Housing Benefit

Mark Pawsey Excerpts

Tuesday 9th November 2010 Commons Chamber

[Mark Pawsey (Rugby) (Con)]

Any organisation facing an item of expenditure that has increased by 80% over 10 years would consider it a matter for attention, so it is entirely appropriate that the Government have been looking at housing benefit, given that expenditure there has increased from £11 billion in 1999 to £20 billion in 2009, and it is predicted that, without the reforms the Government are bringing forward, that figure would rise to £25 billion in 2014. As the Minister reminded us earlier, that is £1,500 per working family. Labour did nothing about the situation during 13 years in government, despite the anxieties of the right hon. Member for Holborn and St Pancras (Frank Dobson), although it was recognised by Labour in its 2010 Budget and is accepted in this motion. The question, therefore, is not whether we should act, but how we should act.

The situation today arose from the freeing up of the private rented sector by the Conservative Government in the 1980s. People were freed from the state as the only provider of affordable housing, and new, assured short-hold tenancies massively increased the private rented stock—a stock of property that was barely in existence up until that point. That measure gave greater choice to tenants and increased mobility, but it became clear that if people’s circumstances changed, or they were unable to remain in their homes, a new form of support would be needed. However, that support has got out of control. In addition, the system has introduced unforeseen consequences, because the payment of housing benefit has caused rents to rise higher than they would otherwise have done. There are 3.3 million rented properties in the UK, and 1.2 million tenants receive this benefit. That is more than one third of the total, and has a massive effect in the market for rented properties.

[Sheila Gilmore]

Is the hon. Gentleman not aware that according to two recent research reports—the Rugg report in England, and another conducted in Scotland for the Scottish Government—the proportion of those in the private rented sector on housing benefit was less than 20%. In Scotland, it was 17%. That report was published last year—not a long time ago. Of that 17%, only 8% were on full housing benefit, 6% had half paid, and 3% had less than half paid. Those are the actual figures from research. It is important that we have this published research, and that Government Members are aware of it.

[Mark Pawsey]

I am referring to the UK as a whole, and I will go on to show how the current system has driven rents up. When councils make their rates available, landlords use them as a benchmark for the rents they charge, knowing that a proportion of tenants will be able to pay and will not contest the level. The recipients of housing benefit are happy to accept whatever a landlord asks for, because they know that the state will pay. That contrasts with the position of private tenants, paying rent out of their earned income, who will be keen to negotiate the best rent they can. These higher rents might be good for landlords, but that does nothing to help people who are not in work to find work. In fact, the reverse can apply, because it can discourage claimants from taking low-paid employment or from working longer hours, because if they do so, their benefit entitlement might be lost, and the mobility introduced by the sector might be reduced.

It is worthwhile remembering—sometimes the Labour party seems to forget—that the benefits paid to recipients come out of the taxes paid by hard-working families. A number of my hon. Friends have drawn attention to that. Often, they are the kind of people who look with envy at the kind of housing enjoyed by some recipients of housing benefit. The new system will make things fairer.

We have heard a great deal today about the effect on people living in London, and some Government Members could be excused for thinking that this is a London-only issue. In my constituency, however, a terraced house costs £550 per month to rent, so some of the sums spoken about, such as the family cap of £26,000—more than many people in my constituency earn in a year—are out of this world to the average resident in my constituency. They fail to understand why such sums should be made available.

Concern has also been expressed about the effect of the new rules on availability of properties for people in receipt of housing benefits. I believe that landlords will have to become more realistic in the rents they accept. They will have to accept a lower return than they enjoy now. My hon. Friend the Member for South Thanet (Laura Sandys) spoke about landlords enjoying a return of 12%. There is no reason residential landlords should receive a disproportionately higher rate of return at the expense of the state. In order to improve returns, those who are committed to this sector for the long term and who continue to acquire properties in the future will not be willing to pay capital prices at the level they have done previously. That will exert downward pressure on the price of housing, making housing more generally more affordable, and, as a side effect, benefiting many people struggling to make a start on the housing ladder.

Increasing the supply of housing more broadly will be another important factor as the coalition deals with the Labour party’s failure to build enough homes. Last year, fewer homes were completed than in any time for a generation, and today’s housing reforms need not be seen in isolation when it comes to providing support for those in need of housing.

[Andrew Bridgen (North West Leicestershire) (Con)]

My hon. Friend should be aware that last year saw the lowest number of houses built since 1924.

[Mark Pawsey]

I thank my hon. Friend for that intervention. I spoke about a generation, but it is clearly two or three generations. Either way, we need to deliver more houses, as I think has been recognised by the Labour party, and the changes that the Government are introducing in the localism Bill will enable more houses to be built. It is that additional supply that will bring down prices for both rental and sale, giving occupiers a better deal. Progressive authorities, such as my local authority in Rugby, recognise the benefits of housing growth both for their local economies, by introducing new consumers into the area, and for the community as a whole, through the new homes bonus, which will enable the local authority to retain more council tax to develop new infrastructure.

I will draw my remarks to a conclusion because I know that other Members wish to speak. In my view, the housing benefit reform that the coalition is introducing is a necessary step in controlling the cost of the system of housing support to taxpayers, a saving that will yield £1.6 billion a year. In addition to that saving, the system being introduced will bring long-term benefits in the operation of the housing market.