Welfare Reform and Work Bill

Lord Young of Cookham Excerpts

Wednesday 27th January 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I rise to move Amendments 46E and 46F in my name and that of my noble friend Lord McKenzie of Luton. In doing so, I remind the House of my declared interest as a senior independent director of the Financial Ombudsman Service in case it should prove relevant to the debate.

I will not go back over the substance of the matter, as we discussed it in some detail in Committee. However, I want to push two points that I did not feel, in the end, were satisfactorily addressed by the government response. Amendment 46F seeks to retain the SMI grant scheme for claimants who are in receipt of pension credit; in other words, our poorest pensioners. In Committee, I dubbed this the reverse Salisbury-Addison amendment, reminding the House that we were helping the Government to maintain their manifesto commitment to protect all pensioner benefits, since that is, in fact, who this is mainly aimed at. My concern is that the effect of this policy is essentially to wipe out what is usually the only asset of poor pensioners, and currently their safety net in case they need equity released for care or other emergencies. As I reported last time, Age UK expressed a concern that older people would be reluctant to take on extra debt, so whereas they might have taken a grant, they will not take out loans. They may indeed compromise their own well-being by limiting essential spending instead. I do not think the Minister addressed that, so I would be grateful if he would.

I also asked a number of other specific questions. I had answers to some at the time, and answers to others in writing later. Sometimes the answers in writing were not the same as those given in Committee, but we will come on to that in a moment. I just want to deal with a couple that are left.

I raised the issue of people who die without enough equity in the house to meet the debt and who might worry that it would not leave them with enough money to pay for their funeral. I had hoped to persuade the Minister to leave a cushion untouched, but he was not having it. His response was that the family could apply for a grant, a funeral payment, from the Social Fund. So will all SMI loan recipients be automatically entitled to access a funeral payment from the Social Fund? If so, how much is it? Will it be enough to cover the fast-rising costs of a funeral all around the country?

I also asked if the loss of SMI would result in someone no longer being entitled to pension credit and thereby losing access to passported benefits such as cold weather payments, help with health costs or access to funeral payments. After a series of questions, supported by the right reverend Prelate of Durham, about the advice that would be offered to people, and having reread the record and read the letter that was given, I wish to tell the Minister what I think has been said and he can correct me if I am wrong. I understood him to say that people will get generalised guidance rather than advice about their own particular circumstances and what they should do. Is that right? I gather that the claimant may have to pay for the advice. Is that right?

During the debate the Minister assured me that the provision of advice would be independent of the party recovering the debt. He assured me that that was the case but then wrote to me afterwards and said that in fact it was not the case. I assume that he did not change his mind but that he misread his brief. Either way, can he reassure the House about that because it seems to be a potential conflict of interest? If someone who is advising a pensioner to take out a loan is also making money out of the recovery of that debt, is that not a conflict of interest? If not, how not? I asked him whether a face-to-face option would be available, at least for vulnerable clients. Can he tell me that?

Amendment 46E would require regulations for the scheme to be introduced by the affirmative procedure. The House will recall that the Delegated Powers and Regulatory Reform Committee expressed significant concern about the fact that the draft regulations for the SMI loan scheme had not been made available to the House for debate, given the plan that the scheme be set up by negative regulation. Effectively, the Bill abolishes the grant scheme and empowers Ministers to create a loan scheme but there are no draft regulations before us. Under the proposals they would be introduced under the negative procedure. The committee therefore recommended that regulations under this clause should be subject to the affirmative procedure. It is usual practice that such a recommendation would be followed. Can the Minister confirm that this will happen? If for some reason he cannot, can he tell the House when the Government last refused such a recommendation from the DPRRC? I beg to move

[Lord Young of Cookham (Con)]

My Lords, we briefly went round this course in Committee. The noble Baroness has raised a number of points to which the Minister will want to respond. However, I am not sure that she made a forceful argument for her Amendment 46F, which seeks to exempt a group of people from this new provision.

Looking at the Bill as a whole, this seems the least painful way of reducing public expenditure, and the argument for looking to this clause for savings is not as strong as the case that could be made in other parts of the Bill. The Opposition recognised this because, in their amendment to the Bill on Second Reading in another place, they specifically said that loans for mortgage interest were a necessary change to the welfare system. So the principle of switching from grants to loans was conceded by the opposition party in another place.

The operation of what is proposed makes no difference to the pensioner at all—the money will simply be paid from the department to the lender—and the impact on the standard of living and the income of the pensioner is wholly unaffected; their day-to-day income is unchanged. The Government’s proposal is that they will continue to get exactly the same level of support as they do at the moment. The fact that the loan may eventually be recovered from their estate has minimal bearing on their financial position, although of course their heirs may take a slightly different view. One has to balance the expectations of the heirs against the taxpayer, who at the moment is footing the bill. Given the imperative to reduce welfare expenditure, it seems to me that this is one of the least objectionable ways of doing it, and I very much hope that the amendment will not be pressed to a Division.

--- Later in debate ---

[Lord Ramsbotham (CB)]

My Lords, in speaking to my Amendment 52, I do so very much in context rather than proposing it. I thank the Minister, first, for seeing me before Christmas on this and other issues and, secondly, for his very welcome letter this morning. At the same time, I salute my noble friend Lord Best for his mastery and tireless pursuit of social housing issues.

I am very glad that this moratorium has been imposed and I sincerely hope that the Minister will encourage urgent consultation with organisations such as the almshouses and the YMCA, which he mentioned in his letter, and which I would have mentioned if the amendment had been going forward as normal. What was unfortunate about the way that the Bill was proposed was that it led to unintended consequences, which I think officials would do very well to consider in the consultation, in which they will hear from the YMCA, the almshouses and others about what would have been the effect if these proposals had been allowed to go forward.

[Lord Young of Cookham]

My Lords, from these Benches I join other noble Lords in commending the negotiating skills of the noble Lord, Lord Best. As a former Housing Minister, I know what a plausible advocate he can be on behalf of those in social housing. I also commend my noble friend the Minister for listening to the case made by both sides in this House a few weeks ago.

The only clarification I seek from my noble friend is in relation to Amendment 51, which says:

“Section 21 does not apply to social housing which meets the definition of supported housing”.

I wonder if my noble friend can confirm that it will be absolutely clear, if we go ahead with this amendment or something similar to it, exactly which housing schemes will benefit from the exemption and which will fall outside, and, related to that, how the good news he is about to announce will be communicated to those associations or organisations which run operations that will qualify under Amendment 51 and indeed some of the other related amendments.

[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.

Welfare Reform and Work Bill

Lord Young of Cookham Excerpts

Tuesday 12th January 2016 Lords Chamber

[Lord Shipley]

My Lords, I hope that the Minister understands the seriousness of this matter. I do not want to repeat what other speakers have said. Suffice it to say that there used to be three sources of funding for supported housing: the Supporting People programme, specific grants, and the income from rent and service charges eligible for housing benefit. Given the deep budget reductions to the first two, it has left income from rent as critical to the financial viability of schemes. That is an important issue to be made clear, because if rents go down, the income inevitably goes down and cannot be replaced from other sources. As we have heard, that 1% annual rent reduction policy will have two consequences for supported housing: a reduction in new building and lower staffing support for schemes, and, indeed, the potential collapse of schemes, given that the management and maintenance costs of supported housing can often be a third higher than the general housing stock.

When I spoke on this matter at Second Reading, I said that there was a danger that if the preventive role of supported housing were reduced, it would push up costs in other parts of the public sector. As the noble Baroness, Lady Blackstone, has pointed out, there is evidence that the rest of the public sector has to pay out more if supported housing is not there to help people. A few years ago, the Homes and Communities Agency reported that there was a substantial net saving for the public sector from investing in specialist housing.

A further consideration is the evidence of the National Housing Federation, which has identified a shortfall of more than 15,000 units in the number of supported housing lettings available each year to people of working age. Furthermore, there is some evidence that the recent rise in rough sleeping is related to the lack of supported housing lettings. So the conclusion is pretty clear. I understand that the cost to the Government in agreeing Amendments 107 and 109 is around £75 million per year—I would be grateful if the Minister could confirm that number. If it is, then surely it is at a level low enough for the Government to accept the cost, because the advantages to the public service outweigh the cost of the £75 million loss.

[Lord Young of Cookham (Con)]

My Lords, I intervene briefly from these Benches to add my support to Amendment 109 in the name of the noble Lord, Lord Best. When I intervened at Second Reading, I mentioned that I wanted to return to this issue in Committee. Subsequent to that, the noble Lord, Lord Kirkwood, chaired a meeting on the Committee Corridor of a number of organisations which would be directly affected, and they made some very moving presentations about the implications for them if the Bill went through without further amendment. Subsequently, I added my name to the letter referred to by the noble Lord, Lord Best, to the Times, expressing the hope that the Government would smile on this amendment or give the necessary comfort in some other way.

As others have said, the last thing my noble friend wants to do is to precipitate the closure of valuable schemes run by voluntary organisations providing support to vulnerable groups. Indeed, that is why there is a whole clause in the Bill entitled “Exceptions”, and subsection (5) gives powers to the Secretary of State to do basically what he wants to. The exemptions that have been trailed so far by the Government are welcome, but I agree with others that they may not go quite far enough, and I wonder if we can just nudge the Government a little further to give a greater degree of comfort to those running these projects.

Housing: Spare Room Subsidy

Lord Young of Cookham Excerpts

Tuesday 22nd December 2015 Lords Chamber

[Lord Freud]

This policy is about making sure that people who are living in oversized accommodation take the decision either to downsize or find the funds to run the extra rooms. That is how this policy works, and we can see in this study that people are now making adjustments. There are substantial moves in various areas in terms of downsizing and finding work between the interim report and this final report.

[Lord Young of Cookham (Con)]

My Lords, is it not in everyone’s interests that there should be a better match between household size on the one hand and the size of houses and flats on the other, to avoid overcrowding and underoccupation? Does the survey not show a fivefold increase in the number of working-age tenants seeking to downsize? Does this not show that the policy is working?

[Lord Freud]

Yes, we have seen a substantial number of people downsizing—45,000 people have downsized within the social rented sector and another 12,000 have moved into the private rented sector. The number of people who have registered for downsizing is now running at 16%. Noble Lords may remember that when this policy started it was estimated from the surveys that about 20% of people would want to do so. We are well on the way to people making this adjustment. Other people, however, are looking to earn more money and to work. That is one of the factors, but not a major one, in some of the record employment levels we are now seeing.

Welfare Reform and Work Bill

Lord Young of Cookham Excerpts

Monday 21st December 2015 Lords Chamber

[Lord Curry of Kirkharle (CB)]

My Lords, I shall speak to Amendment 104A. I very much support the intentions of this Bill, but, of course, there are inevitably special cases that would be adversely affected by a change of this magnitude. The Government have been very clear in their intentions for this change, and I commend them for that. What I seek to amend, however, is not the principle of the clause, but its application. More specifically, I seek to amend this clause so that those who are in receipt of disability living allowance, or carer’s allowance and income support, are exempt from this change so that they can continue to receive support for mortgage interest as a benefit, not as a loan.

This clause was initially brought to my attention by a friend who attends my church. This man purchased a house in 2006 and was financially stable and secure. However, two years into his mortgage, he was diagnosed with a detached retina, which rendered him blind. As a consequence, he has had to cease working. He has been entitled to support for mortgage interest, due to being in receipt of disability living allowance, and carer’s allowance, as his wife is now his carer. With the help of SMI, his mortgage would have reached completion in 2030. At this point, he planned to downsize, using the extra equity to pay off other loans accrued since he was diagnosed as blind to equip his house as a result of his disability. However, the implications of the proposed change from interest support to a loan mean that 12 years’ worth of interest and a small capital contribution will need to be repaid. If interest rates stay as they are for the whole period, my friend, on top of his mortgage, will have to pay the Government back £63,000, the sum contributed by SMI as a loan, and £15,000 for the 5% interest on the interest owed each year. As I said earlier, I am in support of the clause in principle, but strongly urge the Government to reassess and reconsider applying the changes to those who are on disability living allowance.

My friend will be for ever incapable of working, and so would never be able to repay the loan. It is not right that such a burden should be placed on him and others like him—he is not unique—who receive disability living allowance. This change could potentially result in my friend losing his house and being forced to move into government housing, which would ultimately cost the taxpayer much more. Have the Government fully assessed the long-term implications of this? Surely, a successful policy is not one that saves money in one area, only for more to be spent elsewhere.

In conclusion, I repeat that I support the aims of Clause 16, but feel that it is entirely inappropriate for those on disability allowance to be treated in the same way as those on jobseeker’s allowance. The assumption is that those on jobseeker’s allowance will eventually get a job and be able to pay their mortgage in full themselves and also to pay back the loan. Those on disability allowance, however, might never be able to pay it back if they are for ever prevented from working. On these grounds, I urge the Government to reconsider the wording of Clause 16 and allow those on disability allowance or carer’s allowance to be exempt from the changes.

[Lord Young of Cookham (Con)]

My Lords, I listened to most of the debate this evening and have heard the arguments on most of the amendments. Without any discourtesy to those who have proposed these amendments, it seems to me that the case for these are less compelling than the case for some of the amendments that were discussed earlier. There is one fundamental reason for this: what this clause does is basically to convert what is at the moment a grant into a loan. Of itself, it does not affect the quantum of support from taxpayer to recipient: it simply converts the terms. Therefore, to my mind, this is a much less painful way of reducing public expenditure than some of the other measures of the Bill that directly affect the quantum of support from taxpayer to beneficiary. Perhaps it is for that reason that the Opposition’s reasoned amendment to the Bill in the other place said:

“That this House, whilst affirming its belief that … a benefits cap and loans for mortgage interest support are necessary changes to the welfare system”.—[Official Report, Commons, 20/07/15; col. 1264.],

specifically excluding this bit of the Bill from their general reservations. Any measure that reduces the quantum of saving from this particular clause just puts more pressure on some of the other measures in the Bill which directly affect the support that a beneficiary might get.

Turning to the point made by the noble Baroness, Lady Sherlock, in a sense she gave the case away by conceding that 39 weeks was the period for which people had to wait for roughly 10 years under the last Labour Government. If 39 weeks was appropriate when there was not the pressure that we have on public expenditure today, then it is certainly appropriate when we are trying to make necessary savings.

Welfare Reform and Work Bill

Lord Young of Cookham Excerpts

Tuesday 17th November 2015 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I have listened for the past six hours to this excellent debate with its high-quality maiden speeches with a growing sense of relief that I am no longer the Government’s Chief Whip, as some serious issues have been raised that will need addressing in Committee. As someone who was a Housing Minister, on and off, for 10 years and who chaired a housing association for seven years, I want to focus my remarks on the two clauses in the Bill that deal with housing, which were welcomed in another place by the Opposition Front Bench.

Looking at the clauses on support for mortgage interest, the Opposition spokesman said:

“We support reforms to mortgage interest support that will strengthen work incentives and deliver savings”.—[Official Report, Commons, 20/7/15; col. 1265.]

Of the rent reductions, which have been controversial in today’s debate, the Opposition spokesman said:

“We want…reductions in social rents that will deliver savings to the taxpayer”.—[Official Report, Commons, 20/7/15; col. 1273.]

So the housing element of the Bill ought to be less controversial than the rest of it.

Dealing first with support for mortgage interest, which was touched on by the noble Baroness, Lady Sherlock, and the noble Lord, Lord MacKenzie, turning a grant into a loan is a sensible way of cutting public expenditure without reducing support to the homeowner who faces difficulties. I will come to the extra waiting period in a moment, but it is difficult to justify the fact that a householder sitting on a substantial chunk of equity gets a grant from the taxpayer, leaving when he dies his estate to his beneficiaries, unencumbered by the help he has had from the taxpayer. It seems sensible to convert that from a grant to a loan, and I think that would be justifiable whether or not one was looking for savings in public expenditure.

There are extra weeks before the entitlement kicks in, but that simply restores the waiting period to what it was before the financial crash in 2009. I understand the concern that this might push up repossessions, which are at an all-time low, but I wonder whether a bank or building society would go through the aggravation of repossession if it knew that in a few weeks’ time it would get, direct from the Government, monthly interest in full on the sum in question. In view of the concern, I wonder if it would make sense for Housing Ministers to have a dialogue with the CML, perhaps to get a memorandum of understanding that repossession would not normally be activated if SMI was about to kick in. Ministers made it clear in another place that:

“We remain committed to helping owner-occupiers in times of need to avoid the risk of repossession”.—[Official Report, Commons, Welfare Reform and Work Bill Committee, 13/10/15; col. 356.]

I think that dialogue might help.

The reduction in social rents is of course welcome news to tenants, and not just those who pay the rent in full. Of course, some of those currently on housing benefit hopefully will float off it in the next four years and therefore benefit from the measure. Those who currently pay their rent will be able to plan, knowing that for the next four years one of the largest items in their budget will go down in cash terms. This is good news for tenants and good news for the DWP, in that it reduces its outgoings not just on housing benefit but presumably on other index-linked benefits as well, as the downward pressure on rents will influence the CPI.

However, as my noble friend will know, this saving is subject to the ONS changing its mind on housing association debt. It decided just a few days ago that, as from next March, housing association debt will score as public expenditure. This means that, far from this measure reducing public expenditure, it will push it up unless between now and next March the Government can make sufficient changes to the housing association regime to convince the ONS that it can be reclassified. Can my noble friend indicate how they are going to ensure that the ONS ruling is reversed? Of course, that was based on measures taken before the rent reduction and the voluntary right to buy was introduced. It is important that any deregulation does not undermine the creditworthiness of the movement.

What is good news for tenants and the DWP is less good news for investment in housing, as many noble Lords have said in this debate. Ever since housing associations were able to borrow from the capital markets, there has been a link between housing associations’ rents and the size of their investment programme. I confess that when I was Housing Minister, much of my capital programme was funded by the DWP through housing benefit, so any reduction in rent affects cash flow and the ability to sustain borrowing, and therefore affects the investment programme.

It is therefore important that any measures in the Bill that reduce the investment programme of housing associations be replaced by other measures in the Housing and Planning Bill, because there are two sides to this coin. If one side of the coin is reduction in rents in this Bill, the other side has to be measures to increase supply to counteract that in the Housing and Planning Bill currently in another place. I understand the points that were made about supported housing and the excellent work done by those who help the homeless, such as St Mungo’s Broadway and other movements. Clause 22(7) enables the Minister to make exceptions, and I am sure we will want to look at this in Committee to see whether we can safeguard the valuable work housing associations do to support vulnerable people.

My final point concerns an issue that has not been raised in this debate. Reducing social rents at a time when market rents continue to rise brings into sharp focus the question of who gets lifetime tenancies at a lower rent from a social landlord, as opposed to the other half of the market, which has to accept short-term tenancies at market rents from landlords who, in some cases, are not as good as local authorities or registered social landlords. Noble Lords with very long memories may recall the Local Government and Housing Act 1989, one of the objectives of which was to influence the level of social rents to market level, with housing benefit taking the strain. The golden age of Nicholas Ridley never actually arrived, for good reasons, but this measure makes a sharp step in the opposite direction, widening the gap between the two sectors. That means that we need to ensure that the stock of social housing is more accurately targeted at those who need it most. That means another look at lifetime tenancies and at measures to encourage mobility through the social housing sector, as families now decently housed find their circumstances have improved and they can make their way into market housing, freeing social housing for those who, like they were, are in desperate housing need at the inception of their tenancies.

This Bill is an important building block in getting public finances under control, but it raises serious issues for those who want to see an increase in housing supply. Those issues need to be developed when the Housing and Planning Bill reaches this House, and I hope to take a part in those proceedings.