Housing Benefit (Scotland)

Steve Webb Excerpts

Tuesday 8th February 2011 Westminster Hall

[The Minister of State, Department for Work and Pensions (Steve Webb)]

It is a pleasure to serve under your chairmanship for what I think is the first time, Mrs Brooke. I congratulate the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) on securing the debate; I was trained before we started in how to pronounce his constituency’s name by the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke).

This is an important subject, and I know that the hon. Gentleman takes a close interest in it, not least because I seem constantly to be answering his written parliamentary questions on it. He has pursued the issue in an entirely thoughtful and measured manner, which is always helpful in such debates.

The hon. Gentleman raised a broad set of issues relating to the impact of the changes on his constituency and on Scotland. He also raised some more general points. He brought together changes that will come in during April, some that will be phased in with a nine-month lag for existing recipients, some for which the primary legislation has not yet been passed and some that will happen in 2013. He therefore raises quite a raft of things, and properly so, but it is worth saying that these things will not suddenly happen in April. There is, therefore, time for tenants, landlords and local authorities—but particularly tenants and landlords—to change their choices and behaviour. That is part of the point of the reforms.

The figures that the hon. Gentleman quoted at the start—the £2.2 million going out of his constituency as a result of housing benefit reductions—assume that nothing changes, but part of the point of the exercise is that things will be different in the new regime. As I am sure he knows, the context for these things is the sky-rocketing bill we face, although it is not necessarily his role to say where the £1 billion that will be added to that bill each year will come from. However, without the measures that we are taking, a large amount of extra money will go into the system without necessarily benefiting tenants.

Let me cite a slightly surprising source of evidence for that view. On 10 September, COSLA submitted to the Department its response to the consultation on the first version of the housing benefit amendments. I would not for a second suggest that it was supportive—quite the contrary; it is not—but its analysis was rather interesting. COSLA said:

“We had previously flagged up concerns, during the formal consultation prior to the roll-out of Local Housing Allowance nationally from April 2008, that this new scheme was”—

here we go—

“likely to result in a huge increase in expenditure on Housing Benefit for private sector tenants for little return”,

and that is what has happened. LHA has essentially driven up rents; it has not meant more poor people in nice houses. The response goes on:

“We raised concerns that very many landlords would increase their rents up to the LHA level and that allowing claimants to keep any excess above their contractual rent was unlikely to benefit them… because of that upward drift of rents.”

[Several hon. Members]

rose—

[Steve Webb]

Let me say for the benefit of hon. Members that although I should very much welcome their contributions, this debate was initiated by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, and I will give way to him at any point. It is only fair to him to respond to his points.

The Scottish perspective from COSLA is that the convention expected LHA to drive up rents, and that is what seems to have happened. The question now is what will happen when we try to stop that escalation, which is where the CPI point comes in. In that respect, I should say that the CPI excludes only owner-occupiers’ housing costs, not all housing costs. That, however, is where we are trying to put a cap on the process. As far as I am aware, the national cap does not affect Scotland at all.

The question is what landlords will do in response. The hon. Gentleman’s hypothesis was that there is plenty of demand out there, so they will do nothing. However, a landlord with a potential tenant who is on LHA has a choice between not going with that tenant or telling the local authority, “What would clinch it for me would be direct payment.” We have said that we will extend the scope of direct payment, which the hon. Gentleman asked about at the end of his speech, so that a local authority will be able to agree with a landlord and a tenant to make payments direct to the landlord in return for securing a tenancy that would not otherwise have happened and for getting rents down.

Plenty of landlords rent to people on housing benefit; it is not that landlords will not do so, although I accept that some will not. A large number of landlords will rent to people on housing benefit, who are the people we are talking about. It is not that these things do not happen. A landlord looking at a potential housing benefit or LHA tenant, or thinking about renewing a tenancy, can have uncertainty about whether the tenant will pay or they can have direct payments. Direct payments are like a triple A bond; they are like guaranteed money. That is worth something to the landlord. For an investor, certainty is worth something. If a landlord just shaves a bit off the rent in return for the direct payment, which is the deal we shall try to strike, the shortfalls that the hon. Gentleman mentioned, which look a bit scary when they are multiplied, will be reduced.

The debate is about the impact on Scotland, and the hon. Gentleman will know that the average shortfall in the United Kingdom is £12, while the average figure for Scotland, if I remember correctly, is £10. It does not take much, therefore: let us take the example of a rent of £200. A landlord who reduces that by 2.5%, which is £5, or by 5%, which is £10, has suddenly wiped out the shortfall. Clearly we must ensure that that happens. We cannot just sit back and hope that landlords will cut their rent. I fully accept that. That is why we have made the change. That is important.

The regulations have been improved by the consultation and by the changes that we have made, specifically with respect to transition. We said that from April new tenancies will go straight on to the new rules, because the whole philosophy of the reforms is that the choices made by people on housing benefit—who, I fully accept, may be in work—should mirror the choice that someone would make if they had no subsidy but were just doing a low-paid job. That is the parallel. We are not trying to take a penal approach or to be harsh towards people who happen to be on LHA; we are simply trying to level the playing field. The idea is that they will make the choices in a constrained way, just as people in a low-paid job would have to do. That would, again, mean that they focused on a reduced section of the market; but properties would still be affordable. To take the broad rental market area that serves the hon. Gentleman’s constituency, which I assume is the North Lanarkshire BRMA, we estimate that after the reforms 37% of properties will be affordable. Clearly we are telling people on a relatively low income or benefit, “You have a more constrained choice than you did”; but 37% is still, by definition, more than a third of the market.

The hon. Gentleman asked questions on some more detailed points, including the single room rent. We will publish an impact assessment on that change. He also raised the important issue of people with mental health problems and what would happen if, through a reduction in subsidy, someone were to be coerced inappropriately into shared accommodation. There are already exemptions for vulnerable groups. For example, certain disabled people are not affected by the single room rent regulations; but, clearly, we will always consider the issue of vulnerable people and the impact of changes on them.

[Mr Tom Clarke]

Will the Minister give way?

[Steve Webb]

Because this is the debate of the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East it is only fair if I respond to him and the questions he has raised.

[Mr Clarke]

It is not the Minister’s debate either.

[Annette Brooke (in the Chair)]

Order.

[Steve Webb]

I think, technically, that right hon. and hon. Members who intervene are meant to tell me formally that they want to do so; I do not mind at all, but they have made their comments and I think it is fair that I respond to the hon. Gentleman.

There are several Scottish angles to the debate and I want to deal with some of them rather than make more general points. There is an issue about whether people who are covered by LHA are being driven into pockets—very localised areas. One aspect of the Scottish situation is that the 30th percentile tends to be closer to the 50th percentile than perhaps it is in other parts of Great Britain. The cash difference tends to be smaller, as I said earlier, so the impact is not as great as it might be in other areas where the rent distribution is more dispersed. I fully accept the point that the impact of the measures will be different in different places, but the 30th percentile has a smaller impact in Scotland because of the compressed rent distribution.

The hon. Gentleman quite properly raised the issue of unemployment. I would not for a moment suggest that it is ever easy or straightforward to find a job; but, again, headline unemployment is slightly lower in Scotland than for Great Britain as a whole. The majority of Scottish local authorities have lower unemployment rates than the Great Britain average. That is not to belittle the matter, but it is not a purely Scottish dimension. The issue is clearly one to be dealt with nationally.

As to the hon. Gentleman’s constituency and the support that we are giving, an important feature of the new scheme is discretionary housing payments. We recognise that we cannot anticipate every hard case, so we give local authorities discretion. We give them funds so that if there is someone who just does not fit the rules terribly well or who is acutely affected by the changes—the hon. Gentleman gave examples of situations that might be difficult—local authorities have discretionary funding. In 2011-12, Scotland as a whole will be getting an increase of 15% over 2010-11. That is an increase of £360,000 in discretionary housing payments. The hon. Gentleman’s local authority will be getting a 34% increase; more than double the Scottish average increase will be going to North Lanarkshire to provide additional assistance. The figure will go from £77,000 in support this year to £103,000. It is worth saying that the 2011 DHP increase is much smaller than the increases will be in succeeding years; the Great Britain-wide figure will go from £20 million this year to £30 million, and then £60 million a year. Most of the increase in DHP will be in later years, but we have already added 34% to it in the coming year for the broad rental market area of the hon. Gentleman’s constituency. Although, inevitably, that money will have to do a lot of work, it is specifically designed for the sort of hard cases he spoke about.

[Gregg McClymont]

I have been listening closely to the Minister, because I wanted him to develop his argument before I intervened. Is he comfortable with a policy which, as he perfectly fairly described it, tries to put people who get housing benefit and may be working, on a level playing field with people who are, as he described it, low paid, but who do not get housing benefit, in the context of an economy in which there is not much evidence that people can move into better paid jobs? The structure of the economy in a place such as North Lanarkshire does not include many professional—middle-class, if you like—positions for people to move up to, if the Minister’s broader argument is about social mobility. From our point of view there is a danger that instead of focusing on trying to increase opportunities for a broad range of people from near the bottom to the middle of the income distribution, the focus is on people who are already struggling. I think the Minister would agree that we must do something about what happens further up the scale, to open up opportunities for the people who are affected.

[Steve Webb]

I entirely agree with that point. We want to encourage people not simply to move into any job at the bottom of the scale; we also want to encourage career progression and additional hours and training—the things that make people employable and enable them to earn more. That is the philosophy behind the universal credit. One of the problems is that there is an issue about the incentive to take any job; once a person has a job the current system can withdraw 95% in the pound, in extreme cases. That cannot be right and it traps people. Even if jobs are available and there are opportunities to do more work or gain more skills, there is no point, because the money is simply clawed away. With a lower taper rate for most people the universal credit will give people more opportunity to do just the sort of things that the hon. Gentleman describes.

[Gregg McClymont]

We know that the hon. Gentleman is a thoughtful Minister. A larger question looms over the issue, and that is whether, in the economy as it stands—not just in this recession but structurally over the past 30 years—there are opportunities for people to move up the ladder in large enough numbers. Does the Minister agree that such macro-structural political economy issues are related? Unless we have that possibility, what is happening may be seen as an attack on people who are already not exactly living luxurious lives.

[Steve Webb]

I certainly agree that we are not talking about people leading luxurious lives. There are, as the hon. Gentleman says, bigger structural issues affecting the economy. In the past few years under a series of Governments the economy has created millions of new jobs, but some of them are part-time, and they vary in nature. One of the things that the Government are trying to do, whether through apprenticeships or a range of other initiatives, is to upskill the work force. In a global economy we shall not be able to compete with very low wages in the far east, for example.

In the final couple of moments available to me I stress that we are keen to engage with the Scottish perspective, as the hon. Gentleman suggested. COSLA is represented on the Department for Work and Pensions local authority associations steering group, which meets each month, and along with the local authority associations it was formally consulted on the draft regulations for 2011 that I mentioned earlier. Officials from the Scottish Government have attended events and meetings to discuss the impact of LHA reforms, and Members of the Scottish Government have been invited to attend a conference that we are holding in Glasgow on 3 March 2011. We have invited all Scottish benefit managers from local authorities to attend, and we are inviting officials from the Scottish Government to be involved in the LHA reform national implementation group and the evaluation of the reforms.

[Gregg McClymont]

Would the Minister consider publishing evidence that LHA is pushing up rents in Scotland? He referred to that earlier and it would be an interesting piece of information for us, if he would undertake to pass it on.

[Steve Webb]

I was quoting from COSLA’s assertion, but we are happy to give the hon. Gentleman what evidence we have, although trying to prove cause and effect is a challenge.

I congratulate the hon. Gentleman on raising this important debate, and I am grateful to colleagues who contributed.

Question put and agreed to.