Housing Benefit (Scotland)

Debate between Tom Clarke and Steve Webb

Tuesday 8th February 2011 Westminster Hall

[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.