Clause 27
Welfare Reform Bill
1:30 pm
John Penrose (Weston-Super-Mare, Conservative)
I beg to move amendment No. 266, in page 19, line 15, at end insert—
‘( ) The regulations may provide for local variations in AMHB in the event of a shortage of suitable accommodation for disabled people.’.
The amendment is fairly straightforward. I seek to discover the Government’s approach to dealing with those who, potentially, are tremendously vulnerable—disabled people, their carers and associated family—in those parts of the country that do not have a huge supply of houses available to rent with the potential to be adjusted or improved to allow for their particular needs, or places that have already been adjusted to reflect those needs.
The Under-Secretary pointed out this morning that we do not have a national housing market but a series of local markets. It will depend on the local market as to whether there is an adequate supply of such places that can be adjusted or that have already been adjusted. Given the huge variety of adjustments that may be required for the many different conditions, it is clear that there may be no such houses in some parts of the country. That will lead to problems finding an appropriate house or somewhere at a reasonable rent that could be adjusted.
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
Would my hon. Friend not agree that, by the nature of things, the sample will be rather small, and that any deductions drawn from that sample will result in a correspondingly low degree of confidence?
John Penrose (Weston-Super-Mare, Conservative)
My hon. Friend is right. When discussing the single room rent restriction, we spoke of the difficulty of finding an accurate factual basis on which the rent officers could make decisions affecting various parts of the country. This is a similar example, but based on a different set of facts.
Another point will cause difficulties. Not only will the disabled have to find places that can be adjusted to meet their needs, but they have what may be classed a non-standard shape of household—for instance, the carer may or may not be a member of the family. That can give rise to an unusual type of family geometry when compared with the normal run of family types for which rent officers will be declaring local housing allowances.
The Under-Secretary may have started to prefigure her answer when summing up this morning in our debate on the single room rent restriction. However, I hope that she can explain a little more about how the Government plan to deal with the problem and that she can reassure us about the steps that they plan to ensure that this important and vulnerable group will be properly looked after when local housing allowances are decided.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
It is good to see you in the Chair, Mr. Amess. I am pleased that the hon. Gentleman has raised the subject in his amendment. I respect the admirable intentions behind it. As he indicated, to a certain extent it follows on from comments made by the hon. Member for South-West Surrey (Mr. Hunt).
I reassure the Committee that we already have powers to make different provisions for different classes of people under section 175 of the Social Security Administration Act 1992. We can also make different provisions for different areas under section 175(6). However, more importantly, adding the qualification suggested by the amendment to the local housing allowance would undermine its main advantages of simplicity, transparency and fairness.
I hope that the Committee accepts that the majority of disabled recipients live in the social rented sector and will not be covered by the local housing allowance. As I said during a debate on a previous amendment, the discretionary housing payment scheme is also in place. That flexible system will enable the local authority to target help to those who most need it.
I turn to the relevant issue of live-in carers. If the dwelling is the carer’s normal place of residence, the carer will be included as an occupier in the housing benefit calculation; the customer will be entitled to an additional room and a non-dependant deduction will be made. We recognise the different issues; I have already mentioned the charitable and voluntary sectors. The local housing allowance has a built-in flexibility, at an individual level, through discretionary payments. I hope that, with that reassurance, the hon. Gentleman will feel free to withdraw his amendment.
John Penrose (Weston-Super-Mare, Conservative)
I thank the Under-Secretary for that brisk and comprehensive response, and I beg to ask leave to withdraw the amendment.
David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)
It is a great pleasure to see you on this moderately sunny Thursday afternoon, Mr. Amess.
I give a general welcome to the LHA and what it was trying to achieve—a simpler and fairer system. It was designed to encourage greater personal responsibility among claimants, which is a good thing. It wanted to provide tenants with a bit more choice and to reward their shopping around; that was another noble aim. It also sought to reduce administrative complexity and promote financial inclusion by encouraging a welcome trend among those who were unbanked to open bank accounts so that they had a reliable way of receiving money and paying money to landlords.
However, the devil is always in the detail. Clearly, during a pilot not everything has been nailed down and got right, and we Conservatives will not be so unreasonable as to pretend that the problem has been cracked. However, the clause concretises some of the proposals in the LHA pilots. I should like to pose a series of questions and points, on which we, along with outside groups and claimants, would like reassurance.
The first question is about why there is so little evidence from the evaluations of LHA of moves by existing claimants to more appropriate property—more appropriate in the sense that claimants might pay lower rent and be able to save some of that money under the pilot schemes.
We would really like to know how many people have been taking advantage of the cash retention built into the proposal. It is all very well saying that a lot of shopping around is going on and that lots of claimants are able to retain some of the saving by going to a less expensive property, but can the Minister quantify that? It is a great idea in theory, but is it happening in practice?
The second question relates to shortfalls. Hon. Members, on the Government and the Opposition sides, will have some interesting examples to give, but I shall return to that in a minute.
We also need some information from the Under-Secretary about the IT side of the equation. The housing benefit service in pathfinder areas seems to be doing quite a good job with the system. However, I am led to understand that IT problems, ranging from acute to minor, have been experienced. There is some suggestion that the level of resources needed to support an LHA national roll-out, which is what the clause seeks to do, has been seriously underestimated. I should be grateful if the Under-Secretary would give us her views on that. Is she entirely satisfied that the IT capability and resourcing are there to ensure that the national roll-out goes ahead smoothly?
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
Would my hon. Friend not also want to bear in mind, first, that when any system is changed there are always frictional and transitional problems, and that those transferring from one system to another will be the most vulnerable to that? Secondly, there is a world of difference in scale between a pilot with a comparatively small scale, and an escalation to a nationwide system.
David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)
My hon. Friend makes an excellent point. Reassurance from the Under-Secretary would be most welcome.
Next, and crucially, for all of us who are involved in the welfare reform conversation, we must ask the question: what has the LHA done for work incentives, and encouraging people back into work, so far as housing benefit is concerned? The evaluation that I have seen did not disclose very much evidence of the LHA improving employment opportunities. One of the evaluation reports—forgive me; I forget which one—said:
“One officer believed that the effects of the LHA in their location was so small—affecting the better off calculation by only £5-£10—that it was of little significance in the claiming/working decision”
by a claimant.
“Others simply do not know if it is affecting such decisions.”
That is the 2006 evaluation report on the Department for Work and Pensions website.
I ask the Under-Secretary to ask herself whether that LHA pilot has done its work on work incentives. What statistical data has she been looking at before deciding to roll out the proposal nationally? Is there more that could be done after the Bill is enacted to ensure that the propositions in the pilot are tweaked so that we can get more people incentivised into work? We all know about the quite vicious withdrawal rates in housing benefit. I hasten to add that that has been true for many years under successive Governments: it is the nature of the beast that there must be sharp withdrawal rates, and it is difficult to flatten the cliff edges. Nevertheless, is there anything that can be done to look again at those pilot schemes to see whether we can do more on housing benefit, and ensure that the disincentive to work is removed or lessened?
My next question relates to the retention of cash should a claimant shop around and find a lower rent. Proposed new subsection (5) provides that a claimant’s HB could exceed their rent liability, if their appropriate LHA rate is higher than their actual rent liability. The Green Paper asked for views on a proposal to cap the amount of HB that claimants can receive in excess of their rent levels. Obviously, we welcome and support that proposal, which is innovative and clever.
The Green Paper states:
“In some areas, claimants are able to receive large cash sums over and above the amount they need to pay their rent. There is a concern that this is fundamentally unfair and that it could have serious implications for work incentives”.
Will the Under-Secretary say something about the level at which the Government are going to set the cap?
Respondents to the Green Paper appreciated the need to restrict cash gains for recipients of LHA, but also expressed concern about the additional complexity that a capping regime at that level might add to the scheme. The Association of London Government has said:
“It is disappointing that the DWP is proposing to cap excess allowances”
as this
“introduces a level of complexity”.
The Government have said that they intend to implement a £15 cap on the LHA that tenants can receive above their rent level. Why was the capping figure set at £15, and will the Under-Secretary acknowledge that that could introduce complexity? Why not set the figure at more than £15? If someone has had the wit and energy to negotiate downwards, why not £20 or £10? I would be interested to hear how that £15 capping figure was arrived at.
My next point relates to the excellent work, which has been encouraged by the Government, done by Citizens Advice, Shelter and others in giving financial advice and support during the roll-out. The scheme is innovative, and it will be new to HB claimants, which is potentially very confusing, and the Government were entirely right to put in place a support and advice system in many of the pilot areas. However, this is where my concern hoves into view. Citizens Advice has been working with local authorities which have been promoting the LHA and reassuring landlords that vulnerable tenants will be provided for and will be able to make payments. It has also been developing relationships with local banks.
Citizens Advice has considered both sides of the equation. It has talked to landlords and banks about opening accounts so that housing benefit payments can go from the Department into a claimant’s account, which can be subject to a direct debit not only for the convenience of the landlord, but so the claimant can plan their finances with some confidence knowing that their housing benefit will go out on the due date and that they will not have a landlord on their case causing them grief.
That is all important support work, and I understand that much of it is done face to face to improve the financial literacy and debt-management skills of the often vulnerable people who need support and benefits, which includes not only housing benefits, but all other forms of benefit. Now, those people are getting that support with the new HB scheme.
I shall give one example how a citizens advice bureau helped a client. The client had a current account that was already seriously overdrawn. She was concerned that when the LHA was paid into her account, her bank would use it to pay off her overdraft, so she would be unable to pay the rent to the landlord because there would not be enough money in the account. She also thought that she would not be able to open another account because of her poor credit rating. The citizens advice bureau helped her to open a basic bank account for her LHA to get around that problem. I am sure that those of us who have spoken to people in pilot areas can produce many other examples of simple but effective intervention.
Despite the importance of that support network for LHA claimants in pilot areas, Citizens Advice reports that a number of bureaux have been informed that funding will be reduced and will not be supplied at the same level on roll-out. Will the Under-Secretary confirm that, and, more generally, tell us what funds will be made available for such support services throughout the country on the national roll-out? Has a figure been earmarked for such work, and can assurances be given to those who are helping to drive up financial literacy skills, such as Citizens Advice and others?
My next point relates to appeal mechanisms against LHA levels. It does not appear that there is a streamlined, simple and efficient appeal system for claimants who have a serious disagreement with a determination.
Finally—
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
As my hon. Friend has mentioned the magic word “finally”, could he reflect on what one might call the rent profit cap, about which he spoke a few moments ago? Is it not worth considering, at least in principle, whether that cap should be linked to the level of local rent determination rather than being somewhat arbitrarily determined as a monetary amount?
David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)
There is no end to my hon. Friend’s skills. He is a wordsmith, a life enhancer, a caring and compassionate historian and a guide, philosopher and friend—to me, at any rate. Importantly, he has added being a policy wonk to his list of accomplishments, because he has just come up with a policy idea that had not occurred to me. That might indeed be one way of doing it. I have already asked the Under-Secretary why the policy cap has been set in the way in which it has, and I am extremely keen to hear the answer.
In the interests of time, I shall not detain the Committee, but I hope that the hon. Member for Colne Valley (Kali Mountford) will detain us on the issue of the size of what is referred to under the current regime as a locality. Worrying data have been produced by Citizens Advice. In one particular part of the country, Barnet, the locality—the Bill will change the term, but I shall call it the locality for the sake of simplicity—is very large, which leads to the midpoint of rents for the area being completely unrepresentative of what a real market rent would be in some parts of the locality.
I trust that we shall hear more about that, but if the research conducted by Citizens Advice in Barnet is correct, something must be done. From the evidence that Citizens Advice has provided, it seems that there are serious shortfalls, which need not occur if the rent officer draws the map more sensibly. Why have the localities been allowed to grow so large for the purpose of rent determinations by the rent service? I am not sure what the logic is, but I am sure that it is leading to very large shortfalls in certain parts of the country.
Although LHA is a sensible proposition, there are a few questions, and we need the answers if we are to have full confidence that people whom the scheme is designed to help, and who need and deserve that help, will receive it.
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
I shall not continue with the weather theme in our conversations, but I note that the Room is considerably chillier than before. In the interests of hon. Members at some point being able to go and warm their hands on a hot drink, I shall try to be brief, despite the scope of the clause.
I have not tabled an amendment, because I believe that there will be an opportunity to examine matters when regulations are made. However, I look to Ministers to consider my concerns during passage of the Bill and to return with further recommendations or reassurances that will satisfy me and those who have advised me.
I should like to thank the CHAS Housing Aid Service, for which my husband worked until 1998 as a director in Kirklees and for which I have some affection. I no longer have any direction connection with it, but Niall Holland came to see me and has been extremely helpful in advising me about its concerns. CHAS is a small organisation and therefore was not involved in the consultation, but perhaps that could be remedied in the course of our further deliberations, so that it can discuss matters directly with Ministers and so that proper solutions can be found in the future.
The hon. Member for Bury St. Edmunds (Mr. Ruffley) mentioned shortfalls, and the way in which they have come about. We do not wish to exacerbate an already difficult situation by what we are about to do. The CHAS report, “Behind Closed Doors”, covers a number of large metropolitan areas, including Kirklees, and one of its studies covers south Kirklees in my constituency. For single rooms, the current shortfall is approximately £18, but in more typical rental accommodation, the shortfall is £28 for one-bedroomed accommodation and £16 for two-bedroomed accommodation. For bigger properties, the differences vary considerably. Those shortfalls in my area were replicated in all the areas that were studied, including Bradford, Doncaster, areas right across south and west Yorkshire and beyond to, for example, Exeter. The study concentrates largely on areas in Yorkshire—it is none the worse for that, but the concerns do not only apply to Yorkshire. I suspect that shortfalls are replicated to varying degrees across the country, depending on market rents and on housing demand and availability.
There is another way in which shortfalls may be exacerbated: the move from a mid-point assessment to a median assessment. On the face of it, the Government’s Green Paper entitled “A new deal for welfare: Empowering people to work” gives a useful explanatory note on how median rent could improve the situation. The example given is of a range of 13 houses with rental values between £50 and £200. In that group the median is £150, and the mid-point is £125.
My next problem arises out of the work of rent officers. When rent officers were asked how they apply their own values and about the research that they do in setting those values, we found that they cut out the lowest and the highest of those 13 properties available for rent in order to reach their mid-point.
In a parliamentary question, my hon. Friend the Member for Huddersfield (Mr. Sheerman) asked how the median would be reached. He asked specifically whether the median that has been referred to would include all rents or would exclude significantly high or low rents. The answer was that it comes from the rent officers’ market evidence database. Our problem with that is that we know in our own area that the rent officers’ market evidence database already excludes the lowest and the highest rents available in our area. We need to ask whether guidance will be given to rent officers. The median, which would on the face of it bring about an improvement for people, needs to be a true median and not one that is being disguised.
David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)
Am I right in thinking that the size of the locality exacerbates the problem that the hon. Lady is describing?
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
The hon. Gentleman, perhaps not unusually, is a little ahead of me because I am about to come to the size of the locality, which has an impact on deciding a median because the bigger the locality, the larger the variation in rent for similarly sized properties. My area has some leafy and quite wealthy areas. Holmfirth, for example, is a relatively wealthy area when compared with England as a whole, with average annual household incomes of £30,000. Even in Colne Valley—which is not the worst-off in Britain—the average income in the poorest ward is £20,000. Therefore, there is a £10,000 difference in incomes. That is followed by a difference in house prices and rental markets. However, Huddersfield and Dewsbury, which are included in the Kirklees area, have significantly lower incomes per household and a following variation between house prices and rental values.
It is not only that Holmfirth—if anyone wants to visit it, it is the location for “Last of the Summer Wine”—is extremely beautiful and a great tourist attraction. However, the fact that it is a tourist attraction affects its house prices. That is noticeable in my village, Slaithwaite, which is also a tourist attraction due to the production of “Where the Heart is.” It shows how a market can be so easily affected by something that does not appear to be a market change. However, the fact that the television crew decides to film there changes the value of the properties. [Interruption.] That may also have a negative impact on prices—we may look at that in future—but it is currently seen as a beautiful place and one that has a sense of community, something that cannot be easily quantified. I do not know how a rent officer would evaluate that. While a sense of community is one of those things that changes market values, it cannot easily be put into a guidance note to rent officers. Nevertheless, they might look more closely at what is affecting market values in their own areas.
Some areas in the pathways have been very large indeed. Taking Sheffield and Leeds as examples, I am an ex-Sheffield girl myself and, not having lived in one of its leafy areas, knew that there were certain areas in which I would never even have aspired to own a property because the property values in Sheffield vary so greatly. It is a city that was built up from a number of smaller communities, which urbanised over the years as the steel industry grew. My own area is very rural with many formal agricultural properties, smaller villages and even tiny hamlets. There is a great deal of difference between the kind of rent that can be attracted in a tiny hamlet and one that would be attracted in another area. A motorway, for example, could have a huge impact on the market. In some places, it would have a beneficial impact as it would give an easy route to other places where people could go to get work, but in other parts the impact would be seen as detrimental because people do not like the noise.
Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)
Is the hon. Lady concerned that having a single rate for a large area could discourage labour mobility, because it could mean that people looking for work might feel restricted to living in a particular part of the area and might not be able to move to some of the areas that she has referred to? It might impede the desire for people to move back into the labour market if they are out of it.
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
Indeed. The report produced by Labour MPs in 1997-98 was about that very point. It was one of the first surveys of rural communities and was carefully produced, considering the reasons why people were leaving rural areas and going to urban areas to find work: the travel-to-work problems, the community effects, rising house prices that meant that they could not afford to stay and the need to follow the work. There are other effects. In an area such as my constituency, for example, most people go to work in Manchester, Leeds or Sheffield. People going to those towns are followed by the development of four-bedroomed houses, because when people can afford to get on the motorway and tootle on to work in such places but come home to the beautiful Colne Valley with its fantastic scenery, they want to live in the houses that they desire. They change the whole housing market for the people who already live there.
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
I have been following the hon. Lady’s remarks carefully, and I agree with most of what she is saying. Does she think that there is a further problem with the phenomenon that she is describing? A lot of evidence in housing policy suggests that we need to create mixed communities where people of all income groups, families and so on live in the same area. Allowing the broader areas that she is worried about risks putting that policy in jeopardy.
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
Of course, some of that can be catered for by looking at planning guidance, which makes a huge contribution. I have taken many an opportunity to object to some developments that I thought did not add helpfully to the social mix. This is not the only way in which social housing can be provided, and it is not the only way in which we can ensure that houses of a suitable type for rent or cheap purchase can be provided, or indeed some mix of the two so that people can have part-equity. There are other ways of looking at the market, but what does not change is the variation between one locality and another.
Mr. Boswellrose—
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
I am feeling generous, because I am so fond of the hon. Gentleman.
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
I am mortified, but also deeply flattered. Has the hon. Lady seen the dilemma that I see? She cogently made the point about striking off the outliers in determining the median. She also made the point about the huge variations within wards that we may all have between affluent and less affluent areas. I am sure that is true. However, given the need to have a good statistical base to inform the rent officer’s determination, one needs a large enough sample, and given the need to be precise enough to deal with local market conditions, one needs a local solution. Does the hon. Lady at least acknowledge that that is a dilemma whoever is in government?
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
Of course it is a dilemma. In order to get more information, CHAS contacted our local authority and asked for the information in order to make a better assessment of the rents available. Unfortunately, the rent officers did not feel—some for not such good reasons, but others for good reasons—that they could provide all the information that might have informed us better in this debate. In their decision not to provide that information, they cited the exemptions under the Freedom of Information Act 2000 about revealing information that might be against economic interest or would affect the financial interests of the UK Administration. That is a pity. I can understand some of that. I can understand some of the other reasons that they gave. But given that most of us in a locality know the general amount of rent that is on offer and the kind of benefits that are paid for that type of property, I do not entirely accept what the rent officer said. It might have informed our debate better if we had had a clearer picture of what was really happening in Kirklees, but unfortunately I cannot advise the hon. Gentleman further on that because I simply do not have the information.
But any fool can see by looking in the adverts in the local paper the type of variation that exists. That gives rent officers considerable problems. One would not want to skew a market or to attract a higher rent to an area simply by setting a level that its market value would not attract. That would be a mistake. I do not see why taxpayers should pay for something that the market would not attract. Also, reasonably, people should be able to find a mechanism to ensure that the rent that the market attracts is true and fair and does not lead to further, unexpected and unnecessary consequences, especially around the issue of rent shortfalls. That is what we must focus our minds on.
We must also take account of the fact that markets change constantly. There is not one fixed locality that we can draw a red ring around on a map and say that it is there for all time. This problem surfaced in the case of Heffernan v. Rent Service, which was heard in Sheffield. I will not read out all the determinations by Judge Gilbert on that occasion, but in his examination of the issue of locality he talked at some length about the difficulty of defining a locality. If anyone wants to read the judgment, this is in paragraphs 84 to 87. The problem in that case was that the definition of locality that was being used at that time was not being properly applied. The definition was,
“a broad geographical area made up of a number of neighbourhoods with a mix of property types and tenure where a tenant could, as an alternative to the property in question, reasonably be expected to live and benefit from similar amenities.”
I do not want to go through all the particular types of tenure, property and amenities that this case looked at. We all know about the changes that can happen in an area. A new school might attract more properties and different types of properties; a new amenity and proximity to other desirable amenities can also change markets. There is not one fixed area. That gives us a problem. We need to look at ways through the regulations to advise our rent officers on how to determine what a locality is, rather than use too broad a brush. Unless I am misadvised about how the median will be used, it might mean that people find themselves with a bigger shortfall than we would wish.
We also need to find a way through the system for particular tenants. It is difficult sometimes to understand how rent officers come to their conclusions. Some people have asked me to ask for greater transparency on rent officers. I have thought about this a great deal. If the information about every property that a rent officer looked at were made available for anyone to see, would that in and of itself cause a skewing in the market? Would transparency alone be the solution? I am not absolutely convinced that it would but I should like the Under-Secretary to think about and respond to that. In her assessment, will the greater transparency of the work of the rent officer aid the process or inhibit it? There is scope for greater transparency and perhaps greater liaison between rent officers and other departments. Sometimes rent officers have seemed reluctant to engage with other sectors, especially the housing association and social housing market sector. If they had a better understanding of how the market operates—I am not talking about controlling it—they could come to an understanding about how a reasonable rent could be set in an area.
I am not sure that transparency alone would lead us to the result we want. There may still be times, as in the Heffernan case, when people feel that they have had a raw deal. That being so, at present they either pay their rent or they do not. They either decide to live in a property or they go elsewhere. People have to do their best and get on with what is available to them or make another choice.
There is a problem in the attitude of, “Never mind, if you can’t live in that house go and find a cheaper one”. We all know why people choose to live in a locality. Opposition Members have already raised the issue of people in a travel-to-work area wanting to be nearer to places where there are job opportunities. Some people, for example, parents who are having trouble raising their children, want to be near to relatives or friends who can give them support. I have had cases in my constituency of women who were intimidated by a former partner and who needed people nearby whom they could trust. They were reluctant to move out of their locality and away from those who provided an important support network in their daily lives. That is a reason for people wanting to stay where they are, in the community they are used to.
People do not necessarily want to move their families around. There is much credit in a family having stability, which can be found in the community that people live in, as I know from my constituency experience. It is a credible, and creditable, reason for wanting to stay in a locality, even if the accommodation is much smaller than rent officers think is appropriate.
Another way of dealing with the problem is to consider the work of the rent advisory committee in the Kirklees authority, for example. As well as rent officers, the committee includes estate agents and other people with a housing interest who come together to discuss the area’s general housing needs. They are well informed about what is happening in their local housing market and know what is available, what the houses prices and rentals are likely to be, and what types of amenities are planned that might have an effect on the market. Those people are under-utilised at present and they could add something to the mix, especially if they were used as a point of appeal by those who felt that the rent officer had sent an unreasonable rate for their benefits, given the locality.
Will the Under-Secretary consider regulating for a group as a mechanism for providing an over-layer, so that people can be certain that what they have been offered has been properly considered and know that they have a right of appeal? It is a right that exists throughout the benefit system, yet it seems to be curiously unavailable in this proposal.
That brings me to another point that was raised in respect of the Heffernan case: the appropriate maximum housing benefit, to which the hon. Member for Bury St. Edmunds alluded. Whether we are talking about the median, the mid-point or any kind of average, it is the maximum that in the end causes the crunch, and all these matters will affect that. If someone as eminent as Judge Gilbart could not find an absolute answer to that because, in his own words, he was having to determine only whether or not the rules had been applied correctly, rather than whether or not the rules were correct, I should like to ensure that the rules that we have are correct and that all tenants feel that they receive a fair deal.
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
It is good to see you in the Chair again, Mr. Amess, and it is a pleasure to follow the hon. Lady. Given the range and depth of her comments, in both their extent and their thoughtfulness, it will be interesting to hear the Under-Secretary’s response. She raised a number of issues and I shall not repeat what she said, but I share many of the concerns that she raised.
Let me say at the outset of this clause stand part debate that Liberal Democrat Members, too, welcome the principles behind the local housing allowance. Indeed, all hon. Members who have dealt with housing benefit cases at their constituency surgeries will welcomethe idea of simplifying the housing benefit system. Hon. Members on both sides of the Committee will also welcome the idea of promoting greater personal responsibility for the payment of housing benefit in order to promote financial inclusion and, indeed, a general sense of greater responsibility. This is also about greater fairness and choice within the system. My comments will be made in that context, but there are difficult questions that must be asked in addition to the points that have already been raised.
The hon. Member for Bury St. Edmunds made an important point on work incentives. I want to press the Under-Secretary on that issue, not least in respect of the withdrawal rate for housing benefit. I should be interested to hear from her whether, under the local housing allowance system, the Government propose that the withdrawal rate for housing benefit should remain the same as it is today, or whether she will seek to amend that, too. I am sure that many members of the Committee will have had a chance to study the tax and benefit tables issued by the Department for Work and Pensions on Tuesday, which show the interaction between the tax system, the tax credits system, the benefits system and withdrawal rates. Marginal deduction rates affect many people on low incomes. I see a few heads nodding around the Committee, so I can see that we are on shared ground here. For example, a lone parent who is a local authority tenant and has child care costs of £100 a week for one child faces a marginal deduction rate of 95.5 per cent. That means that, for every extra pound that that person earns, they get to keep only 4.5p for themselves.
The role of housing benefit in that context is very important, because the marginal deduction rate for housing benefit is high. The way in which it interacts with the tax credits system and other parts of the benefits system exacerbates that problem, so I should be interested to hear from the Under-Secretary what plans she and her ministerial colleagues have to address that important point. Given the way in which the benefits system, housing benefit and the tax credits system interact, many people who are trying hard to take responsibility for their own lives by working—which is what the Committee is talking about—but who are in receipt of housing benefit and other benefits have very poor incentives to improve their employment status, to work more hours or to get a better job. That issue is critical in this debate and I look forward to the Under-Secretary’s comments on it.
I share many of the concerns expressed by the hon. Member for Colne Valley on the definitions of broad rental market areas and the operations of rent officers. The provision of information by rent officers and the extent to which that is open to scrutiny will be the subject of debates on amendments under clause 33. I do not propose to dwell on that now, but the definition of broad rental market areas is important. Again, I consider the matter from the perspective of someone who represents a large rural constituency. The hon. Lady raised the question of the extent of broad rental market areas and how that affects local housing allowance determinations and people’s decisions about where they can or cannot live. However, it also affects the so-called “shopping around benefit” of the new local housing allowance.
The Under-Secretary knows the highlands of Scotland well, and it may be that the whole ofthe Inverness, Nairn, Badenoch and Strathspey constituency will be one broad rental market area. That would have a much more severe effect on the ability of people to rent privately anywhere in Badenoch and Strathspey because of the limited supply of housing in those rural communities, where there is little choice and high levels of rent are payable. In that context, it is important that she sets out the Government’s intentions for the way that the broad rental market areas should be drawn up and to what extent she will be guiding rent officers to set smaller or larger areas.
In the city of Inverness, there are quite different rental market areas, as the hon. Member for Colne Valley said about her own part of the world. An average of the whole city would ensure that people in receipt of local housing allowance would in effect only be able to afford to live in part of the city. That is an outcome, which I think all hon. Members would agree is highly undesirable for the reasons I pointed out in an earlier intervention. It would be useful if the Under-Secretary could provide more information about the Government’s intentions in relation to the broad market rent area or localities.
Related to that is the timeliness of LHA determinations on an annual or more frequent basis. I have certainly noticed in Inverness that there is a problem because of the limited supply of the types of housing we are talking about and the housing market conditions, which has caused the price of houses for sale to rise dramatically and far beyond the means of local people. That is a digression, but it is important as it has an impact on rent levels. In many cases, private landlords have seen the value of their properties rise dramatically, which leads to an increase in the rent they can charge. If the rent officers’ determinations are not keeping up with that market-driven process, many more people, even over the course of a year, could be left with dramatic shortfalls.
That does not simply cause financial problems. For example, in Inverness the local housing association has shared evidence with me that that leads to an increase in people presenting themselves as homeless. People cannot meet the gap created by housing benefit not keeping up with the level of rents in the private sector. I would like a word from the Under-Secretary on the question of timeliness of revisions. In some of the pathfinder areas, revisions have taken place monthly and I would be interested to hear whether that is the intention of the Government under this clause.
The hon. Member for Bury St. Edmunds rightly referred to the question of vulnerability assessments and the role of Citizens Advice and others in providing support and help to people who might be financially excluded and find the responsibility of paying rent and bills difficult. It is important that the Under-Secretary sets out her intentions in allowing that financial advice to be provided and in supporting organisations such as Citizens Advice as it provides support in all the areas where this is rolled out. That is particularly important at the start of the roll-out because it is at the point of change that many people are more in need of advice. When they are used to the new system, it can operate more fluidly.
David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)
Has the hon. Gentleman been informed by outside bodies that there is a fear that some of the funding might be cut in areas where it is currently supplied?
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
Yes, I have been informed of that, and I am concerned about it. I understand that, although demand for the services will reduce after a year or so, it will never disappear completely, so if the services disappear the number of people who face problems might increase.
David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)
On that point, is the hon. Gentleman not failing to take into account housing benefit onflow?
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
If I misspoke, I apologise to the Committee. Let me rephrase my remarks. At the point of change, a large number of people might move on to the new benefit and need help, and because the new benefit encourages people to take responsibility for themselves, there will be a perpetual flow of people who need financial advice and help. One of the advantages of local housing allowance has undoubtedly been a reduction in complexity, from the point of view of both claimants and benefit administrators. That was clear when I visited Lewisham to talk to people who had been administering the pilot.
The one area in which complexity has increased is making vulnerability assessments. As the Committee knows, when a vulnerability assessment has been made and somebody is to be treated as vulnerable, their housing benefit can be paid directly to the landlord. That is the only category of people for which that can happen automatically. The process of making vulnerability assessments can be a significant new burden for local authorities, and they have addressed it in different ways, whether the test is subjective or objective. Again, I wonder what guidance the Under-Secretary will issue to local authorities on the manner in which vulnerability assessments should be conducted. Overall, the level of complexity seems to be about the same as it was. The process is less complex for most tenants, but it is more complex for those in the vulnerable category.
I have one further question for the Under-Secretary. In responding to the previous debate, she suggested that there might be a degree of policy change in relation to local housing allowance. She said that the proportion of people subject to a single room rent whose costs would be covered by SRR would rise from 26 per cent. to 50 per cent. Will she explain what policy change has been made since the pathfinder pilots that makes her confident that such an increase will take place?
Wayne David (Caerphilly, Labour)
I want to make a number of points, many of which have been put to me by the Welsh Assembly. I understand that the Minister for Social Justice and Regeneration has made a submission in response to the Green Paper, but I should like to ask the Government to clarify some of the points that have been put to me.
Like other parts of the United Kingdom, Wales has benefited from the pathfinder pilots. Two have been held in Conwy and Pembrokeshire, and, like central Government, the Welsh Assembly has learned from them. It is relevant for it to do so because, although social security and housing benefit are not devolved matters, the Welsh Assembly has, under the devolution settlement, developed its own policies on housing and social care. There is a clear implication that changes in legislation will impact on those devolved areas of responsibility.
I want to mention the fact that local housing allowance is to be determined by the median rent. The example on page 98 of the Green Paper shows that that would be more generous than the mid-point calculation that has previously been used. However, I suggest that that is not always the case, because it depends on which figures are cited. It has been suggested that the new method of calculation might result in recipients receiving less generous allowances than has been the case. Moreover, the provision in the Bill is different from the approach in the pathfinder areas. Lessons have been learned, but it was decided that what was tested would not form the basis of the legislation, so we have a different proposal in the Bill. Will the Under-Secretary explain the empirical grounds on which the proposal was based? What evidence is there to back up the argument that the proposal in the Bill is better than the proposal in the pathfinder areas?
In Pembrokeshire, where house prices and rents have recently increased considerably, it has been suggested that if a methodology other than median rent were used for LHA, the calculation would be completely different. I should like that point to be clarified. As for the size criteria for homes and the LHA rate, it is proposed that the calculation should be based on the number of bedrooms rather than the number of living rooms. Although the Green Paper says that that could be a “simpler, more intuitive approach”, a case has not been made why it should be better. Intuition is one thing; hard facts are something else entirely. Again, that approach has not been tested empirically in the pathfinder pilots or elsewhere, and it would be useful if the Under-Secretary were to explain why the Government have reached such a conclusion in the Bill.
Reference has been made to capping, which concerns the difference between the LHA payment and rent costs. The figure of £15 has been mentioned, but I reiterate the request for an explanation why that sum is the magic figure. In the pathfinder areas, it has been an important source of income for many people and, if it is to be reduced, a case should be spelt out for that reduction and a reason given why the figure shouldbe £15.
Worries have been expressed by many people about the complicated nature of housing benefit. There is no doubt that housing benefit is complicated, and we would all welcome a change that would simplify the procedures. It has been said that what the Government are proposing is not as straightforward as it might be, and the two systems will run in parallel for a considerable time. To digress slightly, we all know from the example of the Child Support Agency the difficulties that can arise from such a process. One individual may realise that another individual receives a completely different rate of support, yet the system is meant to be fair to everyone. It will be difficult to explain why, under the new allowance, some people receive one rate while others receive a different rate. The difference is that new entrants will be on the new rate and those on the old system will remain so for some time.
How will the system provide an incentive for people to work? A fundamental element of welfare reform, which is the raison d’être of the Bill, is including an incentive for people to work in the system. It has been suggested that someone on housing benefit who is inclined to work might realise that if they take a job that does not work out, they will be forced back on to the new benefit at a lower rate. Rather than take the risk of that happening, that individual might stay on benefit, although they were inclined to do otherwise. We must tackle that issue head-on and clarify such matters.
With regard to the scope of the LHA, the Bill is focused clearly and precisely on the private sector, but it gives the Government the power, through secondary legislation, to extend the changes to the social sector as well. The Green Paper states, quite correctly:
“We are aware that there are significant differences between the private rental market and social housing, and between the social housing sectors of the UK devolved administrations. Many complex factors will need to be taken into account before a decision is made on exactly how we take forward reform in this sector. Proposals need to be developed with caution and over a longer timescale.”
That is true, but I should like an explanation why it has been deemed necessary to empower the Government to advance proposals for the public sector in the future, rather than saying that there could be new legislation in the future, which could be properly debated and scrutinised by Parliament. My colleagues in the Welsh Assembly Government in Cardiff and I would like that point to be clarified.
Adam Afriyie (Windsor, Conservative)
I want to make a couple of observations and ask the Under-Secretary a couple of questions so that she can justify the clause standing part of the Bill.
Overall, I think that all hon. Members welcome the simplification of housing benefit. There is no dispute, whether from claimants, local authorities or politicians, on whether it is a good thing to simplify an incredibly complicated system. The other good news is that, during the pathways to work pilot schemes, the rent arrears did not necessarily increase, which is a reasonably good sign, and there were no enormously adverse effects from the criteria that were used or the rates that were set.
There has been concern that during the pilots the number of private landlords demanding deposits from people in receipt of housing benefit increased from66 per cent. to 75 per cent., which is a small but significant shift. Will the Under-Secretary say something about that and about the implications for people claiming some form of housing benefit or local housing allowance?
The hon. Member for Colne Valley spoke eloquently and in a sophisticated manner about the nature of a local housing market and the pressures brought to bear on people to live in certain locations. I should like to join the hon. Lady in asking the Under-Secretary to say why the danger and pressure of people being forced to live in a particular area is outweighed by the benefits.
The local housing allowance is based on discriminating in respect of the locality in which someone lives. Does the Under-Secretary consider it to be a discriminatory benefit, because it discriminates on the basis of where somebody lives? If so, will she justify why such discrimination is important?
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
I had not intended to speak, but my remarks are to some extent fired, and even informed—if that is possible—by the interesting contributions by the hon. Member for Caerphilly (Mr. David) and my hon. Friend the Member for Windsor (Adam Afriyie). I am concerned about fairness in dealing with different claimants, which is a theme that I have occasionally developed in this Committee.
It is with some trepidation that I take on the burden of representing the Welsh interest, which is by marriage rather than a direct connection. I have a good deal of sympathy with the hon. Member for Caerphilly. In dealing with areas with a high proportion of second homes, which is a deeply political and controversial issue in all the Celtic countries and in some parts of England, it is at least arguable that no normal housing market is easy to assess. It would be helpful if the Under-Secretary were to explain how rent officers could sterilise artificially high rents driven by artificially high capital values, which are driven by Chelsea money, if I may use that shorthand, and how that would therefore create equity between areas with equivalent indigenous incomes but different costs, even though other circumstances are the same. That is one concern.
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
I am grateful to the hon. Gentleman for returning the favour. Has he noticed that in areas that are popular to live in, and especially in those attractive to tourists, significantly lower numbers of social housing are available for rent? Choice is narrowed in those circumstances.
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
That is a reasonable concern. On the other side of the equation, a lot of people find themselves in bed-and-breakfast accommodation, which is also a feature of some of our tourist areas. I want to flag up with the Under-Secretary concern in the Committee that there should be a degree of equity between claimants and no perverse consequences in the way that the system works.
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
The hon. Gentleman is making a fundamental point. In many rural areas, such as the Scottish highlands, the definition of the rental market area and the level of local housing allowances might well have an impact on whether someone chooses to let out their property privately throughout the year to a regular tenant or to make it a holiday home. In some communities, in which 20, 30 or 40 per cent. of houses might already be second or holiday homes, that decision has a direct impact on the ability of individuals on low wages to live in that community, and therefore on the sustainability of the community asa whole.
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
I agree with the hon. Gentleman; he makes a very good point. I, myself, have surplus farm cottages—not a large number—because farming is so different from what it was, and I do not mind saying to the Committee that that is exactly the dilemma that I rehearse with myself: are we going to let them to local families or perhaps make more money out of holiday lets? I think that Ministers need to focus on that.
I shall pick up on what the hon. Member for Caerphilly said. I worry intensely about the two-tier system of benefits that apply to old and new cases, and occasionally even feel motivated to write to the Attorney-General about my concerns. That is precedented; it has happened in the past. I would get a splendid lawyer’s answer saying, “Parliament has determined that it is all right”. However, our hearts are not comfortable when two systems run in parallel. The underlying concern being expressed is that we should have a fair outcome.
Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)
I wonder whether my hon. Friend can enlighten me on a point with respect to the proposed local housing allowance that I cannot get my head around. Obviously, as the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) said, market prices are dictated in part by Government policy on housing benefit, which impacts on local house prices. However, does my hon. Friend agree that if the Government, as they do now, pay whatever the rent is, wherever a person chooses to live, they could exacerbate the peaks and troughs in local house prices? However—I do not want to pre-empt the Under-Secretary—if we have a single housing allowance, which is the Government’s proposal in the Bill, we could even out those troughs by reducing demand in the most expensive areas and increasing it in the least expensive ones. Does my hon. Friend think that the proposed allowance could have a mitigating effect?
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
It is catching. Another of my colleagues might be making some of the Under-Secretary’s point for her. My hon. Friend is absolutely right. The existence of a benefit creates feedback into what happens in the real world. The market clearing prices offered on housing units vary depending on whether people have the benefit in their hands to pay for them. That must be right.
There could be a smoothing effect, but on the other hand, the point that I was emphasising—I shall not do more than that, because I do not wish to subvert the proposals—is that there are wrinkles in relation to areas with a high second home population, differences between old cases and new cases and possible anomalies resulting from the introduction of the new structure depending on the size of the housing area, as the hon. Member for Colne Valley mentioned. None of that utterly rules out the idea, and I do not wish to do so, but it requires the Under-Secretary to respond to a particularly absorbing debate and to give us her thoughts on how to iron out such wrinkles.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
Well, I suppose that that is one way of inviting a Minister to address the Committee—saying that I am here to iron out the wrinkles. I wonder whether that is stereotyping women Ministers, but I know that that is not what the hon. Gentleman meant. I was only joshing.
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
Joshing!
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
It is an unusual word, one that I have never used before, but it is nearly 3 o’clock on a Thursday afternoon, after what has been—I agree with the hon. Member for Daventry (Mr. Boswell)—an absorbing and wide-ranging debate. I suspect that we will not be able to solve all the problems this afternoon, or iron out all the wrinkles that have been identified. Hopefully, though, we will make a smooth transition to accepting the clause.
I should like to respond to something that the hon. Member for Windsor said, because he made an important point. Perhaps he did not realise how important it was.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
Perhaps I am underestimating his political nous. He spoke about discrimination. Introducing a local housing allowance is about ending discrimination in the private housing market. Like many of my colleagues from all parties, I see adverts in local papers for flats or houses for rent with the sentence below, “No DSS should apply.” By introducing the local housing allowance, we are dealing with long-standing discrimination against those who receive housing benefit. We are translating a person from a benefit recipient to a player in the market.
That links in with the comments of the hon. Member for Windsor about financial inclusion. It is a cultural change for the individual, the landlord sector and society as a whole. Why, when looking for a house, should a person have to identify their personal circumstances and the relationship between them as an individual and the state benefit system? A high moral philosophy underpins the introduction of the local housing allowance, over and above all the issues of transparency and simplification.
Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)
I entirely agree with the Under-Secretary about the Bill’s intentions, which are admirable. She has put it very well. Would she not agree that it is yet another way of getting away from the old idea of the truck system, where things were made available in kind rather than left to the choice of the autonomous individual? I am with her on that. Does she also agree that it will be desirable in the medium term to consider a transition to other forms of social housing? I did not make the point in my remarks that there is a danger that if that is not done, a further anomaly will open up or intensify between the private rental market and the social housing market.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
It is a long time since I have heard the truck system discussed. It takes me back to the higher history days that we did in Scotland while everybody else was doing GCSEs and A-levels. I am delighted by the historical analogy. I intend to discuss the social rented sector in more detail later on. We should recognise that the social rented sector is a different beast from the private rented sector. There is very limited capacity in the social rented sector to negotiate rents. That is why—I hope that this will reassure my hon. Friend the Member for Caerphilly and Mrs. Hart, one of the Ministers in the Welsh Assembly Government—it is not our intention to introduce the local housing allowance into the social rented sector. Yes, it was in the consultation document, but we listened to the consultation responses and recognised that it would be inappropriate to roll it into the social housing sector. I trust that my hon. Friend can take that message and that reassurance back to Mrs. Hart.
I hope that I can get through most of the points that have been made, although I hope that hon. Members will forgive me if I do not deal with every specific detail.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
Yes. I appreciate how important the hon. Member for Bury St. Edmunds is. He asked very specifically, as I would have expected of him, given his background, about the funding of the roll-out. As the hon. Gentleman may be aware, we have set aside some £62 million to support the national roll-out of the housing allowance. The precise allocation of the funding has yet to be decided but, as he also raised in his contribution, the financial support would also ensure that local authorities could support those aspects of financial inclusion that were in the pathfinder areas. Those included help to claimants to access bank accounts—which he fairly identified as one of the very positive elements in the pathfinder areas—the provision of basic financial literacy material, such as how to open a bank account, based on existing DWP literature, signposting the most specialist advice with debt and money management, and the citizens advice bureaux. I hope that that will give the hon. Gentleman some comfort about our analysis of the costs of rolling out the local housing allowance, although we do not yet know what the exact benefit expenditure is. There is obviously an administrative side and a benefit side, and it will depend on the future rents in the private sector, which we have no way of knowing now.
On the issue of IT, which was raised specifically by the hon. Member for Bury St. Edmunds, the five major IT suppliers to local authorities have developed local housing allowance software. Some modifications have been needed, but I can give the assurance that the IT will work—she says confidently. [Interruption.] We are nodding in agreement here. If hon. Members see me duck, Mr. Amess, you will know where the answer originated. We will provide the necessary funding to ensure that that happens. We have made an extensive investment in local authorities over the current spending review, which has put in place a firm basis for further improvements over the next few years.
I come to the £15 cap, and why we have decided on that. It was always going to be difficult to decide where the cap was going to be. However, we think that the£15 cap strikes the right balance between providing tenants with a choice over their accommodation and removing the disincentives to work. As I said earlier about other parts of the Bill, the cap is very much about encouraging an incentive to work. We think that the £15 cap is the right amount, and our understanding is that it would leave about 75 per cent. of the caseload unaffected, so the overwhelming majority of the recipients of the allowance would benefit from the cap.
The hon. Member for Bury St. Edmunds rightly raised the matter of work incentives. We cannot change the culture overnight, but local housing allowance is part of that change. Instead of a person thinking about taking a job not knowing what the impact would be on their housing benefit, the greater transparency of the local housing allowance will ensure that such a person knows how much they will have in their hand to negotiate for accommodation. Jobcentre Plus advisers will be able to say how much a person will get, without having to make all the calculations that are currently undertaken in relation to housing benefit.
Hon. Members will recognise that a range of factors have an influence on whether people move into jobs or not. Housing benefit plays a part, but only a part. We are doing all that we can to raise awareness of the fact that the new housing benefit and local housing allowance can be paid to people in work, because sometimes the information is abroad that the benefit is available only to people who are not in work.
I hope that hon. Members will accept that deciding on the £15 cap was a matter of striking a balance, but we think that it is the right balance.
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
Before the Under-Secretary leaves the subject of work incentives, will she address the question of the withdrawal rate of housing benefit? From memory, I believe that the rate will be 65p in every extra £1 earned. That will have a dramatic impact not only on people’s work incentives, but on their incentives to progress in work, particularly when one considers the way in which the rate interacts with the tax credit system and other aspects of the benefits system.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
I was going to come to that later, but I will deal with it now. The assessment of the income and the tapers will remain the same as under the housing benefit system. In that respect, it replicates the current scheme. Recent research suggests that the taper is not the main barrier preventing people from moving into work. Sometimes the barrier is that people lack knowledge as to whether they can retain their housing benefit and move into work. However, in the next stage of the reform programme we intend to consider the relationship between all the elements, including the tax credit system, which the hon. Gentleman mentioned, and housing benefit. Interaction is an issue, but the research indicates that the taper, although important, as the hon. Gentleman said, is not the main barrier preventing people from moving into work.
Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)
May I suggest that the Minister places the research to which she has referred in the Library, if she has not done so already, so that hon. Members can study it?
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
If the DWP research has been made public, I will place it in the Library. Before Monday, the hon. Gentleman may like to look at the DWP website and he might find that the research is already there.
Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)
It’s a wonderful thing to do at the weekend.
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
Yes, sometimes it can be very cold in Inverness on a weekend night when there is nothing else to do. They have broadband now.
On getting the right size of localities, as the hon. Member for Daventry pointed out, the issue is a matter of judgment. If we go for smaller localities, there is a danger that we could create pockets of deprivation or reinforce deprivation. Having a large number of localities could increase complexity for claimants and local authority staff. We have listened to what hon. Members have said on the issue, and it is a fair point that housing markets are different from area to area. In the highlands and islands, for example, the housing market is starkly different from elsewhere. We will reflect on the comments made on that matter.
On the question whether rent officers should operate with greater transparency, I reassure the Committee that officers liaise with stakeholders, such as local authorities. Such situations will always be difficult. We are demanding greater transparency, and there is a strong view that, in order to maintain their professional independence, officers need to avoid undue influence by some stakeholders. Once again, the key is getting the balance right. We would not necessarily want to specify in guidance how rent officers liaise, but there is an increasing amount of consultation and discussion between them on the matter.
I hope that my next comments will allay some of the fears that we have heard expressed about median rent. Until now, under the current system, including pathfinders, the rent officers looked at the market evidence database, which included all the evidence on rents apart from local authority rents, I think. They then chose to remove the significantly high and low figures in pathfinders to reach the midpoint. At the national roll-out, a true median rent will be used. Outliers, as they have been called, will be excluded. I hope that my hon. Friend the Member for Colne Valley is reassured that the figure will be a true median, based on the analysis of rents in the locality; it will not be an artificial figure, because the outliers at the top and the bottom will have been knocked off. I hope that that reassures her.
Kali Mountfordrose—
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
Perhaps not.
Kali Mountford (PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence; Colne Valley, Labour)
I will send my hon. Friend a copy of the report, which shows that in some circumstances, the median can be lower than the midpoint that is used at present, whether the top and bottom figures are excluded or not. That is a concern. In every case where the top and bottom figures are excluded, the median is significantly lower than the midpoint that is being used. Will she consider that point?
Anne McGuire (Parliamentary Under-Secretary (Disabled People), Department for Work and Pensions; Stirling, Labour)
I would be delighted to look at that evidence. My understanding is that under the system that we will roll out, using the median will at least ensure that 50 per cent. of the properties in the locality—if we can call it that for shorthand—will be affordable to those on the new local housing allowance. I would be interested, however, in seeing the evidence that my hon. Friend has highlighted. We are very clear that we want rent officers to use all the evidence in the area.
I am trying to run through all the other points that have been made. The change in size criteria was mentioned by my hon. Friend the Member for Caerphilly; I assure him that the criteria do not mean that the claimants will have fewer rooms. They mean that local housing allowance rates are set and published according only to the number of bedrooms in a property, which reflects the reality of the letting structure. People do not advertise living rooms and so on; they advertise a three-bedroomed property, for example, and the new allowance will be calculated on that basis.
The Minister from the Welsh Assembly Government has grave concerns about some aspects of the Bill. I know that she has had extensive consultation and discussion with the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt), who has primary responsibility for housing benefit. I appreciate that we may not have allayed all her fears, but we are certainly well aware of some of the issues relating to the Welsh Assembly Government. A reassurance has been given that we are sensitive to those concerns, but we think that the roll-out of the local housing allowance is in the best interests of those who are looking to rent in the private sector in Wales, and not only those in other parts of Britain.
On the linking rules, there is an extended payment scheme, of which Mrs. Hart may not be aware, that allows an additional four weeks’ continued payment of LHA if somebody moves into work. In addition, we are not taking the powers to roll out the LHA in the social sector, nor even to test it. We have given continued assurances that we shall not do anything like that.
I hope that I have addressed most of the points in our wide-ranging debate and that I have allayed most concerns. I shall finish where I started: LHA will for the first time put those who are on benefit, and who are looking to rent in the private sector, into a system that should impact on their ability to decide whether to move into employment. It is not just a question of having a system that is more transparent and less complicated. Most importantly, it will give people on benefit the capacity, for the first time, to negotiate in the private sector rental market in the same way as has long been the case for those who are not on housing benefit.
With those few—or rather, with those extensive—comments, I commend clause 27 to the Committee.