Report (2nd Day)

Part of Welfare Reform Bill – in the House of Lords at 6:00 pm on 14th December 2011.

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Photo of Baroness Meacher Baroness Meacher Crossbench 6:00 pm, 14th December 2011

My Lords, I support Amendment 17, to which I added my name. As always, the noble Baroness, Lady Hollis, has comprehensively covered the issues and I will therefore take only a few moments of your Lordships' time to express my personal concerns about the issue.

The Government have a policy to reduce over time the percentage of GDP paid out in benefits to those on low incomes and those out of work. Perhaps the main mechanisms by which this will be achieved, though by no means the only ones, are the range of housing allowance controls to which the noble Baroness referred and the linking of housing allowance to the CPI, rather than to the rate of increase of rents themselves. The problem I have with the CPI link in particular, along with all the other controls, is that it is beyond the control of government how this plays out; hence the importance of these monitoring mechanisms that the noble Baroness has spelt out.

For example, if the euro collapses-it seems ever more likely that it may-and we have several years of recession or, indeed, deep depression with falling prices, do the Government have any idea how rents will respond in that situation? Because of the pressures of a growing population with more and more single-person households, as well as the limited stock of properties, particularly in London and the south-east, it is possible that rents may remain static, or even rise in the south-east, while other prices are falling. The Government assume that the downward pressure on housing allowances will ensure that in fact rents fall as well, but I am not at all confident about that. There is a huge private rented sector out there and as fewer young people can afford to buy, more and more of them will indeed move into that rented sector.

A very different scenario will be that once the years of fiscal tightening are over inflation could return with a vengeance, leaving a soaring gap between the RPI and the CPI-the prices claimants will have to pay in the shops on the one hand, and the CPI which will determine their housing allowance levels on the other. Of course, all these uncertainties will be there alongside a benefits cap, which may or may not be inflation-proof, and the need for many vulnerable people to adjust to a move from higher ESA to lower-level JSA. The Minister knows that I fear many vulnerable people will be included within that group, going down the slope towards the cheaper JSA. There is also the loss of disability benefits for children, the loss of tax credits and so forth, and the move to monthly payments if we cannot persuade the Minister that this will be the last thing that people are going to cope with. For all these reasons, I agree with the noble Baroness, Lady Hollis, that the House needs some assurance that there will be systematic and regular monitoring of the consequences of linking rents to CPI and on how the situation will be assessed and in what circumstances a change of policy would be regarded as appropriate.

I would also be grateful if the Minister could inform the House on a particular aspect of this issue. Shelter and the Chartered Institute of Housing estimate that the link between local housing allowances and the CPI will, by 2030, result in 60 per cent of local authority areas being unaffordable for LHA claimants. Undoubtedly, these will be the areas with jobs. Can the Minister say whether the Government accept this estimate and, if not, what the Government's estimate is? Whether or not he accepts the estimate, has the DWP undertaken an impact assessment of the housing allowances/CPI link on employment in this country? What particular impact on employment will this have?

If households have no option but to move to areas with very few employment opportunities, how much higher will unemployment be year on year than would otherwise be the case and what will be the costs of that higher unemployment for the taxpayer? These sorts of issues need to be incorporated within the ongoing monitoring and assessments of the impact of these policies, year by year. Within the Minister's response to this amendment, I would be most grateful if he could include some reference to the employment impact.