Affordable Homes Bill

Yvonne Fovargue Excerpts

Friday 5th September 2014 Commons Chamber

[Sir Tony Baldry]

One thing I will miss when I eventually leave the House is the hon. Gentleman’s charm. I suspect I will not miss it for long, but I will miss it.

I looked back in detail at the local housing allowance legislation, which was introduced for new claimants living in the deregulated private sector from 7 April 2008. Following the Social Security Act 1986, the housing benefit scheme was introduced in April 1988. As the House knows, housing benefit is a means-tested benefit administered by local authorities. It is paid to eligible tenants who live in the social and private rented sectors. Entitlement to housing benefit is calculated by comparing the needs and resources of the household, taking the liability for rent payments into account in calculating household net income. Before local housing allowance was introduced, private sector tenants also claimed housing benefit.

On 17 October 2002, the right hon. Member for Oxford East (Mr Smith), my county colleague, who was then Chief Secretary to the Treasury, announced plans for a new form of housing benefit that could no longer be directly linked to rent. He described the plans as

“the biggest reform in Housing Benefit since the benefit began.”

One characteristic of housing benefit reforms is that Ministers always say that their reform is the biggest since the benefit began, but he did seek to make significant savings.

The new approach was introduced in nine pathfinder areas from November 2003 and was extended to a further nine areas from April 2005. At the time, this is how the Department for Work and Pensions described the aims and objectives of the local housing allowance:

“Local Housing Allowance…is the cornerstone of the Government’s Housing Benefit reform programme which aims to simplify Housing Benefit and ensure it supports the wider objectives for welfare reform.”

Most hon. Members are sufficiently savvy to recognise the phrase

“ensure it supports the wider objectives for welfare reform”

as Treasury-speak for making public sector savings. That is exactly what the Labour Government sought to do. The Department for Work and Pensions website at the time said:

“The fundamental aims of the LHA scheme are to promote…Fairness…LHA bases the maximum amount paid to tenants on the size, composition and location of the household. Benefit will no longer be based on actual rents but on median levels of rent within localities.”

[Yvonne Fovargue (Makerfield) (Lab)]

Will the right hon. Gentleman give way?

[Sir Tony Baldry]

I will give way in a second.

The current Government have extended the same principle to social housing tenants of paying the benefit on the size and composition of household.

--- Later in debate ---

[Sir Tony Baldry]

My hon. Friend makes an extremely good point.

So much did the Labour Government think their policy would work that they were going to allow tenants to retain up to £15 a week in surplus benefit, if they could make sufficient savings on their rent. We might not remember it now, however, but as part of the 2009 Budget, they announced that the local housing allowance would be amended from April 2010 to remove that provision:

“The Local Housing Allowance…was introduced in April 2008, and costs have exceeded the planned expenditure for this policy. To bring the cost into line with what is affordable, whilst still ensuring all recipients can afford their rent, the Budget announces that from April 2010 there will no longer be scope for anyone to receive more LHA than they have to pay in rent. Existing claimants will move onto the new arrangements on the anniversary of their claim.”

That makes it absolutely clear that the last Labour Government introduced these changes in housing benefit for tenants in the private rented sector entirely, solely and totally to save money and reduce the housing benefit bill.

The effect of the proposal was summarised thus:

“All new customers claiming Housing Benefit in the deregulated private sector on or after 5 April 2010 would not be entitled to any excess benefit over their contractual rent…Existing customers, including those in the former LHA Pathfinder areas, who are currently entitled to an excess payment of up to £15, would see a reduction in their benefit when their claims are reviewed, usually on the anniversary date of their claim.”

Contrary to the blandishments of the hon. Member for Rhondda, that change was retrospective. A lot of people who thought they would be better off by £15 a week suddenly discovered, as a consequence of that Budget, that that money had been taken away from them.

[Yvonne Fovargue]

The right hon. Gentleman described this system as almost identical to the local housing allowance, but as he himself pointed out, the LHA is a median figure. In Wigan, therefore, somebody moving out of a three-bedroom local authority property can find a three-bedroom, non-social housing, private rented property at the median rent, while still being paid £10 a week more and receiving housing benefit. They could move out of and leave vacant a three-bedroom social housing property, but still have a three-bedroom property even though they only have one child.

[Sir Tony Baldry]

The hon. Lady and other Labour Members are refusing to acknowledge some fundamental points about the Bill. She voted for the welfare cap and the Minister has said that the Bill would cost the Treasury £1 billion. If it were passed, therefore, and if, by any mischance, a Labour Government were to be elected next spring, they would have to find £1 billion of savings elsewhere in the welfare budget. If Labour votes in support of the Bill, it will behove Labour Front-Bench team, given that the Labour party is governed by collective responsibility just as much as the Government are, to tell the House and the country exactly where they would find £1 billion of savings elsewhere in the welfare budget to compensate for the cost of the Bill.