My Lords, I declare an interest as chair of Broadland Housing Association. I will not follow my noble friend Lady Sherlock, the right reverend Prelate and the noble Lord, Lord Adebowale, in talking about the human stress, distress and misery potentially in waiting for so many thousands of families with children in our country. Instead, I want to do something different; I want to challenge the very premises behind the Government's strategy, which I think are false.

We have been here before, with the Housing Finance Act 1972 and especially in the late 1980s when the Tory Government again pressed up rents on the grounds that they should subsidise people, not property. We on the Labour Benches pointed out then what would happen. The selfsame money that had been spent on new homes was now being spent on housing benefit, which in turn trapped people out of work and left us with a shortfall in housing. Now the Government are trying to rectify a problem of their own creation by capping HB. They believe, falsely, that HB is driving up private sector rents, that the HB bill has grown because of those increased rents and that, by capping HB, they will press down rents.

The second fallacy is that this policy is consistent with universal credit-a policy for which I applaud the noble Lord, Lord Freud-which seeks to bring more people into the labour market. On the contrary, I fear that these HB caps, together with the unpleasant and bizarre policies of Mr Pickles, will have the reverse effect. Let me unpick this a little. The Minister says that as 40 per cent of the tenants of private rented sector properties receive HB-a rather disputed figure-HB rates determine rents. However, he will be aware, I am sure, of two very simple statistics from his own department. First, as quoted by the noble Lord, Lord Best, the DWP's own figures show that the increase in housing benefit has been caused not by increased rents but by increased demand for HB from more tenants in both the private and public sectors. Only 13 per cent of the increase in HB can be attributed to private sector rent increases. In other words, the increase in the HB bill has not come about because HB has driven up rents and, therefore, has sought to catch up with the rents that it has inflated. Instead, the HB bill has risen because more and poorer people are claiming HB, including those in low-paid work. That is a fact.

The second statistic is also from the DWP. An Answer to a PQ in August 2009-I do not have later figures-showed that 48 per cent, or nearly half, of all those receiving local housing allowance had, on average, a shortfall of £23 a week. This was because their contractual rent was higher than their HB. Some will have been in work, others on income support and so on. I do not know how they made ends meet. For those in shared accommodation, paying single-room rent, the HB research for the DWP showed that 87 per cent of young people faced a shortfall, on average, of £35 a week. I dread what will happen now that we propose to raise the age at which single-room rent can be claimed from 25 to 35. I repeat: 48 per cent found that their HB did not cover their rent. If the Minister is right and their HB then did not press down on their contractual rent-however much the tenants would have wanted and needed it to-why does he think now that by cutting HB 18 months later he will press their contractual rent down? It is a triumph of hope over history. It was not happening 18 months ago and landlords tell us that it will not happen this time either. SSAC confirms this. Nine in 10 landlords will avoid anyone on HB. Why? Because they can now let to other people at the rents that they seek to charge. In other words, the Government do not control, as they believe they do, the rents of the private rented sector. It is a fallacy. Indeed, preliminary findings from current research suggest that, whether housing benefit claimants account for 20 per cent or 70 per cent of the private rental market, it makes no difference at all to local rent levels. HB levels, and therefore the Government, do not shape the market, full stop.

Why is that? It is because it is a landlords' market and not a tenants' market; it is, therefore, not a Government's market and not a HB market. Surveyors, letting agents and estate agents are reporting gazumping, six to eight tenants after every property and sealed-bid rent offers. The British Property Federation tells us that 150,000 extra tenants will enter the private rental sector next year, pushing up rents even further. Even where landlords in the past might have accepted some limitation of their rents if they were gaining capital growth, this, too, is no longer the case. Those on current HB levels struggle to find a home. What will happen?

Like the noble Lord, Lord German, I want to talk a little about the situation outside London. I have no doubt that the situation in London is harshest because rents are highest, but some of the Government's proposals-the move to the 30th percentile, the threat to those on JSA and requiring single people up to 35 to share a house with others-will have a severe effect on those outside London. Only the first of these-the rents covered by HB to be reduced from the 50th percentile to the 30th percentile-is in these regulations, but they affect 83 per cent of those on LHA, 40,000 of whom will lose £20 and more per week as a result of that change. What does that mean? It means that instead of HB ensuring that private tenants can afford 50 per cent of properties, they will be able to afford only 30 per cent of properties.

But it is worse than that. Benefits, we are told, including HB, will in future increase by CPI. CPI includes only 6 per cent for rent-rather less, I think, than is allowed for restaurants and cafes. It is not a sensitive indicator. What does that mean for these regulations? Let us look again at history, rather than relying on hope. In the last decade for which we have statistics-1997 to 2007-CPI rose by 20 per cent and rents by 70 per cent. In each year, CPI was outpaced by 5 per cent a year. Project that forward-indeed, this very weekend Savills has reported that it expects rents to increase by 7 per cent next year, 6.5 per cent the year after and 5.5 per cent the year after that. HB, instead of covering the 30 per cent of properties that the Minister proposes, will, the following year, on Savills's figures, cover only about 25 per cent of properties, the year after 20 or 21 per cent and the year after that-on a smaller base-some 15 per cent. Within five years, only 10 per cent of properties will be affordable on HB if these proposals continue. Even if a few landlords accept reduce rents in year one to avoid voids or because they rate the quality of their tenants and so on, they will not be able to afford to do so in year two, year three or year four as the gap between the rent levels chargeable and CPI and HB widen. In some places where there is even higher demand, it is likely that HB will cover few, if any, properties. It is estimated that by 2020 not a single two-bedroom flat in Manchester will be available for rent. We know the quality of what will be left.

The Minister places much weight, I suspect, on the discretionary housing payments. My authority-Norwich-had £29,000. It ran out in November this year. The calculations are that, even with the tripling of the sum to some not-very-generous £60 million, it will barely help 6 per cent of those on housing benefit.

I want the noble Lord, Lord Freud, to do two things today. First, I want him to give the House an assurance that every two years the local housing allowance figure will be recalculated to reflect the 30th percentile rents and not be allowed to drift lower in line with the CPI. If the Government believe that from October this year 30 per cent is the right figure, they cannot also believe that the right figure in two years' time will be 20 per cent. I am sure that the noble Lord, Lord Freud, who is an honourable man, will want to hold firm to his policy intention. That means rebasing the figure at least every two years. I want a commitment, please.

Secondly, like many other noble Lords, I want the Minister to keep his policies under review. I am sure that he will say, as I would have done in his place, "We always keep everything under review all the time". However, precisely because the Social Security Advisory Committee regards these policies as high risk and deeply undesirable, we need a report published along the lines outlined by the noble Lord, Lord Best. If the Government are right, they have nothing to fear from the noble Lord's Motion. If the Government are wrong, the distress caused to thousands of families with children will not bear thinking about.

Perhaps I may say one final word to the noble Lord, Lord Freud. The policies of his Right Honourable Friend Mr Pickles will undermine much of what the noble Lord seeks to achieve. Mr Pickles proposes that almost all social housing new build will come from the revenues from increasing rents for new tenants to 80 per cent of market levels in new builds and re-lets. Yet almost every new tenant coming into my housing association is on HB. Indeed, the only sensible strategy for housing associations is to ensure that those who will always remain on benefit-including low-income pensioners, those with disabilities and those always marginal to the labour market-go into the most expensive intermediate-rent properties, because HB will cover the bill, while those who hope to get back into work go into the cheaper properties, where HB is less of a barrier, because you need cheap rents if you are to get back into work. This is perverse. Those who seek to help themselves need to live in the cheapest property, because only in that way can they spring the housing benefit trap. Mr Pickles's policies will undermine the universally credited project of bringing people back into the labour market.

What about the benefit bill? That, too, will soar, thanks to Mr Pickles's proposals. Inside Housing, a magazine that I am sure the noble Lord, Lord Freud, reads, has calculated this weekend that, instead of housing benefit being cut by £2.26 billion, as the DWP hopes, footing the HB bill for Mr Pickles's intermediate rents will actually force the HB bill to increase by £1.56 billion. The DWP's benefit bill will be paying for Mr Pickles's capital programme. It is a brilliant policy.

In the light of this perversity, there will be worse housing for private tenants, reduced stock for private tenants and deep financial hardship for private tenants, yet there will be increased housing benefit Bills, along with reduced incentives to work. This set of policies is an indecent mess, in which the bill, not just in money, but in hardship, stress, grief and distress, will be paid by many thousands of families in this country. I hope that the noble Lord, Lord Freud, will accept the Motion in the name of the noble Lord, Lord Best. I hope, too, that the Minister will, when we consider the welfare reform Bill, be able to accept amendments that will tackle some of the dreadful implications and the false premises that lie behind this strategy.