Welfare Reform and Work Bill

Lord McKenzie of Luton Excerpts

Monday 21st December 2015 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, Amendment 72, tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, would retain the benefit cap at its current levels and have those levels apply across Great Britain. We introduced the benefit cap to increase incentives to work, to promote fairness between those in work and those on benefits and to help address the deficit, and it is clear from the evidence that the cap is working. Since it was introduced in 2013, more than 18,000 previously capped households have moved into work.

The evaluation evidence shows that capped households are 41% more likely to go into work than similar uncapped households. This is even more marked in London alone, where households were 70% more likely to go into work than similar uncapped households.

I am heartened to hear from the noble Baroness, Lady Sherlock, that she now supports the existing benefit cap. I happen to remember that that was not necessarily the position on the Opposition Benches in 2012. Indeed, I seem to remember that the counter proposition from them was that we should have a regional cap, so I hope that the Opposition are now delighted that we are beginning to move in the direction suggested. Perhaps in another three years, in 2018, the Opposition—

[Lord McKenzie of Luton (Lab)]

When we debated the regional cap at that time, did the noble Lord support it?

[Lord Freud]

Of course I did not support it; I am on the record as not supporting it. This is not an absolute regional cap—this is a two-tier cap, London and the regions—but, the Opposition may feel that it is better late than never. I look forward, by 2018, in another three years, to the full-hearted support of the Opposition for the current proposals.

--- Later in debate ---

[Lord Kerslake (CB)]

My Lords, I declare my interests as chair of Peabody and president of the Local Government Association.

My amendment is very similar to the other two amendments in this group, and I will not repeat what I think was a very compelling argument made by my noble friend Lord Best. What I would like to do this evening is focus on three key reasons why I think that the Government should reconsider their approach to this issue. The first reason is the rising level of homelessness, the second is the quadrupling of the number of people who will be caught by the cap and the third is the inadequacy, as my noble friend Lord Best has said, of the discretionary housing payments fund.

Let me deal with the issue of rising homelessness first. My noble friend Lord Best referred to the recent report by Shelter. This report found that the number of children in temporary accommodation is at a seven-year high. The total number of people in temporary accommodation from the period of July to September 2015 was 68,500. That was a 12.5% increase on the year before. So we are clearly experiencing a significant rise in the levels of homelessness. The effect of this will be that, this Christmas, Shelter estimates that some 103,000 families will be in either bed and breakfasts, hostels or temporary rented accommodation. That will be a very grim Christmas for those families. Of those families, something like one in four are living in a different area from the area that they previously lived in. That means that they are away from their children’s schools and family support. In London, that figure is one in three. This is a very significant issue that is growing in its scale and impact.

The second issue I referred to is the number of people who will be caught by the cap. As has already been said, that number is likely to quadruple, adding an extra 90,000 people. Therefore, there will be two effects on the issue that we are speaking about, and that in turn will impact on the financial consequences for local government. It is important to say that the people involved here do not have any real choices. The circumstances they face—losing their shorthold tenancies or family break-up—will undoubtedly lead them to a position where they need to move and move quickly. Similarly, local authorities will have little choice, given the limited accommodation that they have available to them to put people into temporary accommodation, even though the management costs of that accommodation are higher. So we face the situation where there is likely to be rising homelessness, a quadrupling of the numbers caught by the cap and people, through having no great choices of their own, needing to go into temporary accommodation with higher costs.

In the past, the response has been that the discretionary housing payments fund will cover this. The evidence produced, again by Shelter, suggests that that is unlikely to be the case. We know that, in London, the scale of the costs through the DHP funding is already around £4 million. It has been calculated by Shelter that for one local authority alone, Tower Hamlets, this could add a further £2 million per annum in terms of costs. I do not believe that the discretionary housing payments fund will be the answer to this issue. It will squeeze out the other reasons why local authorities need to use this fund. They will therefore be faced with a choice of either compelling families to move further away so that the cost is lower or, alternatively, dipping into resources that they have for other purposes. We will face an increasing squeeze on those local authorities that they will not be able to cope with.

The Minister may say that DHP funding is rising. Indeed, it is. It will rise from £165 million this year to £185 million in 2017-18. However, it falls to £140 million in 2021. Therefore, this fund goes up, but it goes down again, whereas the pressures that I have spoken about are inexorably rising. A simple way out of this issue is to exempt families in temporary accommodation, as has been proposed. This recognises the reality that there is little choice and that, if we ignore this issue, we will increase the pressure on local authorities to a point where it will damage the finances of those authorities and the prospects of those families.

[Lord McKenzie of Luton]

My Lords, I speak to Amendment 86, which is in my name and that of my noble friend Lady Sherlock. I also speak in support of Amendment 73 moved by the noble Lord, Lord Best, and Amendment 90A in the name of the noble Lord, Lord Kerslake. As we have heard, regardless of whether the benefit cap has played a role, local authorities remain legally obliged to rehouse families who are demonstrably homeless through no fault of their own, are vulnerable in some way or are in priority need for rehousing.

Families will be placed in temporary accommodation while a council decides whether it owes them a rehousing duty and then until a settled home can be found. For some families, the wait for rehousing can be considerable. I note that the noble Lord, Lord Best, has a 39-week grace period. I understand that that is likely to be sufficient in the overwhelming majority of cases but not in all cases, particularly in London. While in temporary accommodation, councils charge families rent to cover their own costs and expenses, and this is commonly paid for by housing benefit. In some cases, councils have to top up additional costs out of their own funds or, as we have heard, the limited pot of discretionary housing payments.

Temporary accommodation is generally leased by local authorities from the private sector at a premium, placing a considerable burden on them. Councils are already struggling to secure enough temporary accommodation as a result of the combined effect of limited funding and a shortage of self-contained accommodation. This is already leading to an increase in bed-and-breakfast use or people being rehoused away from their local area. The lower benefit cap will increase demand for homelessness services and exacerbate the pressure on the local authority supply of temporary accommodation. With more homeless families affected by the cap, local authorities are likely to be forced into further subsidising the cost of temporary accommodation. This will be difficult for cash-strapped councils, increasing the incentive to place families in the cheapest areas far away from their support networks.

It will also make it harder to permanently rehouse homeless families, as the benefit cap will make alternative housing options unaffordable. For larger families, even social housing will be subject to the cap. The policy therefore risks the perverse scenario in which families are made homeless because of the benefit cap and trapped in the limbo of temporary accommodation by the benefit cap at the expense of the public purse. The amount that can be reimbursed through the local housing allowance is limited to £500 a week, which means that other costs over and above that amount must be met by local authorities. In some cases, this will come from funding for discretionary housing payments, but often the necessary funds will have to come from elsewhere, given that DHP funds are in such short supply in the context of seemingly insatiable demand.

We know that the Government have declined to collect statistics which might help them measure the extent to which any purported savings from capping household benefits are simply being shifted on to local authorities in the form of additional homelessness costs. Our honourable friend Emily Thornberry MP sent freedom of information requests to every local authority in London over the summer and the findings throw doubt on the idea of the cap as a savings measure.

In the first year following the introduction of the cap, London councils spent a combined total of £19.2 million supporting households which had been hit by it. In the second year, this rose to £23.3 million altogether. Some boroughs spend more than 80% of their total DHP allocations on supporting capped households, and in most boroughs the proportion is increasing each year. To date, local authorities in the capital have spent almost £47 million in DHP funding as a direct result of the benefit cap and it is likely that this is just the tip of the iceberg in terms of the overall costs involved. Reliance on temporary accommodation is a significant driver of these additional costs.

As we have heard, across London more than a quarter of households currently affected by the benefit cap are living in temporary accommodation and in some boroughs it is much higher. In Waltham Forest, apparently a staggering 58% of capped households live in temporary accommodation. This compares with less than 1.5% of the overall population of people claiming housing benefit. The disproportionate presence of families in temporary accommodation among households affected by the cap is a huge issue for local authority spending. It is also a real source of human misery as, increasingly, councils are having to house homeless families in temporary accommodation outside their area, and sometimes many miles away from their support networks and their children’s schools.

Our amendment would exempt newly homeless households from the benefit cap. This would allow councils to continue to procure nearby temporary accommodation and make it easier for them to move households into affordable accommodation. It will also help councils focus their DHPs and their own budgets on homelessness prevention. If the Government are serious about cutting back on public expenditure associated with the benefit system, and in targeting the benefit cap at families in a position to make choices about where they can afford to live, it is hard to see why they should argue against exempting homeless families being housed in temporary accommodation.

[Lord Freud]

My Lords, these amendments seek to exempt people in temporary accommodation from the benefit cap. I cannot agree that it is appropriate to have a blanket exemption from the cap for all those living in temporary accommodation, even if it is time limited in the case of Amendment 73. Rather, I believe that the best approach is to provide support so that people may better address their barriers to work. My challenge to the noble Lord, Lord Best, is: if there were to be a 39-week exemption, how would that not have a perverse incentive on people staying in temporary accommodation longer term if it is likely that the cap will apply to them when they move? That is the reason for our approach.

Discretionary housing payments are available from local authorities for those households who need additional support in adjusting to the cap. We have made £800 million available over the next five years for all the welfare reforms. However, in particular areas, one of which is London, this will be a substantial element. In the Autumn Statement, it was announced that further DHP funding will be made available for the most vulnerable people, including those who may be in supported accommodation. In 2016-17 it will go up from the current level to £150 million, and the allocation of those funds reflects the new measures we are bringing in, as does the timing of their introduction.

We have already made provision to support the most vulnerable people who might be affected by the cap. Housing benefit paid to households in specified accommodation is disregarded from the benefit cap and we have included refuges within the definition of “specified accommodation”. The disregard applies to benefit cap cases under both housing benefit and universal credit. While this does not mean that these households are exempt, by not including housing benefit in the calculation we expect that the vast majority of these vulnerable cases will not be affected by the benefit cap.

Finally, from April 2017 the weekly management fee, currently £40 in London and £60 elsewhere, will be abolished and replaced with a grant that devolves this funding to local authorities. Unlike the existing management fee, the new grant will not count towards the benefit cap and will help local authorities tackle homelessness more effectively. I would therefore ask the noble Lord to withdraw his amendment.