Welfare Reform Bill

Lord Cormack Excerpts

Wednesday 14th December 2011 Lords Chamber

[Baroness Lister of Burtersett]

My Lords, I shall speak briefly in support of the amendment moved by the noble Lord, Lord Best, from a slightly different perspective, and repeat what I said in Grand Committee. In Grand Committee, I congratulated the Government on their research, Perceptions on Welfare Reform and Universal Credit, which sounded out various stakeholders about what they thought about some of the reforms. One thing that came from that from people who will be affected was that although they welcomed the one-stop shop approach of universal credit—to the extent that it is a one-stop shop—there were real fears about putting all the eggs in one basket. If all the money goes together in one lump sum, if anything goes wrong, people are left insecure—high and dry. If some of the rent payment is going to the landlord, where the tenant wishes it, that is mitigated. That is why that choice should remain

Not expressed in this research but by a number of outside organisations is the worry about what happens to the money in the family. I know that the Minister argues that budgeting accounts will sort this out. I hope that they will, but I think that he knows that I am still slightly sceptical about the magical powers of the budgetary accounts. There are fears that the money may not be paid into the account of the person responsible for paying the rent and that they may not then have control over how the money is spent by their partner. That is a slightly different perspective from that of the noble Lord, Lord Best, who understandably and powerfully is relaying some of the concerns about housing providers, but we have to think about the extra burden that this might be placing on some families.

[Lord Cormack]

My Lords, the noble Lord, Lord Best, has made a powerful case. He made it very gently but forcefully. I was also struck by what the noble Baroness, Lady Howe of Idlicote, said. As one who held MPs’ surgeries for about 40 years and saw people come in who were often in considerable distress, I know that it is not just the feckless who get into financial trouble. Many decent people get into financial trouble. The ability to say that this money should go direct to the landlord could be of enormous help to someone who suddenly has a sick child and feels that they must spend the money on that child. If the money has gone to the landlord, the landlord is secure and the tenant is secure. That must surely be wholly desirable.

Those of us who have been constituency Members of Parliament know how difficult it is to persuade private landlords to consider tenants in this general category. We need an abundant supply of privately rented accommodation. Anything that may detract from that is to be regretted.

I admire my noble friend, because he is thoroughly the master of his brief and because his underlying aim, which is to create a more responsible society, is one to which we can, surely, all subscribe, but there are exceptions and times when it is right to give a choice.

Another point, which the noble Baroness, Lady Howe of Idlicote, made, struck a chord with me. There are many elderly people in receipt of benefit who get confused. I am not talking about people who suffer from dementia, but we all know—the noble Lord, Lord McAvoy, knows from his constituency experience—that elderly people sometimes get confused. They think, very genuinely, that they have paid something when they have not. It would be a great blessing to give those people that choice.

I would urge my noble friend the Minister to give very careful thought to this. I hope that the House will not divide on it tonight, but I hope that he will be able to give some thought perhaps even to putting down an appropriate amendment at Third Reading.

[Baroness Hayter of Kentish Town]

My Lords, dinner beckons. Nevertheless, there are seven good reasons for accepting this amendment.

First, it is cost free. The facility to pay rent directly to landlords is there for certain beneficiaries, so it would simply be a case of using this for others.

Secondly, it helps to give financial responsibility and decision-making to claimants, as it would allow them to choose to have the rent paid in this way.

Thirdly, it is what the rest of us do with our mortgages or rent: it goes straight out of our bank accounts, normally the day after payday—in my case, usually the same day—so that we cannot get our hands on it in the mean time. The difference is, of course, that many of these claimants do not have bank accounts, or a joint bank account if they are a couple, and therefore do not have the ability to make such arrangements for direct payments. Furthermore, if they have a basic bank account, such accounts cannot go into the red, and so if there is not money to pay the rent, it simply will not be paid, even with a direct debit mandate, leading to the build-up of arrears.

Fourthly, this amendment is strongly supported, as has been said, by housing associations and by local authorities. Both know that arrears will build up more quickly without this amendment. For housing associations, the interest on borrowing will increase as their assured-rent income will decrease. To give the example of one housing association, 85 per cent of Riverside tenants choose to have their rent paid directly, as many of its tenants do not have bank accounts, and many more fear the bank charges if they go overdrawn. This is an important way for low-income households to manage their finances. If this existing facility is withdrawn, pilot studies show that, as has already been mentioned, rent arrears are likely to rise sharply, putting tenancies at risk. In addition, funders have indicated that they are likely to regard lending to housing associations as higher risk and thus to increase the cost of funding. In the long term, it will mean that social housing providers will simply be able to do less. Income streams to local authorities will similarly be threatened if direct payments, which exist now without any problems, are ended. CoSLA, the association for local authorities in Scotland, estimates that this will cost about £50 million a year in Scotland alone.

Fifthly, many vulnerable families will be at risk. To quote again from CoSLA:

“COSLA is deeply concerned that Housing Benefit paid direct to claimants without sufficient safeguards will result in an increase of rent arrears and evictions, sending households spiralling into debt and facing homelessness”.

We know the families for which the risk of not paying the rent directly will be the greatest: those with debts, where the pressure to pay these off—whether to the gasman or to the loan shark—will be pressing; those with a family member with a drink, drug or gambling habit, where temptation to use the rent money will be high; and those with immediate demands, as the noble Lord, Lord Cormack, has said, for money to feed their children and yet who want to ensure that the roof over those children’s heads, albeit not today’s problem, is equally vital, so want to have that rent assured. While we know some vulnerable groups will have their rent paid directly, we can see no reason to wait until borderline cases get into problems, struggle and get into rent arrears, before we allow them to have the rent paid directly. Why risk that for no good reason?

Sixthly, it will make sure that we do not dissuade private landlords from coming into this sector.

Seventhly, the strongest argument: the noble Lord, Lord Best, who chairs the Local Government Association and has forgotten more about housing associations than most of us will ever learn, tells us it is the right thing to do. We concur.

--- Later in debate ---

[Lord Freud]

That is exactly what we need to ensure and that is exactly what we are discussing with the banking groups. Specific banking support is exactly the issue that we need to get right.

[Lord Cormack]

My noble friend is trying to be helpful and I appreciate that very much. Is he saying that this amount of money that is earmarked for paying the rent will be used for paying the rent and for nothing else, and that, unless he is assured that he has the product that will deliver that, he will not move in this direction?

[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.