Poverty

Lord Best Excerpts

Thursday 22nd July 2010 Lords Chamber

[Lord Best]

My Lords, I congratulate all those who made their maiden speeches today. We have a wealth of new talent among us. I also congratulate the noble Earl, Lord Clancarty, who has rejoined us on the Cross Benches, on his powerful contribution. As president of the Local Government Association, I must welcome the noble Lord, Lord Shipley, particularly. He will be another strong voice for local government, which will be very important in this era of localism and devolution of power from the centre to local government. He brings us expertise from the public and private sectors; from academia in a very distinguished form; and from the arts, which Newcastle and Gateshead have done so much to promote over recent years.

Most of all, the noble Lord has been a councillor for 35 years and since 2006 has been leader of Newcastle City Council. Newcastle has seen the most incredible transformation in recent years. I have followed its progress wearing various hats in the housing world and as the father of a student at Newcastle University, which has entailed endless visits to that vibrant and exciting place. Over the years in which the noble Lord and his predecessor, the noble Lord, Lord Beecham, who we will shortly welcome here, have been responsible, they have done so much to change a great city. I congratulate the noble Lord on a most eloquent and articulate speech, and we look forward to many more contributions of that high calibre.

I thank the noble Lord, Lord McKenzie of Luton, very much for introducing this debate. He has drawn attention, among other aspects of the ways in which the Budget impacts on people in poverty, to the problems that will be created by reductions in housing benefit. I want to share with your Lordships some thoughts on the ways in which the housing benefit cuts may have an effect.

The intention is that the Budget will see a reduction of some £2 billion each year in the amount paid in housing benefit, which means that a hit has to be taken either by the landlords or by the tenants. There are no other sources from which we can draw that £2 billion of savings each year. In other contexts, I will explore with your Lordships some of the impacts on landlords in facing a situation in which their rental income is likely to reduce but today I want to concentrate on the impact on tenants.

The cuts that are to face tenants who receive housing benefit, or in the case of those in the private rented sector the local housing allowance, are in several different forms. The first is the cap on rents in the London area. Although we may hear shock-horror stories of a handful of families with many children who have received as much as £2,000 a week for their accommodation, these are very few and far between. The new cap is to be set for the largest families at £400 per week. One would think that that is quite a large sum, but it is not so in inner London where that is the amount required to house families. Indeed, it is impossible to find accommodation in many parts of inner London at that price.

This will mean that the families whose rent is currently well in excess of this figure will have to move away from inner London to accommodation elsewhere, which is likely to be incredibly disruptive of family life. For example, there may be children at school, carers close at hand, people with disabilities who know a particular area and have no desire to leave it, people who go to a hospital locally and wish to remain there, and people in a range of circumstances who will find it very difficult to relocate to other parts of the country in order to avoid the gap which could be, in the case of inner London, several hundred pounds a week between the rent that will be paid in the future and the actual costs of their accommodation. We need to think ahead to how we will handle the exodus of the lowest income households from the high-priced areas of inner London.

There is also the cap that comes from using the 30th decile instead of the 50th decile in determining the housing benefit for a household, which is a complicated business. It means that in a lot of cases people will again, all across the country and not just in London, find that there is a gap between what they receive in housing benefit and the market rent in the area in which they are located.

Other reductions follow on top of those. If you are living in accommodation deemed to be too large for your needs, there will be a housing benefit cap relating to the size of accommodation in which you are living. If, for example, you are in a three-bedroom council property but it is deemed that you could well do with only a two-bedroom or a one-bedroom place to live, you will be required to move or you will not receive the full rent to continue where you are. The problem with that is that councils have built over the years five times as many three-bedroom homes as they have built of any other size. The actual opportunities to move to the smaller accommodation, until we build more homes, may be rather complicated. If you are living in a tower block, it is likely that you are a single person. Local authorities have been reluctant to put children into the three-bedroom accommodation in towers because of the impact on family life. These are restrictions that families will face.

There is a further restriction if you are on jobseekers’ allowance and are unemployed. Whatever efforts you are making to secure employment, if you fail to do so your housing benefit will be cut by 10 per cent after a year of looking for a job, even if you are in an area of high unemployment. Even if you have been demonstrating that you have been trying your very best to get employment, you will still see a deduction from your housing benefit.

I accept that in some cases landlords will be willing to cut the rents and take a lower rent than they have in the past. That is particularly the case in those low-value areas where a large proportion of those tenants coming to them are on housing benefit. That is not the case in London and in the high-value areas where there will be plenty of choice of other people to accept. Frankly, landlords would be ill advised very often to take anyone who was in receipt of housing benefit. Those people will have to move on and it is not at all certain to where they will move.

We heard about the spiral of arrears, followed by evictions, followed by homelessness, which seems to be a likely outcome in far too many cases. For other people, there will be attempts to struggle on and find the full rent to stay in the accommodation or to move into accommodation elsewhere even though there is a gap between the housing benefit received and the rent that must be paid. That gap would have to be filled from the income support or other benefit being received by—let us remember—some of the poorest people in society. It will be extremely difficult for people to meet that gap out of the income they receive from the state on benefits calculated specifically to exclude any housing costs. They are benefits paid in order to cover food, heating and other costs, but not housing. To fill that gap from within their benefits will be extremely problematic for the poorest households.

Perhaps I may suggest four ways in which the Government might need to respond to the position in which they find themselves. Few people doubt that housing benefit requires an overhaul. It is a very complex arrangement which could do with changes. First, I suggest that we need to phase the cap for those London households which will have to move to the edges of London or beyond. We will need to take that more gently and slowly than at the moment—at the anniversary of your rent coming up—and suddenly finding a colossal cut in what you can pay to your landlord.

Secondly, the discretion for local authorities to make up the difference requires a larger fund than the one that the Government have set aside. They have said that £60 million is available to councils to top up those families and individuals for whom there is that gap. The £60 million is against a backdrop of a £20 billion a year housing benefit expenditure. That £60 million will not go very far. It would go towards two to three families in each local authority area for a year. The sum for local authorities and the discretion that they have needs to be increased.

Thirdly, it would be wise if job centres could certify that people had done their very best to get jobs and they should not have their housing benefit cut by 10 per cent. Finally, I would ask the Minister to ensure that there is now dialogue with Citizens Advice, Shelter, the Chartered Institute of Housing and others who have ideas on how one can make the most of a very difficult situation.