Housing Benefit (Under-occupancy Penalty)

Jonathan Edwards Excerpts

Wednesday 27th February 2013 Commons Chamber

[Steve Webb]

I started my remarks by talking about deficit reduction because this measure is intended to save money. The shortfall to which the hon. Gentleman refers is the saving to the Exchequer. If we fill the gap completely, we will not save any money, so we might as well not do the policy. I have to say that if Wales is getting a fifth of the shortfall, it is doing exceptionally well relative to the rest of the country.

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

rose—

[Steve Webb]

If I may, I shall respond to the Chairman of the Select Committee, who made an important point about those who are “intentionally homeless”. Although it is for local authorities to make decisions on homelessness applications as they do now, under current statutory homelessness legislation, if the only reason for the person’s homelessness is a reduction in benefit that is outside their control they should not be considered intentionally homeless by the local authority. I can put that on the record and hope it is helpful.

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[Ann McKechin]

My hon. Friend refers to regulated rents. I am afraid that I am not an expert on the law of leases in England, but in Scotland long-term secured rentals are still subject to regulated rents. Very few of those remain in the United Kingdom—the average age of the residents in such cases is probably 85 plus—because frankly they were not attractive to the market at the time when the law was changed. In urban communities—the situation is worst in London, but it is an issue in areas such as Glasgow as well—transience is increasing, as people move house at ever more regular intervals, not through choice or for job reasons but because their landlord thinks he can find another tenant who is prepared to pay a higher rental. The only way to stabilise the market and get rentals back down is to improve regulation, and that is why the law needs to change. The Scottish Government should start an urgent debate about that. There is no reason why Scotland cannot lead the way in the reform of leases.

[Jonathan Edwards]

Will the hon. Lady confirm that should the Labour party find itself in government following the next Westminster election, it will introduce rent caps for England?

[Ann McKechin]

The hon. Gentleman raises a good point. The Leader of the Opposition has stated on the record that we want to reform the law of leases in England to create longer-term leases of five years plus. That would be a good measure to stabilise the market.

Registered social landlords should also be provided with much better assistance. Scotland has many small housing associations. The Scottish Government, working with local authorities and housing associations, should be much more proactive in seeing how they will cope with the additional costs they will undoubtedly incur. The housing association is often not just a landlord but acts as the hub of the local community, providing community resources and arranging contact with local police or local schools. It is very much in the control of local tenants and represents the local community. Should a consolidation of housing associations be necessary, it is vital that that be planned rather than chaotic, and that they be fully supported throughout the process.

In Scotland there is also a need to examine how local authority powers under social work legislation can be used. As Members have commented, the costs of eviction and of housing people under the homelessness legislation are high, and in many cases it is much easier, and cheaper for the public purse, for a person to remain in their house.

We also need to consider increasing council tax bands, to find out whether we can levy the additional £50 million per annum—that is a rough estimate—that the change will cost social landlords and councils. That would provide a buffer zone. I believe that those with the broadest shoulders, not the poorest, should take most of the burden.

Doing nothing is not an option. Dropping the bedroom tax and working with tenants, housing associations, local authorities and the devolved Administrations to reduce housing benefit costs in a sensible and co-ordinated way that does not kill our communities should be the only option on the table. I urge the Government to reconsider.

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

I am grateful to be called to speak in this Plaid Cymru, Scottish National party and Green party debate on the UK Government’s proposals to introduce an under-occupation penalty for recipients of housing benefit in the social rented sector. The policy has already gained infamy—it is dubbed “the bedroom tax”. The Labour party has decided to make it a political dividing line with the UK coalition. Leaving aside the fact that Labour Members abstained on Second Reading of the Welfare Reform Act 2012 and have failed to raise the issue in the House in a motion leading to a vote, I was delighted that the shadow Secretary of State for Wales, the hon. Member for Pontypridd (Owen Smith), confirmed on Twitter this afternoon that Labour Members will join us in the Lobby later.

Before the 2010 general election, I made a keynote speech at the Plaid Cymru spring conference at the home of Welsh cricket, Sophia Gardens in Cardiff—[Interruption.] It was brilliant. In that speech, I said that talking up the severity of the public debt was a deliberate tactic by the Tories that served two political objectives: first, it highlighted the economic mismanagement of the previous Administration; and secondly, it created the backdrop to justify the declaration of war on the public sector, which we have witnessed since the election. The so-called bedroom tax is a prime example of what I foresaw. It is a headline-grabbing, ill-thought-out policy that panders to the prejudices of those opposed to any social protection.

We have heard compelling arguments in the debate on why the motion should be carried, most notably from my hon. Friend the Member for Banff and Buchan (Dr Whiteford), who opened the debate—I will not restate her points. Above all, the bedroom tax is part of the UK Government’s strategy to reduce the housing benefit bill, as the Minister admitted in his opening remarks. The capping of benefits is the major element of the strategy, which is complemented by the under-occupancy policy and the recent Welfare Benefits Up-rating Bill, which pegs annual increases at 1%.

[Mr MacNeil]

We sometimes hear Ministers speak of deficit reduction, but is it not likely that the net effects of the policy will be the opposite, because it will reduce demand in the economy by taking money away from the pockets of people who are most likely to spend it, and who certainly need it? The result will be yet more economic mismanagement, which will probably contribute to a further downgrading of the UK.

[Jonathan Edwards]

My hon. Friend makes a valid point—I will give him some meat to justify it in my next remarks.

The Office for Budget Responsibility radically revised its projections for housing benefit expenditure in the autumn statement. At the time of last year’s Budget in March, the OBR projected that the housing benefit bill would fall by £300 million in 2012-13; and then by £400 million for each financial year between 2013-14 and 2016-17. The OBR now projects an increase of £700 million in 2013-14, and increases of £600 million, £500 million and £400 million in subsequent years.

There is a multitude of reasons for that, but by far, one key factor is the spiralling cost of rent. Housing benefit is an in-work benefit. As rent costs spiral, more and more working people faced with real-terms falls in wages meet the eligibility criteria for housing support. The Financial Times has reported that, in 2012, rent costs increased by an average of 37% compared with 2007, despite the economy being in the midst of the great recession since 2008—gross domestic product is still nearly 4% below the previous peak.

The Financial Times further reported that rent costs are expected to increase by an incredible 35% in the next six years. More and more employed people will become eligible for housing benefit. Indeed, last summer, the housing benefit claimant count surpassed the five million mark for the first time, which means that around 20% of households are claiming the benefit to help them meet their housing costs. Between January 2010 and December 2011, the total number of housing benefit claimants increased by 301,000. In the same period, the number of non-passported claims—those in employment—increased by 279,000. Therefore, households in employment account for 92.8% of the overall increase in housing benefit claimants. Unless we are able to ensure that the pace of rent increases broadly reflects incomes, then Governments of whatever colour will have no chance of controlling their housing benefit costs.

Measures such as the under-occupancy penalty are tinkering around the edges. There are solutions for dealing with the housing benefit bill without resorting to the sort of initiatives preferred by the current UK Government that are having such a detrimental social impact. In 2004, the Government of the Republic of Ireland introduced the Residential Tenancies Act. A private residential tenancy board was set up to deliver reforms. Its aim was to regulate the private rented sector by extending the length of tenancy towards a more European model, clearly defining rights and obligations for both landlords and tenants, providing access to inexpensive dispute resolution, safeguarding bond payments and, crucially, capping rents.

By placing a cap on rents and driving down artificially high rental costs, the Government would have direct control over their housing benefit bill. The UK Government could then reduce their liabilities without penalising some of the most vulnerable people in society. It would also mean that working people would have a better chance of affording rent costs in affluent areas. Rent caps have been a fixture in New York since the 1940s, and New York is the home of global capitalism. Rather than targeting social housing tenants, the UK Government, and devolved Governments if they have the competence, should intervene in the social and private rented sector and cap rents.

As we have heard from other hon. Members, another solution is to address supply and demand issues by building more affordable housing. The recovery in the UK after the great depression was in part the result of a massive house building initiative. This is an ideal time for private investment, because of the guaranteed revenue streams from rental payments. It would create construction jobs and drive demand in the economy. As far as this debate is concerned, it would reduce rent costs in the private rented sector and thus the housing benefit bill.

With specific reference to the under-occupancy penalty, social tenants worried about the technicalities of the new rules have already approached my constituency offices. One of my constituents lives in a two-bedroom bungalow and receives full housing benefit. He has turned one of the bedrooms into a sterile room for his dialysis treatment. He spends three hours a day, seven days a week in this room. He has spent a lot of money turning the bedroom into a sterile room and adapting his home for his dialysis treatment. This saves the health board money, as well as releasing the hospital bed for others. Why should he now be penalised for technically under occupying his home?

Another constituent contacted me to say they had been moved from a two-bedroom property to a three-bedroom property that had been adapted for their needs. They now face the charge, despite the housing officer saying that the third bedroom is too small to be used as a bedroom. They will not, as was advocated by several Government Members, be able to rent that bedroom to a lodger. The answers to the housing benefit bill do not lie in a cap in benefits, a real-terms reduction in annual uprating or the bedroom tax. I urge Ministers to think again and to look at some of the solutions I have offered today.