Report (2nd Day) (Continued)

Welfare Reform and Work Bill – in the House of Lords at 8:58 pm on 27th January 2016.

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Amendment 46B not moved.

Amendment 46C

Moved by Baroness Manzoor

46C: After Clause 15, insert the following new Clause—

“Application of sanctions and disallowances to Jobseeker’s Allowance

(1) The Jobseeker’s Allowance Regulations 1996 are amended as follows.

(2) After regulation 22 insert—

0“Treatment of people found not to be actively seeking employment or available for employment

22A. The Secretary of State shall, by regulations, provide that the payment of housing benefit to a person in receipt of a jobseeker’s allowance shall not cease solely because that person’s award of a jobseeker’s allowance is reduced in accordance with regulations made under section 19B of the Jobseekers Act 1995 (claimants ceasing to be available for employment etc), including for a period during which the claimant ceased to be entitled to a jobseeker’s allowance by failing to comply with the condition in section 1(2)(a) or (c) of the Jobseekers Act 1995 (availability for employment and actively seeking employment), without other due cause.”

(3) In regulation 69B, omit paragraph (7).

(4) In regulation 70—

(a) for paragraph (1)(a) substitute—

“(a) in any benefit week, 100% of the allowance payable to the claimant, minus the sum of 10 pence; or”;

(b) in sub-paragraph (1)(b)(i), omit from “100%” to the first “couple” and insert “in any benefit week, 100% of the allowance payable to the couple, minus the sum of 10 pence”; and

(c) after paragraph (3) insert—

“(4) The amount referred to in paragraph (3) may not reduce, in any benefit week, the amount of a jobseeker’s allowance payable to the claimant to less than the sum of 10 pence.””

Photo of Baroness Manzoor Baroness Manzoor Liberal Democrat Lords Spokesperson (Work and Pensions) 9:06 pm, 27th January 2016

My Lords, I shall be brief. Noble Lords can see very clearly what the issue is—it is technical and rather complicated. It is now late. If the Minister will give the assurance that he is happy to meet me and the Child Poverty Action Group so that we can discuss the amendment in greater detail, that will be really helpful and will save me having to go through a very complex explanation. I beg to move.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions)

My Lords, in the spirit of comradeship and friendship with the Liberal Democrats, we are very happy to support that request.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions

I think there were two parts involved in that question, so let me go through them. In answer to the first part, I will meet the noble Baroness and the CPAG. In answer to the second, I am happy to meet her and the CPAG.

Amendment 46C withdrawn.

Amendment 46D not moved.

Clause 16: Loans for mortgage interest etc

Amendment 46E

Moved by Baroness Sherlock

46E: Clause 16, page 15, line 33, leave out from “section” to end of line 34 and insert “may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Opposition Senior Whip (Lords)

My Lords, I rise to move Amendments 46E and 46F in my name and that of my noble friend Lord McKenzie of Luton. In doing so, I remind the House of my declared interest as a senior independent director of the Financial Ombudsman Service in case it should prove relevant to the debate.

I will not go back over the substance of the matter, as we discussed it in some detail in Committee. However, I want to push two points that I did not feel, in the end, were satisfactorily addressed by the government response. Amendment 46F seeks to retain the SMI grant scheme for claimants who are in receipt of pension credit; in other words, our poorest pensioners. In Committee, I dubbed this the reverse Salisbury-Addison amendment, reminding the House that we were helping the Government to maintain their manifesto commitment to protect all pensioner benefits, since that is, in fact, who this is mainly aimed at. My concern is that the effect of this policy is essentially to wipe out what is usually the only asset of poor pensioners, and currently their safety net in case they need equity released for care or other emergencies. As I reported last time, Age UK expressed a concern that older people would be reluctant to take on extra debt, so whereas they might have taken a grant, they will not take out loans. They may indeed compromise their own well-being by limiting essential spending instead. I do not think the Minister addressed that, so I would be grateful if he would.

I also asked a number of other specific questions. I had answers to some at the time, and answers to others in writing later. Sometimes the answers in writing were not the same as those given in Committee, but we will come on to that in a moment. I just want to deal with a couple that are left.

I raised the issue of people who die without enough equity in the house to meet the debt and who might worry that it would not leave them with enough money to pay for their funeral. I had hoped to persuade the Minister to leave a cushion untouched, but he was not having it. His response was that the family could apply for a grant, a funeral payment, from the Social Fund. So will all SMI loan recipients be automatically entitled to access a funeral payment from the Social Fund? If so, how much is it? Will it be enough to cover the fast-rising costs of a funeral all around the country?

I also asked if the loss of SMI would result in someone no longer being entitled to pension credit and thereby losing access to passported benefits such as cold weather payments, help with health costs or access to funeral payments. After a series of questions, supported by the right reverend Prelate of Durham, about the advice that would be offered to people, and having reread the record and read the letter that was given, I wish to tell the Minister what I think has been said and he can correct me if I am wrong. I understood him to say that people will get generalised guidance rather than advice about their own particular circumstances and what they should do. Is that right? I gather that the claimant may have to pay for the advice. Is that right?

During the debate the Minister assured me that the provision of advice would be independent of the party recovering the debt. He assured me that that was case but then wrote to me afterwards and said that in fact it was not the case. I assume that he did not change his mind but that he misread his brief. Either way, can he reassure the House about that because it seems to be a potential conflict of interest? If someone who is advising a pensioner to take out a loan is also making money out of the recovery of that debt, is that not a conflict of interest? If not, how not? I asked him whether a face-to-face option would be available, at least for vulnerable clients. Can he tell me that?

Amendment 46E would require regulations for the scheme to be introduced by the affirmative procedure. The House will recall that the Delegated Powers and Regulatory Reform Committee expressed significant concern about the fact that the draft regulations for the SMI loan scheme had not been made available to the House for debate, given the plan that the scheme be set up by negative regulation. Effectively, the Bill abolishes the grant scheme and empowers Ministers to create a loan scheme but there are no draft regulations before us. Under the proposals they would be introduced under the negative procedure. The committee therefore recommended that regulations under this clause should be subject to the affirmative procedure. It is usual practice that such a recommendation would be followed. Can the Minister confirm that this will happen? If for some reason he cannot, can he tell the House when the Government last refused such a recommendation from the DPRRC? I beg to move

Photo of Lord Young of Cookham Lord Young of Cookham Conservative

My Lords, we briefly went round this course in Committee. The noble Baroness has raised a number of points to which the Minister will want to respond. However, I am not sure that she made a forceful argument for her Amendment 46F, which seeks to exempt a group of people from this new provision.

Looking at the Bill as a whole, this seems the least painful way of reducing public expenditure, and the argument for looking to this clause for savings is not as strong as the case that could be made in other parts of the Bill. The Opposition recognised this because, in their amendment to the Bill on Second Reading in another place, they specifically said that loans for mortgage interest were a necessary change to the welfare system. So the principle of switching from grants to loans was conceded by the opposition party in another place.

The operation of what is proposed makes no difference to the pensioner at all—the money will simply be paid from the department to the lender—and the impact on the standard of living and the income of the pensioner is wholly unaffected; their day-to-day income is unchanged. The Government’s proposal is that they will continue to get exactly the same level of support as they do at the moment. The fact that the loan may eventually be recovered from their estate has minimal bearing on their financial position, although of course their heirs may take a slightly different view. One has to balance the expectations of the heirs against the taxpayer, who at the moment is footing the bill. Given the imperative to reduce welfare expenditure, it seems to me that this is one of the least objectionable ways of doing it, and I very much hope that the amendment will not be pressed to a Division.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions 9:15 pm, 27th January 2016

My Lords, Amendment 46E would apply the affirmative procedure to the support for mortgage interest loan regulations as recommended by the Delegated Powers and Regulatory Reform Committee. The committee opined that these are novel provisions which are likely to have a significant impact on a large number of people. This is true, but the part which is novel is the change in this support from a benefit to a loan. In all other aspects the level of support offered and the way the system will be administered will simply replicate the existing system. The committee made its recommendation before your Lordships debated these measures in detail. I have been quite clear about how the new loan system will be implemented and that the regulations we will bring forward will replicate the existing SMI system. Using the affirmative procedure for these regulations would therefore not be a good use of parliamentary time.

I will come to the government amendments, which may actually be the real palliative here because we will have SSAC reports in this area. If they come up with something there is space within the negative procedure to bring issues before the House. The committee did not have that information about what we were planning with SSAC. I should also point out that the current SMI regulations are subject to the negative procedure.

Amendment 46F would prevent the Government from changing the benefit into a loan for those on state pension credit. It would allow regulations to be made to create a system of grants for pensioners’ mortgage interest. This would mean that pensioners would receive help with their mortgage interest as a grant rather than a loan and that that would be the case indefinitely. In this context that would be unsustainable and clearly unfair on the taxpayer. It is not right that taxpayers, many of whom of course cannot afford to buy their own home, are subsidising the acquisition of what in many cases is a very substantial asset. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides and the Government will not recover the loan until the property is sold. With pension credit claimants, it is most likely that this will be on their death and therefore will impact not on them but on the beneficiaries of their will. My noble friend made the point that they may not be that pleased, but the balance is between them and the taxpayer.

I shall pick up on some of the specific points. Pension credit claimants will have access to passported benefits such as funeral payments. We would normally provide advice through a telephone conversation and the advice will focus on the circumstances of the individual concerned with regard to their options, asking whether they have alternatives available such as downsizing or help from relatives or their heirs. I think that the noble Baroness should take my last word on the issue of who would do this as I wrote in my letter. To the extent that that contradicts what I said earlier, it should be the latter. Our view is that whatever theoretical potential conflict there might be, we will make sure as we set out the arrangements that there is no conflict in the way it is done. I think that that is what I expressed in my letter, although perhaps not using that language.

Let me reassure noble Lords that the Government will seek to recover the debt only up to the level of available equity when the property is sold. Any outstanding debt will be written off. The amendment would also provide powers to introduce regulations to introduce a waiting period for pensioners before they can receive help. There is currently no waiting period for help with mortgage interest for pensioner claimants and it is not the Government’s intention to introduce one. With those explanations, I urge noble Lords not to press the amendments.

Amendments 47 to 49 and 83 provide that loans for mortgage interest regulations made under the Welfare Reform and Work Bill are submitted to SSAC, the independent statutory body that provides impartial advice on social security and related matters for consideration. With the introduction of the new loans-based scheme, help with mortgage interest will no longer be a part of benefit entitlement. However, we recognise the important role that SSAC plays in the scrutiny of regulations and have accepted the recommendation of the DPRRC to provide that regulations relating to loans for mortgage interest fall within the remit of SSAC. I have just realised that I slightly misspoke when I implied that the committee might not have both those bits of information. Perhaps I may also withdraw that point.

The amendments also ensure that certain decision-making rules in the Social Security Act 1998 apply to decisions about SMI loans in the same way as they apply to decisions about benefits. In particular, this will ensure that an appeal may be brought against a decision relating to a mortgage interest loan in the same way as an appeal may be brought against a decision relating to a benefit. This means that applicants will have the same appeal rights as under the existing provision for support with mortgage interest, ensuring fairness for applicants of the new loan provision. They will allow the department to supply information about SMI loans within the broader welfare system to persons who are concerned with the provision of welfare services. For example, it will allow the Secretary of State to share information with those providing free school meals and health benefits such as free prescriptions, so that recipients of SMI loans can access these “passported” benefits. I think that that picks up on the point made by the noble Baroness about concerns with the passporting issues.

The final amendment is a minor and technical change to the Long Title. The purpose of SMI loans is to prevent repossessions. All types of mortgages and loans are eligible for support under the new loan system. This change ensures that the Long Title accurately reflects the contents of the Bill by including a reference to “other liabilities”.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Opposition Senior Whip (Lords)

My Lords, I thank the Minister for that response. I hope that he will take away again the point about the DPRRC. I certainly welcome the move to refer the regulations to SSAC but, welcome though SSAC is and much as I respect its expertise, it is not Parliament. Parliament should have the opportunity to debate this. He mentioned that the DPRRC recognises that regulations for loans for the grant scheme were negative. I am working from memory but I think that the committee pointed out that, had the draft regulations been available, it would have recommended negative in the ordinary run of things because the original regulations had been negative. In fact, the draft regulations were not available, which is why it recommended the affirmative procedure. Will he go away and think about that?

The fact that the Minister said that the service normally will be by telephone gives me a glimmer of hope that the department might be willing to consider a face-to-face service for vulnerable consumers. I hope he will consider that. I will not take on the point made by the noble Lord, Lord Young, although I disagree with him. Given the lateness of the hour and the fact that we went around this issue fairly effectively in Committee, I will set that to one side. I thank the Minister for his other comments. I hope that when he looks at the record he will check the presumptions that I have made as to the operation of the scheme.

Should any of those prove to be wrong and not to have been corrected by him, I hope that he will write to me. On that basis, I beg leave to withdraw the amendment.

Amendment 46E withdrawn.

Amendment 46F not moved.

Clause 18: Consequential amendments

Amendments 47 to 49

Moved by Lord Freud

47: Clause 18, page 17, line 36, at end insert—

“( ) In section 170 of the Social Security Administration Act 1992 (Social Security Advisory Committee), in subsection (5)—

(a) in the definition of “the relevant enactments”, after paragraph (an) insert—

“(ao) sections 16, 17 and 19 of the Welfare Reform and Work Act 2016;”;

(b) in the definition of “the relevant Northern Ireland enactments”, after paragraph (an) insert—

“(ao) any provisions in Northern Ireland which correspond to sections 16, 17 and 19 of the Welfare Reform and Work Act 2016;”.”

48: Clause 18, page 17, line 36, at end insert—

“( ) In section 2 of the Social Security Act 1998 (use of computers), in subsection (2)—

(a) omit the “or” after paragraph (m);

(b) after paragraph (n) insert “or

(o) sections 16 to 19 of the Welfare Reform and Work Act 2016.”

( ) In section 8 of the Social Security Act 1998 (decisions by Secretary of State)—

(a) in subsection (3) (meaning of “relevant benefit”), after paragraph (bb) insert—

“(bc) a loan under section 16 of the Welfare Reform and Work Act 2016;”;

(b) in subsection (4) (meaning of “relevant enactment”), for “or section 30 of that Act” substitute “, section 30 of that Act or sections 16 to 19of the Welfare Reform and Work Act 2016”.

( ) In section 11 of the Social Security Act 1998 (regulations with respect to decisions), in subsection (3), in the definition of “the current legislation”, for “and section 30 of that Act” substitute “, section 30 of that Act and sections 16 to 19 of the Welfare Reform and Work Act 2016”.

( ) In section 28 of the Social Security Act 1998 (correction of errors and setting aside of decisions), in subsection (3)—

(a) omit the “or” after paragraph (i);

(b) after paragraph (j) insert “; or

(k) sections 16 to 19 of the Welfare Reform and Work Act 2016.”

( ) In section 39 of the Social Security Act 1998 (interpretation etc of Chapter 2 of Part 1), after subsection (1) insert—

“(1A) In this Chapter—

(a) a reference to a benefit includes a reference to a loan under section 16 of the Welfare Reform and Work Act 2016;

(b) a reference to a claim for a benefit includes a reference to an application for a loan under section 16 of the Welfare Reform and Work Act 2016;

(c) a reference to a claimant includes a reference to an applicant for a loan under section 16 of the Welfare

Reform and Work Act 2016 or, in relation to a couple jointly applying for a loan under that section, a reference to the couple or either member of the couple;

(d) a reference to an award of a benefit to a person includes a reference to a decision that a person is eligible for a loan under section 16 of the Welfare Reform and Work Act 2016;

(e) a reference to entitlement to a benefit includes a reference to eligibility for a loan under section 16 of the Welfare Reform and Work Act 2016.””

49: Clause 18, page 17, line 41, at end insert—

“( ) In section 131 of the Welfare Reform Act 2012 (information-sharing in relation to welfare services etc), in subsection (12), in the definition of “relevant social security benefit” for the words from “has” to the end substitute “means—

(a) a relevant social security benefit as defined in section 121DA(7) of the Social Security Administration Act 1992, or

(b) a loan under section 16 of the Welfare Reform and Work Act 2016 (loans for mortgage interest etc);”.”

Amendments 47 to 49 agreed.

Clause 22: Exceptions

Amendment 50

Moved by Lord Best

50: Clause 22, page 21, line 8, at end insert—

“(c) the accommodation is owned by a fully mutual housing co-operative within the meaning of paragraph 12(1)(h) of Schedule 1 to the Housing Act 1988 (local authority tenancies etc);

(d) the accommodation is owned by a community land trust within the meaning of section 79 of the Housing and Regeneration Act 2008 (English bodies).”

Photo of Lord Best Lord Best Chair, Communications and Digital Committee

My Lords, I rise to speak to Amendments 50 and 51, the first two amendments in the group, in my name and those of the noble Lords, Lord McKenzie of Luton, Lord Shipley and Lord Kerslake, and to support the other amendments in the group that follow in the names of the noble Lords, Lord Ramsbotham and Lord Kerslake, and the noble Baroness, Lady Meacher.

We return to the rent cuts of 12% over four years for the housing associations and councils. This will achieve savings for the Treasury in housing benefit of approaching £2 billion per annum by 2020 and every year thereafter. The problem is that, although the major developing housing providers can absorb this unwelcome loss of income by reducing the extra services they supply, and/or doing a bit less new building, and/or running down their reserves, some housing bodies cannot take the hit. The aim of Amendments 50 and 51 is to prevent the rent cuts impeding the vital work of these organisations.

There is no margin for a rent cut where the organisation, or the specialist part of a larger housing provider, does not currently make any surplus to set aside, either because rents are carefully kept at a level that covers only loan costs and management and maintenance costs—as with the co-ops and community land trusts covered by Amendment 50—or because the provision of extra services means that existing rents are barely enough, as with the supported housing and extra care housing for older people covered by Amendment 51. The 12% rent cut would clobber the housing associations in these categories for very slim pickings for the Treasury.

I couple my comments on these proposed rent cuts with an equal concern about the proposal that housing benefits for all social housing tenants should be capped at the level for private sector tenants—that is, at the local housing allowance ceilings. Again, the tenants of the major housing providers, whose rents are mostly way below those in the private sector, should not be too hard hit—although, as an aside, I am very worried about some of those aged under 35 who would suddenly get only the shared accommodation rate. But, the biggest problem of the LHA rent cap is, again, supported housing and extra care schemes for older people, where the rents are much higher than for a similar home let by a private landlord because, of course, the work of the provider of supported housing goes far beyond simple property management and maintenance. The LHA private sector cap is clearly entirely inappropriate for supported housing. Applying it in April 2018 for all those who become tenants after 1 April 2016 would mean that very few of the residents who move in just two months from now could continue to stay in this specialist accommodation in two years’ time. Where would they all go if the projects have to close or the supported accommodation has to be switched to general needs housing?

In response to these points on rent cuts and benefit caps, and following representations from many charities working in this field, including Riverside, St Mungo’s Broadway, YMCA, Crisis, Homeless Link and the National Housing Federation, the Minister has taken some very constructive decisions that he will, no doubt, spell out tonight. I am delighted that the noble Lord has determined that housing under all the categories in my amendments—including the housing co-operatives, community land trusts and almshouses, which were of special concern to the noble Lord, Lord Ramsbotham—are to be taken out of the rent cuts while better arrangements are determined, with increases in rent permitted in line with the existing regulations for the time being.

I welcome the Minister’s decision to work in close collaboration with the relevant specialist providers to use a one-year moratorium on rent cuts to devise a satisfactory basis for determining the funding arrangements for supported housing. This is entirely sensible and the Minister will be able to take into account the findings from an important supported housing review by Ipsos MORI, which he has instigated. I am grateful to him for the care and attention he has given to this matter and for today’s important announcement.

On the intertwined issue of the benefits payable to those in supported housing, the Minister has undertaken to ensure that there is appropriate protection from the totally unsuitable private sector standard LHA benefit cap. This is indeed at least as important as the protection from the rent cuts. As I understand it, protection for supported housing will be effected within exactly the same exercise as for protection from the rent cuts.

There will be a pause while the overarching review sorts out the best system for assisting supported housing over the months ahead. I hope the Minister will forgive me for seeking just a little more clarity in this respect.

As currently planned, no tenant will be hit by a reduction in their housing financial support as a result of the introduction of the LHA cap until 2018, but anyone who moves into a property after 1 April 2016 who needs housing benefit would face a disastrous reduction in help within two years. A housing association with lettings to make from April this year—just two months away, and offers need to be sent out now—must hold back until it is possible to accept people who are likely to remain there for two years or more, as would nearly always be the case for housing for older people moving into extra care schemes, for example. If the Minister can tell us tonight that the year-long exception for supported housing while a long-term solution is found will apply equally to the imposition of the LHA rent cap for benefits and to the rent cuts, then all these organisations can continue to let their property in the mean time. Even then, some will feel it necessary to keep projects in the pipeline on hold until the new system is known, so urgency in concluding the exercise is still badly needed.

I believe that moving back the April 2016 LHA deadline for a year while the new arrangements are hammered out is precisely what the Minister meant in his words of comfort and reassurance on the protection for supported housing from the LHA cap. But the many people in organisations who are working hard for those in need of supported housing, and the many people who need those homes, will sleep much easier tonight if he can confirm that the one-year pause he has so helpfully decided upon for the rent cut will also apply to the LHA cap, and will ease the problem. I am pleased to move my amendment but have every intention of withdrawing it shortly.

Photo of Lord Shipley Lord Shipley Liberal Democrat 9:30 pm, 27th January 2016

My Lords, I will not detain the House that long, but I want first to pay tribute to the noble Lord, Lord Best, in particular and to other colleagues for the progress that has been made in discussions with the Minister on this important matter. Some associations would find it difficult to manage properly with such a reduction.

I received two letters this morning. One was from the Minister, the noble Lord, Lord Freud, explaining the policy the Government are now following, which is a welcome change and I thank him for that. I hope it will prove to be a durable, long-term solution to the problem. I also had a letter from the noble Baroness, Lady Williams of Trafford, also dated 27 January. I had asked a question about the cost of supported housing being exempt from the 1% rent reduction, and I had been told that the total sum involved was around £75 million a year. There has not been clarity about that sum. I am surprised that the Government do not seem to know the cost they will have to meet, given the decision not to implement the measure for one year and, hopefully, for longer. Is there a figure to which the Government are working? I look forward to the Minister’s reply because when we are discussing policy in your Lordships’ Chamber, it is important that we have some idea of the sums involved. If it proves to be true that the figure is £75 million, that is not in fact a significant sum.

As I say, I look forward to hearing the Minister’s reply. I welcome the progress that has been made on this matter, which will be very gratefully received by many people outside your Lordships’ House.

Photo of The Earl of Listowel The Earl of Listowel Crossbench

My Lords, having six weeks ago spoken to a mother who had just moved into a refuge with her daughter and granddaughter, and heard from her about the years of abuse she had experienced in her family home, I am very grateful to my noble friends, noble Lords and the Minister for the announcement that he has made today.

Photo of Lord Kerslake Lord Kerslake Crossbench

My Lords, I declare my interest as chair of Peabody and president of the Local Government Association. I support Amendment 50 and wish to speak specifically to Amendments 53, 61 and 63. I will keep my comments brief as I am conscious of the hour.

I add my welcome to the movement and the moratorium referred to by other noble Lords. This is a demonstration of the Government listening and acting, which I welcome. I reinforce the importance of taking early decisions and not using the whole year for the review process, not just because of the uncertainty for existing schemes but for investment in new schemes that are so desperately needed.

Amendment 53 follows on from the debate we had in Committee, when we debated the very abrupt move from the 10-year plan of CPI plus 1% for rent increases to a four-year period when there would be a 1% reduction per annum. We had a considerable debate on what the impact of that change of policy would be. In tabling an amendment in Committee, I was ever hopeful that after the four-year period the Government might return to the original 10-year plan. However, the noble Baroness, Lady Williams, made it clear that that was not the Government’s intention and that they would take a decision on future rent movements in four years’ time. Given the difference of view on this issue, with the Institute for Fiscal Studies clearly saying that there will be a loss of housing association new build as a result of this policy and the Government’s view that the figure will be absorbed through efficiencies and reductions in surpluses, it seems to me imperative that an evaluation is undertaken before policy is set in four years’ time. I emphasise that it should be an evaluation, not simply monitoring the existing policies, and that that evaluation should be independently commissioned.

There is plenty of precedent in government for doing this—for example, with the new homes bonus, where such an independent evaluation was produced and published, and, indeed, influenced government policy on the bonus going forward. It is good practice for government when they introduce such a significant change to not just monitor the impact of that change but to evaluate its impact in the widest sense. That is why I think this amendment is so important. I would like to hear from the Minister what the Government’s view of this is but also how they expect to assess this impact.

Amendments 61 and 63 come together because they relate to social rents and affordable rent. I take very seriously the debate we had yesterday on the Housing and Planning Bill, and particularly the Minister’s view that we should do everything possible to maximise new housebuilding in this country. I endorse that view, whatever that new housing happens to be. This issue is specifically about new build schemes and the flexibility there has hitherto been for setting rents at the commencement of those schemes. This relates not to the viability of the housing association but to the individual schemes. It is why I have tabled the amendments which perhaps require a bit of elaboration.

When a housing association considers its investment programme in new supply, it looks at two things. First, it looks at its wider viability as a housing association and the risks attached to the scale of the programme it is undertaking. The second thing is to look at the viability of the individual scheme before it commits to it. In some cases the scheme will be highly viable and profitable and would go ahead regardless of this rent reduction. In other cases there will be schemes that were not viable before and with the rent reduction would most certainly not be viable now.

However, there is a small but important group of schemes which are on the margin of viability, with risks that are evenly balanced. Having the flexibility to start the rent at a slightly different point at the time the scheme starts will crucially influence whether those schemes go ahead and whether they do so now. This is the particular issue that I am focused on. It will not be a big cost but the numbers could be important. Given the crisis that we face on housing, “every little helps”. I hope that Ministers will hear this point and retain that flexibility. The small cost that is involved will be far outweighed by the confidence it gives to housing associations to go ahead with their schemes. I urge the Government to consider this carefully.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

My Lords, I have a brief comment and a brief question.

I support everything that the noble Lord, Lord Kerslake, has said. On Amendment 53, I urge the Minister to take seriously the need for housing associations to be able to plan their building programme and their revenues more than three to four years ahead. The viability of their bank covenants depend on that, and, therefore, their capacity to manage new investment. If there is a query as to whether this 1% rent reduction will be continuing in three years, in whatever form, there will be a serious question mark over the Government’s ability to meet their goal of affordable housing through the social landlord sector.

I urge the Minister to take that amendment very seriously. Some of us have been engaged in negotiations with banks worried about there being no direct payments and therefore tenants having to pay rent out of their UC. They were worried that this would destabilise the rent roll and asked if they could refloat their loans at X, Y or Z. Some of us have already been through that and banks are quite willing to inflate a risk in order to get the revenue returns they would like to see on their covenants. Therefore, the more predictability the Minister can give us, the better. I hoped we would have a clear line, and that after 2019-20 this would stop. If it does not, housing associations and local authorities will have real difficulty in managing their business plans.

Like everyone else I welcome the one-year suspension of the 1% rent reduction in the social rental and supported housing sector. Can the Minister tell me how that will end? Does he expect to notify the House by virtue of an SI? In other words, will he say to the House that from this point on this accommodation will, as a result of this review, be expected to have a 1% rent reduction? Will the Government claim financial privilege, given that it will be a financial measure, so that this House will find it very difficult to discuss it and, possibly, ask the other place to reconsider?

Photo of The Bishop of Durham The Bishop of Durham Bishop 9:45 pm, 27th January 2016

My Lords, I support Amendment 51 in the name of the noble Lord, Lord Best. I am speaking partly on behalf of the right reverend Prelate the Bishop of Rochester, who spoke on this matter in Committee.

Prior to being the Bishop of Durham I was the Bishop of Southwell and Nottingham, and I had the privilege of working closely with Framework, which provides much supported housing across Nottinghamshire, Derbyshire, Lincolnshire and South Yorkshire. Andrew Redfern is its incredibly impressive chief executive, and I quote him:

“We house more than 1,200 of the most vulnerable people in the communities we serve. They include rough sleepers, people with mental health, drug and alcohol problems, care leavers, young mothers and people with multiple and complex needs”.

He goes on to say:

“The exemption of specified accommodation from the 1% rent cut will offer some breathing space—a fighting chance to save what has survived the various rounds of local authority de-commissioning. If specified accommodation is not exempted, we will lose about half of our current provision over the next four years. Homelessness and rough sleeping will continue to increase”.

I am delighted to hear that the Minister has proposals that will be good news to Framework and many other providers, and I look forward to conveying it to them.

Photo of Baroness Manzoor Baroness Manzoor Liberal Democrat Lords Spokesperson (Work and Pensions)

My Lords, I, too, very much welcome the letter that the Minister sent to all noble Lords earlier today. As I said in Committee, it is vital that supported housing and specified housing are looked at very carefully because this would have had an adverse impact on them. I hope that during this period while evaluation takes place, as the noble Lord, Lord Kerslake, argued, so that there is some comfort for the future as to what happens within this type of accommodation. It is the very basic bare necessity for people who need it, and we have already discussed the people who need to use not only the accommodation but the services that are provided by these types of organisations.

In my haste to withdraw Amendment 46C, I did not thank the Minister for saying that he would meet me and the Child Poverty Action Group. I thank him very much for that.

Photo of Lord Ramsbotham Lord Ramsbotham Crossbench

My Lords, in speaking to my Amendment 52, I do so very much in context rather than proposing it. I thank the Minister, first, for seeing me before Christmas on this and other issues and, secondly, for his very welcome letter this morning. At the same time, I salute my noble friend Lord Best for his mastery and tireless pursuit of social housing issues.

I am very glad that this moratorium has been imposed and I sincerely hope that the Minister will encourage urgent consultation with organisations such as the almshouses and the YMCA, which he mentioned in his letter, and which I would have mentioned if the amendment had been going forward as normal. What was unfortunate about the way that the Bill was proposed was that it led to unintended consequences, which I think officials would do very well to consider in the consultation, in which they will hear from the YMCA, the almshouses and others about what would have been the effect if these proposals had been allowed to go forward.

Photo of Lord Young of Cookham Lord Young of Cookham Conservative

My Lords, from these Benches I join other noble Lords in commending the negotiating skills of the noble Lord, Lord Best. As a former Housing Minister, I know what a plausible advocate he can be on behalf of those in social housing. I also commend my noble friend the Minister for listening to the case made by both sides in this House a few weeks ago.

The only clarification I seek from my noble friend is in relation to Amendment 51, which says:

Section 21 does not apply to social housing which meets the definition of supported housing”.

I wonder if my noble friend can confirm that it will be absolutely clear, if we go ahead with this amendment or something similar to it, exactly which housing schemes will benefit from the exemption and which will fall outside, and, related to that, how the good news he is about to announce will be communicated to those associations or organisations which run operations that will qualify under Amendment 51 and indeed some of the other related amendments.

Photo of Baroness Warwick of Undercliffe Baroness Warwick of Undercliffe Labour

My Lords, I declare an interest as the chair of the National Housing Federation. I speak in favour of Amendment 51, which seeks to protect schemes that house some of the most vulnerable people in the country from a damaging cut to their rents.

In answer to a question from me on Monday on the associated issue of the local housing allowance cap, the noble Lord, Lord Freud, referred to a review of the supported housing sector. That review was referred to again today in another place. Indeed, much has been said today in another place on both rent cuts and the LHA cap. It is only right that we fairly consider what has been said in another place and factor that into our discussions here. Referring to the review, the Government said that it would report urgently by the end of March. In addition, we have heard of a one-year delay in the implementation of the 1% rent cut for supported housing. This extra year’s delay is welcome, since it means that incomes will not be reduced as much as feared. Unfortunately, that is only at the margins when measured against the impact of the LHA cap on supported housing as announced in the spending review. This will have a much more significant and lasting impact, and is a threat to the very existence of much supported housing.

The National Housing Federation has been pressing the Government to urgently clarify that the LHA will apply only to working-age tenants in general needs accommodation. The Government have not done so. A survey of NHF members showed that this lack of certainty will result in 156,000 homes becoming unviable and being forced to close—41% of the sector—while 2,400 homes planned for development will now not be built. I find it hard to believe that it can be even remotely possible that it is the Government’s intention to put all this supported housing at risk. The impact on vulnerable people will be acute: on the elderly, people with disabilities, those fleeing domestic violence and those who served our country in the Armed Forces. The knock-on impact on public services in trying to pick up the pieces will be immense. These services desperately need a long-term commitment to safeguard their future.

The Government had the opportunity today in another place to set this right and clarify their intentions. They did not do it. The Government will carry out a review of how supported housing is funded—excellent. But surely the purpose of a review is to think first and only then act. Why create this level of uncertainty leaving housing association boards, which have to take decisions about future provision now, completely blind-sided about whether or when the cap may now be introduced? A one-year delay on the rent cut, welcome though it is, may not make much difference at all on this issue. The uncertainty is having a damaging and dangerous effect now. Tough decisions are being taken already: to close supported housing schemes; not to renew contracts; and to halt development of new schemes because there is not the certainty that they will be affordable in the near future, whether that be in two years or three. Protective redundancy notices are being prepared now. No provider can risk the cost of new building unless they are confident that the rent will cover that cost.

The announcement made by the Government today will do nothing to allay the fears on this issue of housing associations or the people living in these homes. I urge the Minister to think again and announce now that the LHA cap does not apply to supported and sheltered housing. I also urge the Government, through him, to work with the sector to develop a long-term sustainable funding model for supported housing.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions)

My Lords, we support each of the amendments set down in this group and have added our names to some of them. On Amendments 50, 51 and 52, we join other noble Lords in congratulating the noble Lord, Lord Best, on his negotiating skills—doubtless assisted in that endeavour by the noble Lord, Lord Kerslake—and the Minister for listening and helping with at least a partial solution.

The deferral of the rent reduction programme is clearly welcome. The clarification on the comfort in respect of LHA caps is clearly important as well. The more that the Minister can say on that, the better. My noble friend Lady Warwick has outlined some of the problems because of the known existence of that aspiration. The Minister could, I hope, therefore go further. It is always the way that Ministers come forward with concessions, and then everybody piles in and wants just that little bit more, but this is a very important issue.

That raises the question of where that leaves the amendments, as the Minister’s proposition in his correspondence effectively covers co-operatives, almshouses and community land trusts, as well as housing associations. Are the Government going to accept the amendments, substitute something for them or simply rely on what is on the record of this debate?

The noble Lord, Lord Kerslake, spoke to Amendments 53, 61 and 63, each of which we can support. He stressed the importance of an independent evaluation of what has gone on, in good time for rent policy for the subsequent period to be settled. In respect of Amendments 61 and 63, the noble Lord explained the importance of flexibility in respect of new-build, particularly for schemes of marginal feasibility. We had a very helpful meeting with members of the Bill team and the noble Baroness, Lady Williams, on this. Hopefully, embedded in this long list of government amendments is one that addresses that issue specifically. It may not necessarily have the breadth or flexibility the noble Lord is seeking, but I think it at least seeks to address the principle.

Amendment 59A, in the name of the noble Baroness, Lady Manzoor, proposes a report on local housing allowance rates. We debated this in Committee, but the Minister probably still owes us a reply. The purpose of that discussion was to recognise that, with the moratorium following the 1% limitation, LHA rates are increasingly going to move away from the reality of what renting in the private sector actually entails.

The noble Lord, Lord Ramsbotham, was clearly pleased with the outcome for almshouses. All in all, we should be grateful to the Minister for responding as he has—or hopefully will—at the Dispatch Box in confirming this. This is a real issue of substance which was worrying many people.

The noble Lord, Lord Best, is probably happy with the definition of supported housing that we have here, which is the broadest possible. I know there have been issues with specified support—what is in and what is out—but I take it from the correspondence and what has gone before that the moratorium is in respect of the widest definition of supported accommodation.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions

I will start by picking up a point made by the noble Lord, Lord Ramsbotham, on unintended consequences. The House of Lords has done its job in alerting us to some unintended consequences in time for us to sort them out. I know that I rely on this House for that again and again, and in this case I express my gratitude to a number of noble Lords—with the noble Lord, Lord Best, leading the field—for enabling us to deal with these issues.

Let me now do the business on these amendments. Amendments 50 and 51 would exempt housing co-operatives, community land trusts and supported accommodation, while Amendment 52 would extend that exemption to almshouses. I will just make a few comments before I turn to the rent reductions in social housing. We face a challenge on the overall housing benefit bill and believe that social housing providers need to play their part in helping to bring that bill down. However, we also recognise the vital role that many housing providers play in supporting people who need the most help.

The Government have always made it clear that our policy will protect the most vulnerable members of society. To achieve that, the Bill has built into it the flexibility to accept some social housing and provide exemptions for providers facing financial difficulty as a result of the reduction. We have also made several amendments to the Bill, including some today, which we believe will be helpful.

We continue to look very carefully at supported accommodation. As I said, I am grateful to noble Lords for some very powerful arguments in this respect. I am also very grateful for the helpful engagement I have had with providers of supported accommodation. I emphasise that the Government recognise the important work that providers do in this area to support some of the most vulnerable members of our society. We are determined to ensure that providers who are delivering those vital services can continue to do so.

As Brandon Lewis confirmed in the other place earlier today, we are conducting a review of supported accommodation, from which we will start to get findings in the spring. We want to ensure that we get the review right, and then use it to find workable and sustainable long-term solutions for both the supported housing sector in its widest sense and the Government. I recognise the value of the expertise of the providers of supported accommodation. Therefore, they will be fully involved in that process.

To pick up a point made by the noble Baroness, Lady Hollis, there will clearly be an SI on the one-year exception, which I shall come to in detail. I do not know what the long-term solution to how we run the sector will be. It could be anything from primary legislation down. I am unable to give her more information.

The noble Lord, Lord Shipley, will have seen me smile wryly at him when he asked for figures. One of the key outcomes of the review will be a much more robust understanding of the sector, providing some of the figures we need to reach judgments.

I can announce today that the Government will put in place a year-long exception for all supported accommodation from the 1% reduction. That gives us the time to study the evidence from the review. We will start to get findings in the spring, as I said. We will work with the supported housing sector to ensure that the essential services they deliver continue to be provided after the year-long exception—also making sure, of course, that the taxpayer is protected and the Government’s fiscal commitments are met, and that we make the best use of the money available. We will look urgently at this to provide certainty for the sector. While the exception is in place, those providers will be able to continue to apply the CPI plus 1% rent increase to any supported accommodation that they own.

My noble friend Lord Young asked what we include in the sector. As I said, it is a wide definition and it includes housing such as domestic violence refuges, hostels for the homeless, sheltered accommodation for older people, extra care housing, and accommodation for people with mental health or drug/alcohol problems, ex-offenders, people at risk of offending, women at risk of domestic violence—a large number of groups. I have spelt out some, but there will be others. I can also confirm that the one-year exception will extend to housing co-operatives, almshouses and community land trusts. The detail will be set out in the regulations we will bring forward very soon, following Royal Assent. The intention is that these regulations will be in place for the start of the new financial year.

I am really grateful for the support of the providers for this approach, and I look forward to working with them further over coming months to achieve our shared aims. I can quote from the providers on this issue. They have written to me as follows:

“Homeless Link, YMCA England, Riverside and St Mungo’s welcome the Government’s decision to suspend the 1% rent reduction to supported housing whilst the review into the housing costs of tenants living in this type of accommodation is completed. This decision means they have listened to, and acted on, the concerns of supported housing providers across the country working with disadvantaged people. We remain keen to carry on this constructive dialogue to find solutions to the big funding challenges as we work with Government to find a fair, effective and sustainable way of supporting the needs of the most vulnerable”.

That is the issue around the 1% rent.

The noble Baroness, Lady Warwick, and the noble Lord, Lord Best, talked about the concerns around bringing housing benefit for social tenants into line with that for the private rented sector, which will start to take effect from April 2018. I am not in a position to be utterly specific about how we will do this, but I can say that we will put in place the appropriate protections for those in supported housing. DWP and DCLG will be working closely together to make sure that those protections are in place. We appreciate the concern, and we will aim to do this urgently. There are various solutions one could discuss, but I make that commitment in the context of what I have already said about the 1%. We will now just sort out the caps.

Amendment 53, tabled by the noble Lord, Lord Kerslake, requires an independent review. We cannot accept this amendment. The Government will be keeping rent-setting policy closely under review, especially as we draw closer to the end of the rent reduction period. At that time, we will also wish to take in a range of outside views to ensure that the Government’s understanding is as informed as possible. We therefore see no merit in legislating for an independent review ahead of 2020. We are also concerned that, for it to report in time, it would need to start midway through the rent reduction period and it is therefore unlikely to be fully informed. I am aware that the noble Lord is concerned about providing some certainty to the sector about the rent-setting position after the four years of rent reduction are concluded, but there is a risk that setting up an independent review may prolong any uncertainty because the Government will want to consider a number of factors in addition to the outcome of any review before determining their future rent policy.

Amendments 61 and 63 were also tabled by the noble Lord, Lord Kerslake. Schedule 2 to the Bill set outs how maximum rents should be determined during the four years of rent reductions for tenancies that were not in place after the beginning of 8 July 2015. This will therefore apply to new tenancies. Different rules apply to existing and new social housing and affordable rent housing, and they are set out at paragraphs 1 to 3 of Schedule 2. Rents for new social housing may be set at up to the social rent rate.

My noble friend Lady Williams explained in Committee how this will work and made clear that we have sought to make the 1% reduction work in a similar way to existing policy in so far as we can and that the Government’s intention is that the formula rent as defined in regulations will mirror the formula for 2015 as set out in the rent standard guidance and the Government’s guidance for rent. In the Bill, this is set out in Schedule 2 at paragraph 1(4). The first step is for a provider to determine what would have been the rate of formula rent for that social housing at the beginning of 8 July 2015. Once that is determined, the social rent rate is found by then applying a 1% annual reduction.

With regard to the noble Lord’s concerns about the impact of local circumstances, it is important to understand that formula rent already takes into account relative property values, local earnings, the size of the property and an overall rent cap. Local circumstances are therefore built into the formula. As mentioned, the intention is to reflect current policy in so far as we can. This currently allows providers some flexibility to set social rent at up to 5% above formula rent for general needs housing, and up to 10% for supported housing.

The 10% flexibility in supported housing was intended to reflect the higher costs in providing support and services for this type of housing. I completely accept that this flexibility should continue. I am grateful to the noble Lord for giving me this opportunity to reiterate the commitment we made in another place to allow rent setting for new tenancies in supported housing at up to 10% above the rate for general needs housing. This has been welcomed by the sector and will be brought in by regulation under Clause 26. However, we do not think that it is right to allow general needs housing the same continued flexibility: for general needs housing, this was only ever intended to be applied in exceptional circumstances. Allowing it now would undermine the objective of the rent-reduction measures.

We are bringing forward amendments today to enable the regulator—or Secretary of State, as applicable—to issue a direction giving a provider this flexibility, where an individual provider has been exempted due to financial difficulties. I reiterate that we have listened to providers’ concerns. That is why the Bill had been amended in another place to enable all providers to re-let social rent properties at the social rent rate—that is to say, formula with the 1% per annum reduction applied —even if they were previously let at a much lower rent. This has also been welcomed by the sector.

Turning to affordable rent housing, paragraph 3 of Schedule 2 provides that the rent payable by that tenant should be set at no more than 80% of the amount that would be the market rent for that property, and that in the following years a 1% per annum reduction to that maximum rent applies. However, this is a maximum rent. The guidance is clear that local factors should also be taken into account: for example, the local market conditions, or the local housing allowance for that area. Providers already have flexibility to set rents below 80%, if they think it appropriate. The 5% and 10% flexibility we referred to previously is specific to the formula rent model and does not, therefore, normally apply to affordable rent. However, under the current policy, affordable rent housing may be let at the formula rent if it is higher than 80% of the market rate. I understand that the noble Lord is concerned about this point.

To reflect this, I am pleased to say that we are proposing amendments—to be discussed later—that are intended to address this, and which better align affordable rent setting with existing policy. Again, I want to reiterate that, to mitigate the impact of the reduction, we have already made amendments in another place that will enable affordable rent housing to be re-let at up to 80% of the market rate even if it was previously lower than that rate. Housing which may be let on the affordable rent basis will be identified as such in regulations under paragraph 4.

I recognise that noble Lords are concerned about future housing supply. We have made it clear that this is our key priority, and it is backed by our commitment to invest £8 billion to deliver 400,000 affordable housing starts.

I turn now to Amendment 59A. The purpose of freezing LHA rates for four years is to build on the housing benefit reforms introduced during the last Parliament, which saved £6 billion. Savings from freezing LHA rates are estimated to be around £655 million for the whole of Great Britain over the four years. As noble Lords may be aware from amendments tabled in Committee, within DWP we already monitor the levels of LHA rates in comparison with market rents to assess any divergences. The rent officer services provide DWP with rental data for each broad rental market area for the last 12 months up to the end of September each year. This is used for monitoring purposes and in the last two years has been the basis for identifying which rates should be increased by the targeted affordability funding.

This amendment calls for an independent review of the relationship between the rates and private rents to be carried out at least on an annual basis. While I appreciate what is intended here, undertaking an independent review with such frequency is likely to be of significant cost to the department, especially considering the time of officials required to arrange this each year. Rent officers already publish annually on their respective websites the 30th percentiles of market rents for each area alongside the LHA rates and have done so for the last three years. The Secretary of State has the power to review LHA rates or to provide in regulations for the maximum housing benefit to be an amount other than these rates; those powers have been in place since 2012.

We recognise that rents in some areas will increase and at different rates. In view of this, we will recycle 30% of the savings generated from the freeze through the targeted affordability funding—we have already distributed £140 million since 2014. Because there was no inflation during the relevant period, this means that no savings will be made from the freeze in 2016 and 2017, and therefore no targeted affordability funding, but it will be made available from the savings in subsequent years. In addition, local authorities are able to provide support to those affected by housing benefit reform with an enhanced package of £870 million of discretionary housing payment funding.

In light of these arguments, I urge the noble Lord to withdraw his amendment.

Photo of Baroness Warwick of Undercliffe Baroness Warwick of Undercliffe Labour 10:15 pm, 27th January 2016

Might I press the Minister for a moment on the LHA cap issue? I am not quite clear about what he means. He said that he could not be specific, and I understand that, but I am very conscious of the uncertainties that boards now face as regards the decisions they have to take in the next few weeks. Do we take it from what he said that the slate is clean as far as they are concerned, there is no assumption that the LHA cap will be applied and that the outcome of the review will look at this afresh?

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions

There will be a review, which will look at how we fund. We have given ourselves a year to come up with that, so clearly they can look to that in the medium term. However, I have already said that we accept that it is urgent to make sure that their immediate concerns are taken off the table, and we are working to make sure, as we look forward to a more fundamental review, that those protections in that short-term period are in place.

Photo of Lord Kerslake Lord Kerslake Crossbench

The proposal with regard to the exemption and flexibility for the regulator in those difficult circumstances is entirely welcome. Although it does not go as far as I sought, it is a very helpful move indeed, so I thank the Minister.

Photo of Lord Best Lord Best Chair, Communications and Digital Committee

My Lords, this has been an excellent debate. Many thanks to the noble Lord, Lord Shipley, my noble friends Lord Listowel and Lord Kerslake—I was pleased to hear him say that he welcomed the announcement by the Minister—and the noble Baroness, Lady Hollis, who may have been satisfied to some extent on the process. We should have a chance to debate these things in the future. I thank the right reverend Prelate the Bishop of Durham, who told us about the work of Framework, a typical housing association, which is feeling very nervous and which, I hope we are pretty well fully reassured, will not go out of business as a result of these measures—that will just not happen. I also thank the noble Baroness, Lady Manzoor, my noble friend Lord Ramsbotham, for championing the cause of the almshouses, the noble Lord, Lord Young of Cookham, for joining in very helpfully; and the noble Baroness, Lady Warwick. She continues to feel fearful but I hope that she gained the distinct impression that it would be a bad idea to hold back on the basis of thinking, “The Government will probably let us down; the rents won’t meet what is required”.

For some years I chaired one of the housing associations—Hanover, which runs the most extra care housing schemes in the country. I thought to myself, “Knowing what I know, would I say to my board that it is too risky to go ahead with an extra care scheme in these circumstances, because by 2018 we may find that there is no money on the table and we will go out of business?”. I would say from the chair, “Let’s go for it. I don’t believe we’re going to be put out of business”, but I fully accept that some of my fellow board members might take a more cautious view. That is the anxiety that remains until the Minister is able to come up with something that has a watertight guarantee. However, his words tonight were as reassuring as we could expect them to be.

I echo the Minister’s tribute to the many organisations that have beaten a path to his door. I am sure that they were much more influential than myself or anyone else in this House because they bring the real experience of the front line through to the ministerial office. I am delighted that he is deeply committed to engaging those same organisations in the process that now follows to find a permanent solution.

However, best of all, I am very pleased that the Minister has been able to announce that, while the review takes place and Ipsos MORI comes up with its research, with the providers being part of the process of finding a permanent solution, rents can be increased by CPI plus 1% in these schemes. That will keep the wolf from the door. I have pleasure in begging leave to withdraw the amendment.

Amendment 50 withdrawn.

Amendments 51 and 52 not moved.

Amendment 53 not moved.

Clause 24: Enforcement

Amendment 54

Moved by Baroness Evans of Bowes Park

54: Clause 24, page 23, line 42, at end insert—

“(b) regulations under section 26 of that Act, or

(c) Part 1 of Schedule 2 to that Act.””

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Lord in Waiting (HM Household) (Whip)

My Lords, the amendments in this group are mainly technical in nature. The majority of them respond to points raised by the Delegated Powers and Regulatory Reform Committee and we hope that they will be welcomed. Others stem from issues which we have identified might have been of concern to social housing providers, or they might be helpful to them in accommodating the rent reduction measure.

I start by addressing some of the points raised by the committee. In its report it expressed concern both that the power in Clause 26 to make provision for excepted cases through regulations was drafted too widely, which could provide latitude to make different provision for rent control or enforcement, and that negative procedures apply here. The powers under Clause 28 provide important flexibility to put in place, by means of regulations, alternative provision for how maximum rents should be determined in special cases. Our broad intention is to use these powers either to relax the requirements for social housing providers or to protect tenants.

However, we recognise some of the committee’s concerns and, in response, have brought forward Amendment 77, which restricts the use of the power so that it may not be used to increase the annual 1% reduction specified in the Bill or to impose a maximum rent below the social rent rate in a case where an exception from Part 1 of Schedule 2 applies. The amendment also provides clarity regarding how the power may be used to apply modifications of the provisions.

The power remains a wide one, and necessarily so, because it will allow the flexibility to put in place provisions which soften the effect on providers of the rent restriction measure. It will also put in place protection for tenants and, if necessary, make provision for new rent products launched during the life of this measure. These are important flexibilities to ensure the proportionate application of the Bill’s provisions so that they are aligned, as far as possible, with the current rent policy, and they will enable us to respond to developments in the sector. It is not our intention to use them to put in place significantly different or more onerous provision for large swathes of social housing. That is why we have not accepted the committee’s recommendation that regulations under this power should be affirmative. That would make implementing measures intended to assist providers or help tenants more burdensome and it would curtail the Government’s ability to act quickly to modify the effect of provisions where required.

Amendment 80 is consequential on Amendment 77, and Amendment 65 is, in turn, consequential on Amendment 80.

The committee also expressed concerns about the different approach to enforcement of Part 1 of Schedule 2 and of regulations under Clause 26—both, as originally drafted, powers to provide for enforcement—as well as enforcement of Clause 21, which is on the face of the Bill. We accept that there should be consistency of approach, so Amendments 54 to 58, 74 and 78 align enforcement of Schedule 2 and Clause 26 with that of Clause 21 so that all enforcement will be provided for on the face of the Bill through Clause 24. Amendment 60 is consequential on Amendment 74. Amendment 59 is a consequential amendment which transposes Clause 24 to after Clause 28.

We are grateful to the committee for identifying an inconsistency in drafting relating to the definition of formula rent and have brought forward Amendment 64 to address this. We have also taken the opportunity to clarify that the power to define formula rent includes the power to provide that it is a rent set in accordance with a method specified in regulations. The committee also expressed the view that delegation of the power to define “formula rent” is inappropriate in the absence of a proper justification and includes unacceptable sub-delegation. I hope that I will be able to reassure the House on both points.

As many of your Lordships will know, formula rent is a principle that is well understood in the social housing sector and a key element of the current rent policy regime. We have been clear that the definition of formula rent in the Bill will be aligned to the definition under the rent standard and government guidance on the reference date, albeit with the qualification that the flexibility to deviate from formula in exceptional circumstances will no longer be available. That policy intention has been subject to parliamentary scrutiny and, given that the method for determining formula rent is complex and involves reference to numerous tables of supporting data, we remain of the view that it is appropriate to set the definition out in secondary legislation and to refer to the rent standard and guidance from which that definition is derived. We do not accept that cross-reference to these historic documents is inappropriate, but do accept that the drafting did not make the intentions in this regard clear. Amendment 64, therefore, restricts such references to the rent standard and guidance documents applicable on the reference date.

Finally, the committee expressed similar reservations about the power to define affordable rent. Having reflected on them, we have tabled Amendment 70 to address the criticism of sub-delegation. We agree that cross-referring from the regulations to the content of the rent standard and guidance documents is not necessary. Instead, the regulations may provide that it is a rent set in accordance with a method specified or described in regulations. However, again, the Government’s clear view remains that the complexities of the definition are such that they are more appropriately dealt with in secondary legislation, which can, if necessary, be adjusted to reflect the terms of new affordable rent agreements.

I now turn to Amendments 66 to 68. These are important amendments to address a drafting oversight and to allow the continuation of the present policy that affordable rent housing may be let at the social rent rate when this is higher than the affordable rent, as may be the case in some low market-value areas.

Amendments 71 and 82 will enable continuation of the present policy that affordable rents are inclusive of service charge when determined on the percentage of market rent principle, but exclusive of service charge when determined on the social rent model.

Amendment 79 is a consequential amendment and removes the definition of “affordable rent housing” and “affordable rent” from the interpretation section, as these terms are no longer used other than in Schedule 2. Amendment 69 adds an example to the list in paragraph 4(4) of types of arrangements and agreements to which the definition of “affordable rent housing” may refer.

I now turn briefly to Amendments 72 and 73. I know that my noble friend Lady Williams had a helpful meeting with some of your Lordships to explain the purpose of these amendments. They amend Schedule 2, paragraphs 6(2) and (8), and would enable the regulator of social housing or the Secretary of State to issue an exemption allowing a provider to set initial rents at a specified percentage above the social rent rate if the statutory conditions for granting such an exemption are met.

Amendment 81 is a small clarification that, for the purpose of calculating rent reductions, the day on which a tenancy begins or ends should be treated as a full day. The purpose of this is to simplify calculations for providers.

Amendment 62 modifies the principles for determining the assumed rent in order to avoid disadvantaging providers who implement their annual rent increases later in the year than 8 July. An “assumed rent” is a rent set by reference to the rent of a previous tenant, and this amendment corrects a drafting anomaly which could have meant that, in certain circumstances, the assumed rent would be determined by reference to the provider’s 2014-15 rate, not the 2015-16 rate as intended. Again, the Government’s intention here is that this amendment should prove helpful to providers.

Amendments 75 and 76 are consequential amendments.

I apologise to noble Lords, but I misspoke earlier: I was supposed to have said Clause 26 and not Clause 28. Due to the technical nature of these explanations, if it would be helpful, I am happy to write to noble Lords to clarify exactly what I meant and to correct what I said. Because it is late and these are technical amendments, I am very happy to pick up other points in correspondence if, having read what I said, noble Lords would like any further clarification. I am sorry about the length of time that that took. I beg to move.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions) 10:30 pm, 27th January 2016

My Lords, I thank the Minister for that quick but extensive exposition of what is in the amendments. Clearly there is a lot that we need to study in the record. I thank her for the notes we received in advance but we have had a limited time in which to absorb them. If we need to, perhaps we could take up the offer of a meeting between now and Third Reading, whenever that is. However, as a matter of prudence, we reserve the right to come back at Third Reading if anything proves to be contentious. We accept the proposition that these are enabling, protective or technical amendments and that that situation should not arise but, frankly, until we have had the chance to study them in detail—which we should have—I hope the Minister will accept that.

Amendment 54 agreed.

Amendments 55 to 59

Moved by Lord Freud

55: Clause 24, page 24, line 3, at end insert—

“(b) regulations under section 26 of that Act, or

(c) Part 1 of Schedule 2 to that Act.””

56: Clause 24, page 24, line 7, at end insert—

“(b) regulations under section 26 of that Act, or

(c) Part 1 of Schedule 2 to that Act.””

57: Clause 24, page 24, line 11, at end insert—

“(ii) regulations under section 26 of that Act, or

(iii) Part 1 of Schedule 2 to that Act,”.”

58: Clause 24, page 24, line 15, at end insert—

“(ii) regulations under section 26 of that Act, or

(iii) Part 1 of Schedule 2 to that Act,”.”

59: Clause 24, transpose Clause 24 to after Clause 28

Amendments 55 to 59 agreed.

Amendment 59A not moved.

Clause 25: Further provision about social housing rents

Amendment 60

Moved by Lord Freud

60: Clause 25, page 24, line 21, leave out “, exemptions and enforcement” and insert “and exemptions”

Amendment 60 agreed.

Schedule 2: Further provision about social housing rents

Amendment 61 not moved.

Amendment 62

Moved by Lord Freud

62: Schedule 2, page 32, line 40, leave out sub-paragraphs (i) to (iii) and insert—

“(i) was payable at the beginning of 8 July 2015 by the person who was the tenant of that social housing, in a case where 8 July 2015 is the relevant day,

(ii) was payable at the beginning of the relevant day by the person who was the tenant of that social housing, in a case where the relevant day falls after 8 July 2015 and the person who was the tenant at the beginning of 8 July 2015 continued as tenant until at least that later time,

(iii) is likely to have been payable at the beginning of the relevant day by the person who was the tenant at the beginning of 8 July 2015 if the person’s tenancy had continued until at least that later time, in a case where the relevant day falls after 8 July 2015 and the person who was the tenant at the beginning of 8 July 2015 ceased to be the tenant before that later time, or

(iv) is likely to have been payable at the beginning of the relevant day by a tenant of that social housing, in a case where there was no tenant at that time and sub-paragraph (iii) does not apply,”

Amendment 62 agreed.

Amendment 63 not moved.

Amendments 64 to 76

Moved by Lord Freud

64: Schedule 2, page 33, line 20, leave out sub-paragraphs (7) and (8) and insert—

“(6A) The Secretary of State may by regulations define “formula rent” and may, in particular, provide that it is a rent set in accordance with a method specified in the regulations.

(6B) Regulations under sub-paragraph (6A) may, in particular, make provision by reference to—

(a) the standard published in January 2015 by the regulator under section 194(2A) of the Housing and Regeneration Act 2008 (the powers of the regulator to set standards relating to levels of rent),

(b) Rent Standard Guidance published in January 2015 by the regulator, or

(c) Guidance on Rents for Social Housing published in May 2014 by the Secretary of State.”

65: Schedule 2, page 34, line 17, leave out sub-paragraph (6)

66: Schedule 2, page 34, line 26, leave out from beginning to end of line 30 and insert “the higher of—

(a) the amount found by—

(i) determining the rate of the market rent for that social housing when the tenancy begins, and

(ii) determining the amount that is 80% of the amount that would be payable in respect of a year if that rate had applied during the year, and

(b) the amount that would be payable in respect of the first relevant year if the tenant were paying rent at the social rent rate.”

67: Schedule 2, page 34, line 40, leave out from “is” to end of line 44 and insert “the higher of the amounts described in sub-paragraph (3A).”

68: Schedule 2, page 34, line 44, at end insert—

“(3A) The amounts referred to in sub-paragraph (3) are—

(a) the amount found by—

(i) determining the rate of the market rent for that social housing when the tenancy begins,

(ii) determining the amount that is 80% of the amount that would be payable in respect of a year if that rate had applied during the year, and

(iii) (if necessary) reducing that amount in proportion to the part of that relevant year that elapsed before the tenancy begins, and

(b) the amount that would be payable in respect of the period in question if the tenant were paying rent at the social rent rate.”

69: Schedule 2, page 35, line 31, at end insert—

“( ) an arrangement between a local authority and the Homes and Communities Agency, the Greater London Authority or the Secretary of State under which rents for social housing may be set on a particular basis.”

70: Schedule 2, page 35, line 32, leave out sub-paragraphs (5) and (6) and insert—

“(4A) Regulations under sub-paragraph (2) may define “affordable rent” and may, in particular, provide that it is a rent set in accordance with a method specified, or of a description specified, in the regulations.

(4B) The methods that may be specified in the regulations include, but are not limited to, methods that provide for a maximum level of rent when accommodation is initially let to be a certain percentage of market rent in certain cases or circumstances.”

71: Schedule 2, page 35, line 41, at end insert—

“( ) A reference to an amount of market rent includes a reference to an amount payable by way of service charge.”

72: Schedule 2, page 37, line 26, at end insert—

“( ) a direction that Part 1 is to have effect in relation to a private registered provider specified in the direction as if a reference in Part 1 to the social rent rate were a reference to that rate increased by the percentage specified in the direction;”

73: Schedule 2, page 38, line 12, at end insert—

“( ) a direction that Part 1 is to have effect in relation to a local authority specified in the direction as if a reference in Part 1 to the social rent rate were a reference to that rate increased by the percentage specified in the direction;”

74: Schedule 2, page 38, line 38, leave out paragraph 7

75: Schedule 2, page 39, line 9, after “1(5)(a)(iii)” insert “or (iv)”

76: Schedule 2, page 39, line 10, leave out “the beginning of 8 July 2015” and insert “a particular time”

Amendments 64 to 76 agreed.

Clause 26: Provision about excepted cases

Amendments 77 and 78

Moved by Lord Freud

77: Clause 26, page 24, line 43, at end insert—

“(3A) Regulations made by virtue of subsection (3) may, in particular, provide for section 21 or Part 1 of Schedule 2 to have effect with modifications.

(3B) The modifications that may be made by virtue of subsection (3A) include (but are not limited to) modifications that—

(a) provide for the maximum amount of rent to be increased from year to year by no more than a percentage specified in the regulations;

(b) provide for the maximum amount of rent to be determined by disregarding the effect of a temporary reduction or waiver of rent;

(c) provide for the maximum amount of rent to be determined by reference to a different period;

(d) provide for section 21(1) or paragraph 1(4)(c) or (5)(c) or 3(4) of Schedule 2 to have effect as if it referred to a different percentage;

(e) provide for paragraph 1, 2 or 3 of Schedule 2 to have effect as if the social rent rate were uplifted by a percentage specified in the regulations;

(f) provide for paragraph 3(2) or (3) of Schedule 2 to have effect as if paragraph 3(2)(a)(ii) or (3A)(a)(ii) referred to a different percentage;

(g) provide for the maximum amount of rent to be determined by reference to what would have been the amount if an exception in regulations under section 22 or paragraph 5(5) of Schedule 2(including an exception making such provision as is described in section 22(7) or paragraph 5(7)) had not applied.

(3C) Regulations made by virtue of subsection (3B)(d) may not provide for a higher percentage to have effect.

(3D) Regulations made by virtue of subsection (3B)(e) may, in particular, make provision in relation to cases where an exception in regulations under paragraph 5(5) of Schedule 2 making provision about social housing which satisfies conditions prescribed by the regulations as to design, facilities, use or the provision of support to tenants applies.

(3E) Regulations under subsection (1) may not provide for a maximum amount of rent payable by a tenant of social housing in respect of a relevant year, or a part of a relevant year, which is less than the amount that would be payable by the tenant in respect of that period if the rent was payable at the social rent rate in that period, in a case where an exception in regulations under paragraph 5(5) of Schedule 2 applies.”

78: Clause 26, page 25, line 15, leave out subsection (8)

Amendments 77 and 78 agreed.

Clause 31: Interpretation

Amendments 79 to 82

Moved by Lord Freud

79: Clause 31, page 27, leave out lines 33 and 34

80: Clause 31, page 28, line 10, at end insert—

““social rent rate” has the meaning given by Schedule 2;”

81: Clause 31, page 28, line 34, at end insert—

“( ) In determining the maximum amount of rent payable by a person who is a tenant of social housing for part of a relevant year, a fraction of a day during which the person is a tenant of that social housing is to be treated as a whole day during which the person is a tenant of that social housing.”

82: Clause 31, page 28, line 37, leave out from beginning to “does” in line 40 and insert—

“(a) in a case where the maximum amount applying under regulations under section 26 or Part 1 of Schedule 2 is determined on a basis that treats an amount, or a description of an amount, payable by way of service charge as part of the rent payable, includes a reference to an amount, or an amount of that description, payable by way of service charge,

(b) in a case where section 21 applies after regulations under section 26have, or Part 1 of Schedule 2 has, applied a maximum amount determined on a basis that treats an amount, or a description of an amount, payable by way of service charge as part of the rent payable, includes a reference to an amount, or an amount of that description, payable by way of service charge,

(c) in a case not falling within paragraph (a) or (b) where, under the terms of the lease or agreement, an amount, or a description of an amount, payable by way of service charge is part of the rent payable, includes a reference to an amount, or an amount of that description, payable by way of service charge, and

(d) in any other case,”

Amendments 79 to 82 agreed.

Amendment 82A

Moved by Baroness Meacher

82A: After Clause 31, insert the following new Clause—

“Housing costs: payments to landlords

Housing costs: payments to landlords

(1) Regulations made by the Secretary of State under section 5 of the Social Security Administration Act 1992 (claims and payments regulations) must provide for the payment of the housing costs element of an award of universal credit to the landlord where the claimant requests such payment to be made to the landlord.

(2) In this section—

“landlord” means the person who is entitled to payment of rent for the occupation of the accommodation occupied by the claimant as his or her home;

“rent” includes the license or similar payment for the use and occupation of the accommodation.”

Photo of Baroness Meacher Baroness Meacher Crossbench

My Lords, in moving Amendment 82A I hope not to take up much of the House’s time. The amendment requires the Secretary of State to make regulations that would enable tenants receiving universal credit to choose to have the housing element of universal credit paid directly to their landlord.

We debated this matter in relation to an earlier welfare reform Bill and I am aware of the Government’s resistance to the measure. As benefit levels fall drastically under successive rounds of cuts, the need for this provision has grown over time. Until the introduction of local housing allowances, private tenants were able to choose to have rent payments paid direct to their landlord. Currently, social tenants can still request that housing benefit be paid direct to their landlord. However, under universal credit, tenants, whether social or private, will lose this flexibility and thus the opportunity to ensure that their rent is paid regularly so that they can at least be guaranteed a roof over their heads even if they cannot feed their children.

The Government argue that to include housing benefit payments within the universal credit payment promotes financial responsibility and helps prepare claimants for the world of work, when they will need to manage their entire budget without help from the state. Of course, in a perfect world this a reasonable argument. However, it fails to take account of government policy to ensure that work pays. But this is being done by reducing out-of-work benefits substantially. The result is that it is highly doubtful that any of us in this House could manage to live on out-of-work benefits—pay the bills, feed the family and pay the rent. If we could not do it, why should we expect others far less privileged to be able to do so?

The Government’s attitude to this matter suggests to me, I fear, little understanding of the incredible challenges faced by out-of-work claimants under the regime which has been unfolding since 2010.

I wish to put on record in your Lordships’ House that tenant choice, as set out in the amendment, was supported by the Work and Pensions Select Committee in its report Support for Housing Costs in the Reformed Welfare System published in April 2014. The Select Committee suggests that such arrangements could be available at least for the first few years of a UC claim as a transitional measure. I hope the Minister will be able to respond to that proposal.

There is considerable support for direct rent payments to landlords if claimants request it. In February 2015, for example, the Northern Ireland Executive confirmed that landlords will be paid benefit directly to cover tenants’ rent. The Scottish Government have also indicated their wish to introduce such a provision. Both Shelter and Crisis support it, for obvious reasons.

An important point raised by the Residential Landlords Association is that direct payments will prevent an abusive partner using the rent money for their own purposes, an issue I had not thought of. Partners with a gambling or drink problem too often reduce their families to destitution. In fact, I was very familiar with such problems years ago, although they had rather gone out of my mind. This amendment would provide some protection for such families.

Finally, the Minister will be well aware that this is a big issue for landlords and hence for the adequacy of housing supply for benefit claimants. It seems that this is as powerful an argument for the amendment as the concerns about tenants. Quite simply, if landlords cannot be sure that the claimant will be able to pay the rent on time every time, they would be sensible not to rent their properties out to universal credit claimants. We already have an excess of demand for housing over supply. Does the Minister have an estimate of the expected fall in the supply of properties for rent for claimants in the coming years? Is the Minister concerned that research by the RLA earlier this year showed that 63% of private landlords with tenants on universal credit said that their tenants were in arrears with the rent? How many of those landlords will be willing to risk renting to benefit claimants again? In my opinion, only very few.

I very much hope that the Minister will be able to persuade the Secretary of State to take this amendment seriously in order to avoid a likely catastrophe in housing provision for universal credit claimants, and serious consequences for the children of the many parents who will be unable to cope. I beg to move.

Photo of Earl Cathcart Earl Cathcart Conservative

My Lords, as the noble Baroness, Lady Meacher, has just said, under the old housing benefit scheme the tenant had the choice of the payment going to him or directly to the landlord. The Minister said that, under the new scheme, the,

“position is for universal credit to be paid as a single monthly sum direct to the claimant; that is designed to mirror what would happen if the claimant was in full-time employment, when they would be responsible for managing their own funds and paying their own rent”.—[ Official Report , 21/12/15; col. 2438.]

In an ideal world that is an excellent idea, but in the real world it invariably does not happen. As a landlord, I can foresee that when the tenant receives the universal credit, the temptation will be to buy the weekly shopping, petrol, clothes and so on, and by the time the rent becomes due there will not be enough money left, so the spiral of debt takes hold. But the Government are adamant that paying universal credit only to the claimant not only will work but does work. Is this experiment working as the Government say it is?

According to a survey conducted by the Residential Landlords Association, it is not. It found that of those private sector landlords who had tenants on universal credit, some 63% had tenants in arrears on their rent—a point just made by the noble Baroness. Of that group of landlords, 85% had contacted the Department for Work and Pensions to have the housing element of the universal credit paid direct to them after eight weeks of arrears, as is their entitlement. More than 57% of that group said that it had taken the department more than five weeks to respond to the request, which means that the landlord is already more than three months out of pocket. I understand that the problem is even worse for social housing, with nearly 90% of tenants in arrears. It is heartening that the Minister said in Committee that,

“we are doing a lot of work now with social landlords to get the problem under control”.—[ Official Report , 21/12/15; col. 2437.]

At least my noble friend admits that there is a problem and that the new system is not working quite as planned. Much of this could have been avoided if the rent had been paid direct to the landlord.

In October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefits as a direct result of the decision not to allow payment of the benefits direct to the landlord. Not making the payment direct to the landlord is not helping the landlords and it is certainly not helping the tenants. All the evidence, backed by Shelter, Crisis and the Money Advice Trust, has been that paying it direct to the landlord was popular with tenants, as they were assured that their rent was covered before they decided how else to spend their money.

If the Government really want to make tenants,

“responsible for managing their own funds and paying their own rent”.—[ Official Report , 21/12/15; col. 2438.], what better way than the tenant asking for the rent to be paid direct to the landlord? To my mind, that is the height of responsibility for the tenant: to ensure that the roof over their heads is paid for before deciding how to spend any remaining money.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

My Lords, I strongly support the amendment moved so ably by the noble Baroness, Lady Meacher. This is a real problem. The previous proposals that we were given, and the previous explanations that we wanted to model on the world of work, frankly belonged to a different planet. Those tenants, particularly in social housing, who need housing benefit are not those, for the most part, who are paid monthly. They very often are on ZHCs, have insecure or short-time jobs, or have fluctuating incomes week by week. That is topped up by universal credit. They want and need the security of a home in order to continue often to be able to find the jobs that they want, which would give them greater security. If they seek direct payments to the landlord, why does the Minister think that the Government and the DWP can second-guess what is in their best interest? Why not treat them as moral adults who can make their own judgment? The result that we are already seeing and beginning to worry about is that refusal to give alternative payment methods until after six to eight weeks’ arrears, and given the time of processing that, we can be talking about debts of more than £1,000, from which tenants never recover.

The alternative is to try to help tenants to find ways to bypass the rigidity of DWP. So we are busy setting up jam-jar accounts and other friends are busy trying to use credit unions in order to bypass the total universal credit going into the bank account where the bank then takes payments for any other outstanding debts or anything else. As a result, HB becomes the last thing to be paid to the landlord. Many are already experiencing those problems. Certainly, one local authority tenant said to me, “Well, I won’t worry about that because that will be the last thing that gets paid. The local authority won’t evict me. It costs them more to send me into temporary housing and, given that I’ve got kids, I can run that risk”. That is the mental framework. She said, “I would be perfectly willing if they took it at the beginning of the month. But if I put it in the bank, it will be gone by the end of the month before I pay the rent”.

I suggest that the Minister responds very positively to this amendment. Where the tenant seeks it, the department should agree that alternative payment arrangement and stop all the futile effort that so many of us are making trying to find ways to loop around the system, to overcome the rigidities of the department, to help tenants avoid what will probably be debts from which they will never recover. I hope that the Minister will take the words of the noble Baroness and the noble Earl very seriously. It is a real problem on the ground.

Photo of Lord Layard Lord Layard Labour

My Lords, the Government are great believers in the principle of “nudge” and have greatly expanded the nudge unit. The fundamental principle of nudge is that, by quite small differences in institutional arrangements, you can produce big differences in outcomes. One principle of nudge is to give people an opportunity to protect themselves against their worse natures. That is exactly what this is about: offering people an opportunity to protect themselves against their own weakness. It is difficult for me to understand why the Government are not willing to use this elementary psychological principle. Would the Minister consider consulting the nudge unit before insisting that this ideological line that is being pursued is consistent with modern psychology?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions) 10:45 pm, 27th January 2016

My Lords, we strongly support the amendment moved by the noble Baroness, Lady Meacher. Indeed, it replicates part of an amendment moved in Committee by the noble Earl, Lord Cathcart. We know from the Government’s point of view that there is an article of faith here. Their starting point is that they overwhelmingly want and expect universal credit to be paid as a single monthly payment in arrears to the claimant. We know that there are opportunities for alternative payment arrangements and my noble friend Lady Sherlock set down our understanding in responding to the amendment in Committee.

The issue of eight weeks has been raised, but it is not eight weeks before you get to a solution. As I understand it, the guidance states that, when arrears reach one month’s rent, the DWP will review the situation—I am not sure how long it takes it to do that—following notification by the claimant or landlord. When they hit two months or eight weeks, either the landlord or the claimant can request an APA. Again, I think the point was raised about how long it takes the DWP to respond to those questions. Even then, there is no automatic right to one because the Government are still clinging to the concept that managing benefits should mirror choices in managing money which they say that those in work have to make.

The issue is one not only of having a nominal system in place under which alternative payments can be made, but of how those are put into practice and what realistic timescales are involved. Even if it were on the dot of eight weeks, that is a time for a landlord to wait. Some landlords might be left in a marginal economic situation.

A question was posed about what information we have about claimants of universal credit and other benefits being effectively denied access to properties available for rent. It might be quite hard to get hard statistics on that, but it would be interesting to know what the department has. The landlords fear, even if they may ultimately get paid, that they will have to wait eight weeks or even longer before they get their money.

My noble friend asked about what is happening with universal credit and how many people are in the system at the moment. At December 2015, there were 287,000 universal credit claims—I think that this is internal management information and therefore not fully verified—and some 37% of those payments included a housing element. Again only preliminary analysis showed that 19% of those had a managed payment to the landlord. I suppose that that gives a glimpse of something that is working to an extent, but clearly is not working in a sufficiently robust way to address the very real concerns that have been raised.

We debated this endlessly during the passage of the Welfare Reform Bill. My noble friend will remember it, and jam-jar accounts have featured already this evening. The arguments were strongly made against not only monthly payments but the opportunity for direct payments, particularly in relation to housing. My noble friend Lady Hollis made an extremely important point that the fundamental is a roof over your head—pretty much everything else flows from that. How can you get a job if you do not have secure accommodation? How do the kids get to school if you do not have secure accommodation? It is a fundamental issue. Just a relatively small change to the system, giving people the choice of having direct payments, means the prospect of removing what is clearly a growing problem, as explained, and fixing it in an effective way, so we support the amendment.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions

This amendment requires the Secretary of State to make regulations that would allow universal credit claimants to opt to have the housing cost element of their award paid direct to the landlord, irrespective of the reason. One key principle of UC is that the single, monthly payment mirrors the payment of monthly wages that most claimants would receive if they were in full-time employment. Whether they are receiving UC or are working, tenants need to make similar decisions on managing their money, including paying their own rent.

The Government understand that a move to a single, monthly household payment is a significant change for many claimants and that some will require help and support. Regulations came into force in February last year to allow DWP to inform social landlords whenever one of their tenants makes a claim for or is awarded universal credit with housing costs or when an existing universal credit claimant moves to one of their properties. This enables the social landlord to decide whether the claimant requires advice, support or assistance in budgeting so that they can manage their rental payments.

There will, of course, be instances where the claimant needs additional support and, to this end, the Secretary of State already has powers to pay all or some of a claimant’s UC entitlement to a third party through alternative payment arrangements—or APAs, in the trade. There are three APAs: paying rent directly to the landlord; making more frequent than monthly payments; or splitting the payment within the household. APAs can be considered by the Secretary of State at any point during the universal credit claim, whether at the outset or later on, if a claimant cannot manage the monthly payment arrangement.

Recent improvements allow the landlord to email their APA requests, which are dealt with in a matter of days as a priority—so some of the early teething problems as we started rolling out the system have been addressed to speed up that process. Wherever possible, these arrangements are time-limited and delivered with appropriate budgeting support to help claimants make the transition to monthly budgeting.

The arrangement also covers claimants who are in rent arrears, and managed payments to the landlord will be considered where claimants have arrears of at least one month due to repeated underpayment or where the claimant owes arrears of at least two months and is at risk of eviction. These protections, combined with the measures enabling landlords to recover arrears from a tenant’s UC award, already mitigate any impact on landlords’ income or on homelessness.

We are in fact making a series of initiatives in this area and one of the most interesting is the trusted partner trials, where we are working with local authorities so that they decide the people who should be put on an APA, at least initially, and then look to see the budgeting support that a person needs to run their own funding.

Picking up the point made by my noble friend Lord Cathcart on experience, in terms of arrears we did an elaborate direct payment project and we found that, in the early stages, the numbers who paid in full were running at 95.5%, compared with 99% of those where the state paid. However, by the 18th payment—these were weekly payments in the comparator in this project—the direct payments figure had risen to 99%. Interestingly, this happened when the removal of the spare room subsidy came in, and those tenants who had become used to managing their own rent handled the removal of the spare room subsidy better than the ones who had been on the state-managed payments system. That is not surprising because the managed payments system is not necessarily an easy option where there are reductions for non-dependants, the spare room subsidy and so on, because the claimant will still need to pay the shortfall to the landlord.

The other factor, which I am surprised that noble Lords have not clocked, is that a large number of the families on universal credit are in work. It is not like the old legacy system where you have one lot out of work and one lot in work; this is a blended group and people are moving from the out-of-work group into the in-work group. Therefore, the idea that you can be halfway down the taper—in the jargon—and have a managed payment would be incredibly hard for any organisation, including the DWP and the tenant, to manage. Two million households is equivalent to a quarter of the case load.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

The noble Lord makes our point for us. If a substantial number of people are in work and managing fine—as, indeed, is the case; it is one of the reasons for supporting UC—they will not seek alternative payment arrangements. Who will seek them? It is those who have the self-knowledge to know that they are vulnerable when it comes to paying their rent, given the pressure of debt payday loans and all the other debts they may accrue. If they are being hounded, as we know they are, what will go first is the money that should be earmarked for their rent. I urge the Minister not to superimpose on people who find it hard to manage assumptions about how those of us with rather more comfortable incomes and reliable monthly salaries handle our accounts. It can be a very different and very difficult world.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions

The core reason why I dislike this measure—and I do dislike it, so it is not a question of persuading the Secretary of State—is that we can actually see this situation right now. Interestingly, my understanding from conversations I had with welfare rights people in the 1980s was that they were against managed payments because they disempower tenants. It is funny that the political debate has come full circle. If you say that tenants can choose but you have an imbalance of power between the landlord and the tenant, which is the reality, you will find very quickly that every tenant will choose to have a managed payment because they will be told by their landlords—who would love to have someone with an AAA credit rating paying them—“You must have a managed payment”. That is what has happened. Some 93% of people in social housing choose to have a managed payment. They are disempowered, which makes it hard for them to get back into work—I think the noble Baroness is shaking her head, as a landlord. You say lots of good things—

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Labour

I have spent years in either local authority housing management or housing association management. I have represented, possibly unlike the noble Lord, a council estate—one of the largest in the city of Norwich—and day by day, week by week, year by year, we went knocking on doors. We know what we are talking about.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions 11:00 pm, 27th January 2016

Perhaps I should not have personalised it.

The reason this idea of choice does not work is that it is too attractive for a landlord to have an AAA income stream. That is why the solution of the noble Baroness, Lady Meacher, cannot work. It is a retrograde step away from claimants being job-ready. We know that we need to give an enormous amount of help to people with budgeting, and we are doing so. We are looking to social landlords to help us with that, and many are doing a great job. But I am afraid that I must ask, with some passion, that the noble Baroness withdraw this amendment.

Photo of Baroness Meacher Baroness Meacher Crossbench

It is extremely late but I would like to thank the noble Earl, Lord Cathcart, the noble Baroness, Lady Hollis, and the noble Lords, Lord Layard and Lord McKenzie, for their very helpful and powerful contributions. The Minister and I will have to disagree passionately about this issue: I do not think we are going to agree. The Minister is right that landlords have a lot of power. They will walk away. Why should they let out their properties and not have their rent paid? They will not do it. That is my big worry—I say that seriously to the Minister: they will not do it. One can talk about budgeting help and all sorts of things but this is very difficult. As benefits reduce, people are going to find it incredibly difficult to manage at all. They simply will not be able to leave any money in the pot until the end of the month to pay their rent because of the pressures they will be under. I profoundly and passionately disagree with the Minister, as much as I respect and like him. But what am I supposed to do but withdraw my amendment?

Amendment 82A withdrawn.

In the Title

Amendment 83

Moved by Lord Freud line 5, after “interest” insert “and other liabilities”

Amendment 83 agreed.

Title, as amended, agreed.

House adjourned at 11.03 pm.