Housing Benefit

Steve Webb Excerpts

Thursday 10th March 2011 Westminster Hall

[Ms Karen Buck (Westminster North) (Lab)]

As others have done, I congratulate the Select Committee, on producing such a comprehensive report into the Government’s proposals in the June Budget. I also congratulate my hon. Friend the Member for Aberdeen South (Dame Anne Begg) on her thoughtful, balanced and comprehensive introduction to the debate. It is a great credit to the Select Committee that the report sought to be so balanced, and that the Committee so rigorously examined the proposals. It is striking and a tribute to the generosity of my hon. Friend’s character that the report ended up being just a touch more generous to the Government than to itself in terms of the Government’s impact assessment, which warned of the danger of increases in the number of households facing rent arrears, eviction or presenting as homeless, and of rising crime, increased pressure on the legal aid budget, increased overcrowding, disruption to children’s education and lower educational attainment.

The Social Security Advisory Committee also comprehensively rubbished the proposals, and warned of unintended and perverse consequences of the changes, which will in many cases lead not only to hardship, but to additional expenditure in other areas of Government service.

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

Just for the record, will the hon. Lady confirm that the SSAC produced its report before the nine-month transition period, before the October and April changes were brought together and before the 10% housing benefit change was reversed?

[Ms Buck]

I certainly confirm that. I am happy to commend the Government on their decision to withdraw the proposal to reduce housing benefit by 10% for people who have been on jobseeker’s allowance for more than a year. I also accept entirely that there has been a phasing in of the cap on housing benefit, which particularly affects central London. As the Minister knows, that was more than compensated for in cash terms by bringing forward the reduction to the 30th percentile for housing benefit for local housing allowance claims, which affects the rest of the country for new claims.

We have heard a range of contributions this afternoon. My hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) was highly critical of the proposals, and she raised concerns about their impact particularly on families with children. She made it clear that one of the areas that has not been properly addressed by the Government and many commentators on this agenda is the variance between London housing costs and those in the rest of the country.

The hon. Member for Cardiff Central (Jenny Willott) raised a number of thoughtful and important points about the structure of the broad market rental areas and the complex lives of real individuals who will be affected by the move to the single-room accommodation rate. She made an important point, which I accept entirely, when she said that one reason why we have a dilemma about how to pay for low-income households and housing is due to a 30-year-long reduction in the availability of social housing. I do not want to divert too far from the central topic—I know you will not allow me to, Mr Sheridan—but in 1997 the Labour Government inherited social housing stock in such a poor condition that huge investment had to go into improving the physical conditions of council housing through the decent homes initiative. I have gone on the record extensively over the years to say that I, too, regret that we did not build more social housing. We would still, however, have had a significant number of low-income households in the private rented sector, and we would still be facing some of the same problems.

My hon. Friend the Member for Stockton North (Alex Cunningham) drew attention to the risks of homelessness and eviction in another part of the country. This debate has so often focused on London, and it is good and right for us to recognise that it is not only a London problem. The hon. Member for Brighton, Pavilion (Caroline Lucas) spoke powerfully about the experience of a city with a large private rental market, where the changes will have a profound impact in terms of squeezing out low-income households on local housing allowance across the city.

Since the cuts were introduced by the Government, the debate has concentrated largely on London and a few individual cases. It was good to hear many speakers emphasise that such cases involve a tiny minority of larger households living almost in very high-value properties, something none of us would defend. As the Select Committee report reflected, depending on which figures one uses, the few thousand cases that are at the significantly higher end of the cost market are an issue that the Government could have tackled, if they had wanted to. They could have confined themselves to that, but instead we have almost 1 million—936,000—households that will lose by an average of £12 a week over the course of a full year, once housing benefit changes to the local housing allowance are introduced. It is important that the public understand the sheer scale and spread of the changes, and there will be a nasty shock starting in April with the new cases calculated on the 30th percentile and the other changes phased in later.

[Steve Webb]

It is important that those who listen to our debates understand whether the hon. Lady opposes all the changes. She has mentioned 1 million losers. Does she accept that roughly 500,000 households would have lost in any case through the abolition of the £15 excess, which the previous Government were going to implement but put off until after the election? Does she support those losses affecting 500,000 households, or does she oppose them?

[Ms Buck]

It is right that the Labour Government intended to remove the £15 excess. However, the Minister will accept that the sheer number of people who will lose as a consequence of these changes far exceeds the small number of high-profile cases to which people on his side of the argument usually confine the debate.

We have rehearsed this argument before, so I do not want to spend too much time on it. None the less, the argument was made again during yesterday’s debate on the Welfare Reform Bill that housing benefit is out of control. We know that expenditure on housing benefit increased from £11.5 billion to £21.5 billion over the decade, and only half of that is down to inflation. Social housing rents have risen significantly as a consequence of rent restructuring, and above all—this is the key factor and the reason behind so much concern in the Labour party—case loads have risen. Case load increase has been the main driver of increased expenditure on housing benefit. In the two years since the local housing allowance was fully extended across the country, 87% of the rise in that allowance was driven by case load. During those years of recession, almost half that case load involved either people in work, or those on jobseeker’s allowance who were therefore connected with the labour market and seeking to get back into work.

It is also worth emphasising that local authorities have been making far greater use of the private rented sector in order to place homeless households. That is not a party political point, because the previous Government did that as well, reflecting the shortfall in social housing. In the past year, 60,000 households were placed in the private rented sector at far higher unit cost than if they had been in social housing. Many of those high profile individuals who found their stories in the Daily Mail and the Daily Express were placed in that accommodation by a local authority, because it had no other place in which to put them.

Professor Wilcox was, I believe, an adviser to the Select Committee and has worked extensively for the Department for Work and Pensions. Writing in the new UK Housing Review, he refuted the central Government claim that the local housing allowance was the main driver of inflation in costs:

“The Government have argued that increased rents charged to clients reflect exploitation of the housing benefit regime by private landlords and that this has also been a substantial factor accounting for rising programme costs. The evidence for these claims is not robust. Even if it is assumed that all the above-inflation rise in private rents is attributable to landlord action, this would account for only 10% of the total cash increase in Housing Benefit over the decade.”

We therefore have a rising case load, including a rising case load of those in work, of people who are at risk of losing a substantial share of their income either from April or during the 9 months afterwards. There will be new claims, and many of those people will be forced to move.

We already know that 47% of all local housing allowance tenants have a shortfall between their current rents and the allowance—I stand to be corrected if that is wrong. Therefore, the ability of tenants to absorb an additional shortfall is already small. We know that a substantial number will need to move to a reduced and continually decreasing pool of available property. The National Housing Federation has stated that in London alone, 160,000 claimants will need to fit into 46,000 homes.

There will be a major movement of people. The hon. Member for Woking (Jonathan Lord) made the case that his constituents find it hard to justify people living in high rental areas, and that they want to see costs come down and fewer people living in expensive areas, which may well be true. I understand that concern and that members of the public, particularly outside London, find it a struggle to justify those rents. There is less of a clamour, however, among the communities that seek to accommodate all those who will be required to move, whether that is further out into Brighton, to the edges of London or outside London.

It is worth reflecting on the response given by the London borough of Barking and Dagenham to the housing benefit cuts. Barking and Dagenham is one of the cheapest areas in the south-east, and it is likely to receive a large number of out-movers. I will quote its report:

“Given that Barking and Dagenham has the lowest private rent levels in London…it would be logical to expect that displaced households might…of their own choice look for private rentals here,”

or they might be placed there by other local authorities.

“Such an influx would place additional pressures on waiting lists, social, educational and welfare provision as well as greater demands for support in preventing debt and homelessness.”

It has been estimated that at least 3,000 households will seek to move to Barking and Dagenham. The report goes on to say:

“If rental demand does decrease and housing benefit claimants do migrate to the borough, this may have a significant impact upon the Council’s ability to move its own residents from waiting lists”

into local accommodation. That would lead to increased tension between Barking and Dagenham residents and in-movers—as we know, Barking and Dagenham is a community where we do not want to increase tension between in-movers, many of whom will be black and minority ethnic, and the resident population.

The areas that will be expected to accommodate out-movers are not prepared for it financially: they do not have the resources; they do not have the school places; they do not have the social capacity; and many of them are seeing their grants cut as well. The move to using the consumer prices index will further ratchet down the availability of accommodation until, as the Cambridge centre for housing and planning research has shown, 34% of all local authorities will, within a decade, be unaffordable to everyone on the local housing allowance.

The Minister will say that discretionary housing payments will meet the shortfall and take the strain. It is welcome that additional money has been put into the discretionary housing payment pot and into the homelessness prevention fund for local authorities. However, it is estimated that that money will assist only about 60,000 of the total pool of households. Conveniently, 60,000 is also the figure for the households placed by local authorities in the private rented sector. It will therefore go no further than merely meeting the shortfall of local authorities’ placements of their own homeless households. If it is asked to stretch further, it will not meet the shortfall at all. Therefore, as welcome as the money is, it will go only a very short way towards offsetting the disadvantage.

The measures will mean homelessness, hardship and all the risks set out in the Select Committee report, the Social Security Advisory Committee report and the Government’s own assessment. They will mean, as we have heard, that huge numbers of people who are currently in work—including 1,000 local housing allowance claimants in my borough alone—will lose and lose big. Those people have jobs, and they will be forced a long way out of inner London. They will, of course, face commuting costs that make it extremely difficult for them to make work pay in the new environment.

I want to say a few words about the measures on social housing under-occupation, which so far have not received the attention that they deserve, because they are being phased in a little later than those relating to the private sector local housing allowance. We have seen the equality impact assessment released yesterday by the Department, and we know that the introduction of the size criteria for social housing will affect an estimated 670,000 people throughout the country. That number will rise as the pension age rises. It is 32%—almost one in three—of all housing benefit claimants in the social rented sector.

Most extraordinarily—I think this astonishing—the equality impact assessment states that the number of people with disabilities who will be affected by the change is twice as high as the number of people without disabilities. The Government are seeking to require, in two years’ time, 450,000 households with a disabled recipient of housing benefit to move to an alternative property. That is what the impact assessment says—450,000. The figure is 670,000 people in total. If those people do not move, they will face a shortfall of £13 a week between their rent and their housing benefit. Not only is that a disproportionate and extraordinary impact on older and disabled people, but one wonders how on earth the whole policy of downsizing in relation to the under-occupation rule will work. The total number of households that moved in the social rented sector in the last year for which figures are available was less than 200,000. In 24 months’ time, the Government will expect 670,000 people to try to avoid a penalty on their housing benefit by moving to smaller accommodation. That is three times more than the total number of people who get moved in the social rented sector every year.

Housing authorities, housing associations and councils simply will not be able to meet the demand for downsizing. The position is even worse, because there is a huge regional disparity, with by far the highest level of under-occupation in the north-west of England and by far the highest level of overcrowding and pressure on housing in London and the south-east. Local authorities will not necessarily be able to meet even the demand in their own local authority area. They will be seeking to obtain accommodation from other local authorities in other areas at the very moment when local authorities are tightening their criteria for housing allocations. Westminster council—my local authority—has just announced a 10-year residency qualification for people seeking to move into the area. It will not be offering any of its accommodation to people outside the area who are seeking to downsize.

The sheer mismatch between the legal duties on local authorities and housing associations, their own lettings criteria, their homelessness duties and reasonable preference requirements and what the Department for Work and Pensions expects to happen is extraordinary. I asked the Minister parliamentary questions to try to find out, before we got to the Welfare Reform Bill, what the practical implications of the measures would be. Of course, the reply that I get is that the Minister and the Department are still working on what the practical implications will be.

The scale of the problem is far greater than the Government have admitted, including in their response to the Select Committee. There will be huge practical difficulties in implementing the policies, which I suspect will end up in many cases either not saving any money or being completely impossible to implement, leading to greater responsibilities and homelessness costs in relation to other authorities. That is before we get into the extraordinary situation in which the new affordable housing delivery programme—150,000 new homes—welcomed by the hon. Member for Cardiff Central, will involve higher levels of housing benefit than most properties currently in the private rented sector, thereby pushing up the housing benefit bill at the same time.

A great deal of work needs to be done by the Government to see whether any of the proposals are workable, let alone able to accommodate the sheer hardship and social stress that will be caused by them. It would be nice to be able to house people who are on low incomes and in need for nothing, but that is not a possibility. We have to work with the resources that we have. What the Government are proposing will potentially create a perfect storm of housing need and difficulty with implications going far beyond the housing sector.

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

Let me begin, quite properly, by congratulating the Select Committee on its thorough and detailed report and by thanking members of the Committee and other hon. Members for their contributions to the debate. Members of the Committee and other hon. Members who have spoken have a lot of expertise on the benefits system in general and on housing and housing benefit in particular, and we have all benefited from that expertise today.

It would have been nice if the Government response to the Committee had been available slightly earlier than the day before the debate, but it was in the hands of the Committee yesterday, ahead of the debate, as I was keen for it to be. Rather than my standing up here and giving the Government response and then everyone going away and deciding what they thought about it, the Government response was already in the hands of the Committee and, as we have seen, members of the Committee have been able to read it, form a view and give further feedback, which has enabled us to have a useful dialogue this afternoon as part of the conversation. From that point of view, this has already been a worthwhile afternoon and a valuable process.

I thank the Chair of the Select Committee, the hon. Member for Aberdeen South (Dame Anne Begg), for acknowledging some of the important steps forward that have been made since the Committee’s report was tabled. There was some suggestion that we had paid no attention to it, but in her opening remarks, the hon. Lady graciously flagged two particular areas in which there has been significant progress since the Committee’s report was produced. One was on research into the impact of the changes. The other, which was the subject of several paragraphs of recommendations from the Committee, was on the previously proposed 10% cut in housing benefit after a year on jobseeker’s allowance.

It is tempting to say that Government responses to Select Committee reports should be judged by action, not words. If a Select Committee recommends a specific change in policy, and a change in policy subsequently takes place, it is a little ungenerous of members of the Committee to say, “Ah, yes, but the wording of the response was not good enough,” or something similar, especially if it were done at significant cost to the Exchequer. The hon. Lady, of course, was characteristically gracious.

It may help if I update hon. Members on where we are on monitoring the impact of the changes. The Committee issued a press release to accompany the report three days before Christmas—it is good to see that they were working right up to the deadline. In it, the hon. Lady said that

“it is too early to determine if this will happen in reality, which is why it is hard to say exactly what the impact of these changes will be.”

There is an element of uncertainty, which is why we always intended to commission research and to monitor the impact of the changes. Discussions with their lordships prompted a fuller discussion of the form that it would take.

The research that we undertake will be independent. It will include comprehensive primary research on the effect of the changes on different types of households in a range of areas. The debate has shown that the impact of housing benefit in Blackpool is different from that in Cambridge or central London. We accept that, which is why the research will cover the whole of England, Scotland and Wales. It will be done over the next two years, due to a factor that was given insufficient attention in our debate. With a nine-month transition period, and with no change happening until the anniversary of claims, some people will not be affected by the change until December 2012.

That is the roll-out period, which is significant. Rather than there being a day when everyone’s housing benefit is reassessed, with everyone competing for the same properties, new tenancies will be dealt with under the new rules, which is precisely the point of the exercise. We did not want people to be locked into new tenancies at above the new limit, day after day and month after month, only for us to say, “Oh, no, we’ve cut the limits, so the decision that you made three months ago is not valid.” Instead, from April new tenancies will come under the new rules, so people starting new tenancies will face the constraints that anyone else will face, as we discussed earlier, rather than having a more generous system. It is right to make new tenancies under the new rules and to give existing households more time to adjust.

[Ms Buck]

Does the Minister mean new tenancies or claims, or changes of circumstance that affect existing claimants?

[Steve Webb]

That is a helpful question. We are talking about what happens after April. For people who are working but who become unemployed post-April, it will clearly be a new claim, and it will be dealt with under the new rules. The fact that they happen to be living in the same house as before will not affect the claim. However, as their circumstances change, they will face the new regime. They will have to decide whether to take the new rules—the new regime—and stay where they are. For example, if someone becomes temporarily unemployed but has a pretty good chance of getting a new job—many folk who become unemployed are typically back at work within three to six months—a short-term period on a tighter housing benefit regime can be accommodated before moving back to work.

The hon. Lady asked about the existing case load and the protection that we give those cases. The majority of relatively minor changes in circumstance will not affect ongoing entitlement.

[Ms Buck]

I am grateful to the Minister for allowing me to interrupt him again. In many parts of the country, the shortfall will be relatively manageable, which would accommodate his point about people being temporarily out of work. In London and some other high-cost areas, however, the difference could be £5,000 or more over three months. In those areas, the shortfall will be such that people who lose their jobs will also lose their homes.

[Steve Webb]

The phrase “lose their homes” is rather evocative and misleading. When people say that they have lost their home, they are usually describing repossession—their home; their loss. What the hon. Lady describes is someone who has presumably managed to sustain a very high rent—if the shortfall is £5,000 in three months, the rent must be enormous.

The suggestion that the taxpayer should keep paying a vast rent while the claimant decides whether to stay in the property brings me back to my fundamental concern about the tone of the debate, which relates to balancing the responsibilities of the individual and of the Government. It was evident to some extent in the remarks made by the hon. Member for Aberdeen South, and particularly in other contributions, that almost every combination of circumstances, every possible need and every possible variation was deemed to be responsibility of the Government.

The hon. Member for Hampstead and Kilburn (Glenda Jackson) mentioned our response to the Committee’s report and some specific needs. For instance, she said that people living in a larger house might need somewhere to put a wheelchair and questioned whether it should be included in statute. The implication of what Committee members were saying is that they did not want it decided on a discretionary basis, but wanted it written into law. The point about our allowing an extra bedroom for carers is that we have legislated for it; after deciding on a category of clearly identified people and clearly specified needs, we wrote it into legislation, and it has become a right. However, there is a dividing line between identifiable, clearly categorised groups with particular needs and the much broader group listed in the Committee’s recommendations that may need a room for a wheelchair or something else.

The question is not, “Do we give a damn?”—I am sorry; I mean, “Do we care?” The hon. Lady implied that the Government do not care and that we are telling people to get lost. No; as my hon. Friend the Member for Cardiff Central (Jenny Willott) said, the Government believe that some needs should be written into statute, which we have done in cases where previous Governments did not act. However, other needs are so diverse that we should have the local flexibility to respond when the need arises. That is better than sitting down in Whitehall, trying to think of all possible circumstances and writing primary legislation to deal with them, which is not a sensible way to proceed.

[Dame Anne Begg]

That is not what I or others were asking for. In other areas, we use proxies or other measures to help passport people into getting greater help. For instance, there is a good chance that someone on the highest rate of the disability living allowance care element will need extra housing. That factor would give them the right to apply for more housing benefit. It works with the council tax system, under which those who need more space as a result of a disability can get the council tax reduced to a lower band. It is straightforward and simple. The problem with discretionary payments is that not everyone gets them, because they can be refused.

[Steve Webb]

The hon. Lady has said that proxies can be used, which means that we can identify categories of people to whom additional concessions should be made. That is what we did with the extra bedroom for the carer. The report specifically mentions people who need an extra room for a wheelchair. People on certain rates of disability benefit will almost certainly have a wheelchair but live in a house that can accommodate it; others will live in houses that need another room for the wheelchair. Rather than trying to categorise everyone in the same way, the flexibility of the discretionary system allows us to cater for those differences.

I was pleased to hear the hon. Member for Westminster North say that we have to work within our resources. That was a heartening comment, because every pound spent on another recipient or on further delays and concessions—on everything that has been asked for today—comes either from someone else covered by the housing benefit system or from our contribution to tackling the deficit, which is one reason for the reforms.

The hon. Member for Stockton North (Alex Cunningham) said that it is a difficult time for local government, implying that the Government just fancied cutting council budgets by 25% because of what he called an evil Tory-led, or Liberal Democrat-Conservative coalition plot. We all knew that this would happen, because substantial cuts in local government were coming down the track anyway. It is important to acknowledge that that is the backdrop against which we are operating. This is not an environment in which there is money kicking around. It is not as if we can resolve all these problems and delay tackling the remorseless rise in the housing benefit budget. Every £1 billion that goes on housing benefit every year is £1 billion that the low-paid, hard-working taxpayers, who are our constituents, will have to find.

[Alex Cunningham]

There would have been cuts under a Labour Government as well, but they would have been spread over a longer period of time. Does the Minister not accept that the pressure on local authorities today in dealing with all the inquiries from people who are worried about the Government proposals is just adding to the strain that they are under at a time when they are losing staff and more people are coming through their doors?

[Steve Webb]

As the hon. Gentleman has said, local authorities are making plans to reduce staff over the coming years. Some local authorities have chosen to frontload more than is necessary—more than is proportionate to the cuts that they have had—for their own political reasons. Nobody disputes that this is a difficult financial environment for local government; it is. Part of the problem is that spending has been allowed to get so out of control that we have had to rein it in rather rapidly.

[Ms Buck]

rose—

[Glenda Jackson]

rose—

[Steve Webb]

I will give way to the hon. Member for Westminster North in a second. One of the reasons why deficit reduction is so vital is that so many items of spending have become too large. Some of the concessions that we have talked about would be £100 million here or £500 million there. Very soon they add up to serious money.

[Ms Buck]

Let me make one thing clear. Of course the financial context is important. When I used the word resources, I was not only talking about money, but making an important point. With the social housing stock, we only have so many units into which we can pack people on lower incomes. We know that many people—we know how many—need to be accommodated in the private rented sector, and we know the geographical distribution of those properties. One of my big concerns is that we are attempting to do something with that that cannot be done.

[Steve Webb]

That is where I fundamentally disagree with the hon. Lady. The flaw in her analysis is this static view of the world: housing stock and the private sector is as it is and nothing can ever change. The figures that she quoted from the impact assessment assume that nothing changes. The losses she quoted assume nothing changes. Nobody can find somewhere cheaper to live; they just stay where they are and lose the money. Rents do not go down; they stay exactly as they are. The impact assessment from which she quoted is the worst-case scenario.

However, what actually happens is different. Let me give an example. If we were able to reduce rents by £10, that would wipe out nearly 500,000 people with shortfalls. One of the questions that was asked in the debate was: how will landlords respond? Guess what? When landlords were surveyed, they said, “Oh, we won’t cut our rent.” Well, there is a shock. Of course they would. They do not want these cuts because they are the ones who will be most affected. I was very surprised by the hon. Member for Brighton, Pavilion (Caroline Lucas) for whom I have a lot of respect—sadly, her contribution was 90% polemic and 10% substance—because she seemed to be defending private landlords. They are the people who get this money. They are the people who have got the £21 billion that used to be £11 billion 10 years ago. I did not know that they were her best friends. That is where the money is going.

The question is: if we go to direct payment in cases in which it will secure a tenancy, will landlords bite? We have 1 million private sector tenants on housing benefit. We have all seen adverts that say, “No housing benefit” but there are also 1 million people with private sector landlords getting housing benefit. Therefore, someone out there is renting to people on housing benefit. If a private sector landlord is renting to someone whose housing benefit gets squeezed and they or the council says to them, “You can have a guaranteed rental stream straight into your bank account month after month if you will reduce your rent to a level that will enable the tenancy to carry on” that is hugely attractive. It is turning a tenant into a triple A credit-rated tenant rather than someone who may or may not pass on the rent.

[Dame Anne Begg]

rose—

[Glenda Jackson]

rose—

[Steve Webb]

I will give way in a moment. Landlords are quite clear that that is hugely attractive to them. It is worth shaving the rent for, and that is often all that it would take.

[Dame Anne Begg]

It is actually possible to accept the Minister’s argument. The problem is the Government are about to introduce universal credit, which will make direct payments impossible, unless he has a different idea.

[Steve Webb]

We are focusing specifically on the roll-out of these changes over the next two years. Over that period, before universal credit comes in, this mechanism will be in place. Clearly, there is plenty of time to work out ways of underwriting the rent to the landlords combined with the universal credit. The crucial point is that this is a transitional issue, although there are longer-term aspects as well. It is in this transition—the crucial period in which the housing market adjusts—that the mechanism will be most effective.

[Dame Anne Begg]

May I make a suggestion to the Minister? It is that very point that concerns the housing associations, which already have direct payments. They are terrified that under universal credit, there will be no direct payment, which could undermine their whole ability to get us out of this mess by building more houses because they are not able to borrow the money. That is a serious concern.

--- Later in debate ---

[Steve Webb]

Indeed. In co-operation with our colleagues at the Department for Communities and Local Government, we are working through the way in which we can ensure that these affordable rent tenancies—80% of market rent tenancies—have a guaranteed revenue stream that will enable the investment to take place and those discussions are ongoing.

[Angie Bray (Ealing Central and Acton) (Con)]

I apologise for coming in so late. I absolutely agree with the Minister when he says that landlords will inevitably adjust. That is what the private sector does. When the benefit changes, there will be so many tenancies affected that there will be a sizeable effect on the market. The Opposition sometimes forget that this is about not just cost-cutting but fairness and balance. We must remember the taxpayer in all of this. In Acton, we had that amazing example—some called it grotesque—in which a family was plonked into a house that was worth well over £1 million. Very few people in Acton can afford to live in a house of that value. There are some really unfair things that must be addressed.

[Steve Webb]

I am grateful to my hon. Friend for setting that context. During the course of this debate, one or two hon. Members have said that this is all about chasing the headlines in the red tops—the tabloids—and it is that that is shaping policy. Clearly, this is not a policy about a small number of extreme cases. The hon. Member for Hampstead and Kilburn says there are about 90 cases, but let me give one example. The top 5,000 cases of people to whom we pay housing benefit cost us £100 million a year. For 5,000 people to live in properties—

[Glenda Jackson]

It is not 5,000 people; it is 5,000 families.

[Steve Webb]

The hon. Lady can have 5,000 families, but she is, I think, losing sight of zeros. For someone in the Department for Work and Pensions, £100 million does not seem such a big figure, but it is a colossal amount of money that is not providing value for the hard-pressed, low-paid taxpayer, who often does not live in brilliant accommodation. It is not a good use of £100 million.

[Ms Buck]

I will try to make this my last intervention. Given that the Minister says it is a colossal amount of money, does he agree that introducing affordable rents in the social rented programme, which will add £200 million to the cost of housing benefit, is also not a good example of joined-up government?

[Steve Webb]

As the hon. Lady knows, a lot depends on who takes those tenancies. If they are people who would have been in lower-rent social tenancies, the housing benefit costs will be higher, but if they are people who would have been renting in the free-market private sector, the costs could end up being lower. The numbers that she quotes are spurious.

[Glenda Jackson]

I want to know the Minister’s evidence for believing that landlords in the private rented sector will lower their rents. That certainly was not the finding of the National Landlords Association, which I mentioned earlier in the debate. Surely it is dependent on whether there is an excessive amount of empty properties, which, in a constituency such as mine, or any in central London, is an absurd premise. For all the properties concerned, there are many more people who are willing to take them on.

[Steve Webb]

I have a number of observations to make. First, the hon. Lady cited “evidence” that was not evidence at all, of course. It was a survey of the people who stand to lose from the policy, who mysteriously wanted to undermine the policy. When we talk to landlords’ groups—as we do—it is absolutely clear that direct payment is a prize for them. I hope that she does not argue with that statement. It is self-evident, blindingly obvious and common sense.

[Glenda Jackson]

Will the Minister give way?

[Steve Webb]

Can I just respond to the hon. Lady’s points before giving way to her again? [Interruption.]

[Jim Sheridan (in the Chair)]

Order.

[Steve Webb]

I hope that I can just respond to the points that the hon. Lady has made.

[Glenda Jackson]

I did not make that point.

[Steve Webb]

Landlords clearly value direct payment. There is no doubt about that. It is common sense and stands to reason. I do not know if the hon. Lady accepts things that stand to reason, but it is patently obvious that landlords value direct payment. There is an economic value to direct payment. It offers certainty as opposed to uncertainty. That can translate into lower rent. If landlords have a choice between the rent that they previously charged with uncertainty about whether they get the money, and a slightly lower rent with certainty of getting the money, landlords will go for certainty every time. That is common sense.

[Glenda Jackson]

Will the Minister give way?

[Steve Webb]

In a moment. The hon. Lady also said, “Where are all these properties? There is this massive, pent-up demand and these landlords will just go somewhere else.” If there is that massive, pent-up demand, why have landlords not already gone somewhere else? Why have they not already increased their rents beyond what housing benefit covers today? Why are they not already renting to non-housing benefit tenants? There is a reason why they rent to housing benefit tenants: they get the money, particularly with direct payments.

[Glenda Jackson]

Oh, I am most grateful to the Minister for giving way. The words “direct payment” never passed my lips and as I said in an earlier intervention, I would be grateful if the Minister could try to answer the questions that I put to him. Then there is the issue of why landlords are not renting to others outside the housing benefit sector. As I have pointed out, there is a growing trend that private landlords will not accept tenants whose rent is paid by housing benefit. In my constituency and contiguous constituencies, I do not see a massive increase in signs showing places to let.

--- Later in debate ---

[Steve Webb]

I hesitate to bring facts into the debate, but the number of properties in the private rented sector with tenants on housing benefit, which the hon. Lady says is falling and indeed she also says that such properties are hard to find, has risen since November 2008—

[Glenda Jackson]

Where?

[Steve Webb]

Across the country. It has risen since November 2008 by 440,000. To listen to the hon. Lady talk, one would imagine that tenants on housing benefit cannot find anywhere to live. There are 1 million tenants on housing benefit in the private rented sector. To listen to her, one would think that those people do not exist. Unfortunately for her, I am afraid that what she describes is at variance with the facts.

[Ms Buck]

Will the Minister give way?

[Steve Webb]

As such a wide range of issues were raised during the debate and a number of hon. Members have contributed to it, I will make a bit more headway and then I will be happy to give way again.

I was about to describe the evaluation and assessments that we will be carrying out, because a lot of the points that were raised during the debate were about particular groups of people. I want to identify the facets of the research that we will be undertaking.

To ensure that we gather the evidence required on key areas of concern, such as the behavioural and market responses of claimants, landlords and external organisations, we will commission primary fieldwork that will cover a number of issues, which I will now take the House through. They are: homelessness and moves; the single shared accommodation rent, which I will come back to later because there were a lot of misconceptions about that during the debate; the impact on Greater London, which is explicitly in the terms of reference for the research; the impact on rural communities, which I think has been mentioned in the debate; the impact on black and minority ethnic households, which has been mentioned; large families, family life and children’s education, and schools, for example, were mentioned in the debate; older people, who were mentioned in the debate; people with disabilities; working claimants; landlords, and housing and labour markets. There will be comprehensive evaluation that will start imminently and that will run over a two-year period. We will be watching—very carefully—what goes on and we will be reforming the system, with measures such as the allocation of discretionary housing payments.

Discretionary housing payments are quite important. Although the allocation of those payments for 2011-12 has been determined, the allocation has not been determined beyond that time. The total budget has been determined and it will treble. This year, it will be £20 million and then it will be £60 million a year for the next three years. We will treble the total budget. However, where the money goes will be informed by the early roll-out and by the research. We will base the policy on the evidence about the impact on the ground. If there are particular areas—hot spots—where there is particular pressure, we will be able to gear the discretionary housing payments money to those areas.

I enjoyed the observations of the hon. Member for Aberdeen South, who is the chair of the Work and Pensions Committee, about how often we refer to discretionary housing payments. I take her point. I read the Government response myself and I noticed the same thing. However, there is a reason for it. It is that the Select Committee’s report quite properly identified specific sets of circumstances that need to be addressed and they will be addressed by a response that is tailored to the local situation. If there are particular geographical areas where there are particular local pressures—we heard about a number of such areas during the debate—the DHP system will be tailored to those areas. It is almost a circular argument. That is the reason why the DHP system is our answer to most of the questions put to us, because it is the best way to respond to different but equally significant local issues of the type that have been raised during the debate.

I now come to the issue of the shared accommodation rate. Technically, I know that the title of the Committee’s report is, “Changes to Housing Benefit announced in the June 2010 Budget”, but as the shared accommodation rate was covered in the report I will address it.

The question is, “Why do we pay a shared accommodation rate to the under-25s only, because many young people are sharing and is it fair”—to come back to the point about fairness made by my hon. Friend the Member for Ealing Central and Acton (Angie Bray)—“that someone in their early 20s on housing benefit can, in principle, get a flat to themselves but someone in their early 20s who is in work and beyond the reach of the housing benefit system has to share, because they cannot afford a flat of their own?” That is the thinking and in fact that was why the shared accommodation rate was introduced. I think that it was introduced about 15 years ago, if I remember correctly. It has certainly been a feature of the system for many years.

When we have looked at the 25 to 35 age group, we have found it striking that a very high proportion of individuals who are not on housing benefit in that age group are also sharing accommodation. The number of people sharing accommodation does not tail off dramatically at the age of 25. More than 40% of non-students—single people—in this age range are sharing accommodation in a range of situations.

Various questions were asked about shared accommodation during the debate. For example, “Is any of this sort of accommodation available?” One of the notable things is that about 50% of those being paid the shared accommodation rate now are over 25. We have to think about that for a moment. The shared accommodation rate is only imposed on the under-25s, but if someone applies for housing benefit from shared accommodation and they are over 25 they receive the shared accommodation rate, even though they could receive housing benefit for a one-bedroom flat. There is a set of people over the age of 25, therefore, who could receive housing benefit for a one-bedroom flat but who are living in shared accommodation. That suggests, first, that some of those people have chosen to do so and, secondly, that the properties of that type exist. That helps to counter the suggestion that those properties simply do not exist.

Of course, there will be local variations. I accept that point and I will come back later to the point about houses in multiple occupation. However, I think that the hon. Member for Aberdeen South, the Chair of the Select Committee, wants to intervene.

[Dame Anne Begg]

Again, I suspect that the group of people that the Minister is talking about were already in that shared accommodation, which illustrates that people do not like to move house because of the upheaval involved. It also illustrates that not everybody is out to milk the system and receive the maximum amount of housing benefit. It does not illustrate at all what the Minister said it illustrated.

[Steve Webb]

I do not think that I have ever said that everybody is out to milk the system. Moreover, the hon. Lady is guessing what the figures tell us. Clearly, the information demonstrates that such properties exist. It was asserted during the debate that, “You just can’t find these properties”.

[Several hon. Members]

rose—

[Steve Webb]

Let me just explain what I mean by that. The hon. Lady and others said that we are expecting young people to live in HMOs and that those HMOs may not be there. However, to qualify under the shared accommodation rate, someone does not have to be in an HMO. For example, someone could be a lodger. Her Majesty’s Revenue and Customs already runs the rent-a-room scheme, whereby owner-occupiers can receive several thousand pounds a year in tax-free rent simply by renting out a room. Someone renting in those circumstances would qualify for the shared accommodation rate. There are statistics about HMOs, licensing and all the rest of it. However, if we think that things will be a bit tight and that some people might face unemployment and therefore will need some extra income, we might find that more owner-occupiers in a particular area are renting out spare rooms. That might be a very rational thing to do and that will increase supply. But of course the entire debate that we have had today has been based on the assumption that nothing changes. What we are saying is that this change will create a new demand for these shared rooms and spare rooms, and the market will to some extent adjust. That is part of the story.

[Several hon. Members]

rose—

[Steve Webb]

I will give way to the hon. Member for Aberdeen South, the Chair of the Committee, and then I will give way to the hon. Member for Hampstead and Kilburn.

[Dame Anne Begg]

I am sorry, but I have now forgotten what my point was.

[Steve Webb]

Okay, I shall give way to the other hon. Lady.

[Glenda Jackson]

I just wondered whether the Minister had the shared accommodation figures, and why hard-working taxpayers are not offended by HMRC allowing people to have tax breaks when they let a room.

--- Later in debate ---

[Steve Webb]

I have a feeling that it might have been the previous Government, in whom the hon. Lady was a Minister, who introduced the rent-a-room rate. The point about the rent-a-room scheme is to try to make better use of the housing stock. I will not dwell on the social housing overcrowding measures—they are in the Welfare Reform Bill and are not the subject of this report—but I will say that much of what the Government are trying to do is about recognising the limitations of the existing social housing, private rented and owner-occupied stock, and making better use of it.

We have here a classic example. Rather than pay a 29-year-old single person the full housing benefit for a flat of their own, we could pay them housing benefit that enables them to live in a spare room in someone’s house, which would be good news for the person who owned that house, would free up the one-bedroom flat and would save the taxpayer money. I have no idea why the hon. Lady opposes that idea, unless it is on the grounds that it is better value for money. [Interruption.] I am sorry, but I have not given way. I am trying to manage my time, because we have covered a very wide range of topics.

I have covered the fact that accommodation does not need to involve HMOs, and I have raised the rent-a-room scheme. As soon as I talk about, “living with family”, everyone will throw their hands up in horror and say, “You can’t possibly expect people to do that,” but there are diverse circumstances. For example, there is a set of people in their late twenties who live at home with their parents—I think they are called the boomerang generation. For them, it is a rational thing to do, and it enables them perhaps to save up for a deposit on a house. There is also a set of people who live close to family and have a good relationship with them—there are lots of caveats to that—to whom we pay housing benefit for the full rent on a one-bedroom flat just for themselves, when they have family down the road who could accommodate them at no cost to the taxpayer. At a time when money is tight, asking them to consider that option seems entirely rational and a sensible way to use the existing housing stock.

The hon. Member for Aberdeen South spoke about the housing market in her own constituency. I do not think that anyone is saying that all housing rent inflation is about the LHA. I do not think that I have ever said that, and I am not aware that any of my ministerial colleagues have either. I do not dispute for a second that in Aberdeen and other places local market factors drive up rents. However, it is clear that rising real rents are part of the story. In response to Professor Steve Wilcox, whom I know well because I have written papers with him, our breakdown of the growth in housing benefit between different factors suggests a significant role for rent growth. Let me just take Members through how we get to that.

In the past decade, between 2000-01 and 2010-11, the cash increase in spending on housing benefit was £10.5 billion. It is worth reflecting on that £10.5 billion increase over 10 years, and there is no sign of that increase easing off. With another billion, another billion and another billion, doing something does not seem particularly deplorable. Out of that amount, £5 billion is straight inflation—what we would have expected on the strength of inflation—£2 billion is real terms social rent growth, £2 billion is real terms private rent growth, £2 billion, right at the end of the period, as the hon. Member for Westminster North said, is case load growth, and about £500 million is the child benefit disregard. Real rent growth, therefore, is not only about the LHA, but it is a significant contributor to the growth in spending.

The challenge for us, as a Government, is whether to just sit back and take it, letting private landlords go on increasing rents above inflation year after year, and saying, “Yep, that’s fine, we’ll pay that,” without trying to put a brake on it. That is where CPI comes in. I have seen the projections. If CPI is done for decades, it of course has the sorts of effects that were described in the Shelter research mentioned by the hon. Member for Stockton North and, I think, the hon. Member for Brighton, Pavilion, who has now left us. CPI is not for ever. We have said that CPI on the LHA rates will be introduced in 2013, and will be reviewed at the end of the comprehensive spending review period in 2014-15. At that point, we will look at the impact, but what CPI will do is put a brake on the expenditure. Housing benefit expenditure is like a runaway train—nothing seems able to stop it—and we have to try to get the housing market to structure itself differently, rather than keep feeding the runaway train.

[Alex Cunningham]

If, as the Government say, CPI is the only fair way to determine increases in the future, is the Minister suggesting that they will go back to an unfair system at some point?

[Steve Webb]

No. The hon. Gentleman, possibly with my help, might be confused. We have already had lengthy debates on CPI as a measure of inflation for uprating benefits, and our judgment is that it is the most appropriate measure of inflation. What I am talking about here is what we do to the LHA rates in 2013. We will put a brake on them rising faster than inflation for two years, and at that point we will look at the impact. That is all I am saying. We are putting in place a mechanism that will cause a pause in that remorseless rise, and I have heard almost nothing in this debate about how we will tackle the growth, apart from building more houses, which is vital—in the past year, we have had the lowest rate of private house building on record, or certainly for a very long time. The argument appears to be, “Lie back and take it,” but that is not the action of a responsible Government.

My hon. Friend the Member for Cardiff Central raised the issue of broad rental market areas, which is relevant in the CPI context. If LHA rates are to be subject to CPI, ideally the broad rental market areas should not move around because the base figure subject to CPI would not be clear. The broad rental market areas must be frozen at the point at which one goes to CPI, and the question is what they would be at that point. My hon. Friends the Members for Cardiff Central and for Cambridge (Dr Huppert) have properly highlighted the problems with the city of Cambridge and the wider area of Cambridgeshire, and although there have been changes to the BRMAs around that area, the idea is that they will be fixed in 2013. My hon. Friend the Member for Cardiff Central mentioned coterminosity with local authorities, in relation to Wales, and that is one of the options being considered. It is an option that has a number of attractions. In London, it would mean that the BRMAs were smaller, and the affordability figures would therefore be within a tighter geographic area. We would be unlikely to make significant changes this side of 2013, partly because every time the rules are redrawn, another set of gainers and another set of losers are created. So, we would rather do that at the point of moving to CPI in 2013.

Local authority boundaries are not without their own problems. Many of my Liberal Democrat colleagues represent seats in Cornwall. Cornwall is now a unitary authority and the whole of Cornwall would be one BRMA—I think that BRMAs can be smaller than that. My colleague who represents Land’s End, my hon. Friend the Member for St Ives (Andrew George), and my hon. Friend the Member for North Cornwall (Dan Rogerson) might have views about the interchangability of their two areas. There is no simple solution, but we are certainly looking at local authority boundaries in response to the points that my hon. Friend the Member for Cardiff Central has raised.

Universal credit has been mentioned, and it was asked whether housing benefit would go in at a flat rate. The details of that will be discussed more in the Welfare Reform Bill Committee, but my certain understanding is that the intention is not simply to have a “so much for housing” number in the universal credit. I think that the approach will be much more tailored, but I am sure it will be discussed much more fully in the Committee.

On the under-occupation rules, it was asked whether people would be moving from three-bedroom houses to one-bedroom flats. The data show that about three quarters of the under-occupation in the social rented sector is by only one bedroom, so the move from three bedrooms to one bedroom would represent perhaps a quarter of the change. The impact might not be quite as great as I think the hon. Member for Westminster North suggested, but we have just published some more data on that.

[Ms Buck]

I am grateful to the Minister for giving way again; he is being generous. We will be addressing this issue in the Committee on the Welfare Reform Bill, so we must think about it.

In my contribution, I mentioned that the total number of transfers in social housing stock in one year was only one fifth of the total number of people who will need to move to avoid the under-occupation penalty after its introduction. Has the Minister thought about that and discussed it with the Department for Communities and Local Government? Surely any penalty applying to people in the social security system must be avoidable. The question is whether the capacity in housing stock makes the under-occupation penalty avoidable.

[Steve Webb]

It is important to remember that we are discussing a change that will not be introduced for more than two years. The fact that local authorities and housing associations know that the change is coming two years down the track will affect tenancy decisions and allocations now, so it will be part of the mix. Putting someone into a property that they are under-occupying, knowing that in a few years’ time they will not be covered by housing benefit, would raise issues. The situation will be ameliorated partly by forward planning. However, these are issues in the Welfare Reform Bill rather than the report. I fully accept that they are important issues and will need to be managed.

I propose to allow the Chair of the Select Committee to respond at the end of the debate, if she would like to do so, so I will leave some time for that, but first I will consider some of the main themes that have emerged during the course of this debate. The dropping of the 10% cut after a year was an important theme of the report, and we have heard several hon. Members discuss their quite proper concerns about that. We took the view that the measure was not necessary after 12 months on benefit, given the introduction of the Work programme, which will support people, and the universal credit. We took account, obviously, of what the Select Committee and others who made representations had to say. Naturally, I was pleased that the proposal was withdrawn. It is another example of how we have responded to the proper concerns raised by the Select Committee.

Since the proposals were first published, they have been considerably improved. On the nine-month transition, the changes will start to have an impact from April, but rather than a cluster of people chasing after the same properties, we will see the rental market start to adjust. Landlords will adjust their rent-setting behaviour; we will see whether the mechanism that we have implemented—direct payment, where that enables a tenancy to happen—is working; and we will be able to refine it over the next nine months before almost nobody with an existing claim starts to be affected. I stress that people will not be affected until the anniversary of their claim. For some people, that will be 18 months or more. The process will be gradual, giving us a chance to monitor what is going on and to consider the allocation of discretionary housing payments as we go, which improves the proposition considerably.

To draw the threads together, one thing that strikes me about this debate is that it is clear that whoever was running the country at this point would have done a number of the things that we have done and are now being criticised for. We have heard figures quoted on the losers: 500,000 people will lose an average of more than a tenner a week from the abolition of the £15 excess. The previous Government decided to delay that change by a year, because there was an election coming, but we are going to do it, yet the figures for losses have all included that. It would be unfortunate if anyone gained the impression that we are making new policy and new decisions. This would have happened anyway and was part of what was planned.

As my hon. Friend the Member for Cardiff Central said, the previous Government applied bedroom caps. They drew the line at five, and we draw the line at four, but the principle is identical. The outgoing Administration stood on a platform of restricting housing benefit to what somebody in work could afford. What does that imply? The 30th percentile. Using the 30th percentile, getting rid of the excess and applying bedroom caps is virtually there. I hesitate to say this, but almost everything that we are doing is Labour party policy, yet the Opposition suggest that this is some sort of evil right-wing plot to attack the poor.

The idea is that the housing market is not static. It is influenced by what the Government do. We cannot spend £21 billion a year subsidising rents without influencing the housing market. Does anyone think that if we abolished housing benefit tomorrow, it would not have a massive effect on the rental market? It would have a huge effect. We are players in the market, and we have a huge effect.

Our challenge is to ensure that the system is fair. In most rental market areas, 30% of properties will be affordable. There will be a transition to the new system of at least nine months for existing tenants and up to a year after that to ensure that in difficult local situations treble the amount of discretionary housing payment will be forthcoming. The fact that the budget is £20 million this year and will be £60 million in two years’ time, repeated over a three-year period, indicates that we accept that there will be difficult individual cases in which adjustments must be made, which is why we have provided the money.

I do not apologise for tackling something that has gone untackled for too long. The budget was growing remorselessly by billions year after year. We must ensure that taxpayers’ hard-earned money is well spent, and we believe that the housing benefit changes will make that difference.