Housing: Spending Review

Lord German Excerpts

Thursday 4th November 2010 Lords Chamber

[Lord German]

My Lords, I congratulate the noble Baroness on the timing of this debate, and also the noble Lord, Lord Brooke, on answering the question “what now”, rather than “what if”. That is the question that faces us all. Unlike the right reverend Prelate, I shall not use a golden fish as my metaphor; I shall use simultaneous equations—the need to bring into balance a number of competing factors, each of which has a set of variables and a number of unknowns. That describes the situation with housing; both sides of the equation need to be understood. At its heart is the need to balance the degree of support which the state can provide to individuals and families to meet their housing needs and the need to provide adequate numbers of homes at affordable levels. One side of this equation is the responsibility of the DWP, with its reach right across the United Kingdom, and the other is a department, the DCLG, with responsibility for England only. As the accompanying documents to the CSR helpfully point out, the responsibility for housing for large parts of our country—Wales, Scotland and Northern Ireland—does not lie with this Government or Parliament. In this new era of joined-up government, it is important that the DWP particularly takes note of that firmly when trying to bring the matters we are debating today into balance.

Is the present system in balance? Does the state's support funding for individuals and families match the stock of affordable housing? Clearly not, because between 1996 and 2010 the stock of affordable homes fell by a net 45,000. Meanwhile, the bill for supporting individuals and their families has ballooned to £5 billion extra in the past five years alone. As the number of affordable homes available has dwindled, so the cost to the country has risen. Using my equation metaphor, the factors on one side of the equals sign have grown more as the other side has diminished. This Government, and any Government in the current financial circumstances, are therefore constrained to do more for less, making available more housing at prices which people can afford, replenishing and building more homes so that the net stock grows, with a smaller public resource available to achieve that growth. Neither can it be in the public interest to see housing benefit costs balloon in the way that they have, yet our society should expect and demand that we can support those in need who need a proper and decent home.

This complex equation needs planned resolution, avoiding the dangers of perverse outcomes. The complexity of the equation has in the past driven changes which have made the system more, not less, complex—more difficult to understand and more susceptible to those perverse outcomes. The challenge for government is, first, to build more homes and, secondly, to create a benefits structure which is simpler and fit for purpose. I welcome the Government's ambition to deal with these very large-scale issues. Of course, there are a number of icebergs in the water around which they have to steer.

I am a recent rented-property searcher in London, working within the parameters of your Lordships’ expenses regime. It is quite clear to me that the London housing equation has a quite distinct set of factors. It is a market with prices attached which, in most parts of our country—where I come from, for example—would make people stagger with amazement. I have to admit that I have been priced out of Kensington and Chelsea. Do I find that strange? Indeed I do not. There are many parts of the country where I, like many others, would like to live but find it impossible to do so. I also find it strange that some politicians in London are surprised that the rents in some areas price many people out of them. But that is the reality. Fundamentally, can it be right that some claimants for housing support can claim more than £100,000 a year to live in large houses in expensive areas when many hardworking taxpayers would find it impossible to do so? Indeed, they are subsidising those who receive those high rates of benefit.

London is not the whole of the United Kingdom and it would be wrong to see the vision of change through the prism of the capital city. Admittedly there are some other hotspots, some of which have been mentioned already—some university towns, for example—where prices in the private rented sector have been driven up by the demand. However, the rental cap is appropriate for many parts of our country and, with appropriate provision, could work for London and those other hotspots. But there are other, localised problems of a different kind, one of which has already been alluded to—the demand for affordable housing in our rural areas in order to retain local families in their communities. That is a massive problem which again requires a tailored solution. The Government will face a major challenge on that matter, particularly on the 30 percentile figure that they are introducing.

There is not a uniform picture across the country, and a uniform solution may not always be appropriate because that may lead increasingly to further market distortion. That is why a more discrete definition of housing areas—in fact, a much more clear map—would perhaps make solutions more appropriate. After all, market rents, as I have discovered, can vary considerably within a couple of miles and even within a couple of streets. However, the universal benefit changes will make a significant difference and improvement to the current arrangements on housing. But the timing of these housing allowance changes means they will be put in place before the universal benefit changes begin to bite. I therefore think that, at all levels, this set of equations will be more tricky to resolve than the simultaneous ones that I did at school. A large number of changes all coming down the tracks together requires greater co-ordination and planning. I hope that the Government will have success and, more than anything else, certainty of action.