Welfare Reform and Work Bill

Lord McKenzie of Luton Excerpts

Wednesday 27th January 2016 Lords Chamber

[Baroness Manzoor (LD)]

My Lords, I shall be brief. Noble Lords can see very clearly what the issue is—it is technical and rather complicated. It is now late. If the Minister will give the assurance that he is happy to meet me and the Child Poverty Action Group so that we can discuss the amendment in greater detail, that will be really helpful and will save me having to go through a very complex explanation. I beg to move.

[Lord McKenzie of Luton (Lab)]

My Lords, in the spirit of comradeship and friendship with the Liberal Democrats, we are very happy to support that request.

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

I think there were two parts involved in that question, so let me go through them. In answer to the first part, I will meet the noble Baroness and the CPAG. In answer to the second, I am happy to meet her and the CPAG.

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[Baroness Warwick of Undercliffe (Lab)]

My Lords, I declare an interest as the chair of the National Housing Federation. I speak in favour of Amendment 51, which seeks to protect schemes that house some of the most vulnerable people in the country from a damaging cut to their rents.

In answer to a question from me on Monday on the associated issue of the local housing allowance cap, the noble Lord, Lord Freud, referred to a review of the supported housing sector. That review was referred to again today in another place. Indeed, much has been said today in another place on both rent cuts and the LHA cap. It is only right that we fairly consider what has been said in another place and factor that into our discussions here. Referring to the review, the Government said that it would report urgently by the end of March. In addition, we have heard of a one-year delay in the implementation of the 1% rent cut for supported housing. This extra year’s delay is welcome, since it means that incomes will not be reduced as much as feared. Unfortunately, that is only at the margins when measured against the impact of the LHA cap on supported housing as announced in the spending review. This will have a much more significant and lasting impact, and is a threat to the very existence of much supported housing.

The National Housing Federation has been pressing the Government to urgently clarify that the LHA will apply only to working-age tenants in general needs accommodation. The Government have not done so. A survey of NHF members showed that this lack of certainty will result in 156,000 homes becoming unviable and being forced to close—41% of the sector—while 2,400 homes planned for development will now not be built. I find it hard to believe that it can be even remotely possible that it is the Government’s intention to put all this supported housing at risk. The impact on vulnerable people will be acute: on the elderly, people with disabilities, those fleeing domestic violence and those who served our country in the Armed Forces. The knock-on impact on public services in trying to pick up the pieces will be immense. These services desperately need a long-term commitment to safeguard their future.

The Government had the opportunity today in another place to set this right and clarify their intentions. They did not do it. The Government will carry out a review of how supported housing is funded—excellent. But surely the purpose of a review is to think first and only then act. Why create this level of uncertainty leaving housing association boards, which have to take decisions about future provision now, completely blind-sided about whether or when the cap may now be introduced? A one-year delay on the rent cut, welcome though it is, may not make much difference at all on this issue. The uncertainty is having a damaging and dangerous effect now. Tough decisions are being taken already: to close supported housing schemes; not to renew contracts; and to halt development of new schemes because there is not the certainty that they will be affordable in the near future, whether that be in two years or three. Protective redundancy notices are being prepared now. No provider can risk the cost of new building unless they are confident that the rent will cover that cost.

The announcement made by the Government today will do nothing to allay the fears on this issue of housing associations or the people living in these homes. I urge the Minister to think again and announce now that the LHA cap does not apply to supported and sheltered housing. I also urge the Government, through him, to work with the sector to develop a long-term sustainable funding model for supported housing.

[Lord McKenzie of Luton]

My Lords, we support each of the amendments set down in this group and have added our names to some of them. On Amendments 50, 51 and 52, we join other noble Lords in congratulating the noble Lord, Lord Best, on his negotiating skills—doubtless assisted in that endeavour by the noble Lord, Lord Kerslake—and the Minister for listening and helping with at least a partial solution.

The deferral of the rent reduction programme is clearly welcome. The clarification on the comfort in respect of LHA caps is clearly important as well. The more that the Minister can say on that, the better. My noble friend Lady Warwick has outlined some of the problems because of the known existence of that aspiration. The Minister could, I hope, therefore go further. It is always the way that Ministers come forward with concessions, and then everybody piles in and wants just that little bit more, but this is a very important issue.

That raises the question of where that leaves the amendments, as the Minister’s proposition in his correspondence effectively covers co-operatives, almshouses and community land trusts, as well as housing associations. Are the Government going to accept the amendments, substitute something for them or simply rely on what is on the record of this debate?

The noble Lord, Lord Kerslake, spoke to Amendments 53, 61 and 63, each of which we can support. He stressed the importance of an independent evaluation of what has gone on, in good time for rent policy for the subsequent period to be settled. In respect of Amendments 61 and 63, the noble Lord explained the importance of flexibility in respect of new-build, particularly for schemes of marginal feasibility. We had a very helpful meeting with members of the Bill team and the noble Baroness, Lady Williams, on this. Hopefully, embedded in this long list of government amendments is one that addresses that issue specifically. It may not necessarily have the breadth or flexibility the noble Lord is seeking, but I think it at least seeks to address the principle.

Amendment 59A, in the name of the noble Baroness, Lady Manzoor, proposes a report on local housing allowance rates. We debated this in Committee, but the Minister probably still owes us a reply. The purpose of that discussion was to recognise that, with the moratorium following the 1% limitation, LHA rates are increasingly going to move away from the reality of what renting in the private sector actually entails.

The noble Lord, Lord Ramsbotham, was clearly pleased with the outcome for almshouses. All in all, we should be grateful to the Minister for responding as he has—or hopefully will—at the Dispatch Box in confirming this. This is a real issue of substance which was worrying many people.

The noble Lord, Lord Best, is probably happy with the definition of supported housing that we have here, which is the broadest possible. I know there have been issues with specified support—what is in and what is out—but I take it from the correspondence and what has gone before that the moratorium is in respect of the widest definition of supported accommodation.

[Lord Freud]

I will start by picking up a point made by the noble Lord, Lord Ramsbotham, on unintended consequences. The House of Lords has done its job in alerting us to some unintended consequences in time for us to sort them out. I know that I rely on this House for that again and again, and in this case I express my gratitude to a number of noble Lords—with the noble Lord, Lord Best, leading the field—for enabling us to deal with these issues.

Let me now do the business on these amendments. Amendments 50 and 51 would exempt housing co- operatives, community land trusts and supported accommodation, while Amendment 52 would extend that exemption to almshouses. I will just make a few comments before I turn to the rent reductions in social housing. We face a challenge on the overall housing benefit bill and believe that social housing providers need to play their part in helping to bring that bill down. However, we also recognise the vital role that many housing providers play in supporting people who need the most help.

The Government have always made it clear that our policy will protect the most vulnerable members of society. To achieve that, the Bill has built into it the flexibility to except some social housing and provide exemptions for providers facing financial difficulty as a result of the reduction. We have also made several amendments to the Bill, including some today, which we believe will be helpful.

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[Lord McKenzie of Luton]

My Lords, I thank the Minister for that quick but extensive exposition of what is in the amendments. Clearly there is a lot that we need to study in the record. I thank her for the notes we received in advance but we have had a limited time in which to absorb them. If we need to, perhaps we could take up the offer of a meeting between now and Third Reading, whenever that is. However, as a matter of prudence, we reserve the right to come back at Third Reading if anything proves to be contentious. We accept the proposition that these are enabling, protective or technical amendments and that that situation should not arise but, frankly, until we have had the chance to study them in detail—which we should have—I hope the Minister will accept that.

Amendment 54 agreed.

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[Lord McKenzie of Luton]

My Lords, we strongly support the amendment moved by the noble Baroness, Lady Meacher. Indeed, it replicates part of an amendment moved in Committee by the noble Earl, Lord Cathcart. We know from the Government’s point of view that there is an article of faith here. Their starting point is that they overwhelmingly want and expect universal credit to be paid as a single monthly payment in arrears to the claimant. We know that there are opportunities for alternative payment arrangements and my noble friend Lady Sherlock set down our understanding in responding to the amendment in Committee.

The issue of eight weeks has been raised, but it is not eight weeks before you get to a solution. As I understand it, the guidance states that, when arrears reach one month’s rent, the DWP will review the situation—I am not sure how long it takes it to do that—following notification by the claimant or landlord. When they hit two months or eight weeks, either the landlord or the claimant can request an APA. Again, I think the point was raised about how long it takes the DWP to respond to those questions. Even then, there is no automatic right to one because the Government are still clinging to the concept that managing benefits should mirror choices in managing money which they say that those in work have to make.

The issue is one not only of having a nominal system in place under which alternative payments can be made, but of how those are put into practice and what realistic timescales are involved. Even if it were on the dot of eight weeks, that is a time for a landlord to wait. Some landlords might be left in a marginal economic situation.

A question was posed about what information we have about claimants of universal credit and other benefits being effectively denied access to properties available for rent. It might be quite hard to get hard statistics on that, but it would be interesting to know what the department has. The landlords fear, even if they may ultimately get paid, that they will have to wait eight weeks or even longer before they get their money.

My noble friend asked about what is happening with universal credit and how many people are in the system at the moment. At December 2015, there were 287,000 universal credit claims—I think that this is internal management information and therefore not fully verified—and some 37% of those payments included a housing element. Again only preliminary analysis showed that 19% of those had a managed payment to the landlord. I suppose that that gives a glimpse of something that is working to an extent, but clearly is not working in a sufficiently robust way to address the very real concerns that have been raised.

We debated this endlessly during the passage of the Welfare Reform Bill. My noble friend will remember it, and jam-jar accounts have featured already this evening. The arguments were strongly made against not only monthly payments but the opportunity for direct payments, particularly in relation to housing. My noble friend Lady Hollis made an extremely important point that the fundamental is a roof over your head—pretty much everything else flows from that. How can you get a job if you do not have secure accommodation? How do the kids get to school if you do not have secure accommodation? It is a fundamental issue. Just a relatively small change to the system, giving people the choice of having direct payments, means the prospect of removing what is clearly a growing problem, as explained, and fixing it in an effective way, so we support the amendment.

[Lord Freud]

This amendment requires the Secretary of State to make regulations that would allow universal credit claimants to opt to have the housing cost element of their award paid direct to the landlord, irrespective of the reason. One key principle of UC is that the single, monthly payment mirrors the payment of monthly wages that most claimants would receive if they were in full-time employment. Whether they are receiving UC or are working, tenants need to make similar decisions on managing their money, including paying their own rent.

The Government understand that a move to a single, monthly household payment is a significant change for many claimants and that some will require help and support. Regulations came into force in February last year to allow DWP to inform social landlords whenever one of their tenants makes a claim for or is awarded universal credit with housing costs or when an existing universal credit claimant moves to one of their properties. This enables the social landlord to decide whether the claimant requires advice, support or assistance in budgeting so that they can manage their rental payments.

There will, of course, be instances where the claimant needs additional support and, to this end, the Secretary of State already has powers to pay all or some of a claimant’s UC entitlement to a third party through alternative payment arrangements—or APAs, in the trade. There are three APAs: paying rent directly to the landlord; making more frequent than monthly payments; or splitting the payment within the household. APAs can be considered by the Secretary of State at any point during the universal credit claim, whether at the outset or later on, if a claimant cannot manage the monthly payment arrangement.

Recent improvements allow the landlord to email their APA requests, which are dealt with in a matter of days as a priority—so some of the early teething problems as we started rolling out the system have been addressed to speed up that process. Wherever possible, these arrangements are time-limited and delivered with appropriate budgeting support to help claimants make the transition to monthly budgeting.

The arrangement also covers claimants who are in rent arrears, and managed payments to the landlord will be considered where claimants have arrears of at least one month due to repeated underpayment or where the claimant owes arrears of at least two months and is at risk of eviction. These protections, combined with the measures enabling landlords to recover arrears from a tenant’s UC award, already mitigate any impact on landlords’ income or on homelessness.

We are in fact making a series of initiatives in this area and one of the most interesting is the trusted partner trials, where we are working with local authorities so that they decide the people who should be put on an APA, at least initially, and then look to see the budgeting support that a person needs to run their own funding.

Picking up the point made by my noble friend Lord Cathcart on experience, in terms of arrears we did an elaborate direct payment project and we found that, in the early stages, the numbers who paid in full were running at 95.5%, compared with 99% of those where the state paid. However, by the 18th payment—these were weekly payments in the comparator in this project—the direct payments figure had risen to 99%. Interestingly, this happened when the removal of the spare room subsidy came in, and those tenants who had become used to managing their own rent handled the removal of the spare room subsidy better than the ones who had been on the state-managed payments system. That is not surprising because the managed payments system is not necessarily an easy option where there are reductions for non-dependants, the spare room subsidy and so on, because the claimant will still need to pay the shortfall to the landlord.

The other factor, which I am surprised that noble Lords have not clocked, is that a large number of the families on universal credit are in work. It is not like the old legacy system where you have one lot out of work and one lot in work; this is a blended group and people are moving from the out-of-work group into the in-work group. Therefore, the idea that you can be halfway down the taper—in the jargon—and have a managed payment would be incredibly hard for any organisation, including the DWP and the tenant, to manage. Two million households is equivalent to a quarter of the case load.