Housing Benefit (West Ham)

Part of the debate – in the House of Commons at 10:14 pm on 22 November 2010.

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Photo of Lyn Brown Lyn Brown Opposition Whip (Commons) 10:14, 22 November 2010

I am grateful to have secured this debate, which seems particularly timely given today's announcement by the Minister for Housing and Local Government. Time and again, we have been told that the aim of the Government's welfare reform package, including the reform of housing benefit, is to make work pay. Today, we have found out that if people living in social housing get a new job, or a promotion or pay rise, they may lose their home. So much for making work pay. However, that is a debate for another day.

I have a strong feeling of déjà vu about this debate. Housing benefit and the difficulties that it poses to my constituents has been a theme to which I have returned over past years, campaigning with a number of colleagues on the Labour Benches to identify an approach that makes work pay, and, by doing so, protects the public purse. I hope that despite the fact that the Minister of State, Department for Work and Pensions, Steve Webb, and I do not sit on the same side of the House, we too might work together to find some common ground and work towards common aims.

For the record, I do understand why housing benefit is seen as such a prize when the Government want public spending reduced. If I have my maths about right, housing benefit, combined with council tax benefit, is almost equal to all the other means-tested benefits added together. There are some rather easy, even cheap, political points to be scored by citing examples of abnormally high housing benefit for highly untypical large houses in high-rent areas. However, I do not believe that the changes proposed by the Government will solve the real difficulties faced by many of my constituents. They will, I believe, compound social and housing problems and become a greater cost to the taxpayer. Incidentally, a point worth noting and often forgotten is that many of those worst affected by the changes will be taxpayers too.

I represent a London borough-Newham-which has the fourth highest level of child poverty and the sixth highest level of deprivation in the country. The gross earnings figure for the bottom quarter of employees in Newham last year was 23% lower than the figure for London, and the average wage for those living in the borough is just £455 per week. As I am sure the Minister will acknowledge, that does not go far in an area where the costs of day-to-day essentials, including child care and housing, are so very high. The average house price in Newham is £221,801, which is 9.4 times the average income.

The implementation of the Government's proposals will result in many private renters having their housing benefit, and therefore their income, driven down by a harsh reduction in local housing allowance rates. It is not as though private tenants claiming housing benefit have had it easy up to now. Even at the current rates, nearly half of local housing allowance claimants in Newham currently face shortfalls of almost £100 a month in meeting their rent obligations. Estimates by the London borough of Newham suggest that, as a result of the change in local housing allowance alone, more than 6,300 people in Newham-three quarters of the LHA claimants in the borough-will face shortfalls between the LHA that they receive and the rent they have to pay.

Some 40% of local housing allowance claimants work, and Newham council's housing benefit team tells me that their average net annual earnings are just over £8,000 a year. I am sure the Minister will acknowledge that that is not a fortune, and makes it genuinely difficult to make ends meet in an expensive capital city. The cuts will push many already struggling families to breaking point.

Community Links is a fabulous local charity that, among its many activities, provides debt and benefit advice. As I am sure the Minister will appreciate, it is particularly concerned, given last week's announcement on legal aid, that it will not be able to provide advice services for some of the most vulnerable in our community, and I expect that that will be the subject of much further, more anxious debate in this Chamber. In addition, Community Links reports that the numbers seeking debt advice have doubled in the past two years.

As Shelter has said:

"For those households already struggling to balance very tight budgets, a reduction in LHA will only push more of them over the edge, triggering a spiral of debt, eviction and homelessness."

Things can only get worse, as the LHA allowance will effectively be cut year by year for ever. I must admit that even the ingrained cynic in me was a little staggered to learn that the measure of inflation to be used in calculating increases in LHA is the one that deliberately excludes housing costs. Over the past decade alone, it has risen at a third of the rate of private sector rents. How cynical is that?

Citizens Advice believes that many will face eviction in a matter of weeks after the cuts are imposed. The non-regional, one-size-fits-all LHA cap will make it almost impossible for low-income households to rent in the private sector in inner London. That will have an impact on outer London areas such as my own. In east London, low-income households will be priced out of areas such as Hackney and Tower Hamlets, forcing people to look for accommodation where rents are cheaper. Rents in Newham are lower than in neighbouring Whitechapel, in Tower Hamlets, and far lower than in Islington and Westminster. According to information sourced from the Greater London authority, the cost of a two-bedroom property in Whitechapel ranges from £271 to £369 per week. In Stratford, which is just a few short miles away, it ranges from £204 to £250.

I believe we will see evictees from Tower Hamlets crossing the border to stay with families in Newham and declaring themselves homeless once there. The impact on homelessness rates could be catastrophic. The Minister will be aware that Newham is already home to high proportions and concentrations of low-income households. The private rented sector is large and expanding. In my borough, 30,000-plus people are on the council waiting list. Newham already has more people on waiting lists for social housing and living in temporary accommodation than any other London borough. As well as housing, other services will be badly hit as a consequence of the cap in other areas. Newham will be left dealing with more pressure on school places, doctors' surgeries, jobcentres and social services. Our schools are already over-subscribed.

Those problems will emerge as the council and other providers are forced to retract services due to the swingeing cuts in their budgets, and-I assure the Minister that this is not rhetoric-the cuts to Newham council's budget are, by any definition, swingeing. Just to heap coals on the heads of our people, it is also clear that the employed residents of Newham are very reliant on public sector jobs; indeed, they are in the highest category in that respect according to the latest survey. That is what is called a double whammy.

I want to touch on the suggestion that the changes will give us an opportunity to renegotiate rents and place more power in the hands of the citizen. Westminster council's cabinet member for housing writes of the need to

"support the reduction of the housing benefit bill...which was distorting private sector rents."

Councillor Roe explains:

"Once the lower rate is in place, we believe rents will fall, as landlords will not be able to charge such high sums."

I gently suggest, first, that the distortion of private sector rents was brought about by the deregulation of rents. I would also suggest that Councillor Roe is sadly over-optimistic about the direction of private sector rents, certainly in London. A survey of London landlords finds that when the shortfall in rent rises to more than £20 a week, more than 90% of landlords renting properties to LHA recipients in London would look to evict tenants who fall into arrears or not to renew the tenancy at the end of the rental period. Controls to limit evictions for families with manageable arrears are completely absent from the system. Using Department for Work and Pensions figures and results from the survey, it can be estimated that 82,000 households across London will be at risk of losing their home as a result of the changes.

The elected mayor of Newham, Sir Robin Wales, wrote to Lord Freud outlining his concerns about the LHA cap and the impact on Newham. In his reply, Lord Freud acknowledges the concerns, stating:

"We appreciate that outer London boroughs could be faced with an increased number of new Housing Benefit customers needing access to additional services such as schools and health care. We will look at the wider impacts on local authority housing departments, and other local services particularly with regard to social mobility, homelessness and overcrowding...We will ensure that the full range of options for customers facing a shortfall in their rent, from renegotiating their rent levels through to applying to their local authority for assistance in obtaining alternative accommodation, is publicised, and that people are encouraged to consider those options in good time".