Housing Benefit (West Ham)

Steve Webb Excerpts

Monday 22nd November 2010 Commons Chamber

[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.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the Minister give way?

[Steve Webb]

I have only six minutes left in which to respond to the hon. Lady, and it is probably important to do that rather than to respond to another hon. Member.

I have explained our broad estimate. A good proportion of rental properties will be available throughout the borough, but I agree that we do not want constant moves. No one wants that. The challenge is to ensure that when people enter a tenancy agreement they do so sustainably. All we are trying to do is to ensure that the choices made by people on benefit at the start of a tenancy, when they choose a property and a rent, involve the same constraints as for someone in low-paid work. The change is not designed to be penal; it is designed to be fair and equal. That is the idea.

The hon. Lady cited a figure of 82,000 people being at risk of losing their home, but that was based on London Councils research and not that of the Department for Work and Pensions, and it was based on a fairly low response rate from landlords. Moreover, landlords are bound to say that they do not want any reform that is going to cap what they get. Landlords have been the principal beneficiaries of the local housing allowance system. We have already seen private sector rents falling in the past 18 months, yet the rents paid to people on LHA have been going up. Through housing benefit and LHA, we are putting more than £21 billion a year into that market, and it would be implausible to suggest that we are not having an effect on it.

We believe in trying to restrain the growth in rents, although in four years’ time, we will still be spending more in cash terms on housing benefits than we are this year. I think that the hon. Lady used the term “swingeing cuts” about something else, but these are not swingeing cuts. This is about restraining the rate of growth of housing benefit, so it is a far more modest reform than she suggests.

The hon. Lady raised the issue of slum landlords, for whom we have no time, and one of the things we want to do is to change landlord behaviour, which is crucial. We are considering whether, by paying housing benefit directly to landlords, we could use that leverage to try to get rents down. Yes, some people might face shortfalls—I accept that point, although I think that the figures might sometimes be exaggerated—but we are not in a static situation. The question is: what happens next? If landlords, particularly those renting to housing benefit and LHA tenants, see that we are not simply going to follow the market up, that could change rent-setting behaviour.

The hon. Lady made a point about the consumer prices index, and about the way in which we are going to index LHA in the future. Her view seemed to be that we should simply follow the market, but we think that that has been the biggest problem with LHA over the years. We have actually stoked up the market, and then increased LHA to keep pace with the market, so that rents keep rising. We are not getting good quality accommodation, however; we are simply driving up rents, and that is not what we want to spend public money on.

I want to come back to the hon. Lady’s point about constant moves and people being constantly moved around an area. Clearly, there is an issue about the transition to the new regime, and we are trebling the discretionary housing payment system. More of that money will go to boroughs such as her own and to other inner London boroughs that are most affected, because we want the particularly hard cases, where people are particularly affected by the changes, to have extra resources to deal with that. However, the long-term goal has to be to try to get rent levels under control, rather than to keep stoking them up.

The hon. Lady referred in the debate in 2008 to the impact of high rents in temporary accommodation. She said:

“My constituents are virtually imprisoned by the excessively high rents charged for temporary accommodation”.—[Official Report, 5 November 2008; Vol. 482, c. 293.]

She was absolutely right, and in April 2010, a cap was introduced on the rents in temporary accommodation. Since then, the early evidence has shown that the rents in those properties have started to fall, so we have a precedent for what we are doing now. This is not nationwide, systematic evidence, but the early evidence suggests that what we are saying will happen in the wider market is already happening in the temporary accommodation market. That is what we as taxpayers, and as people who are concerned about our constituents, want to see. We want to see more of our money providing accommodation for people, and less of it simply stoking up the private rented sector.

The hon. Lady also raised the issue of the changes to non-dependant deductions. They have been frozen for a number of years instead of being indexed, which would have been a more natural policy, and all we are doing is returning them to the level at which they would have been, had they been indexed. So, yes, there is an increase, but we are simply taking them back to their real value of a few years ago. She mentioned the consumer prices index being applied for ever, but that is not the intention. It will come into the LHA rates in 2013 for two years, and we will then look at the market and the impact of the changes that have been made. So we are trying to introduce a cap and to restrain the rate of growth of rents, but we are trying to do that with some flexibility. We will look at the broad rental market areas when we do that and try to ensure that they fit the local housing market situation.

I want to try to draw some of those threads together. First, it is vital that we do not overstate the impact of the changes. There will be an impact, but some of the numbers that get thrown around, such as 82,000, are an exaggeration. We will see what impact they have, and there is the possibility of different rent levels as a result of the changes. There are also discretionary housing payments. The idea is to get good value for the taxpayer, but not to cause misery for the hon. Lady’s constituents. That is not our intention, and I do not believe that we will do that.

Question put and agreed to.