Welfare Reform and Work Bill (Third sitting)

Shailesh Vara Excerpts

Tuesday 15th September 2015 Public Bill Committees

[Kate Green]

Q 132 Could I ask for your comments on a suggestion made to me that if this legislation precedes as currently proposed, there should in fact be a choice for some housing associations to accelerate the increase and take it in the first year or two, rather than it being 1% per annum? Have you any comments on the pluses and minuses of that suggestion?

David Orr: That would be even more destabilising for most business plans, because what you do is bring forward the reduction in rent, and once that reduction is in, it is there in perpetuity. That would just add to the amount being taken out of business plans, so it is not a helpful proposal.

[The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)]

Q 133 Good morning, gentlemen. I just have a few brief questions. For those who are on low incomes, would you agree that the reduction will be beneficial?

Gary Porter: For those who are on low incomes but above housing benefit level, yes, by about 80p a week. For those who earn money but not enough to take them out of housing benefit, no, it will not make any odds. For council tenants, the biggest savers will save about 84p a week. Obviously, if you do not have a lot of money, that extra £1 a week will be a benefit, but there are better ways of doing it.

Mike Donaldson: In L&Q terms, 54% of our residents will not see any benefit at all, because the benefit is to the Treasury—the taxpayer.

[Mr Vara]

Q 134 That will be for this year, but cumulatively it will increase over the four-year period.

Mike Donaldson: Only if those people remain in the same circumstances.

[Mr Vara]

Q 135 Yes. On a balance of probability, there will be a proportion that will benefit and a proportion that will not. It will be 84p this year, more next year, more in the summer of the following year and so on. Gradually, it will increase for those on low incomes.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

Before you go on, can I follow this up?

[Mr Vara]

I think the Chairman’s instructions were to catch his eye.

[The Chair]

I am coming back to you in a second, Emily.

[Emily Thornberry]

Sorry.

[Mr Vara]

Q 136 I note what you say about comparability, but you will be aware that between 2004 and 2014, average social rents rose by more than 60% compared with 23% in the private rented sector. Notwithstanding what you said, would you agree that the reduction in social rents will be able to bring some sort of parity between the private sector and the social sector?

Gary Porter: It is the complete reverse. If you force our rents down and allow private sector rents to go up—

[Mr Vara]

Q 137 Hang on; you say “allow”, but the private sector operates independently. The disparity at the moment is that one has been going up a lot more and the other less so. As I say, look at the figures: between 2004 and 2014, average social rents rose by more than 60% compared with 23% in the private rented sector. Given that this has gone in a certain direction in the past 10 years, if it were to go in the same direction in the next 10 years, clearly one will go up less than the other.

Gary Porter: Private sector rents will go up as a result of this, because there will be less public sector houses built. That will push up the demand in the private sector, which will allow private sector landlords to push their rents up more. That is the way the market works.

David Orr: Sadly, we don’t live in a world that is that simple and straightforward. Social rents going up by 60% is a specific and direct consequence of Government policy to reduce the amount of capital investment in new supply through housing associations, while still wishing to see the same level of delivery.

In the 2010 comprehensive spending review, when capital investment in new supply through housing associations was reduced by 63%, the coalition Government set us a challenge to deliver the same number of new homes or more, specifically by introducing a new rent regime called the affordable rent regime, with much higher rents. That was a Government proposition; it was not asked for or particularly supported by the sector. Having created affordable rents that are designed to be set at 80% of market rates and therefore responsive to what is happening in the market, rebased every time there is a new letting, the Government now want to reduce the rates on those. It is not consistent; that is the problem.

Housing and housing investment is a long-term business. We borrow money and organise finance on a 30-year basis, and that kind of cavalier approach—up one year, down the next; capital subsidy and then changing it to revenue subsidy—plays havoc with the ability of organisations to make the commitments they have entered into.

[Emily Thornberry]

Q 138 You have been asked a question about those on low incomes and the impact on them of rent going down, and I wanted to pick that up. I wonder perhaps if Councillor Porter particularly might be able to answer this. If rents go down by 1%, will that have an impact on the amount of money that local authorities have available to do repairs, and can you see that having a long-term impact on the service that is available to council tenants?

Gary Porter: Well, yes. Whatever money is taken out of the system will prevent us either, in some cases, from maintaining the homes in the way that we would like to maintain them, or—more importantly from a Government perspective, I would suggest—from building new homes to reduce the long-term housing benefit bill. It will in a few cases have an impact on the ability to maintain homes properly, but I hope that my members would find a way of prioritising making sure that people still live in fit, decent properties. We have a good track record over the past 10 years of improving the high quality of our housing stock, and I cannot see any council easily going back on that. They will make other decisions, other than reducing maintenance, but that will be investment in their value.