Housing Benefit (West Ham)

Lyn Brown Excerpts

Monday 22nd November 2010 Commons Chamber

[Lyn Brown (West Ham) (Lab)]

I am grateful to have secured this debate, which seems particularly timely given today’s announcement by the Minister for Housing and Local Government. Time and again, we have been told that the aim of the Government’s welfare reform package, including the reform of housing benefit, is to make work pay. Today, we have found out that if people living in social housing get a new job, or a promotion or pay rise, they may lose their home. So much for making work pay. However, that is a debate for another day.

I have a strong feeling of déjà vu about this debate. Housing benefit, and the difficulties that it poses to my constituents, has been a theme to which I have returned over past years, campaigning with a number of colleagues on the Labour Benches to identify an approach that makes work pay, and, by doing so, protects the public purse. I hope that despite the fact that the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), and I do not sit on the same side of the House, we too might work together to find some common ground and work towards common aims.

For the record, I do understand why housing benefit is seen as such a prize when the Government want public spending reduced. If I have my maths about right, housing benefit, combined with council tax benefit, is almost equal to all the other means-tested benefits added together. There are some rather easy, even cheap, political points to be scored by citing examples of abnormally high housing benefit for highly untypical large houses in high-rent areas. However, I do not believe that the changes proposed by the Government will solve the real difficulties faced by many of my constituents. They will, I believe, compound social and housing problems and become a greater cost to the taxpayer. Incidentally, a point worth noting and often forgotten is that many of those worst affected by the changes will be taxpayers too.

I represent a London borough—Newham—which has the fourth highest level of child poverty and the sixth highest level of deprivation in the country. The gross earnings figure for the bottom quarter of employees in Newham last year was 23% lower than the figure for London, and the average wage for those living in the borough is just £455 per week. As I am sure the Minister will acknowledge, that does not go far in an area where the costs of day-to-day essentials, including child care and housing, are so very high. The average house price in Newham is £221,801, which is 9.4 times the average income.

The implementation of the Government’s proposals will result in many private renters having their housing benefit, and therefore their income, driven down by a harsh reduction in local housing allowance rates. It is not as though private tenants claiming housing benefit have had it easy up to now. Even at the current rates, nearly half of local housing allowance claimants in Newham currently face shortfalls of almost £100 a month in meeting their rent obligations. Estimates by the London borough of Newham suggest that, as a result of the change in local housing allowance alone, more than 6,300 people in Newham—three quarters of the LHA claimants in the borough—will face shortfalls between the LHA that they receive and the rent they have to pay.

Some 40% of local housing allowance claimants work, and Newham council’s housing benefit team tells me that their average net annual earnings are just over £8,000 a year. I am sure the Minister will acknowledge that that is not a fortune, and makes it genuinely difficult to make ends meet in an expensive capital city. The cuts will push many already struggling families to breaking point.

Community Links is a fabulous local charity that, among its many activities, provides debt and benefit advice. As I am sure the Minister will appreciate, it is particularly concerned, given last week’s announcement on legal aid, that it will not be able to provide advice services for some of the most vulnerable in our community, and I expect that that will be the subject of much further, more anxious debate in this Chamber. In addition, Community Links reports that the numbers seeking debt advice have doubled in the past two years.

As Shelter has said:

“For those households already struggling to balance very tight budgets, a reduction in LHA will only push more of them over the edge, triggering a spiral of debt, eviction and homelessness.”

Things can only get worse, as the LHA allowance will effectively be cut year by year for ever. I must admit that even the ingrained cynic in me was a little staggered to learn that the measure of inflation to be used in calculating increases in LHA is the one that deliberately excludes housing costs. Over the past decade alone, it has risen at a third of the rate of private sector rents. How cynical is that?

Citizens Advice believes that many will face eviction in a matter of weeks after the cuts are imposed. The non-regional, one-size-fits-all LHA cap will make it almost impossible for low-income households to rent in the private sector in inner London. That will have an impact on outer London areas such as my own. In east London, low-income households will be priced out of areas such as Hackney and Tower Hamlets, forcing people to look for accommodation where rents are lower. Rents in Newham are lower than in neighbouring Whitechapel, in Tower Hamlets, and far lower than in Islington and Westminster. According to information sourced from the Greater London authority, the cost of a two-bedroom property in Whitechapel ranges from £271 to £369 per week. In Stratford, which is just a few short miles away, it ranges from £204 to £250.

I believe we will see evictees from Tower Hamlets crossing the border to stay with families in Newham and declaring themselves homeless once there. The impact on homelessness rates could be catastrophic. The Minister will be aware that Newham is already home to high proportions and concentrations of low-income households. The private rented sector is large and expanding. In my borough, 30,000-plus people are on the council waiting list. Newham already has more people on waiting lists for social housing and living in temporary accommodation than any other London borough. As well as housing, other services will be badly hit as a consequence of the cap in other areas. Newham will be left dealing with more pressure on school places, doctors’ surgeries, jobcentres and social services. Our schools are already over-subscribed.

Those problems will emerge as the council and other providers are forced to retract services due to the swingeing cuts in their budgets, and—I assure the Minister that this is not rhetoric—the cuts to Newham council’s budget are, by any definition, swingeing. Just to heap coals on the heads of our people, it is also clear that the employed residents of Newham are very reliant on public sector jobs; indeed, they are in the highest category in that respect according to the latest survey. That is what is called a double whammy.

I want to touch on the suggestion that the changes will give us an opportunity to renegotiate rents and place more power in the hands of the citizen. Westminster council’s cabinet member for housing writes of the need to

“support the reduction of the housing benefit bill…which was distorting private sector rents.”

Councillor Roe explains:

“Once the lower rate is in place, we believe rents will fall, as landlords will not be able to charge such high sums.”

I gently suggest, first, that the distortion of private sector rents was brought about by the deregulation of rents. I would also suggest that Councillor Roe is sadly over-optimistic about the direction of private sector rents, certainly in London. A survey of London landlords finds that when the shortfall in rent rises to more than £20 a week, more than 90% of landlords renting properties to LHA recipients in London would look to evict tenants who fall into arrears or not to renew the tenancy at the end of the rental period. Controls to limit evictions for families with manageable arrears are completely absent from the system. Using Department for Work and Pensions figures and results from the survey, it can be estimated that 82,000 households across London will be at risk of losing their home as a result of the changes.

The elected mayor of Newham, Sir Robin Wales, wrote to Lord Freud outlining his concerns about the LHA cap and the impact on Newham. In his reply, Lord Freud acknowledges the concerns, stating:

“We appreciate that outer London boroughs could be faced with an increased number of new Housing Benefit customers needing access to additional services such as schools and health care. We will look at the wider impacts on local authority housing departments, and other local services particularly with regard to social mobility, homelessness and overcrowding…We will ensure that the full range of options for customers facing a shortfall in their rent, from renegotiating their rent levels through to applying to their local authority for assistance in obtaining alternative accommodation, is publicised, and that people are encouraged to consider those options in good time”.

[Stephen Pound (Ealing North) (Lab)]

I am reluctant to interrupt my hon. Friend because she is making an extremely powerful case, but is she as nauseated as I am by the use of the word “customer” in that context? A “customer” is a person who makes a decision on alternatives in a market economy, so are recipients of housing benefit—those human beings—to be denigrated as “customers”?

[Lyn Brown]

I am happy to agree with my hon. Friend. A customer has choice, but I am sad to say that the people of Newham will have very little choice. What options are open to those facing a shortfall in rent? What alternative accommodation and what options to renegotiate will they have? There are 35,000 households in private rented accommodation in Newham, almost a third of which are on housing benefit. Given that the rents in my area are relatively low compared with the boroughs immediately adjacent and to the west, it is absurd to suggest that the changes will force down rents in the area, or that residents will have the option to renegotiate their rents downwards. The private sector in Newham can and will soak up the properties left by those who, owing to the changes, have to leave their homes. The changes will mean that those dependent on housing benefit will be unable to afford to live in Newham.

The Minister will also know that, despite the Housing Act 2004, there is a dark side to a small proportion of the private rented market. Anecdotal evidence from head teachers in my local schools suggests that a new breed of slum landlords who rent out houses to families by the room is emerging. I am also told that some landlords will rent only to migrants, because they are less likely to know their rights. As we know, landlords should turn down families who have too many children for the rooms available. Instead, vulnerable tenants are claiming for space that they are not allowed to use as other families are squeezed alongside them. That is a benefit fraud, and it is perpetrated at the behest of landlords.

There are currently not enough resources to police the growth in multiple occupation, which will increase exponentially as the single-room rent is extended up to the age of 35. However, regardless of those extreme cases, it is clear that the cuts in housing benefit will force many more households into overcrowded and substandard accommodation.

My hon. Friends and I have spoken many times before of the knock-on effects on families of being shunted around from house to house and living in poor conditions; of the profound impact that that can have on health, education, inclusion in the community and mental well-being; and of the dreadful impact on children and their ability to achieve their potential. There will be more stress and conflict as unemployed family members are unable to pay their non-dependant deductions, which are set to increase disproportionately. As Crisis has pointed out, there will be more single homelessness and, yes, more NEETS—people not in education, employment or training—in this big society.

I believe that the situation will now get worse. Last week’s announcements by the Secretary of State for Work and Pensions compounded all the problems that I have outlined. The universal benefit and its cap, set at £500 per week per family, will effectively mean pricing low-income families out of the capital. Citizens Advice has stated that

“we are very concerned that the Government appears to be rushing into benefits policies that have not been thought through, or tested for their impact on individuals…The fact that the cap applies regardless of household size means that it will inevitably fall hardest on families with children.

Coming as it does on top of the cuts to housing benefit announced in June’s emergency budget, a cap of £500 a week on household benefits will price many low income families out of living in London and the south-east of England altogether, and if it goes ahead will inevitably lead to widespread hardship, debt and homelessness…For example, a couple with four children currently receiving £350 a week in jobseekers allowance…child tax credit…and child benefit…and £25 in council tax benefit would be left with a maximum of £125 per week for rent.”

The Government’s impact assessment had little to say about the impact on children and poverty, yet London Councils calculates that nearly 80% of the households affected by the cap in London will be households with children.

Let us also recognise that there will be many thousands of families whose breadwinners may lose their jobs, but be horrified at the thought of claiming benefits. It is insulting to suggest that those people will have made a lifestyle choice to claim jobseeker’s allowance. In Newham, it is currently estimated that 1,900 families will be affected by the absolute cap. There will be many more after the cuts to the public sector have impacted and unemployment in my constituency has risen. The 10% sanction on housing benefit for people who have been unemployed for 12 months will hit my constituents especially hard. There are 1,910 JSA claimants who have been out of work for a year or more in Newham, and 10,196 people claiming JSA in the borough. Nine JSA claimants are competing for each unfilled job vacancy in Newham, compared with a national average of 5:1. I genuinely believe that the 10% cut presupposes that living on £65 a week jobseeker’s allowance is a lifestyle choice.

The Budget and the comprehensive spending review proposals are unjust, and they appear to have been thrown together with a disregard for the consequences. This attempt to save money will, I believe, store up problems for the future. The problems of homelessness, debt, unstable homes and constant moves impact on children and families, preventing children from belonging to a community and fulfilling their potential, and storing up social problems that all the Sure Start facilities in the world will not be able to solve. It is truly difficult to see how that fits with the Government’s commitment to end child poverty. This is not the big society. Quite the reverse: it is the sound of doors clanging shut and communities breaking apart. There appears to be a poverty of compassion in the coalition.

I hope that I have begun to outline some of the difficulties that I believe my community will face, given the changing benefit scene. I hope that the Minister will be able to address those concerns and offer some understanding both of the circumstances of Londoners and my constituents on low incomes, and of their challenges ahead. I and many anxious residents of Newham will listen eagerly to what he has to offer.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate the hon. Member for West Ham (Lyn Brown) on securing this important debate and on her track record of raising such issues in the House—as she said, from the Government Benches, which are indeed still here. I agree with a good deal of what she has said in the past about the issue. Two years ago she told the House:

“My message is that the housing benefit system is in desperate need of reform.”

She then quoted one of her constituents, who had said that they were

“trapped in benefits, prevented from returning to work—all my wages would just go to pay the rent and I would be worse off.”—[Official Report, 5 November 2008; Vol. 482, c. 293-94.]

I suppose I was hoping that today she would come up with some suggestions for how housing benefit should be reformed to address those problems. In anticipation of her speech, I checked what the Labour manifesto said on the subject. Surprisingly, I found that I entirely agreed with that as well. It said:

“Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.”

The basis for one of the key reforms to which the hon. Lady referred and which has most impact in Newham is the switch to paying rent based not on the 50th percentile, which is the current regime, but on the 30th percentile, which is more or less the typical rent for a low-income working household. That seems to be, almost verbatim, the policy on which she stood at the last election and which we are now implementing. Yet she is saying that the impact of that will have the single biggest impact on her constituency because the cap overall has relatively little impact, and that she now opposes that policy. I am not entirely sure that that is consistent.

The hon. Lady was critical of the universal credit, which my right hon. Friend the Secretary of State has proposed and which is designed to address just the sort of barriers to work that she is worried about by reducing withdrawal rates, albeit relatively modestly, and reducing barriers to work so that when people such as her constituents take jobs they will know that they are better off. I hope that on reflection she will be more charitably disposed to those reforms.

I will not dwell at length on the reasons for the reform, because time is limited, but it is true that cost is one. Housing benefit costs have risen by £1 billion a year in each of the past five years, partly due to the recession, but also to rising rent levels, so there is a need for action. But the issue is not just about cost; it is about fairness. The hon. Lady did not address why it is fair that someone on benefit, albeit not through any fault of their own, should have a wider choice of properties than someone in a low-paid job, and that is how the current system works. That is the current regime.

[Lyn Brown]

My basic tenet is that it is not possible to exist with the universal cap level and pay the rent of a London property, whether it is a two-bedroom flat over a fish and chip shop in Green street, or somewhere a little more palatial, perhaps further out. The taper in the benefit system, which the Minister rightly said I spoke about previously, is a disincentive for people who are trying to work, but we now have a cap and there will be no opportunity for them to negotiate their rent downwards. I cannot see how the reform that the Minister talks about will improve matters at all.

[Steve Webb]

With respect, the hon. Lady is conflating about three different changes. The universal credit is nothing to do with the cap. It is a separate proposition, and the details are yet to be announced. We have already announced exemptions, and people in work who receive working tax credit will not face the cap at all. That is part of the response to her point. No one in work and receiving working tax credit will be affected by the overall benefit cap, nor will anyone on disability living allowance, but the details have yet to be worked out. The universal credit—not the universal cap—is a separate reform designed precisely to address the points that she raises.

I shall try to respond to some of the more specific issues that the hon. Lady raised about her constituency. Our estimate is that in her borough of Newham, 32% of properties in the private rented sector will be available to people on local housing allowance.