Housing Benefit

Nick Raynsford Excerpts

Tuesday 9th November 2010 Commons Chamber

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

Does my right hon. Friend recall the answer that the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb) gave less than one month ago, when he indicated that at the last count 48% of local housing allowance recipients received a sum less than the rent that they were due to pay? The idea that half of all local housing allowance recipients are forcing up rents, when they are not actually getting enough housing allowance to pay the rent, is an extraordinary proposition.

[Mr Alexander]

My right hon. Friend’s expertise is well revealed in his question. I have been told to avoid hysteria and be careful and measured, but any of us who recollect the impact of the community charge, when a number of poor people started with a small but rapidly accumulating debt and ended up owing significant arrears to local authorities—which ultimately had to write off those debts—have reason to be very cautious before endorsing these proposals.

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[Mr Betts]

rose—

[Mr Raynsford]

rose—

[Mr Duncan Smith]

I will give way in a minute.

Nine tenths of the rise in housing benefit in the past 10 years is down to increased rents. To put that into context, if that increased spend in rents going to private landlords had instead been used to invest in social housing, we would have had 80,000 social homes being built per year. I therefore wonder who Labour Members think has squandered the money they had flowing into the Exchequer. Political short-termism was the reason for that.

[Mr Raynsford]

rose—

[Mr Duncan Smith]

Okay, I will give way to the right hon. Gentleman as he was one of those responsible.

[Mr Raynsford]

Will the Secretary of State please now put the record straight and say that the increase in housing benefit attributable to rent increase covers both the social and the private sectors, and that the increase in housing association rents contributed to building the homes that were built? Will he now put the record straight and say it is completely wrong to imply that this is entirely going to private landlords when it is not?

[Mr Duncan Smith]

When the right hon. Gentleman is in a hole he should stop digging. The reality is that he was responsible for one of the lowest levels of building social housing. I do not know whether he is proud of that, but I would not be if I were sitting there with him.

We have to ensure that people who pay their way without recourse to benefits will no longer have to subsidise people who live in properties that the former could not afford. As I said, the maximum rate under the cap will be set at a level that is affordable and which some will consider generous. Based on what people spend on average on housing, the figure will be quite high; about £80,000 a year is what you would have to have.

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[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

Let me draw attention at the outset to my interests as declared in the register.

It is clear that the Government are pursuing a policy not of housing benefit reform but of housing benefit cuts—a policy based on assumptions that are wholly untested.

[Bob Russell]

Will the right hon. Gentleman give way?

[Mr Raynsford]

No, I have only just started. I will give way in due course, but the hon. Gentleman is perhaps being a little impatient. He might benefit from listening for a moment before interrupting.

The policy is based on assumptions, many of which are wholly untested, premises that are, frankly, incredible, and an absence of detailed impact assessments of how the eight different cuts will cumulatively affect the 4.75 million households that currently receive housing benefit. In my view, it is that absence of a detailed and thorough appraisal of the impact of the cuts that is the most serious indictment of the Government.

We have heard the Secretary of State’s claim that the effect of the changes will be to reduce rent levels in the private rented sector. His noble Friend Lord Freud made a similar claim last week when, according to a report in The Guardian, he said:

“We are expecting a large number of people who see less housing benefit to be able to negotiate their rents downwards, and the landlords will move to the new lower rate.”

As the Secretary of State and Lord Freud are clearly not totally familiar with the rented market, let me remind them and their colleagues on the Front Bench what is actually going on. Yesterday’s Evening Standard reported:

“Widespread rental ‘gazumping’ has hit London for the first time as desperate tenants fight to secure homes. Rents have soared by up to 35 per cent this year, with as many as one in four landlords asking for sealed bids from applicants, according to one agent.”

The director of a lettings agency is quoted as saying:

“The exceptional demand for rental properties which we saw earlier in the summer is showing no signs of slowing down. If anything, the rental market is now more red-hot than a month ago.”

He said that

“one four-bedroom ex-council home was recently let in Camberwell for £500 a week—£150 above the asking price and more than 40 per cent higher than the previous rent.”

A partner at Cluttons is quoted as saying:

“occupancy rates stand at an unprecedented 95 to 98 per cent, as tenants opt to stay put rather than move and risk being frozen out,”

adding that

“the stampede for homes was at all levels of the market, from studio to family homes and is in all areas of London.”

She said:

“We had a studio let at Cinnamon Wharf in Shad Thames that had been on at around £225 to £230 a week. I suggested putting it on at £305 and we got that within half a day.”

The director of another agency said:

“The demand for rental property will heat up even further in the medium-term and gazumping will become even more common as tenants look for any way in which they can get ahead of the competition.”

[Bob Russell]

I was going to ask the right hon. Gentleman what interest he was declaring, but my question to him now is this: is he not talking about supply and demand? If the issue is supply and demand, why did the previous Government, in which he played a leading role for 13 years, fail with the supply?

[Mr Raynsford]

Let me say to the hon. Gentleman what I have said in many previous debates. When we came into government in 1997 we inherited a very serious problem caused by the condition of the existing housing stock, as he knows. He also knows that a great deal of money was put into the decent homes programme to improve the condition of millions of social homes throughout the country. Because that was a priority, perhaps not enough was spent on building new homes, but if he looks at the figures, he will know that during the later years of the previous Government, until the recession hit, there was a rising trend of new house construction in all tenures, including social housing. Had that been sustained, we would now be seeing levels approaching those set out by Kate Barker in her report.

Obviously there has been a recession in the meantime. It has hit the world—it has hit this country and everywhere else—but given that situation, we want to see policies that will improve prospects rather than make things worse. The problem is that the present Government have managed to destabilise every part of the housing market. House builders are in shock because of the ill-considered planning changes. The private rented sector is in difficulty. Landlords are worried about the proposed changes to housing benefit. The social housing sector has been pulverised by the Government’s proposal to remove security of tenure and to jack up rents to near market levels. That has created a serious problem of anxiety and lack of confidence in all sectors of the market. Not surprisingly, as the hon. Gentleman highlighted, there is therefore a problem with shortage of supply. That is precisely what is driving rent levels.

[Mr Burley]

Will the right hon. Gentleman give way?

[Mr Raynsford]

No. I have given way once, and I must make a little more progress.

All hon. Members should realise that the Government’s hope that the changes will lead to a reduction in rents is delusional. It will not happen, and the consequence will be that many people who depend on access to private rented housing, and on a degree of housing benefit to support it—many of them are in low-paid work—will find it harder and harder to compete in an increasingly tough market. I am afraid that the Government are making things worse.

[Simon Hughes]

One factor over the past 13 years that affected supply was the number of right-to-buy applications exercised by tenants. Does the right hon. Gentleman support a discretion for local councils to decide whether to allow the right to buy? That has become the policy throughout Wales.

[Mr Raynsford]

The hon. Gentleman is going wide of the subject. The right to buy now has a relatively minor influence on the supply of housing, because most people in social rented housing are on incomes that make it impossible for them to buy. I would not change the current rules. I think it is right to have an option for people to buy, but in the current market there will not be many who take that up. I want the focus to be on securing a good supply of rented accommodation through social and private providers at rents that people can afford, supported by a proper benefit system.

We know that a substantial number of local housing allowance recipients are in properties where the rent is higher than the LHA. I have quoted the answer given by the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), earlier this month that 48% of LHA recipients had to meet a shortfall because their rent was higher than the LHA. It is absurd for the Government to argue that the LHA is driving increases in rent, when the evidence that I quoted from the Evening Standard shows that it is the private market and the huge demand in the private market that is driving the increase. A very high proportion of LHA recipients will find it increasingly hard to compete, because their LHA is already below the rent that they are paying.

[Steve Webb]

Will the right hon. Gentleman give way?

[Mr Raynsford]

No. I will not give way because I have very little time left. The Minister should remember that private tenants who are dependent on housing benefit may find that they are priced out of the market as a result of the Government’s policies. I am surprised that he and his party are prepared to countenance that.

The hard questions that Ministers must answer—they have not done so—is simply: where will the tens, and perhaps hundreds, of thousands of LHA recipients go when their allowance is cut to a level that makes it impossible for them to make up the shortfall, and their landlord declines to reduce the rent?

[Steve Webb]

The right hon. Gentleman cited a £500 rent on a four-bedroom property—he quoted that from a newspaper—which is above our cap. Is it his policy that taxpayers should pay someone £500 for a four-bedroom property?

[Mr Raynsford]

No, it is not, and the point has already been made that that is not a housing benefit letting; it is a market letting being driven by the market. The Minister finds that difficult to understand because of his extraordinary prejudice that the local housing allowance is somehow driving the increase. I would have thought that he understood that, because he has some grasp of economics. He should also understand the cumulative effect of a series of such changes: not just the cap, not just the local housing allowance, but the change in non-dependant deductions, the restriction of the entitlement of social housing tenants of working age who are deemed to occupy larger accommodation than they need, the extension of the shared room rate to single applicants aged 35—the hon. Member for Cardiff Central (Jenny Willott) raised that anxiety—the change to the uprating formula using the consumer prices index rather than the retail prices index, the 10% cut in benefits for those on jobseeker’s allowance for more than a year, and the overall cap on benefit entitlement. Cumulatively, those changes will have a devastating effect. Why has the Minister, with his distinguished background in social policy, not insisted on proper appraisals of the cumulative impact, and the impact over a period, of all the changes, which will have dire consequences for many people on very low incomes?

This is not evidence-based policy making; it is faith-based policy making, using assumptions that most of the commentators in the outside world who have a real understanding of these things believe to be seriously flawed. I put it to the Minister that unless the Government can give us evidence that their policy will reduce rents in the private sector—for which there is not a shred of convincing evidence—and that the cumulative impact of the changes will not have dire consequences for many vulnerable people, the only decent thing for them to do is to withdraw their package and say that they will look again at the measures and discuss with the Opposition agreed arrangements to deal with abuses of the system without causing vulnerable people to suffer. If they do that, they will have our support. If they do not, I hope that all hon. Members with open minds will vote for the motion tonight.

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[Amber Rudd]

I am grateful to the right hon. Lady for making that point, because it is exactly the one with which I am about to deal. Earlier in the debate, we heard about sensational articles in newspapers and unrealistic reporting. I am afraid that Hastings has been on the receiving end of quite a lot of that. I have spoken to the councillors who made those comments and to our director of housing, Andrew Palmer, who has done excellent work. I asked him how many London councils had made inquiries of him, and he said none. I asked him whether he had had an opportunity to speak to the people who run the bed-and-breakfast establishments that he very rarely uses—although he has had to do so occasionally—and to the landlords whom he uses for the purposes of the local housing allowance. He said that he had spoken to all of them, and that not one of them had received such an inquiry.

I strongly believe that we have been reading sensationalist reports in the newspapers. There is an apocalyptic vision of a group of Londoners arriving on the south coast, but it simply is not happening. I think it important to repeat that so that people do not become fearful. They do not have to believe what is said by the right hon. Member for Don Valley (Caroline Flint) about extra pressure on education establishments, because that is not happening at the moment.

We hope that rents will fall. Members will not be surprised to hear that I agree with much that has been said by Conservative Members about reducing rents. The right hon. Member for Greenwich and Woolwich (Mr Raynsford) spoke of the unrealistic aspect of falling house rents, and referred to an article in the Evening Standard that focused mainly on larger houses. In my constituency at least, between 80% and 90% of people who receive local housing allowance live in homes with one to two bedrooms. The larger house element does not feature so much, although it represents a large cost. I am told by Westminster council, whose representatives I have consulted, that house prices in its area are falling rather than rising.

[Mr Raynsford]

When the hon. Lady reads the record of the debate, she will see that among the quotations that I gave from the article in the Evening Standard was one from an agent who said that properties of all sizes were affected, from the largest to the smallest, and that all areas of London were affected.

[Amber Rudd]

I am interested to hear that London is affected. We will see the consequences, but at present I am receiving different answers and people are reaching different conclusions. It is not entirely clear how the private sector will respond, but one thing is entirely clear: we cannot continue with the cost as it is now.

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[Steve Webb]

I do not think that the right hon. Gentleman has followed the proposition. It involves new houses and new build. People in existing tenancies do not face that change.

We have heard talk of the impact of these changes. I appreciate that it is a shame to introduce facts at 9.45 pm, but I shall give it a try. As was pointed out by the Chairman of the Select Committee, the hon. Member for Aberdeen South (Miss Begg), this is not just a London issue, but obviously the impact of the cap will be felt particularly in London. There are 400,000 people on housing benefit in inner London, which ought to be where the impact will be greatest. Of those, 313,000, or 77%, will be unaffected because they are in social tenancies, and a further 30,000, or 7%, will be unaffected because they are in the non-local housing allowance sector. That adds up to 84%. A further 6% receive local housing allowance, but will not be affected. That means that 90% of people on housing benefit in central London will not be affected at all, while another 3% will be affected by less than £10 a week.

The mistake made during the debate is that people have assumed that any shortfall is equivalent to homelessness. That is a ludicrous leap. We know that people experience shortfalls in a number of ways. Of all the people on housing benefit in central London, 7% will experience shortfalls of more than £10 if there is no change in rents.

[Mr Raynsford]

Will the Minister confirm that he has just misled the House? Tenants in social housing will be subject to increased non-dependant deductions. The housing benefit of those who have received jobseeker’s allowance for 12 months will be terminated or reduced by 10%, and the benefit of those who are deemed to be occupying accommodation larger than they need will be reduced as well. All those social tenants will be affected by the Minister’s changes. Will he now admit that?

[Mr Speaker]

Order. I think that the right hon. Gentleman intended to include the word “inadvertently” in his intervention.