Housing Benefit

Oliver Heald Excerpts

Tuesday 13th July 2010 Westminster Hall

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

As ever, it is a pleasure to server under your chairmanship, Mr Hancock.

I am mindful that a number of colleagues have approached me to say that they are keen to speak in the debate—that is an indication of how serious the Government’s recent proposals are—so I do not propose to go into detailed background about housing benefit. The Minister, along with my hon. Friend the Member for Westminster North (Ms Buck), is one of the most expert Members of Parliament on this subject. None of us need a history lesson on housing benefit, and I hope that the Minister will focus on answering the serious points that we all need to raise.

The cap on housing benefit levels that was announced in the Budget is devastating for London and for Londoners. Only four London boroughs are completely unaffected. I do not have time to go into some important general issues to do with the provision of affordable housing, so I will instead focus on the impacts in relation to housing benefit in Hackney and more widely.

In addition to the cap on benefit levels, we will see an impact due to the local housing allowance level being limited to the 30th percentile of a local reference rent. There will also be a devastating impact due to the perverse proposal to impose a 10% cut in benefit for those who are unemployed for more than a year, which will be particularly hard for young people aged 18 to 24, who are among those hit by the highest levels of unemployment. That is a particular concern of organisations such as Catch22, which is a charity that works with young people.

More than 650,000 homes are rented in the private sector in London, so this subject touches the lives of many people. More than a third of those homes are rented to families who receive the local housing allowance. High rents in London are not a new phenomenon and are driven largely by a housing shortage. Figures provided by London Councils show that when the local housing allowance was introduced in 2008, the rent charge for three-bedroom properties in central London was £700, which is twice the level of the proposed cap. Looking further back to 2005, the then local reference rent, which excluded the top end of the market, recorded the rental market as follows: £435 a week for two-bedroom properties; £546 a week for three-bedroom properties; and £625 a week for four-bedroom properties, all of which are above the cap recently proposed—some seven years later. It seems that the Government are making decisions without looking at any evidence or at history. The lack of affordable alternatives in London meant that the previous Government’s desire to achieve a reduction in rents through the introduction of the local housing allowance was not fulfilled, because local housing allowance rates have risen as they chase the ever-increasing level of rent in the wider market.

According to a parliamentary answer, 14,000 households will be affected by the changes. The Minister has acknowledged the impact. We need him to tell us what measures will ameliorate those changes, if the Government go ahead with them. I should like the Minister to explain that figure and to say how the private rented housing market will be able to cope with the likely upheaval that it suggests. In addition, he needs to address the impact on families at a human level.

There is an assumption that people will be able to move to lower-price properties, but the pace and scale of change will present a challenge in that regard, even without the huge impact that there will be on children and families, and on low-paid workers. It is important to ask where that low-rent property will be available. It will not be available in my constituency. Will my constituents be forced to move to the borough of Barking and Dagenham, which is no doubt delightful, but not convenient for work and schools for my constituents with Hackney connections? The impact, including the social impact, on those few boroughs that will be unaffected could be huge.

For those listening to this debate who are not aware of the situation or are not from London, I point out that all central London boroughs are affected, including that covered by my constituency and that of my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott)—the whole of Hackney—as well as Barnet, Brent, Ealing, Haringey, Hounslow, Lambeth, Merton, Richmond and Wandsworth. The changes will have a particular impact in London.

It is interesting that the Government have professed their intention to get rid of the Minister for London. That is all very well, but I believe that there is a spokesman—or spokesperson—for London. However, I wonder whether the hon. Member for Wimbledon (Stephen Hammond) has been asleep on the job because it seems that this measure has been advanced without any understanding of its wider impact, particularly in London, which is the driver of our economy. The Mayor of London has also written to the Government to outline his concern.

[Mr Oliver Heald (North East Hertfordshire) (Con)]

Does not the hon. Lady accept that the level of housing benefit—and how it is set—affects the rental market? The National Landlords Association has said:

“Landlords will have to look at their profit and loss and decide how much they can afford to cut their rents by.”

The hon. Lady will have seen examples in the Evening Standard last night of properties being rented at almost double the market value to housing benefit tenants.

[Meg Hillier]

The hon. Gentleman brings me nicely to my next point, and I shall deal with his second point in a moment. Let me be clear that I am not saying that all is perfect with housing benefit, as the Minister, from his previous incarnation as an academic in this area, knows all too well. Although I have been unable to source the reference, I believe that the current Leader of House famously said, “Let housing benefit take the strain,” when a previous Government made changes following which social housing rents increased.

--- Later in debate ---

[Meg Hillier]

I agree. We must not lose sight of the majority of our constituents. Good law is not made on the basis of rare exceptions.

The hon. Member for North East Hertfordshire (Mr Heald) raised an interesting point about housing benefit levels in the private rented sector. Some private landlords have been in touch with me to say that they are concerned that they will no longer wish to rent to anybody who is either in receipt of benefit or likely to be. Given the current economic situation, the group of people who are likely to be in receipt of housing benefit will grow, because many people could be affected over the next few years. We heard yesterday about cuts to the NHS, and job losses are coming from all directions. That will mean that for many people in the private rented sector who want stay in their home and their community, the only option will be to look to housing benefit to take the strain.

[Mr Heald]

Does not somebody have to speak up for the hard-pressed taxpayer? Average earnings—take-home pay—in this country are £374 a week, but the hon. Lady is arguing that people should be able to rent properties for amounts hugely above that.

[Meg Hillier]

There is an interesting divide in the Chamber—not on party lines, but on London and rest of the country lines. Those of us who represent London see the reality of the situation. Yes, the housing benefit bill has increased, but tinkering in such a way is not the solution. The subsidy needs reform, but it is flexible, and that flexibility is useful. In the current climate, with job losses looming, we tinker with such flexibility at our peril. If wholesale reform was being proposed, we might want to look at that, but at the moment we are talking about tinkering with the system in a way that damages London.

--- Later in debate ---

[Mr Oliver Heald (North East Hertfordshire) (Con)]

Average earners in this country—taxpayers—take home £374 a week. Is the hon. Member for Hammersmith (Mr Slaughter) seriously arguing that they should chip in so that £2,000 a week can be spent through housing benefit for a family? He needs to wake up. The fact is that the housing market for rentals is affected by the level of housing benefit and the housing allowance. In Wolverhampton, 75% of the rental market is housing allowance. The maximum amount that can be claimed for a four-bedroom property is £693 a month and—guess what?—that is what they all go on the market at.

[Several hon. Members]

rose—

[Mr Heald]

I will give way in a moment, but first I wish to mention Blackpool. The effect of the local broad rental market area, which takes in surrounding areas such as Fylde, has been to put up all the rents in the centre of Blackpool. There are other examples, including one in yesterday’s Evening Standard showing that housing benefit rents are higher than ordinary rents. The National Landlords Association states that the effect of the change will be landlords looking at their profit and loss and deciding by how much they can afford to reduce their rents. The fact is that housing benefit and the rental market are intertwined and it is ridiculous to say otherwise.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Does the hon. Gentleman agree that those on the lowest incomes pay most in income tax, as a percentage of their income, rather than those on higher incomes? The idea that these measures are somehow unfair to taxpayers is completely misguided.

[Mr Heald]

The hon. Lady makes my point exactly. If someone with a job that does not pay much is struggling and paying taxes, how will they feel to see a family renting at £2,000 per week?

[Lyn Brown]

Will the hon. Gentleman give way?

[Mr Heald]

Of course.

[Mr Mike Hancock (in the Chair)]

Order. I urge hon. Members to consider that at least six more people have indicated that they wish to speak. If we have such a rate of interventions, they will not all get in. Please can we be fair to each other?

[Lyn Brown]

I am grateful, Mr Hancock. Other people would like to contribute to the debate but will probably find it impossible.

I want to make it absolutely clear that the hon. Member for North East Hertfordshire (Mr Heald) is talking about one case that has been cited in the Daily Mail, The Mail on Sunday or wherever. In Newham, in London, the rent for a five-bedroom house is £350 a week, not the ludicrous amounts that the hon. Gentleman is talking about. Perhaps he will focus his remarks on the real world, rather than the world of Notting Hill.

[Mr Heald]

The hon. Lady must recognise what has happened to the housing benefit budget. It has gone up in a decade from £14 billion to £21 billion, and has been pushed there the whole time. When the Work and Pensions Committee looked at the issue before the election, some people were seriously arguing that we should remove the five-bedroom cap so that someone could get a seven-bedroom house on housing benefit—there is no end to it. Someone needs to speak up for the ordinary taxpayer.

What about large families? The hon. Member for Hampstead and Kilburn (Glenda Jackson) talked about that issue in Hampstead. If ordinary working people want to have a large family, that is their individual choice, and it probably means that if they are not subsidised to a huge extent, they will be a bit more crowded and cannot live in the part of London in which they want to live. People with large families need to be more realistic about the way of the world.