Welfare Reform Bill

Lord Best Excerpts

Wednesday 14th December 2011 Lords Chamber

Moved by

[Lord Best]

12: Clause 11, page 5, line 2, after “credit” insert “, subject to subsection (3A),”

[Lord Best]

My Lords, I am speaking to Amendments 12, 14 and 49. I know that amendments to my amendments have been put down and I will say a few words about them. I understand—I hope this is the correct procedure—that my Amendment 14, as amended, is consequential on Amendment 12. It is Amendment 12 that I shall concentrate on now.

These amendments cover the new underoccupation penalty for council and housing association tenants, the so-called bedroom tax for those on housing benefit. I am very grateful to the noble Baroness, Lady Hollis of Heigham, for her support, and to the noble Lord, Lord Kirkwood of Kirkhope, and the right reverend Prelate the Bishop of Ripon and Leeds, for theirs. Since the noble Lord, Lord Newton of Braintree, asked for his name to be added to the list, although of course only four are allowed, I know the amendment has support across all of your Lordships’ Benches. The amendment also comes with the backing of an impressive list of concerned charities and voluntary bodies led by the National Housing Federation and Shelter, to which I am very grateful for their hard work.

The amendment seeks to prevent a change to the definition of underoccupation currently used by the Department for Communities and Local Government. The Bill paves the way for a much tougher test than at present, with a hefty underoccupation penalty—a cut to the housing benefit—for those whose accommodation fails the new test. Currently, as the Housing Minister Grant Shapps made clear in October, a household in council housing or a housing association home is deemed to be underoccupying only if it has two or more bedrooms above the basic bedroom standard. One spare room is permitted. Under the Department for Work and Pensions’ proposed new definition, one so-called spare room would not be allowed.

Under the fierce new test, a family would be counted as underoccupying if, for example, two teenage girls were not sharing the same room, or if an older couple, one of whom is below pension age, have a two-bedroom flat. All those deemed to be underoccupying will have to move and downsize to somewhere smaller. If they do not, even if there is simply nowhere smaller for them to move to, then they must pay the new penalty. Six hundred and seventy thousand households receiving housing benefit will be caught in this trap, rising to some 740,000 in the years ahead. If they do not move out, they will be charged an average of £13 per week, which will have to come out of their low earnings or their other benefits, which are meant to cover food, fuel, clothing, and specifically not housing. These are by definition very poor households, and the new tax will represent a significant reduction in their living standards.

This may sound a heartless measure, but the Government’s objectives are not dishonourable. The intentions are to reduce the high cost of housing benefit in respect of tenants who stay put, or to free up bedrooms for larger households where existing tenants are persuaded by the new penalty to downsize. I fear that neither of these perfectly understandable objectives will be achieved by this measure.

First, it seems improbable that this will raise tens of millions of pounds. Those deemed to be underoccupying who seek smaller homes as a consequence may well have to move into the private sector, where rents, and therefore housing benefit, will be much higher, costing the DWP an extra £50, £60 or more a week. Secondly, the savings for the DWP will often translate directly into costs imposed on councils and housing associations. These bodies will have to assume the role of tax collectors, extracting the average £13 per week penalty from each tenant who does not move, which will prove to be an administrative and financial nightmare. To see who should be sharing a room, a landlord will need to keep track of the age and gender of each child. They will need to measure the bedrooms to see whether they can fit in two beds. They will need to find out whether family members are living at home or have actually moved out. It will require an army of snoopers to see who must be deemed to have a spare room.

If tenants will not pay or cannot pay, the saving to the DWP simply becomes a cost to the council or the housing association in arrears and bad debts. Less money for social landlords means fewer improvements, fewer regeneration schemes, and fewer much-needed new homes. Since the underoccupancy issue is a much more significant one in the north, affecting 46 per cent of working-age tenants in the north-east, and 43 per cent in the north-west, this tax takes money out of local economies in places that most need it. In Bradford, for example, one of the big housing associations has calculated that if it cannot collect all the payments, and has to take the hit in lost rent, it will cost £2.7 million per annum, which it can ill afford. That excludes the heavy cost of evictions—pointless evictions, since so often there will be nowhere cheaper for the household to move to—wherever the landlord cannot keep tolerating rising arrears.

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In summing up, I emphasise that this is not the end of the process. We have had to make some hard choices here to make the necessary savings as part of the deficit-reduction plan. We are balancing that by protecting those for whom being able to remain in their adapted homes and lead an independent life is rightly not something to be messed around with. Likewise, we recognise the vital work of foster carers and have in place additional funding to ensure that they are not discouraged. A watchful eye will be kept on the £30 million boost to the discretionary housing payment pot. A review will inform our evaluation of this measure. We have more than a year until implementation and we are using that time to explore the risks for landlords and claimants alike to minimise the potential for arrears and all the associated costs that can arise from them. We will continue to work closely with our stakeholders and draw on their expertise in this House. I ask for this amendment to be withdrawn.

[Lord Best]

My Lords, I am deeply grateful to Members from all parts of the House for their support. I am grateful to the noble Lord, Lord McKenzie, for the refinement to my amendment, which I fully accept. I hope noble Lords who have spoken will allow me not to summarise the excellent points that they have made and go straight to a few words about the Minister’s very helpful remarks. I congratulate him on bringing an extra £30 million this evening to alleviate the problems created by this legislation. Perhaps I could just pick up on two key points that he made.

The first is the suggestion that the proposed new definition of underoccupancy would bring social housing into line with the private rented sector. Tenants in the private rented sector are unaffected by this measure. They operate within a quite different framework, whereby the maximum of the local housing allowance is calculated for them based on this tight definition of underoccupancy but with the opportunity for the tenant to use the cash—the benefit—for something smaller, perhaps in a better area, or larger, perhaps in a less popular neighbourhood. In any case, those in the much more expensive private rented sector are predominantly younger, single and childless households, more than half of which stay for less than two years, and a third for less than one year. Unlike those in social housing, they seldom comprise a family needing a long-term home in which to bring up their children.

Secondly, the concession that the Minister has brought to us this evening would allow discretionary housing payments to be made to people whose properties have been specially adapted for a disabled member of that household. The discretionary housing payments would also be available where a foster child is coming into the property. These are excellent exclusions, or opportunities, at any rate, for a discretionary payment to kick in. One could list a whole lot more. Indeed, as one gradually looks at this, one begins to do just that. Why not include people with other disabilities—perhaps a family where, as the noble Baroness, Lady Hollis, suggested, a carer comes to stay periodically to provide respite for a parent? Perhaps an exception could be made where an elderly person has a spouse aged only 60. As things stand, they would both have to move or pay up.

The Minister says that everyone must pay their part and, on average, £14 per week is the part that many households will have to pay as the penalty charge. Even if it is £12, or £22 at the other end, I suggest that these are serious sums of money for many people in very low-income households, if they stay put. The option of moving does not exist for a lot of them.

I think this is the moment at which I would like to test the opinion of the House.

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Moved by

[Lord Best]

14: Clause 11, page 5, line 21, at end insert—
“(3A) In relation to a dwelling of which the landlord is a local housing authority or a registered provider of social housing, regulations under this section shall not permit the housing cost element of the universal credit to be less than the actual amount of the liability in a case where a household has no more than one spare bedroom.”

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[Baroness Hollis of Heigham]

My Lords, I will be very brief. The amendment indicates our very real concerns about the effect of all these cuts to housing benefit. We fear that if there is any reverse in our decision today on underoccupancy, housing associations will face mounting arrears, and spend more time and employ more staff chasing deficits in rent. As a result, there will be even less chance for those housing associations to build the new housing stock we badly need. I know the Minister thinks my fears are exaggerated. I hope he is right. The House has alleviated most of my concerns, but we cannot properly calculate the behavioural effect of all these changes on tenants. The Minister is evidence based—something we all welcome and respect—and he wants UC to work, as we do. I therefore hope that by the time the Bill has gone through its full passage in both Houses he will, if it is appropriate, find the resources to ensure that we have the research to undertake an independent review of its effects on tenants in social housing. Frankly, if we do not have that protection, I fear the worst. I beg to move.

[Lord Best]

I support the amendment. We already have up and running, thanks to the good work of the Minister, a really first-class piece of research looking at the impact of the housing benefit changes on families, poverty and a whole range of issues. I strongly congratulate him on taking that suggestion seriously and bringing forward a significant piece of research. It engaged a consortium of the top people at Oxford University, Sheffield Hallam University, Ipsos MORI polling and the IFS. I wondered whether that team might have its work somewhat extended to embrace the research suggested by the noble Baroness. It would not involve quite as much work because it would examine the 150,000 or so households that will now be affected by the underoccupancy arrangements. There is much important research to take place.

[Lord Freud]

My Lords, I acknowledge and commend the contributions of the noble Baroness and the noble Lord to the debate on policy. Both of them, particularly the noble Lord, Lord Best, played an important role setting up the independent research that the department has already commissioned around the local housing allowance. More recently, as noble Lords are aware, we have announced research looking at direct payments in the social rented sector. However, I must complain bitterly at the improvement to the negotiating position of the consortium that the noble Lord mentioned. When we carry out research, we always have open competition and no one is favoured. We choose the best researchers.

I place real value on independent research. We need robust evaluation on the impact of welfare reform on housing provision. I know that we are taking some steps in housing benefit reform where we need to monitor the risks. I know that there are risks, and we have all discussed them. That is why proper research, considered properly and taken very seriously, is right at the heart of the protections that we are looking at in this area.

I fully support the intention behind this powerful amendment. I want to go on record as saying that. I can tell noble Lords that the department is currently in the process of planning its research programme for 2012-13 onwards, subject, I have to add, to available funding—and I hope that noble Lords do not take that away from me in other ways. I intend to cover the size criteria and underoccupancy in housing benefit. We are considering separately how to evaluate universal credit. Noble Lords will be aware of the constant-piloting clause that we approved in Committee, which provides for a radically new way of looking at this important benefits system.

All research commissioned by the department is published. I am sure that noble Lords will accept that it is not necessary to provide for this research in the Bill. I know that this is a probing amendment and we will look to providing this research at the right time. With those reassurances, I hope that the amendment can be withdrawn.

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Moved by

[Lord Best]

21: After Clause 11, insert the following new Clause—
“Payment of housing costs
(1) This section applies to payments of the housing cost element of the universal credit.
(2) Payment of the housing costs element of the universal credit must be made to a person’s landlord where that person has requested or consented to such payment in agreement with their landlord.
(3) Regulations made by the Secretary of State may prescribe the circumstances in which subsection (2) does not apply.
(4) Regulations made by the Secretary of State shall prescribe the person who is to be treated as the landlord for the purposes of this section and shall make provision as to the discharge of liability consequent upon the making of any payments to the landlord.”

[Lord Best]

My Lords, the amendment relates to the payment of help with housing costs—at present in housing benefit and later as the housing cost element of universal credit. The Minister has announced that in future the payment for rent must go directly to the tenant, not, as is possible at present, to the landlord. The amendment preserves the current option for the tenant to choose that the rent should be paid straight to the landlord where the tenant thinks that that will help with their budgeting and housekeeping.

When I introduced a similar amendment in Committee, I pointed out that private landlords were already often very reluctant to take on tenants in receipt of housing benefit or local housing allowance. However, where the benefit is paid straight to the landlord, thereby minimising the chances of arrears, the reluctance of landlords can be much reduced. There is backing for the amendment from the private sector—the Residential Landlords Association, the British Property Federation and others. There is also backing from social landlords. This morning at the LGA, I addressed a conference on housing finance and was surprised at how strongly local authorities expressed their view that the direct payment of rent to tenants would lead to arrears and difficulties for councils in handling housing accounts. The amendment is also strongly supported by those who represent tenants—residents in the rented sector. Associations of residents in social Housing—TARAs—Shelter, Crisis and others are right behind the amendment, not least because surveys have shown that a high proportion of tenants would wish for their rent money to go to the landlord.

The Government have agreed that this choice will be available to those of pension age. This amendment would extend that possibility to make this kind of sensible choice available to all tenants. The housing associations organised a pilot of their own in which they experimented to see how things worked out when rent was paid directly to the tenant. They found that arrears increased from 3 per cent to 7 per cent. If that was applicable generally, the cost to the housing association sector would be some £320 million a year in additional arrears. Local authorities have a similar stock of social housing which would double the figure to some £640 million a year. Housing associations also discovered that their administrative costs were very much higher when the rent did not come straight to the landlord in the form of housing benefit or—in future—the housing element of universal credit. The extra costs on administration for that are estimated at £100 million.

If housing associations face those kinds of costs, the hazard is that lenders will not be so keen to lend to them. The Council of Mortgage Lenders is in favour of the amendment, as are the individual lenders, because they worry that housing associations will get into difficulties if they do not get the rent that they need. The Minister has set up some important pilot schemes to test ways of assisting tenants to handle the money provided for rent, and new arrangements for low-cost banking may be developed in the months and years ahead. However, the Minister undertook to look further at the option of giving more vulnerable tenants the right to choose to have their rent paid to the landlord. I know that he has been considering how a fast-track arrangement might be implemented to switch the payment of rent from tenant to landlord when arrears are mounting.

These changes would be useful but they do not address the fundamental problem. Surely the best approach is to continue to give tenants the right to choose to have their help with housing costs paid directly to their landlord, and not to give them the temptations which are bound to be placed in their path if sums, perhaps in the region of £500 or £700 a month, were paid to them, and possibly used to satisfy the requirements of loan sharks and less salubrious lenders and creditors, rather than paid to their landlord. Can we not preserve the existing right of tenants to choose to be assisted in their budgeting? I beg to move.

[Baroness Howe of Idlicote]

My Lords, having listened to that explanation from my noble friend Lord Best, I have been completely converted to this approach. I certainly appreciate that the Minister is trying to educate people better to take care of their own finances, but the choice already exists for the individual tenant to decide whether to pay for themselves or to opt in to a system which is, from what we have heard, more satisfactory and reassuring to the landlord—whether a local authority or whoever. As all of us in this House are beginning to get a little older and, sometimes, a little forgetful, perhaps that is a helpful thought for later, when we get even more forgetful about things such as paying our rent.

All I am saying is that this sounds the better way to do things. I am all for running courses to help people to cope better with their finances, but from the point of view of not wasting money, this is clearly a way forward.

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[Lord Freud]

I am saying that we are working really hard with the banks and the banking community to make sure that we have an escrow arrangement of that nature, and we are doing this at several levels. We can have a general agreement, which I shall discuss with the banks as a whole, to provide a generalised protection. However, I am quite interested in getting particular banking products that will provide a simple bank account and elaborating on what could be a new level of support for some of the poorest people in our community. We have a one-off chance with universal credit to ramp up support for the poorer people in our community, and we are putting a lot of energy into achieving that. I have talked about this before. It is one of the hidden gains that we can get out of the introduction of this new system. Rather than people living on drips of money from here and there, we can really start to help them, supporting them in managing their finances and getting true independence. This is a core part of what we are going to be doing with universal credit, and part of that relates to housing. Housing will be a major part of people’s total income stream. We are not doing this for fun or to annoy anyone; this is absolutely part of what we are trying to do with universal credit.

I need to deal with one other point—the issue of safeguards raised by the noble Baroness, Lady Lister. We are concerned about the safety and welfare of claimants and, where we have a concern, we need to put direct payments in place. There are vulnerable groups who are not able to manage the potential freedoms, and for them we will make sure that we go on with existing arrangements for direct payments.

We have commissioned a consortium led by Professor Paul Hickman—I am sorry, but this is a bit of an announcement late at night—from the Centre for Regional Economic and Social Research at Sheffield Hallam University to evaluate the effects of direct payments to claimants in the six demonstration project areas, which I shall announce soon. The other key team members are Dr Kesia Reeve, Peter Kemp of the Oxford Institute of Social Policy, and Stephen Finlay from Ipsos MORI, names that I know that the noble Lord, Lord Best, approves of. That will give us a cumulative understanding of the impacts of direct payments and inform the detail of delivery under universal credit.

Research published by the Joseph Rowntree Foundation in 2007, Paying Housing Benefit to Claimants, on both private and social tenants’ experiences of and their hypothetical attitude toward the management of their own housing benefit confirms that a significant proportion of social tenants have the potential to manage their own housing benefit payments. We will also have an advisory group for the demonstration projects and a wide range of local government, money advice, voluntary sector and other external stakeholders who will be invited to join that group.

We had a slight exchange about what “choice” means and we have been teasing each other about the imbalance of power when you have choice. It concerns us that while there is theoretical choice today, only 5 per cent of people take it. As it stands, tenant choice does not go far enough, which is why I am concerned about it. I hope that the noble Lord, Lord Best, will accept that we are making incredible efforts here to be transformative and not to undermine the housing sector, and on that basis will feel that there is enough going on for him to withdraw this amendment.

[Lord Best]

My Lords, I am very grateful to all of those who have joined this debate. I am sure that we all feel much reassured by the passion that the Minister brings to this subject and by the genuine efforts that he is making to see that the behavioural change that he wants is triggered and that the disadvantages of going down this route are mitigated. The excellent research that he is announcing tonight—and I thank him very much for it—might show that it is not possible for only 20 per cent of the tenants within the social sector to be regarded as vulnerable and to have their rent paid directly and that there is a rather larger number.

However, I think the Minister is keeping an open mind as to what proportion of the sector will get their rent paid directly, and I greatly welcome him saying how much he is concerned not to undermine the social housing sector, the production of new homes, the sector’s lending and the security of income within that sector. If those discussions with bankers fail and the products do not materialise, we must place our faith in the Minister and hope that he will recognise that the difficulties still exist and that rent direct to the landlord is going to be necessary for a larger proportion of people. On that basis, I am happy to withdraw my amendment.

Amendment 21 withdrawn.