an increase of an average of £9 a week as the consequence of £1.8 billion being taken out of housing benefit by his Government—families who can ill afford to pay £9 a week extra?

[Craig Whittaker]

I thank the hon. Gentleman for that intervention. I am sure he will agree that it was the previous Government who brought in the housing allowance, which is hindering the progress of the private rented sector and stopping investment in it, as I mentioned.

The rule by which the local housing allowance can be paid directly to landlords only when claimants become eight weeks in arrears should be replaced when a sum of one month’s rent falls into arrears for 14 days. That would prevent tenants in difficulties from getting further into debt. Allowances should also be paid calendar-monthly in advance, in line with normal rental payment practices.

For a system that was set up to give people their own choices, its failure is producing a system where rents are on the rise because of the shortage of housing in the sector and because of those who do not pay their rent and buck the system. That is without question increasing rents in the sector. That is not fair, it is not sustainable and it needs to change.