Relevant document: 20th Report from the Delegated Powers Committee
Clause 68: Housing to be taken into account
Amendment 66CA not moved.
Moved by Lord Cameron of Dillington
66D: Clause 68, page 30, line 17, at end insert—
“( ) it is not in a rural area.
( ) A rural area is defined as—
( ) any settlement with a population of fewer than 3,000 people at the most recent national census, or
( ) any settlement with a population of between 3,000 and 10,000 people at the most recent national census, and designated as a rural area by the Secretary of State following representations from the relevant local authority.”
My Lords, I rise to speak to all of the amendments in the group, for two of which I am the lead name and two of which I am an also-ran.
I must apologise, first, because the ground we are covering in this group is very similar to the ground we covered on Thursday, except that in this context we are dealing with the rural perspective. I controlled myself and bit my tongue several times on Thursday waiting for this moment. In fact, there was a moment at about quarter past 2 when I was nearly chewing my tongue for lack of lunch. Anyway, I apologise for covering much of the same ground.
I realise that increased home ownership, including the right to buy, is a manifesto commitment, but the most important need for the average voter in the countryside, as has been said so often in our discussions over the last week or so, is to ensure that there remains adequate affordable housing for their children—or even themselves if they are young adults who could not possibly afford to buy a house or even a local starter home. This is why in previous debates I and others sought, if possible, to ensure a good mix of different sorts of affordable housing on rural Section 106 sites; to protect exception sites from the transience of starter homes; and even to use the right-to-buy clauses to provide more homes in the countryside, because we desperately need more homes—above all, more affordable homes—in the countryside.
So, it is absolutely no good at all if the discount being provided by the Government for the right to buy comes from a reduction of affordable housing in our countryside, owing to both rural and, more particularly, mixed urban and rural local authorities being forced to sell their most valuable houses, which, inevitably, will be those in desirable rural England. This, as was said many times on Thursday, is robbing Peter to pay Paul. It will seriously not help the provision of more affordable houses in the countryside, and do not forget that we are already hard done by when it comes to affordable rural homes, compared with our urban counterparts. Some 8% of our homes are affordable, compared with 19% in towns. The Treasury seems intent on making that situation worse. I say the Treasury because I detect its dead hand and lack of social awareness in all this: as long as more people own their own homes, which might be good for the nation’s overall economy, and the public debt is simultaneously unharmed or even reduced, that is all that matters; but the fact that it is adding greatly to rural housing problems and possibly to the number of rural homeless seems to be of no consequence to it.
I know that the noble Lord, Lord Carrington, said last Thursday that he believed that London was a special case because it has “intractable housing problems”, but we have intractable problems in rural England, too. For years and years we have needed thousands of homes per annum and for years and years we have had them only in hundreds. There is now a huge backlog. It therefore really would be best if these local authorities, as set out in Amendment 66D, did not have to include their rural housing stock in the sums involved in Clause 67(2), and that they were thus discouraged from selling these houses.
If it is not possible totally to exclude such sales as of right in the Bill, the alternative is that they certainly must be excluded where it is not possible to replace them in the same parish or adjoining parishes, as proposed in Amendment 67A. If the manifesto commitment is actually about building more homes, as interpreted by various Peers on the government Benches, then that amendment should be totally acceptable to the Government. It goes without saying—others have already said this more eloquently and in more detail—that these sales must include a one-for-one replacement requirement in rural areas if we are not to go backwards in the provision of affordable homes in the countryside, which, as I have already said, we really must not do. We cannot afford to.
The situation is already desperate in rural England, hence my Amendment 68D. I do not wish to give the Minister a hard time, but if the Government want to fund their right-to-buy manifesto promises they really must put some of their money where their mouth is, or look very carefully at the equity loan scheme of the noble Lord, Lord Kerslake, or at some possible variation of it, as proposed by the noble Lord, Lord Horam. If two-for-one is right for London, the countryside deserves at least one-for-one. That means leaving the local authorities enough money to pay for the new houses by whatever means possible, including, possibly, raising their cap, although I recognise that that affects the PSBR; or better still—this seems the simplest of all solutions and therefore the best—just allowing them to retain more of the proceeds of sale. In other words, the right-to-buy promise in the manifesto should be paid for not only by the local authorities, but to some extent by central government.
I am tempted to wish that we had a Conservative rural mayor to be elected; if so, I am sure we would solve the problem in a jiffy. Actually, on second thoughts, one should be careful what one asks for. I speak, of course, as an ex rural tsar, or rural advocate—one of those funny titles—without wishing in any way to see the return of such a post.
On the subject of electoral priorities, the Government should not forget that in the currently clear blue waters of the south-west—where rural housing problems are probably at their most critical throughout the whole of England because of the seeming desirability of living there, and thus the high price of houses, combined with the lower average wages paid there—housing looms particularly large as an issue for voters. I would have thought it to the Government’s advantage to see serious action on housing in the south-west before 2020.
The Government may have noticed that Amendment 69B in this group, in the name of my noble friend Lord Best, echoes the wording of Clause 9, entitled,
“Duty to grant planning permission etc”, referring in that case to self-build housebuilding. The aim of this amendment is to overcome one of the main challenges associated with both the right to buy, which we discussed previously, and the sale of these very important local authority council houses in rural areas: finding the necessary sites to replace the sold affordable homes, providing that the local authorities are allowed the money to pay for them. The aim of this amendment is to encourage a more proactive and positive approach by local authorities to finding and supporting development on rural exception sites through windfalls, and, in some cases, allocation of land. This could be through their own local authority endeavours, through their work involving neighbourhood plans and through co-operating with all parishes, farmers and landowners. More positive action is required by all parties to make this happen, and this includes more than just filling in SHLAA forms. These amendments speak for themselves, and with those short but relevant explanations, I commend them to the Government. I beg to move.
My Lords, we are coming to the end of the debates on the forced sale of council homes. The Minister has noted that, through regulations, the Government will be excluding certain categories of council housing and, since no decisions have yet been taken, she has welcomed proposals from your Lordships. The amendments in this group address what I maintain is an essential exclusion, namely council properties that become vacant in rural areas, as my noble friend Lord Cameron of Dillington has explained. If vacant council properties in rural areas are removed from the calculation of the new levy that pays for discounts for housing association tenants, there will be no pressure or obligation on councils to sell these valuable homes.
Almost by definition, council housing in villages is likely to be more sought-after than that on council estates in urban areas. These are the properties most likely to be in the higher-value bracket and therefore most vulnerable to the requirement to sell to pay the levy. The circuitous route whereby funds circle round from council house sales to housing association discounts to tenants, to the housing association building programmes, sounds like a new version of the house that Jack built: here is the levy paid by the council, that sells vacant homes, that funds new discounts, that goes to the housing association that pays for the house that Jack built. It is certainly a convoluted process with particular ramifications for rural communities.
The bungalows issue revealed by the recent report of the Joseph Rowntree Foundation is highly pertinent. If the calculation of “high value” for the levy is to be related to the size of the property, the most high-value one-bedroom and two-bedroom homes are likely to be bungalows. Of course, council bungalows, which are important for the downsizers, who can then free up family houses, are prevalent in villages because land was available there in the past.
A lot of attention has been given to the potential loss of rural social housing if housing associations choose to opt in to the right to buy for their rural properties. However, the issue here—the loss of council homes in villages when they become vacant—could be far more damaging to the prospects of local families obtaining an affordable home where they have been brought up or at least are working. First, I suspect that few housing associations will feel it right to sell their rural homes, because they are so difficult to replace. Secondly, the impact of the new right to buy will not be felt until the existing occupiers, the buyers, move out—maybe in several years’ time—but the loss of vacant council housing will be felt immediately as local families needing a home in the village cannot move into properties that become vacant.
The existing council right to buy has led to a much higher proportion of sales—over twice the level—in rural settings compared with urban areas. If, as I believe, the Government recognise the importance of rural communities, I hope that these properties will be taken out of the levy requirements. At the very least—as set out in the amendments in the names of myself, my noble friends Lord Cameron and Lord Kerslake, the noble Lords, Lord Beecham and Lord Stoneham, and the noble Baroness, Lady Bakewell—if these precious homes are sold, steps must be taken to replace them, perhaps through support to a rural housing association, and land must be allocated for this purpose, often no doubt on rural exception sites. Best of all would be the simple removal from the levy system of the virtually irreplaceable affordable homes serving our rural communities.
My Lords, last week I mentioned the position in my former constituency, where you have on the west coast of Cumbria council housing that is fairly inexpensive when it is sold and, in the Lake District part of my former constituency, which includes the town of Keswick and a number of villages in that vicinity, council property that is very expensive when it is sold off. In Workington and Maryport, you could buy a former council house today on a subsequent sale—not straight after right to buy—for as little as £50,000 or £60,000. A similar house in the Lake District part of the constituency would now cost between £250,000 and £300,000. The latter group of houses will now fall under the provisions of the Bill in the sense that the local authority will be required to sell them.
The problem is very simple: those houses are irreplaceable. They cannot be replaced, as there is no land. I understand from a letter to my noble friend Lady Hollis today that local authorities will be able to rely on housing associations to replace property lost under right to buy through this one-for-one arrangement. However, that does not deal with the problem if there is no land. You cannot expect the Lake District planning board—or any national park planning board anywhere in the United Kingdom—to compromise all its principles and provide for planning permission on land where otherwise it would not, simply to meet the objectives of the Government and this one-for-one replacement.
I think of villages and small hamlets where there might be only six or a dozen council houses at the moment. If we are required to sell those because of this nonsensical levy, all that will happen is that those properties will be lost to the young people who want to stay in the Lake District National Park—or in any national park in the United Kingdom where young people have been driven out because of high prices already. The properties end up on the second-home market in exactly the same way as the problem has developed over recent years in London.
The noble Lord, Lord Best, referred in speaking to his amendment to there being perhaps some flexibility in the Government’s position. I appeal to Ministers to look favourably on the position in the national parks, exempting them from the levy and from the requirement to sell in the event that they are approached to buy. Let us see some sanity in housing policy.
When my noble friend sums up in this debate, will she look carefully at national parks? It is a pleasure to follow the noble Lord, Lord Campbell-Savours, who was my first opponent—I never felt confident enough to buy a property, in the national park or otherwise, in the constituency of Workington because he did such a good job there. Housing is a real problem, particularly for younger people who want to remain in rural areas, in or outside a national park. There are situations where planning permission has been granted for a major housing development only on the basis that a proportion of the houses would be given up for affordable social housing, but the developers then renege on that commitment. Will the Minister undertake to look carefully at such situations, to ensure that we are not going to lose, through the levy, that cohort of houses in national parks, or those affordable homes which have been agreed to but which the developers then find that they cannot afford to build?
My Lords, last week I spoke about the importance of protecting housing association properties in small, rural communities where they are effectively irreplaceable. The exact same point leads me to speak in support of the amendments tabled by the noble Lords, Lord Cameron and Lord Best, with whom I shared work on the rural housing review last year. As well as being president of the National Association of Local Councils, I am extremely aware of the concerns of parish councils about this area of policy. I hope that the Minister will listen seriously to the concerns that are being raised.
The issue here is a combination of two questions that we should ask ourselves. First, are these homes necessary? Secondly, are they replaceable if sold? On the first issue, of necessity, it is clear that in smaller rural communities, particularly in areas of outstanding natural beauty, the national parks and coastline villages, there should not, as a matter of policy, be endless growth of new housing, in order to preserve that which is best in the natural beauty of the environment. There is no question but that the people who work in those communities, in the school, in the pub and on the land—maintaining through farming the wider natural beauty that we are seeking to preserve—must be able to access a home that they can afford. If there are no affordable rented homes, provided either by housing associations or councils, it is simply impossible for people on low incomes to live in these communities. That impossibility gets worse every year. Communities are not sustainable if a wide section of the population, particularly those who work in the countryside, cannot afford to live in them. The necessity is clear.
The second question is replaceability: if they are sold, are they replaceable? It is self-evident that, in many of these communities, they are not. We decide to limit development because of the nature and history of the community, the beauty of the surrounding landscape and its protected designation. We know that they are necessary; they may not be replaceable.
These amendments directly address those two issues, by saying that either we should not make a sale where the homes are necessary and irreplaceable or, at the very least, we should not make the sale unless they are clearly to be replaced within the community where they are needed. The Minister may feel that the particularity of the amendments is not appropriate, but I ask her to go away and think hard about how the Government can address the specific concerns so eloquently raised by my colleagues.
My Lords, I support Amendment 66D. I refer your Lordships to my entry in the register of interests as a vice-president of the LGA and a district councillor. I also support the amendments tabled by the noble Lords, Lord Cameron, Lord Best and Lord Kennedy.
As I expounded last Tuesday—probably for longer than I should have done and I will not repeat myself today because the arguments are on the record—I am passionate about the nature of our English countryside and that it should be preserved, with a true mix of people from all income brackets and all walks of life being able to live there. If social, affordable or other low-cost housing is sold off under the right to buy, that will have a very detrimental effect on rural and smaller communities, as the noble Lord, Lord Cameron, eloquently laid out.
I am grateful to the Minister for listing last Tuesday those types of properties, organisations and locations where right-to-buy exemptions would exist, including the national parks. It is useful to have those in Hansard, but I have to press her on the categories listed in the amendment: rural populations under 3,000 and settlements of between 3,000 and 10,000 people. Many of these, as has been said, will be small but vibrant market towns, essential for serving the small villages and communities around them. This vital lifeline must be protected for all classes of residents, not just the well-off. I support all the amendments in this group.
My Lords, I, too, support the amendments in this group. The noble Lord, Lord Best, made a very powerful case in relation to the problems that would arise from the right to buy of council housing. Rural areas have commanded and will continue to command a great deal of concern in your Lordships’ House as the Bill progresses.
I confess that I am old enough to recall listening to “The Archers” when Grace Archer was consumed by a fire in, I think, about 1954. I have not been a particularly regular listener since, but I understand that, by chance or otherwise, the question of rural housing has featured rather largely in recent editions. I believe I am right in saying that the Grundy family have encountered enormous difficulties in finding suitable local accommodation and may be driven to palming off their ancient father into some sort of care. Whether this was motivated by concerns over the Housing and Planning Bill is perhaps questionable but nevertheless it illustrates a real concern in those areas.
Of course, there has been a right to buy council housing for some considerable time. I wonder whether the Minister can indicate to us the extent to which the right to buy has been exercised and what proportion of houses that have so far gone under the right to buy have ended up as second homes or private lettings, and what the impact generally has been on the provision of council housing in rural areas.
Needless to say, I searched in vain for any reference to this issue in what passes for the impact assessment on the Bill, which makes no reference at all in relation to the relevant clauses that we are debating today to the impact of government policy. Again, the Minister may or may not have the information. Those who drew up the impact assessment clearly were not interested in having it. If the information is not available today, and it may not be, will she take steps to ensure that by the time we get to Report we will have an assessment of what will happen to the existing stock of council housing that will be subject to the right to buy—and, for that matter, to housing association properties that will also be subject to the right to buy—given the unlikelihood of like-for-like replacement being achieved?
I find it very frustrating—and I am afraid it is becoming a constant refrain of Members around the House—not to be able to form a judgment about what the Government’s policies are actually going to lead to. They are leading us, and perhaps themselves, into a blind valley, as it were, without any apparent awareness of the impact of their policies upon communities, where unfortunately there is very little political gain to be made by my party as they are regarded as the natural territory of the Conservative Party. Perhaps they take it for granted. However, they cannot take for granted the needs of young and older people with very little choice of accommodation, a choice likely to be increasingly narrowed if this legislation goes through without the kind of safeguards that the amendments in the group would provide, limited though they are but nevertheless very desirable. I look forward to hearing some kind of explanation from the Minister as to how the aspirations of people in those communities are going to be met if the legislation passes in the form it is presented to us at the moment.
My Lords, before responding to the specific amendments on the sale of high-value vacant housing, I will say a few words about more detail on the policy of the Bill as a whole. Last Thursday I undertook to the noble Lords, Lord Beecham and Lord Foster—and I am sure there were several other noble Lords—that I will ensure that your Lordships will have a timetable of secondary legislation in a week or so. Later this week, I shall write to all noble Lords setting out the timetable for laying, and in some cases debating, the secondary legislation.
As I said on Thursday, and as noble Lords have pointed out during our debates, there is a healthy set of regulations to follow, but I hope to provide an overview of what your Lordships can expect and when. The finer grains of details may be subject to change—my senses tell me to expect some debate at Report, for instance—but I hope the general outline will be helpful. In addition, I have asked my officials to provide policy notes in lieu of secondary regulations wherever possible with the ambition that these will be sent to noble Lords before Report. These will build on the policy fact sheets and the information sheets which we have already circulated to noble Lords. The noble Lord, Lord Foster, also asked me to confirm again today our response to the DPRRC report and I can reconfirm that that will be done by Report.
Before responding to the specific amendments, I will respond to a suggestion from my noble friend Lady Hollis—I have just called her my noble friend but I am sure she will not be offended—during the previous Committee discussion about setting up a working group with the LGA, the housing practitioners and others, to ensure that any fraud experienced through right to buy in the local authority sector is not repeated when we extend the right to buy to housing association tenants. I did watch the “Dispatches” programme over the weekend. I am delighted to confirm that I am happy to commit to setting up a working group with the local government sector and others to learn from their experiences in operating right to buy. For example, such a group could gather evidence about what has worked and what has not worked so well. It could also potentially build on the experience of a number of local authorities in tackling fraud more generally.
In extending the right to buy to housing associations, we are keen to ensure that we identify where any potential abuses could arise so that the right to buy goes from strength to strength and helps more people to achieve their dream of home ownership. We would also be interested in exploring whether such a group could usefully input on other related issues, including, for example, the provision of additional homes by local authorities that enter into an agreement with the Secretary of State following the sale of high-value vacant properties. This proposed working group will further extend our extensive engagement with local authorities and other stakeholders on high-value vacant housing. It will also help to inform our consultation with local authorities, representatives of local government and relevant professional bodies on the determination that will set out the payment required from each local authority.
My Lords, before the noble Baroness moves on, I say thank you for the firm proposal. Whatever our views about the Bill—and they are very divided—the one thing that we all want is, as far as possible, to build abuse out of the system. I am glad that the noble Baroness had the chance to see the “Dispatches” programme, which confirmed some of our worst fears. Many of us have had similar experiences to boot. I am very pleased that the Minister has responded to that, and I hope that with the help of the noble Lord, Lord Porter, she will be getting together a really strong group to do exactly as she suggests.
On that matter, what happens if the working group comes up with conclusions which we are unable to resolve during the course of Committee or Report because the group reports after the Bill becomes law? What happens in those circumstances? That is my first question.
My second question is this. The Minister may recall that we were given an undertaking—two weeks ago now, I think—that we would receive information on starter home demand figures in the various parts of the United Kingdom. Despite repeated references to them in the Chamber by me and others, we have simply not received them yet.
Before the noble Lord, Lord Kennedy, stands up, that is on the list for the end of the week, definitely.
I just wanted to thank the noble Baroness for both her announcements; they are very helpful. On the first one, she talked about noble Lords receiving various policy position papers. Would it be possible, when she does that, to sketch out when she thinks—we will not hold her to this, but just some idea of when—we will get the various regulations? That would be very helpful.
We will endeavour to the best of our abilities, if we know when those dates will be, to bring them to noble Lords. In reply to the noble Lord, Lord Campbell-Savours, I do not want to pre-empt any discussions that the group will have; I go into it with an open and clear mind. I am sure that we will glean information useful not just for the Bill but for housing policy generally.
My Lords, I am very pleased to have the movement that the Minister has announced. Perhaps I can make one further suggestion, because I am still not entirely clear what the timing of all this is, because, as I recall, last Thursday, the Minister said that we would not have further information about regulation on aspects of the Bill until after Royal Assent. To pursue the point made by the noble Lord, Lord Campbell-Savours, there is an issue about the Government’s plan to use the negative procedure, as opposed to the affirmative procedure, in secondary legislation. I draw the Minister’s attention to the two reports by the Delegated Powers and Regulatory Reform Committee, which had a lot to say on that. If the negative procedure is used and if the working group comes up with proposals which post-date Royal Assent, that makes it very difficult for the House to make any changes to the Bill. Therefore, accompanying the proposal to have a working group I hope that the Minister can now at least think with colleagues about how the strong criticisms of the committee about overuse of the negative procedure can be addressed.
I will bear the noble Lord’s point in mind. It has just come to me that I may have sent that list to the noble Lord, Lord Campbell-Savours, last week, so it may be in his post pile today.
If the noble Lord cannot find it, I am happy to resend it.
I think noble Lords for their contributions on the amendments. I understand the pressures faced by rural communities, about which we have spoken a lot in your Lordships’ House, which are many and complex. I am pleased that we are taking time to consider them again today. Amendments 66D and 67A propose that housing in a rural area be excluded, or excluded if it would not be reasonable to expect at least one new affordable home to be built in the same or an adjoining parish for each property sold.
Turning to Amendment 68D, we have discussed the need for new homes across the country and the particular pressures in some housing markets in both rural areas and some of the high-value urban centres, including London. However, we have also heard many arguments on the protection of rural areas and the need for Government to continue to ensure that we do not adversely impact rural communities with large amounts of new housing. We come to the conundrum of not being able to have it both ways: we can build more housing across the country, including in rural areas, or we can restrict where housing is built. That is an issue that we need to consider.
The noble Lord, Lord Best, brought up the selling off of all bungalows in rural areas, which are obviously vital for some people to live in. The legislation also allows for types of housing to be excluded from the policy. We are considering the suggestions put forward by noble Lords and in the other place, as well as local authorities, as to what these exclusions could be. We are engaging with local authorities and other stakeholders about the details of the policy. These include the threshold for high value—we spoke about this the other day—which would be set out in regulations, and the consideration of possible exclusions, which would also be set out in regulations. We will consider the views expressed by noble Lords on all of these elements as we develop the details of the policy.
Amendment 68D would require a new home in the same parish or the neighbouring rural area where a sale has taken place. This would place significant restrictions on local authorities with rural areas which wish to have an agreement. Their assessment of housing needs may find that it is more appropriate for new housing to be built in a different part of the authority; for example, where the necessary infrastructure and services are already established. It would reduce the flexibilities that we think are so important in this chapter, as local authorities would have to consider whether they could build a new affordable home in a rural community when they are considering which vacant properties to sell, regardless of whether or not this is where a new home is most needed.
We have been clear that we want as much new housing as possible, and we are aware that this requires negotiation and collaboration, as well as funding. We do not want to place restrictions on the flexibility to do this in primary legislation, which is why we would not want to restrict where local authorities can choose to build new housing with the receipts they retain. I would hope that local authorities know their housing markets and ensure that new housing is delivered where it should be, and where it can be built.
Amendment 69B is more specifically about replacing housing in rural areas. I agree that it is important to recognise the particular issues facing rural areas in terms of housing supply and affordability. Housing plays a really important role in supporting the broader sustainability of villages and smaller settlements.
Our National Planning Policy Framework is clear that we expect local authorities to plan to meet their needs for all types of housing, including in rural areas. Housing in rural areas should be located where it will enhance or maintain the vitality of rural communities. For example, where there are groups of smaller settlements, development in one village may support services in a neighbouring village. Local authorities should plan housing in rural areas to reflect local needs, particularly for affordable housing, including through rural exception sites where appropriate. Councils should consider whether allowing some market housing would facilitate provision of significant additional affordable housing to meet local housing needs.
Our planning guidance also recognises the important role of rural housing in ensuring thriving communities. It sets out that blanket policies restricting housing in some settlements, and preventing other settlements from expanding should be avoided, unless their use can be supported by robust evidence.
Our guidance is also clear the local authority should update its assessment of sites that may come forward for development as part of its authority monitoring report. We are of the view that existing planning policy and guidance already strongly supports provision of housing, including affordable rural housing, into local and neighbourhood plans.
I reiterate that we will carefully consider the suggestions that noble Lords have made today, but I stress that no decisions have been made on what types of housing may be excluded from the policy, and we do not wish to place restrictions on the building of new homes using these receipts, as we want to ensure that as many new homes can be delivered as possible. With this in mind I hope that the noble Lord will agree to withdraw the amendment.
I thank all noble Lords who supported the amendments. I was struck, when listening to the noble Lord, Lord Campbell-Savours, and the noble Baroness, Lady McIntosh, that it is a bit like Morton’s fork. You are offered two unpalatable options—one is to lose the incredibly important affordable housing that we have in the countryside and the other is to lose our countryside, which is also very precious to us, particularly in national parks and AONBs. I do not believe that we can afford to lose what we treasure most, and not just to pay for what I consider what I consider to be a fairly rash manifesto promise. I believe that the rash manifesto promise should be paid for by the Government and not, ultimately, using the contorted trail described by the noble Lord, Lord Best, by those desperate for housing in our rural communities.
The Minister has very kindly agreed to meet us before Report to discuss some of our rural housing problems. I give notice to her that this matter will undoubtedly be on the agenda. In the meantime, I beg leave to withdraw my amendment.
Amendment 66D withdrawn.
Amendments 66E to 68A not moved.
Clause 68 agreed.
Clauses 69 to 71 agreed.
Clause 72: Reduction of payment by agreement
Amendments 68B to 68D not moved.
Clause 72 agreed.
Clause 73: Set off against repayments under section 67
Debate on whether Clause 73 should stand part of the Bill.
My Lords, as this is my first detailed contribution during today’s Committee consideration of the Housing and Planning Bill, I draw Members’ attention to my entry in the register of interests and declare that I am an elected councillor in the London Borough of Lewisham. However, I feel bound to repeat the point, notwithstanding the points made by the noble Baroness earlier, about the complete failure of the Government to provide the regulations that enable proper scrutiny of this Bill. I again place on record how unacceptable it is that a Bill as complex and controversial as this is brought before Parliament in such a poor state of preparedness. It is nothing short of an outrage that not only have the Government treated the House of Commons and House of Lords in such a manner, but that local authorities, social housing tenants and others affected by the Bill are being treated in the same way. The consequence is a failure to allow the proposals to be properly considered. The line from the Minister last week that the contributions from noble Lords are helping and informing the consultation just underlines the weakness of the Government’s position. We have also heard a variety of apologies and expressions of frustration, and I am sure that the noble Baroness must be frustrated with the problem, which is entirely of the Government’s own making, and the effect it is having on the proper consideration of the Bill by your Lordships’ House. At the end of the day, the power is in the hands of the Government to make the process considerably more acceptable, but they have not gone far enough as yet.
Of course, the Minister is a Minister in the department responsible for this Bill. Instead, we have heard the manifesto defence deployed in Committee, even though it is more usually deployed when the Government are fearful of an imminent defeat on Report or during ping-pong. I shall not be surprised if I hear it suggested from the government Benches that it is all the fault of the last Labour Government that we have not got the regulations before the end of consideration of this Bill.
I oppose Clause 73 standing part of the Bill because it is totally unnecessary. It really is a bit rich: when a local authority has paid too much money in a particular year, that money should be returned to them immediately. The clause will put it the Government’s back pocket as a deposit for next year’s bill. That is totally unacceptable.
However, it gets worse. In our debate last Thursday the noble Lord, Lord Young of Cookham, told noble Lords that there was a process to return money overpaid by local authorities under Clause 67. Through this clause, that process is totally negated. There is not even a suggestion that a local authority would get any interest from the Government’s holding its money. There is more. The money can also be offset against liabilities owed under Section 11 of the Local Government Act 2003. I am sure we will be told not to worry and that it will be offset only against housing debt, but the fact is that Section 11, on my reading, goes wider than the Government suggest, and that is unacceptable. This clause should not form part of the Bill and should be removed.
I take a similar position regarding Clauses 74, 75, 76 and 77, which I also oppose standing part of the Bill. Clause 75 appears to add in a further matter that could lead to a local authority being refused permission to dispose of an asset: any reduction in the amount the local authority would be liable to pay under Clause 67. By way of belt and braces, the Government propose to add a similar provision to Clause 43(4)(a). In respect of local authorities in Wales, Clause 76 makes sure that the Secretary of State can offset against what they should pay to an authority amounts they believe should be paid by the authority under Clause 67, or the relevant section of the Local Government Act. It is like a Government money-hoovering operation.
Clause 74 sets out the conditions and requirements for a local authority to sell its vacant council houses. We on these Benches believe that that is just wrong. It is an attack on council housing, whether by selling the council house or by paying the levy. It is making the duty of an authority to meet its housing need much harder. It does nothing for large families, who often live in larger properties that are usually of higher value. I have said before that I come from a large family, by modern standards, and grew up in a large council property. Living in such a property improved all our lives and helped us progress as a family. I fail to see what this measure does for families in similar situations today who cannot afford to buy their own home.
Amendment 69A, in my name and that of my noble friend Lord Beecham, seeks to help the Government change this disastrous course of action in future if they will not see reason today. It places a sunset provision on Clause 74, meaning it would expire three years after the Bill is enacted. This should not cause the Government any real problems. I specifically set the expiry at three years because we are in the first year of a fixed-term Parliament which is due to run for five years until 2020, so it is this Conservative Government who would be making the required regulations to prevent the clause being repealed. I do not have a crystal ball but unless there is some unforeseen event, it is not unreasonable to assume that the present Government will be in office in the summer of 2019 and able to take the action they need with the benefit of seeing the policy in action.
That is all I have to say at this stage but I may intervene later, as in Committee, that is permitted. I beg to move.
Does the noble Lord agree that the potential for overpayment by local authorities is made much worse by the capacity of the Government to change the meaning of words and interpretations as they go along? A “new affordable home” means what the Government say it means in Clause 72(7); then Clause 72(9) states:
“The Secretary of State may by regulations amend this section so as to change the meaning of ‘new affordable home’”.
In other words, local authorities are going to be charged under a regime that may change as the period of the agreement goes on, leading inevitably to miscalculation and overpayment.
I agree entirely with the noble Lord. I know the Minister is trying to deal with the point I made earlier about regulation, but where we are today really is unacceptable.
My Lords, I want to intervene only briefly on this question of the sunset clause. Members of this House regularly peddle—if I might use that word—the view that we are brilliant at scrutinising legislation; indeed, we claim to be better than the House of Commons on many occasions, although I often doubt that. The problem is the procedures that the Commons introduced in 2001, which made it impossible to consider certain parts of Bills.
However, this Bill cannot be properly considered and mistakes will be made because most of the measures that warrant consideration will be in statutory instruments, which we cannot see. Despite the undertaking the Minister has given us today, we will not see most of the regulations until after Royal Assent. Therefore, if the Bill cannot be fully considered and mistakes are going to be made, and we will not be able to amend the regulations when they are brought forward because that is the way this place works, it seems to me there has to be some kind of contingency arrangement whereby the Government can renew the Bill if they feel it is not fit for purpose after three years’ experience. Perhaps the Minister would have that in mind when she discusses this matter with her officials in the department.
The public should know that the Bill cannot possibly be properly considered. They should know that the great majority of the controversial issues in it cannot be considered by Parliament because we cannot see them and will not see them until the Bill has received Royal Assent.
My Lords, I hope that I have made clear my intention to bring forward information to your Lordships’ House by the end of this week as a “starter for 10”, and more in due course as the Bill progresses. However, we have debated the principle and the elements of this policy in some detail, and I rise for the last time to make the case for Clauses 73 to 77. I will also respond to Amendment 69A.
As I have previously explained, this chapter, on the sale of vacant high-value local authority housing, is an important contributor to the Government’s aims of increasing home ownership and increasing housing supply. Clause 73 simplifies accounting arrangements by reducing the total number of payments made between the Secretary of State and a local authority. It will apply if a local authority has, for example, made an overpayment through an incorrect data entry as a result of human error. It enables the Secretary of State to offset the amount that needs to be repaid against another payment that the local authority is due to make under this chapter or under Section 11 of the Local Government Act 2003, which concerns capital receipts from the disposal of housing land.
Clause 74 imposes a duty on local housing authorities that keep a housing revenue account to consider selling any vacant high-value housing which they own, recognising the importance of making the most effective use of valuable assets. The Secretary of State may exclude housing from this duty through regulations. The intention is that this will be in line with any exclusions made under Clause 68—that is, if we do not include housing in the calculation of payments, we propose that local authorities will not have a duty to consider selling it under Clause 74.
The Minister mentioned high-value properties but, as we have heard before, there is a greater proportion of high-value properties in rural areas. Does that not make the concept more difficult to apply in those areas in terms of the consequences of the policy for that category?
My Lords, we will see how the mechanism works when it comes out, but I think I have said a couple of times in your Lordships’ House that we do not want to adversely and disproportionately affect one area compared with another, so the calculations will be made by area and by type of property according to the number of bedrooms. Noble Lords will have ample opportunity to scrutinise this through the regulations, and we may have more detail through the Bill as time goes on.
Can the noble Baroness tell the Committee how often these payments will be made? Will it be monthly, half-yearly or yearly? If an account overpaid an amount of money, when would that be put right? If a payment was due to be made in April and it was to be paid again the following April, the timing might be an issue.
I take the noble Lord’s point. A local authority may be disadvantaged for quite a period of time if the payments were not made very often. I shall take that point away and consider it.
Clause 75 seeks to amend Section 34(4A) and Section 43(4A) of the Housing Act 1985 to add to the list of matters to which the Secretary of State may have regard when considering whether to give consent to a local authority wishing to dispose of housing. These amendments will mean that if a disposal of housing by the local authority to another person or body could result in a reduced payment to the Secretary of State under Clause 67, the Secretary of State may choose to take this into account, among other factors, when deciding whether to give consent to the disposal. Making this change will ensure that there is important clarity on the issues that the Secretary of State may choose to take into account when organisations are considering such transfers and that he or she can consider if disposal of housing by the local authority to another person or body could result in a reduced payment.
Clause 76 is a technical amendment to Section 11 of the Local Government Act 2003, existing legislation which concerns the pooling of capital housing receipts. It replaces the existing power in Section 11(5) which enables the Secretary of State to set off payments owed to a local authority under that section against any payments the Secretary of State is liable to make to the local authority, with a more limited power which mirrors the provision in Clause 68 of this chapter. Like Clause 73, this aims to simplify accounting arrangements by reducing the total number of payments made between the Secretary of State and a local authority.
Clause 77 deals with the interpretation of certain terms used in this chapter, the great majority of which are self-explanatory. However, I would like to mention one term in particular. Housing “becomes vacant” for the purposes of this chapter,
“when a tenancy granted by the authority comes to an end and is not renewed expressly or by operation of law”.
We have discussed this previously. There may be some circumstances where a high-value home would become vacant under this definition but we would not want it to be counted in the vacancy rate set out in the determination. The power in subsection (2) will enable such exclusions to be made. Providing this power through regulations will provide flexibility to ensure that if circumstances change over time, or if a need for further exclusions is identified in the future, this can be addressed more quickly.
The department is engaging widely with local authorities and other stakeholders and no decisions have been made yet on the circumstances in which housing that becomes vacant may be excluded from the chapter under subsection (2).
Turning now to the specific amendments, Amendment 69A seeks to end the duty for local authorities to consider selling high-value housing as it becomes vacant three years after the Act is passed. Noble Lords have provided many considered lines of debate today but I do not believe the amendments would have the effect they envisage or be beneficial to local authorities or to people in need of new homes. While they would prevent the duty to consider selling from applying for six months following a vacancy arising and would end the duty after three years, the requirement for payments to the Secretary of State would not be changed. The Secretary of State would still be able to make determinations, which would be based on the sale of high-value housing that is expected to become vacant, but these amendments would mean that local authorities would no longer have to consider selling their vacant housing to make the payments.
This moves away from the intentions outlined in the Government’s manifesto. The legislation is framed to provide local authorities with some flexibility on what housing to sell and how to make payments to the Secretary of State. The duty is an important part of this to ensure the payments are focused on high-value housing, both in the calculation by government and the way they are met by local authorities. These amendments would move away from the aims of the policy. Six months is a very long time for a property to sit vacant before the duty to consider selling arises, particularly given the need for housing across the country. On this basis, I hope the noble Lord will consider withdrawing the amendment. When the question is asked, I hope noble Lords will withdraw their opposition and allow the clauses to stand part of the Bill.
Can the Minister help me on a question that we have been pursuing through several Committee days? It is clear that there will be a time gap—even if one accepts the push in policy, which of course I do not—between selling more valuable property and the deployment of the money to fund housing association discounts. Housing association discounts will be required on day three after the Bill gets Royal Assent. The sales to fund it may take a year, two years, three years or four years to come through to fund the presumed demands that will come very quickly in the direction of local authorities.
Therefore, many local authorities will instead be levied in view of their sales. The information I had from my authority, Norwich, this morning was of a housing revenue account of around £50 million facing a loss of £7 million a year on its rental income as a result of the 1% reduction. The levy, in lieu of sales, because of the delay in sales coming through, is likely to cost up to—we do not know yet—£11 million. A quarter of its net housing revenue account will, therefore, be lost to funding housing association discounts until—and if—the sales come through in lieu
Can the Minister tell us when local authorities will have some idea what that levy is likely to be? Will it be governed by the pent-up demand or otherwise of housing association tenants? Will the Minister expect this to be rationed so that it proceeds on an equal path along with the diversion of local authority resources through high-value sales? How exactly will this work? At the moment, it stands to wreck my local authority’s housing revenue account.
My Lords, that is precisely why we are engaged with local authorities to make sure that we get this policy right. The noble Baroness has given me some figures for Norwich. I do not doubt that she is correct, but could she send me the figures so that I can have a look at them and perhaps comment on them?
The noble Baroness has said that there will be time to see how the matter develops. I remind her that Amendment 69A, in my name and that of my noble friend, would allow for that because it is a sunset clause. It would allow a three-year period to see how the process worked. If it did work, it could be renewed by the affirmative procedure, which, as we know, should not take all that long. Why do the Government not accept that amendment and give some reassurance that they will not press ahead with this irrespective of the outcome? The amendment would allow them to affirm the policy, assuming they are still in office, after a three-year period and on the basis of experience. Is that not a more pragmatic way of dealing with a difficult issue?
My Lords, the amendment moves away from the intentions outlined in the Conservative manifesto, but while the amendment would prevent the duty to consider selling applying for a period of six months following a vacancy, the requirement of payments to the Secretary of State would not be changed. However, we monitor all policy as we go along.
I once again press the Minister on the issue of moving to the affirmative procedure. I have raised this question on other days. It has been raised twice this afternoon. On no occasion has the Minister answered the question of when the Government will let this House know whether they are prepared to move in this direction. That would be a much more satisfactory approach to dealing with the detail of the regulations.
I do not think the noble Baroness was in her place when I outlined, at the beginning of today’s session, my intention to bring forward that sort of information by the end of the week.
My Lords, before the noble Baroness finally sits down, perhaps I may indulge myself with a comment on procedure. This is not my patch, which I am here to learn, but we have been here before. There was a very similar procedural wrangle and difficulty over the Childcare Bill. The Bill came forward without sufficient detail to allow the House to debate fully some of the very important issues in it. There was a common mind with the Government and, I think, around the House that two factors could alleviate the problem. One was affirmative resolution, which was agreed for many of the regulations; the other was groups of people convened by the two Ministers responsible to talk through the process of developing regulation and implementation. I think that helped immensely and I hope that something similar could be done here.
I thank the noble Lord for his information. As I have just said, I will bring forward as much as possible, but I have also undertaken to meet noble Lords to discuss matters for regulations as we go forward.
Can the Minister repeat for the Committee what the Government’s problem is with Amendment 69A? It would not stop them doing anything. It is just a sunset clause and would provide them with the ability, if they proceed with the policy and find an issue with it, to stop it. If they wanted to carry on, they would bring forward the affirmative regulations to do so. I do not see what the major problem is. If the Minister could repeat her reasons, it would be very helpful.
Before the noble Baroness answers my noble friend, perhaps I may add to his question—it is the same point but viewed from a slightly different angle. If it turns out that the scheme is not working, on the face of it that would require the Government to bring in primary legislation to change the duty. What the amendment offers is a way of dealing with matters, if required, by secondary legislation, where that difficulty is much less—in fact, we complain about it being less much of the time. In this case, it would surely be a better way of dealing of it than imposing a duty to come back with primary legislation if the scheme proved not to be working properly.
My Lords, it is not usual for a Government to bring forward legislation that they want to end. There have been sunset clauses in certain legislation, but, in this case, we do not particularly want to end it after three years.
I do not know whether the Minister agrees, but Amendment 69A would not only allow, as it would intend, that after three years one might examine the success or otherwise of the policy but risks significantly distorting any potential implementation of that policy, since in the intervening period any local authority which was disinclined to implement the duty to sell vacant high-value housing might well for a substantial part of that three-year period delay such sales in the hope that the duty would repealed under this amendment and not reinstated? Clearly, it would be inappropriate for the Government to pre-empt Parliament’s decision on any such regulation by making it clear that they wanted to extend it indefinitely, so local authorities would be placed in a position which allowed them to frustrate the policy and the Government would not be in a position to insist.
My Lords, I think I have said what I can say on this matter. I recall legislation that has gone through this House with a sunset clause for a very specific purpose.
My Lords, I thank all noble Lords who have spoken in today’s debate: the noble Lords, Lord Stunell and Lord Campbell-Savours, the noble Baroness, Lady Williams of Trafford, and my noble friend Lady Hollis of Heigham. I was not particularly convinced by the points made by the noble Baroness, Lady Williams, and was struck by the intervention of the noble Lord, Lord Stunell, on the wide powers that this part of the Bill grants to the Secretary of State. I am obviously disappointed that the Government have not taken up my offer of a sunset clause. I thank the noble Baroness for undertaking to take away the issue I raised about when payments would be made.
I thank the noble Baroness. That is interesting and I will reflect on it.
As I said, I will reflect on the points that have been made in the debate. We may bring this issue back—or some variation of it—on Report after Easter. With that, I beg to withdraw my opposition to Clause 73 standing part of the Bill.
Clause 73 agreed.
Clause 74: Duty to consider selling vacant high value housing
Amendments 68E to 69A not moved.
Clause 74 agreed.
Clauses 75 to 77 agreed.
Amendment 69B not moved.
Clause 78: Mandatory rents for high income local authority tenants
Moved by Lord Best
69C: Clause 78, page 34, line 9, leave out “must” and insert “should”
My Lords, my noble friend Lord Kerslake is unable to be with us today, but I am grateful to the noble Lords, Lord Kennedy and Lord Stoneham, for their support. I shall speak also to Amendments 70D and 75C. They all relate to the proposed mandatory rent increases for council tenants. I would guess that all of us who are known to have an interest in this Bill will have been lobbied more vociferously on the issue of “pay to stay” than anything else in the legislation. This is because the potential immediate impact of the measure is more frightening than any of the other ingredients in the Bill.
It threatens to reduce significantly the incomes of some 350,000 tenants. Rumours had suggested that those earning £1 more than the threshold of £30,000 outside London and £40,000 in London could see their rent doubling overnight. As the IFS pointed out, that cliff-edge approach would have a disastrous impact on incentives to work or work harder. I have heard of numerous cases where those who are just over the threshold would have been coerced by the huge rent rise to cut back on their working hours so that they could afford to keep their tenancy.
The good news for these very anxious tenants is that the options which the Government have now published are far less onerous than was feared. We now have the prospect of either a rent rise of 20p for every £1 earned over the limit—which is £4 per week on the rent for every £1,000 over the threshold—or £40 per week for someone earning £10,000 over the threshold, and 10p for every extra £1 earned, which is £20 per week for someone earning £10,000 over the threshold.
I have some figures. The Minister has put forward two propositions, one for tenants to pay another 20p for every £1 earned over the limit and the other to pay 10p more in rent for every £1. These are the two propositions and my sums are based on the Government’s suggestions.
My Lords, all I can confirm at this stage is that, as the noble Lord, Lord Best, said, there are two options on the table.
I hope I am right in thinking that the Government are minded to choose the lower of these two options. It would be cruel to suggest the lower figure and then choose the taper that costs tenants twice as much. For a household with two earners together earning £40,000 per annum outside London, with a 20p taper they would face an extra £40 per week on the rent—a serious loss of income. If the taper was at 10p in the pound, their extra rent would be £20 per week, which seems quite enough of an extra burden for two people both earning well under the national average.
I recognise that such increases will be offset to some extent by the Government’s cut in council rents over the next four years. Of course, for the relatively small number of households—well under 1% of council tenants—where household income is more than £50,000, the increases would require substantial cuts to the household budget. That does sound a painful change. Nevertheless, the headline here, following the letter to Peers from the Minister, is that pay to stay will not be quite as dreadful as it appeared earlier.
The amendments address the underlying problem. They would remove the compulsion on local authorities with council housing to introduce any higher-rents regime dictated by central government. Local authorities may well have their own ideas on schemes that would suit local circumstances, local rent levels and local incomes. Whitehall does not always know best. On top of losing their autonomy over relatively micro decisions on rent setting, local authorities will also lose all the extra rent which the pay to stay arrangements generate.
Since all financial benefits from the new arrangements accrue to the Exchequer, not to the local authority, once again it seems that every avenue is being blocked for councils that want to engage in providing more and better housing. Housing associations, including those where councils have transferred all their housing to a housing association, will be able to decide for themselves whether to adopt a scheme of this kind. I think that many will choose not to do so. If they do increase rents for better-off tenants, the housing associations will keep the extra money, not least to make up for some of the loss of rent they will suffer over the next four years due to the Government’s recent requirement on them to cut rents by 12% in real terms—but not councils.
In earlier sittings of this Committee we heard from noble Lords who are understandably aggrieved about other costs falling on councils but not—in just the same circumstances—on housing associations. Driving a wedge between the two providers of affordable housing is a very unfortunate by-product of the Bill. As a strong supporter of councils doing more not less to ease the nation’s housing problems, and as a very long-standing advocate for the contribution of housing associations, I find it very troubling to see the two set against each other in this way.
Surely councils, like housing associations, should be able both to decide on any rental schemes for higher-income tenants and to retain any extra rental income from tenants with higher earnings just as housing associations can. Many of your Lordships have already argued that councils should be able to retain receipts from sales of vacant properties, as housing associations can, and as councils can today but will be prevented by the Bill from doing tomorrow.
The nation needs all hands on deck—all sectors to join the fight to get more homes built. All of us in the housing world need to pull together and not allow ourselves to be pulled apart. These amendments would let councils continue to decide for themselves on any new rental arrangements and, as with housing associations, keep any rent receipts to help meet housing need. I beg to move.
My Lords, I rise to speak to Amendments 69D, 70E, 76A and 79C in this group. I have already declared my vice-presidency of the Local Government Association in Committee, but in view of what I am about to say, I will simply draw attention to it again.
The noble Lord, Lord Best, covered all the key issues on pay to stay, although I will say something further when Amendment 81 in this group has been spoken to. These amendments basically challenge the nature of Clause 78, which is about a mandatory approach to local authorities. They require an element of discretion for local authorities to make decisions that they think are best for their areas. It is difficult to understand why, if it is voluntary for housing associations to do this, it is not voluntary for local authorities. The noble Lord made clear that there is to be a change in the nature of what the Government have been proposing on pay to stay, so the “cliff-edge approach” that he talked about is apparently no more—although we have yet to see the detail. I associate myself with what the noble Lord said about the lower sum being better.
Will the Minister give some further thought to the administrative cost to local authorities and others of pay to stay? I think that the cost will be much higher than the Government currently think. On a later group we will come to the issue of access to HMRC data, but it would be easier to raise the thresholds than simply apply a taper, partly because so much of what is being proposed could relate to levels of household income that exist a number of months before the information is made publicly available under HMRC timescales. The Government need to be very careful about the administration and bureaucracy that will be put in place, particularly relating to the taper, whatever its level—and let us hope that it is the lower one.
My objection to what the Government have been proposing on pay to stay is that it reduces the aspiration to work more and actually encourages people to work less. If they are to lose out with the amount of rent they have to pay it is not worth their while to work, or work as much, so there will be a tendency for people to decrease their hours, with a growth in part-time working. That is particularly dangerous in the public sector, where pay levels are not that high. It might encourage people to work less and take qualified people away from public-facing duties.
I say to the Minister that I hope that it is understood that any extra income deriving from higher rents should be kept for reinvestment in the housing stock locally. I know that there are discussions on that. In the end, the requirement for social housing for rent is such that this cannot be seen as some kind of source of taxation for the Treasury to get its hands on. Actually, money needs to be reinvested by local authorities in providing the right level of housing for their areas.
I hope to come back at a later point on Amendment 81 in this group, which relates to the delegated powers that the Secretary of State will have—but I will wait until a later moment to do that.
My Lords, I will speak to this group of amendments, and in particular in support of Amendment 69D, which would make pay to stay voluntary for local authorities.
The government argument for RTB for housing association tenants is the level playing field—or, as the noble Lord, Lord Porter, said, similar treatment of people on either side of the street. The Government have also proposed pay to stay, under which so-called high-earning council tenants outside London on £30,000 a year between them—£15,000 times two—were to pay a full market rent. But whereas for housing associations pay to stay is voluntary, for local authorities it is compulsory. We need the level playing field of the noble Lord, Lord Porter.
As the noble Lord, Lord Best, absolutely rightly said, whereas housing associations can retain any proceeds from this, local authorities must send theirs to the Exchequer. The reason for that, according to page 56 of the impact analysis, is that the policy of sending the proceeds to the Exchequer will help the Government “reduce the deficit”. Will the Minister tell us why council tenants have a special duty to reduce the deficit while housing association tenants do not?
Secondly, how does this interact with the 1% social rent reductions? Let us assume that a local authority family with two children on gross £30,000, net £24,000, income a year might now have a social rent of about £100 a week for a three-bedroom house. Social rents will be coming down 1% a year, while market rents will grow, it says, with overall private-rental inflation. So the gap between the two will therefore widen. With the push to market rents, if that family’s rent rose to £150 a week, they would get housing benefit; if it rose to £250 a week, their housing benefit would be £100 a week. Even the Government think that that is daft.
So the Government are now proposing, as the noble Lord, Lord Best, said, that rent increases should be tapered and should not apply to those on housing benefit. What would be the result? As the noble Lord, Lord Shipley asked, what family on housing benefit would increase their pay and lose their housing benefit firewall? Work incentives would be badly damaged. Fraud would certainly increase—and, incidentally, contaminate HMRC records. Part-time work would move into the grey economy and couples would come to more informal living and financial arrangements, and so on. In a single-parent household, with an adult son living there, what happens to adult non-dependent deductions? Around
25% of their income is taken into account in determining HB. The son may move out—and then there lurks the threat of the bedroom tax.
And how—I am puzzled by this—will all this interlock with universal credit? If you are on HB, you will not be paying market rent; but what happens if you are on universal credit? The Government say, in their consultation exercise, that they will consider the links to UC “in due course”. That is very odd. DCLG is treating housing benefit and universal credit as two separate streams of benefit. Having sorted HB, they will turn to UC. But of course, as the Minister must know—and I am sure that she does—UC is absorbing HB. UC will be based on monthly real-time information. Pay to stay—ultimately part of UC; whether the Minister or the department are fully aware of this or not, I do not know—will be based on out-of-date tax records, perhaps one year behind. So UC will be based on real-time information on a monthly basis, and housing benefit on the taper will be based on records perhaps a year out of date.
The effect for the tenant of the 20% taper on the move to market rent takes UC withdrawal rates—and there is not a word about this anywhere in the impact analysis, needless to say—from up around 73p in the pound, which is already a high work disincentive, as the noble Lord, Lord Shipley, said, to 93p in the pound. As a result of this, you work for 7p an hour. Would any of your Lordships do that? This really screws UC. There is not much point in rolling out UC—which I very much support and which was based on improving work incentives, which I very much support—if you return to pre-UC deduction rates, keeping just 7p in the pound.
Let us turn away from the effect on tenants to the effect on local authorities—again, as mentioned by the noble Lord, Lord Shipley. At the moment, tenants coming forward for housing benefit know that their finances will be scrutinised—of course they will be; it is an income-related benefit. But in future, as far as I can see, local authorities will need blanket information from HMRC on every adult living in a council home not already on HB, reversing separate taxation and matching it by household and address, in order to increase their rent on an individual, tailored basis. So, if you go down the street mentioned by the noble Lord, Lord Porter, almost every tenant could pay a different rent, personally tailored, for the same kind of property—or worse, based on out-of-date details of their previous year’s income.
At the moment, because rents are standard in local authorities, HB is fixed for the most part for 12 months at a time, apart from major reportable changes of circumstance. Yet even now, local authorities are unable to deliver HB as speedily as they would wish, while losing more and more staff because of their 40% cuts. Given, as we found with tax credits, that income fluctuates quite markedly over the course of the year with overtime, commission, children’s school holidays and periods of sick pay, will the tenants’ pay-to-stay rent fluctuate by the month alongside their income?
If it does not fluctuate, or the Government rely on end-of-year HB adjustments, tenants will find it impossible to avoid debt, arrears, poverty and probably eviction.
But if it does fluctuate monthly, the local authority will find—as with tax credits—that the pay-to-stay rent it charges on a monthly basis is always a couple of notifications behind the facts and will never catch up. It will be a nightmare. As local authorities said in response to the very perfunctory consultation exercise as reported by the Government, their systems are not designed to do any of this. The Government breezily say that they can keep their administrative costs. But the system will crash—constantly.
Then, any extra rent goes to the Treasury. Local authorities already have the power to pursue an individual on more than £60,000 a year for a rent rise—what we call the Bob Crow amendment—if they see fit. But the last thing they will want to do is proceed with mass investigations of almost every council tenant—some will be on HB; those who are not will need to be investigated—at huge administration and probity costs. This is almost literally another poll tax. And the sums at the end of all this go not to local authorities but to the Exchequer.
Only local authority tenants, not housing association tenants, are being levied to fund huge discounts under the voluntary deal. Only local authorities, not housing associations, are required to pursue market rents. Only council tenants, not housing association tenants, may see their UC taper rise from 73p to 93p in the pound so that poorer council tenants get less financial support than the housing association tenant on the other side of the street of the noble Lord, Lord Porter, while having an identical property, identical family and identical income. Finally, only local authorities, not housing associations, are required to send the proceeds to HMT. Local authorities have become the whipping boy at every point in the Bill. Yet local authorities are publicly elected, fully accountable and entirely transparent bodies, open to the public and the press. None of that is true of even the best-run housing associations.
Finally, I turn to the implications for HMRC. The Chancellor has been very clear in the past—it was repeated today in the fourth Question—about the need to protect taxpayer information. I understand that in 2016 he discouraged the Prime Minister from releasing his personal tax statements—which he was willing to do—because it would violate the principle of taxpayer confidentiality. In 2011, Dave Hartnett wrote to the Public Accounts Committee that,
“if taxpayers believe that their information may be disclosed, it will make it very much more difficult for us to collect tax”.
The Minister made the same point earlier today.
“The principle of taxpayer confidentiality is not new. It has existed for as long as we have had a tax system”.
He added that to abandon it would reduce,
“the attractiveness of the UK as a place in which to do business”.—[ Official Report , Commons, 25/1/16; col. 38.]
Yet the income of every adult living in council housing, not having come forward voluntarily for HB—a million or more people—may have to be disclosed by HMRC to local authorities. By 2017, perhaps 200,000 tenants will be paying to stay.
The administrative and security logistics are absolutely frightening. The administrative complexity of a taper doubles the problem. As we try to move on to monthly housing benefit adjustments in line with income which, in turn, determines the rent people are expected to pay, the consequences for families of computer failures will be far worse than any that we have seen with tax credits. Is it possible to conceive of a more open goal for computer collapse than that?
Never before will there have been such a mass transfer of data. Such was the ferocity of the confidentiality rule that when I was a Minister, 15 years ago, my DWP team, which was chasing errant, absentee fathers for maintenance, was allowed only about 20 interrogations of the Inland Revenue a month—and this was between fellow government departments. But at least the transactions for HB are between two public bodies: HMRC and local authorities. Now, housing associations, whose tenants’ housing benefit is handled by local authorities, and which insist they are private bodies, would, if they introduced this policy, have access to taxpayer information on all their tenants.
Worse still, many local authorities will expect to use the private companies they already employ for housing administration—Serco, Capita, Liberata—to handle this. These are commercial, profit-seeking companies, which do not always have a good record in competence or confidentiality. For example, I understand from its website that Liberata, a private, commercial company, handles data for North Somerset, Bromley, Hillingdon and Hounslow, Redcar and Cleveland and Barrow-in-Furness, among others.
I understand, from HMRC sources, that, for the first time ever in the history of the Inland Revenue, private commercial companies will be handling the gold dust of confidential taxpayer information on thousands and thousands of council tenants. I do not believe that it will not be abused. Perhaps it will be quietly sold on to insurance companies, pay-day loan companies, mail-order companies or wide-boy equity release companies. Who knows? Would any of your Lordships like their named, personal data swanning around such companies? Or is it only council tenants, refusing to buy their homes, who are going to be exposed in this way? Under the Bill, and pay to stay, they will have fewer legal and civil rights to privacy than any other section of our society. It is outrageous.
My Lords, I support Clause 78 not standing part of the Bill, although what I have to say applies also to Clause 79.
This policy is perceived by tenants as a punitive policy and one that goes against the Government’s own social policy objectives of promoting security, aspiration and social mobility, mixed communities and reduced bureaucracy. I think that Nottingham City Homes has written to a number of noble Lords—as I live in Nottingham, this is of particular interest to me—saying that it was “overwhelmed” when it organised a meeting on the Bill, with tenants angry and upset, particularly about the pay-to-stay proposals. One of them dubbed it “an assault on ambition”.
Welcome though the confirmation of a taper is, it in no way constitutes a U-turn, as was spun in the media, giving the impression that the Government have somehow climbed down on the policy. After all, a taper has been on the cards ever since the consultation document was first published. The IFS has warned that a taper would still “weaken work incentives”. There are two aspects of this that particularly concern me.
First, no account will be taken of family needs and the costs associated with children, as in a normal means test, nor of the costs associated with disability and caring, which I will talk about in the next group. As the Joseph Rowntree Foundation warns,
“this proposed threshold may be too blunt to accurately reflect the differing needs of households”.
There is no “may” about it. I know that child benefit will be ignored in the income calculation, but according to Professor Donald Hirsch’s calculations of the cost of a child for the CPAG, it covers less than one-fifth of that cost, and that is without taking account of childcare costs, which the most recent survey by the Family and Childcare Trust showed can be astronomical, especially in London. Where is the fairness in treating a childless couple and a couple of two working parents, whose disposable income available for rent is effectively reduced by the costs of children and childcare, in the same way when assessing whether their income is high enough to warrant paying to stay? As the Social Market Foundation has argued, the assessment,
“must relate to equivalised resources”.
My second concern is the likely impact on second earners, mainly women. Despite what I think is now five requests, I still have not received an equality impact assessment for this clause. I can conclude only that one has not been prepared. But, as the Equality and Human Rights Commission has argued:
“To be most effective, Government departments should analyse the equality implications of a policy proposal at a formative stage, so that the assessment can inform policy development and the content of legislation. This will also ensure Parliamentarians have the information they need in order to scrutinise and debate Bills”.
We do not have that information. As I said, I have sent I do not know how many emails, I have made phone calls, I have asked for it in a technical briefing meeting. I still do not have it, even though it is pretty obvious that the policy is likely to act as a particular disincentive to women in couples to stay in or enter paid work. At the same time, it undermines government policy on promoting paid work as the route out of poverty, as all the evidence suggests that the presence of a second earner reduces the risk of child poverty significantly.
Just what such a work disincentive to second earners could mean was brought home to me by a woman who came to see me with the support of TPAS. I think she has also written to a number of noble Lords. She has lived in north Kensington for 35 years and has lived in her current home and worked in a local primary school for 25 years. She kept saying how much she loved her job and the children. She is utterly devastated at the prospect of giving it up but that is what she fears she will have to do if the policy goes ahead because the combined modest earnings of her and her husband take them above the threshold. In her letter to some noble Lords, she wrote: “I have never felt so insecure as I do now and it seems so unfair that I’m being penalised for working”. It was quite clear that by no stretch of the imagination was this a well-off, high-earning couple. It may be that her worst fears will be unfounded when the taper is applied, but how can we know? Until the details are published she will no doubt continue to feel insecure.
We use the term, “the devil is in the detail”. As we have already heard, the crucial devilish detail is still missing. It is totally unclear how the compulsory means test is going to work—in particular, as has already been said, how fluctuating incomes are to be taken into account. Cross-national research, which looked at other countries that had tried something similar, concluded that the administrative burden could well outweigh any supposed efficiency or equity gains. Indeed, I understand they have been discontinued for the most part in Germany, partly because of the bureaucratic costs involved in keeping tabs on incomes. At least the Government have stated that recipients of housing benefit will be exempt, which will be a relief to local authorities and to them, but there remains a big question mark over the interaction with universal credit, which my noble friend Lady Hollis of Heigham underlined with devastating clarity—in so far as one can have clarity in the midst of all this confusion.
The tenants who came to see me about pay to stay said over and over again how bitter they felt. “Punitive” and “punished” are frequently used words because this is how people feel. It is clear that the thought of what might happen is causing acute anxiety. Another tenant from Kensington and Chelsea wrote to say that she and her husband are just about getting by. She said: “I am truly stressing out over this as I don’t want to move away from the area I have known all my life or my family and also leave the job I love”.
On Second Reading, the Minister advised us to keep coming back to the word “home” as we discuss the Bill. This is one of a number of measures that threaten people’s homes. While a taper will mitigate the worst effects of the policy, it does not address the basic fact that people on modest incomes will be affected by a policy spun as aimed at high earners in the name of fairness. There is nothing fair about this.
My Lords, I support all the amendments in this important group. I shall speak particularly to Amendments 69D, 70E, 76A, 79C, and Clauses 78, 84, 85 and 86 stand part. I will try not to repeat previous contributions but I agree with the comments made, especially by the previous speaker.
There is something inherently abhorrent in central Government imposing their will on locally elected councils and insisting that they must do the Government’s bidding. In some cases this may be justified, where they are protecting the very vulnerable in our society—children, the frail elderly, and the chronically sick and disabled—but not on housing. The provision of housing has always been and currently remains, the responsibility of local authorities. They have discharged this duty for decades always with the needs of their local communities in mind, as my noble friend Lord Shipley has already indicated.
We now have a situation where a local authority must charge a high-income tenant a high rent. This might be acceptable if the tenants were, indeed, earning a high income. I welcome the Government’s commitment to introduce a taper and look forward to confirmation of what that taper will actually look like and mean for tenants. However, I would much prefer that we leave the discretion to local authorities, which know their communities, to determine at what point they start charging individual tenants higher rents. The words “may” and “enable” give all those involved the opportunity to assess actual incomes, individual needs and the likelihood of the higher rent being paid.
Absolutely the last desirable outcome is for the tenant to be evicted for non-payment of rent. They will have to move to a cheaper housing area, the wage earners will have further to travel to work or lose their jobs and the children will be forced to change schools. Where is the sense in this?
I am sure that your Lordships have all received many letters from members of the public on the subject of pay to stay. I could spend the next 30 minutes reading out some of these heartrending stories; your Lordships will be pleased to know that I shall read only one. For reasons which will be obvious, I have not included the name or address of the writer, but I have it in my office. The lady writes:
“I am writing to let you know how Pay to Stay will affect my household.
I was homeless about 15 years ago due to a family trauma and it took me many years to get back on my feet. It took me five years to get my son back from my ex-husband who had kept him in America. During this time I experienced a severe depression and homelessness.
I was finally housed in a secure tenancy for rough sleepers. I had to give this up when I got my son back and we now have a 2 bedroom flat in a housing association flat in Camden with an assured tenancy.
I managed to obtain work again working with women with mental health needs in prison and the community. My son is now 25 and earning about £20,000. Last year I earned £26,000. This puts us over the proposed threshold for pay to stay.
I will have to give up work if this is the case. I have no savings and will not have a very big pension as my husband ‘forgot’ to pay some of my NI stamps when we had our own business about 20 years ago.
How will my son ever be able to save enough to leave home? All properties in Camden will have very high rents. I want to work as long as I can, at least another 7 years hopefully. I am 63 now.
Please look at raising the threshold of pay to stay. £40,000 is not a large wage for 2 people, especially if you are not a couple like my son and me. I feel very threatened by the housing bill and feel my flat should go to someone else when I die, not be bought and sold on for lots of money”.
That is a very poignant story, and typical of those that I have received. One lady wrote to me last week giving me a breakdown of all her household budget, including putting away a very small sum each week to pay for Christmas. She and her husband are both working and have children, the eldest of whom is six. Her husband has been in the same job for 17 years, and she has worked for the past 18. They know exactly where every penny goes. Their joint income will take them over the limit for London. If they have to pay the market rent, there will be no money for childcare.
The introduction of the taper is good news, but I urge the Minister to raise the threshold of income at which it begins; otherwise I fear that we will be hearing a lot more heartrending stories. I support the amendments.
My Lords, I shall comment briefly on this group of amendments on the pay-to-stay extension. There has been a lot of consultation, but only 46% of the housing authorities or local authorities actually replied, and it is a pity that that statistic is not broken down between the two entities; it would have been interesting to have had that result. As usual, regulations will set out the thresholds where the proposed takeover will bite. I trust that these will not be set too harshly to disadvantage even more tenants.
As the Government state, it should not be a disincentive to work. A joint income of £30,000 outside London may seem about right where accommodation is being subsidised below market rent levels, but it is not really a very high income for the two highest-earning people in the household. As usual, the devil is in the detail, and we have not yet seen the regulations, so what will happen if a tenant is made redundant or there is a pressing family crisis? Can the Minister give assurances that the authorities will still be able to react swiftly, despite all the funding cuts from which they have been suffering?
The explanatory paper states that the Government do not expect frequent rent adjustments, but I wonder what is meant by “frequent”. Is it going to be monthly or yearly or what? Will every pay rise mean a review or a new assessment? What about the drag that is going to follow on from such an event?
I suggest that the cost to housing associations and to local authorities should not be underestimated in bringing this policy into the Bill, especially where new IT systems are needed. We know the record that public authorities have on IT systems—it is not good. This may make this whole part of the project counterproductive.
As other noble Lords have said, the involvement of HMRC is a very dubious practice that will slow up assessments and—worse still—incite distrust and resentment among the parties involved, let alone disturbing the code of confidentiality that we have heard so much about already today.
I would like to end on a good point: I am pleased that those on housing benefit will be outside the scope of this part of the Bill. I look forward to hearing the Minister’s response with more detail on the taper proposals.
My Lords, I thank the Minister for her earlier remarks, which offered at last to provide us with the information about the state of play regarding secondary legislation, and for her commitment to provide us with a response to the Delegated Powers and Regulatory Reform Committee’s two reports—the 20th and 21st—before Report. I draw noble Lords’ attention to pages 7, 8 and 9 of the 20th report, which give the committee’s response to some of the issues we are discussing.
I genuinely believe that a case can be made for a discretionary, flexible, locally set pay-to-stay arrangement, with the money raised reinvested locally to meet locally identified housing need. It is very difficult to make a case for an imposed, inflexible scheme with no opportunity for the money to be reinvested at the local level and no account taken of individual circumstances or of local conditions. That case is made even more difficult by some of the language that has been used—not by the Minister but, for example, by the Chancellor of the Exchequer, who has talked about the burden of this being placed on other working families by the subsidy made on social rent.
I remind the Chancellor that the taxpayer and those working people make very large subsidies to other forms of tenure, whether it is to the owner-occupiers who attract relief from capital gains tax and are not taxed on the value of their homes, right the way through to the first part of this Bill where we are going to give very large subsidies to those who choose to acquire a starter home. Of course, the right to buy itself is another form of subsidy. The case is not made easy by the language in this part of the Bill about rents for “high income” social tenants. As the noble Lord, Lord Best, has pointed out, a family with two people on the living wage would have an income that puts them only just below the threshold level proposed as a “high income” for the imposition of the right to stay.
It is not as if the right to stay is new. It was introduced in 2012 by the coalition Government when they introduced a voluntary scheme starting for payments over an income of £60,000. During the preparation for that introduction there was another consultation that looked at what people thought of such a scheme. It is quite reflective to look back at some of the things that people said during that consultation—indeed, they said all the very things that people are saying this time round. They said, first, that you had to be very careful about the threshold levels so you did not create a disincentive; secondly, that there had to be locally determined setting of levels because of fluctuating local circumstances; and thirdly, above all, that it should be a discretionary scheme enabling, for example, local authorities to decide whether or not to introduce it and the details of doing that.
That is why I am so supportive of the amendments before us, in whichever combination you choose, because in one way or another they are all basically saying that we should change the compulsory nature, get rid of the imposition of pay to stay and allow a voluntary scheme of one sort or another. But, as I said, we have already had a scheme introduced. I am assuming that the Government would have looked in detail at the operation of the current voluntary scheme in coming forward with a revision of that scheme, which is what is before us in the Bill today. Can the Minister tell us in some detail what information has been gleaned about the scheme introduced in 2012? She will be in some difficulty, because last July, in answer to a Parliamentary Question, the Government admitted that they had collected no data whatever and had no information whatever about whether any local authorities or any other providers of social housing had even introduced such a scheme. But they have had time since July, so—not wishing to embarrass them—I am assuming that they have that information, and we look forward to having it.
Of course, lack of information is the problem that we have had throughout this Bill. I am absolutely delighted that the Government have now said that they are going to introduce a taper scheme. It is amazing that that was not included at the very outset of the Bill, because only a couple of years ago the previous Government made it absolutely clear that a pay-to-stay scheme must not have a built-in disincentive for people to go out and earn more by getting a better job or working longer hours. That was very clear—yet the failure to include a taper at the beginning of this scheme has led to a very large number of people being extremely concerned about what the future may hold.
It is equally bad that we are in a situation whereby, notwithstanding the fact that there is a taper or, as we have heard from the noble Lord, Lord Best, there will be either a 10% or 20% scheme, we do not know which it is—we do not know the details of it or what level of income is going to come in as a result, and we do not know how much local authorities are going to be allowed to keep back to pay for their costs. So we have no idea what the impact of the legislation that we are debating today is going to have either on the people whom it will affect or on the Exchequer of the country. The sooner we get that information, absolutely the better.
Above all, the best thing would be for the Government to do what they have already done and back down in respect of something being compulsory. We know that the Government have backed down in respect of requiring housing associations to impose right to buy, and we hope that on this occasion they might back down on imposing pay to stay on councils. After all, it makes much more sense for a local council to have that discretion and be able to take account of local circumstances and invest the money in providing for local housing need that it has identified. It does not make sense that housing associations are to have that freedom both to decide whether or not to do it or to be able to use the money, if they introduce it, to invest in housing stock to meet what they have identified as housing need.
I have a second question for the Minister, because it is important that we at least have this on record. Could she confirm that one reason why there has not been an imposition on housing associations to introduce pay to stay is because it is part of the package of measures to try yet again to get the ONS to reclassify housing associations so that they are no longer public bodies? If that is the case, we need to know and, if there any other reasons, we need to know. Above all, these amendments would get rid of compulsion, give flexibility and give an opportunity for local determination. That is why I am so keen to support them.
My Lords, the case made by my noble friends Lady Hollis and Lady Lister on this amendment has been utterly devastating. They have totally undermined the Government’s case and one is left wondering, having listened to their contributions, how this section of the Bill managed to clear the officials. They would have had access to the data produced by my noble friends and I simply cannot understand how the Minister will be able to respond to what they have said—in particular to the comments of my noble friend Lady Hollis, who said that information of a private nature, on private incomes, will now, within the law, for the first time ever, be given to private companies acting on behalf of local authorities.
At this end of this debate we need a clear statement from Ministers as to whether they accept that that is the case. We believe that it is the case, but Ministers should be prepared to say at the Dispatch Box whether it is true that information of a private nature on personal incomes can now be handed over to private companies—with all that that implies. It means leakage within communities where people may well find that they are in a position to discuss the private incomes of individuals.
I support the first five amendments in this group and would like to ask some questions that have not been asked during this debate. I do not really want to repeat anything that other noble Lords have said, apart from what my noble friend Lady Hollis said. Clause 78(2) states:
“The regulations may, in particular, require the rent—(a) to be equal to the market rate, (b) to be a proportion of the market rate”.
I think we should at this stage know where. When the people were on the streets of London yesterday—I understand there were thousands of them—demonstrating about the consequences of this Bill for them as individuals and the breach of privacy that it entails, many of them were perhaps unaware that in many parts of the country the full market rate will be the target. It might well be that some of them thought that their properties might be simply covered by the provision of the “proportion of the market rate” in paragraph (b).
That question is relevant because in the Shelter briefing—and Shelter has been one of the main sources of information on this Bill rather than government departments, certainly when it comes to statistics—we find from DCLG tables 702 and 704 that the London average social rent in local authority-owned housing is £455 per month. If that property were in the private sector, according to the private rental market statistics summary of monthly rents recorded between October 2014 and September 2015, that rent would be £1,626 per month for a two bed flat. In other words, the rent nearly quadruples. So if the target is market rents, people in London have to expect that the Government’s ultimate objective is to secure a market rent of £1,626 a month on a property that currently on average costs £455 a month. That is a huge increase.
I move now to Clause 79. Again, we have the problem that we have a skeleton Bill. We are not given the answers. This is a classic example of the problem of this Bill. It says:
“Meaning of ‘high income’ etc … Rent regulations must … define what is meant by ‘high income’ for the purposes of this Chapter”.
We had a debate about that and we broadly know what the figures are—the £30,000 and £40,000 thresholds.
But then Clause 79(2) says:
“The regulations may, in particular … define ‘high income’ in different ways for different areas”.
What will that mean for London, Newcastle or Birmingham? Is a different area going to determine what the high-income level is? Again, that will be in regulations, so we cannot see what it means. The differential in England may well be very controversial but we cannot debate it at this stage of the Bill.
Clause 79(2)(b) says that the regulations may,
“specify things that are, or are not, to be treated as income”.
Will they include unearned income, pensions, all benefits, the benefits of dependants, the unearned income of dependants, or the unearned income or benefits of relatives who might stay in the property? Once again, a whole area is excluded from consideration by this House. My noble friends Lady Hollis and Lady Lister at least tried to put wings on it but we still do not know the detail.
Clause 79(2)(c) then says that the regulations may,
“make provision about the period by reference to which a person’s income is to be calculated”.
Is it to be weekly, monthly, annually or biannually? Again, we are not told.
Paragraph (d) says that the regulations may,
“make provision about how a person’s income is to be verified”.
Noble Lords should remember that my noble friend Lady Hollis said that everyone who lives in a council house and is not on housing benefit could be subject to an inquiry about their income by their local authority. Can we presume that if you live in a council house in the United Kingdom and your total household income exceeds £30,000 a year, the local authority will be able to ring up your employer or anybody they want—for example, your pension provider, your private pension provider or any other organisation that might be paying someone an income—to ask how much you are being paid. We know that that already exists in law for means-testing systems, but now we are talking about people who are outside the benefits system and will suddenly be brought into the whole world of means testing. I believe that that is fundamentally wrong.
That brings me to my final objection. This Bill will fail for the reasons that have been given by my noble friends. If the annual income for your household outside London is over £30,000 a year, you are going to be very tempted to go on the fiddle. There will be hundreds of thousands of people who say, “I’m not going to declare that income. I’m going to take a little job here and get a bit of extra money there. I’ll go and work in a hotel and do a few little jobs here and there”. They will find all sorts of ways to get round these rules.
I do not normally attack officials but I cannot understand how even officials do not realise what is going on in the real world. Parliament has become unwieldy—it just does not understand what is going on in the population. People calculate how they can maximise their income, and if they are going to be caught by the £30,000 threshold, as a lot of people in the United Kingdom will be, they will find ways of getting round it. There will be an army of people trying to track down people’s incomes, and people will get very upset. As my noble friend Lady Hollis said, this will turn into another poll tax. We have warned the Government: there will be abuse and massive fiddling. I think that, even at this late stage, the Government should take stock of the nonsense provisions in this stupid Bill.
My Lords, as we have heard, this group deals with the Government’s extraordinary assumption of powers to determine for every local housing authority the rent they must charge to high-income tenants—an even greater trespass on their right to manage their own affairs than those we have previously discussed in relation to this Bill. We support the amendments in this group, which would leave councils with discretion in this area and would transform government prescription to responses better determined at a local level, taking into account but not being bound by the Government’s views.
Later as we proceed with the Bill we will debate permission in principle in relation to planning. In the clauses in Chapter 3 we have legislation in principle. The rent regulations which the Bill requires councils to apply are potentially wide ranging as they may require the rent to be equal to the market rate; or a proportion, needless to say unspecified in the Bill, of the market rate; or to be determined by other equally unspecified reference to other factors; while Clause 8(3), as my noble friend has said, provides different rents for people with different incomes or for different areas.
Clause 79(2) extends the scope of these regulations to define what constitutes high income, how it is to be calculated—including different ways for different areas—and specifying what is and is not income, the period to be taken into account for the purpose of the calculation, and how a person’s income or a person’s household income is to be calculated, and requires the housing authority to have regard to guidance when calculating or verifying a person’s income. All this, of course, will come in regulations we have yet to see but hope to see—we have an assurance—before we finally reach Report. However, even they are only possibilities. They will not be prescriptive but what councils and housing authorities may do. It is unclear whether they will be binding.
Clause 80 deals with information about income. Again it sets out a series of regulations which may require housing authorities to do things and may, in particular, make provision about the kind of information or evidence that may be required. Interestingly, subsection (4) defines a tenant as including a prospective tenant. That rather concerns me and perhaps other noble Lords. There is a suggestion there that, if a tenant’s income is found to be rather low in relation to the property, that will affect the granting of a tenancy. It opens up the possibility that tenants will be picked from those who can, on the Bill’s definition, afford a particular property and that it will not be let to tenants who cannot. If that is not the case—if I am being unduly suspicious—perhaps the Minister can tell the House why subsection (4) is in Clause 80 at all.
This complex bureaucratic exercise will have to be undertaken up and down the country. What is the Government’s estimate of the cost of this cumbersome system and how will it be met? Will it be met by the Government or by the Housing Revenue Account and, therefore, by the tenants themselves, effectively, in the end—and tenants not only of these properties but, presumably, across the housing range?
We will encounter in later groups other aspects of this extraordinary example of naked centralism, but can the Minister tell the House how far the drafting of regulations has got? She has indicated today that we will be seeing regulations—she is nodding her head—so it looks as though these particular regulations will be included, for which we will be grateful. However, when she replies to this debate, can she say who has been consulted in the matter and with what outcomes? In particular, have the Government consulted representatives of tenants? Tenants’ federations and tenants’ associations exist in many places. Have they discussed the matter with them or has their conversation been confined to the housing authorities themselves?
If this approach is appropriate for this area of public policy, can the Minister say which other areas of public provision by local authorities can be certain of avoiding the imposition of similar manifestations of democratic centralism that would have made Stalin, Nicola Sturgeon or even Eric Pickles blush?
Amendment 81, in my name and that of my noble friend Lord Kennedy, deals with the particularly egregious provision in Clause 84 that regulations may require an authority to make a payment to the Secretary of State,
“in respect of any estimated increase in rental income because of the regulations”, which will prescribe how a payment is to be calculated. Among the provisions in this clause is the following amazing formulation:
“The regulations may provide for assumptions to be made in making a calculation, whether or not those assumptions are, or are likely to be, borne out by events”.
I challenge the Minister to cite any other piece of legislation which comes even close to resembling this extraordinary wording.
Amendment 81 removes the word “estimated” such that only actual rental income would have to be paid. What possible justification could the Minister have for failing to accept this amendment? There have been some particularly forensic analyses of the provisions here. I draw attention particularly to my noble friend Lady Hollis’s critique. She has raised a lot of questions. The Minister may not be in a position to reply to them fully today—that would not be her fault. One has to say, however, that as we go through this Bill, in clause after clause we are finding similar problems. It is a Bill that has been ill thought out and rushed, and its impact on people has not, as it so far appears, been reasonably calculated.
We will endeavour to do our best, as a Committee, to improve this Bill, but this clause in particular highlights almost everything that is wrong about the Government’s approach.
My Lords, I said earlier that I wanted to comment on Amendment 81 when it had been spoken to. It is part of Clause 84, and therefore Clause 84 stand part is relevant. This is a very important issue. The noble Lord, Lord Foster of Bath, referred to pages seven, eight and nine of the Delegated Powers and Regulatory Reform Committee’s report. I do not seek to repeat what the noble Lord, Lord Beecham, has said, but I hope that the Minister will have a clear reply because, as the Delegated Powers and Regulatory Reform Committee says in paragraph 37:
“It could be viewed as a form of taxation because it enables the regulations to require local housing authorities to make payments to the Secretary of State in respect of ‘any estimated increase in rental income because of the regulations’”.
It goes on to say that the memorandum of explanation that it received,
“gives only the barest explanation or justification for this power; indeed, it seeks to dismiss this highly important provision as ‘quasi-technical’.… The intended meaning of that expression wholly eludes us, and the House may wish to ask the Minister for an explanation”.
We have asked for this. Given that this has been available since
In paragraph 38, the Delegated Powers and Regulatory Reform Committee says:
“The Henry VIII power in Clause 83(4) will be subject to the affirmative procedure. Otherwise, the negative procedure applies to regulations made under all the other powers in this group of clauses. The justification in the memorandum is that the negative procedure follows ‘a clear policy framework that has been set in Clause 78 and the related clauses of the primary legislation’….We strongly disagree with the suggestion that the clauses in question offer anything like a clear enough statement of discernible policy to justify the delegation, far less the negative procedure”.
I want it to be clearly understood by the Minister that this is a very serious matter. I hope and anticipate that she will be able to give a full explanation of why this clause has been worded in this way.
My Lords, before I turn to the amendments I want to outline the Government’s latest position on the policy for high-income social tenants, which I outlined in a letter late last week. I hope this will address some of the concerns from noble Lords, particularly those who have stated their opposition to the policy and the clauses in the Bill.
I recognise and share the concern about the level of detail that has been brought forward with regard to our policy for high-income social tenants. My priority over the past few weeks has been to finalise key aspects in order to give that detail. This is particularly important, as the greater part of the policy will be set out in secondary legislation. Although I do not have regulations to share with noble Lords today, I am able to set out a significant amount of detail about what will be included in those regulations.
I am clear that secondary legislation is necessary for this policy, as we need the ability to keep the policy under review and bring forward changes in future based on a thorough review of the effectiveness of the policy and its impact. I am sure that that will be supported.
It is fair to ask how the legislation will be used in the first place. Before I turn to that, I remind the Committee of the Government’s reasons for introducing the policy. The 2015 Budget set out that households in social housing on incomes of £30,000 or above nationally and £40,000 or above in London would be required to pay a higher amount of rent if their current rent was below the market value. It is simply not right that social tenants continue to benefit from lower rates of rent as their income rises when households in the private sector on comparable income levels do not have this luxury. Households in the private sector on those kinds of incomes would, in many cases, be expected to pay the market rent. This is fundamentally unfair when it is those same taxpayers who are contributing to the lower rents enjoyed by tenants on similar incomes in the social sector. The position cannot continue.
Many taxpayers will be surprised to learn that there are more than 40,000 households in the social sector on annual household incomes of over £50,000 a year who are continuing to benefit from taxpayer-funded lower rents. Of course, that figure is at the top end of the household income scale, and we recognise that there are far more social households in receipt of incomes between £30,000 and £40,000 a year. We have always recognised that we must not damage the incentive to keep and find work, as the noble Lord, Lord Foster, says, and I know this important aim will be shared by many in the Committee. Households earning above £30,000 should be able to contribute a little more towards their housing costs, and it is on that basis that we consulted in October 2015 on a proposal for a taper to ensure that rents would increase gradually above the proposed income thresholds.
There was a strong level of support for the proposed taper, with just under 90% of respondents to the question supporting the proposal. I am pleased to be able to confirm to the Committee that the Government will be introducing a taper, and we will use regulations to set out the design of the taper. There are a number of ways in which this could be done. For example, a taper set at 20% would mean an extra 20% in rent for every £1 earned above the income threshold. A taper set at 10% would mean an extra 10% in rent for every £1 earned above the threshold. Both examples would mean that, for households just above the starting income thresholds, the rent rise would be a few pounds each week, not the doubling of rental payments that has been a prominent accusation in recent weeks. I am sure the Government’s confirmation of the taper will provide some reassurance to members of those households who have been worried that rents will jump straight to market rental values.
My Lords, perhaps I may finish this statement and then the noble Lord can intervene.
The noble Baroness, Lady Bakewell, mentioned a lady who wrote to her who was a housing association tenant. Of course, this measure would not apply to her.
Of course, for those households earning far more than the proposed starting thresholds, the rent increases would be greater. However, the taper will reflect what we consider to be the best balance between ensuring fairness between the social and private rented markets, and protecting the incentive to find and keep work.
I should take the opportunity to remind the Committee about the Government’s home ownership offer to social tenants, particularly those on the kind of incomes we are talking about. If a social tenant were to make the move into home ownership, via either Right to Buy, shared ownership or Rent to Buy, the policy for higher rents simply would not apply to them. This is an important message.
The consultation also asked for views on how the administrative costs for local authorities should be dealt with. The proposal was to allow local authorities to retain a reasonable amount of admin costs, and I can confirm today that the Government will honour this proposal—the noble Lord, Lord Shipley, asked about this. Further work with local government is necessary to understand what the actual costs will be, and we will explore in detail how to implement a policy that minimises the burden on local authorities.
Moving forward over the next few months, the priority for my department is engagement with local authorities and housing associations. The work will inform much of the rest of the regulations and will be focused on three key areas: how “income” is defined for the purposes of the policy; how market rents should be established; and the process for returning money raised from local authorities to the Exchequer. I assure noble Lords that we want a policy that is workable, and this is why the engagement work is so important. I will pick up on these areas in more detail as we move through the amendments.
I hope that these opening remarks have been helpful to noble Lords and that some reassurance has been provided on key aspects of the policy on the taper and the treatment of admin costs.
Just for the avoidance of doubt, when my noble friend referred to the two illustrations on the taper, she referred to 10% and 20%. I understood that we are in fact talking about 10 pence and 20 pence in the pound.
My noble friend is absolutely right. I had not realised that I had made that error. At this point, I shall let the noble Lord, Lord Campbell-Savours, intervene.
I think that the noble Lord, Lord Best, said that he thought that the Government were minded towards the lower taper. If he thought that, he must have had some indication, either from officials or from within the department. Has any discussion gone on and who is privy to it?
My Lords, I think that the noble Lord spoke in hope rather than anything else. I have not had private conversations with him about what those figures would look like. I am sure he will speak for himself if he wishes to do so.
The amendments would give local authorities the option to adopt a voluntary policy for high-income social tenants. While I understand why this may seem an attractive way forward, particularly for local authorities, a voluntary approach does not help achieve our aim of a consistent and fair approach for all local authority tenants.
Amendment 69C, tabled by the noble Lords, Lord Kerslake, Lord Best, Lord Kennedy and Lord Stoneham, would give local authorities the choice about whether to raise rents for high-income social tenants. As I have explained, the policy will be mandatory for local authorities to ensure fairness and a consistent approach.
It may be that noble Lords have in mind that the policy will still be voluntary for housing associations, and it may help if I provide more detail on that decision—this goes to the point raised by the noble Lord, Lord Foster. I am sure that noble Lords are all aware that following the reclassification of the housing association sector as public by the Office for National Statistics, the Government have taken the necessary steps to persuade the ONS to reverse that decision. This means not putting in place controls over the sector, and there are clauses elsewhere in the Bill that aim to deregulate it. Part of this approach is to make sure that we do not tell housing associations how to run their business and, on that basis, we cannot force them to operate a pay-to-stay policy. However, we want as many housing associations as possible to operate a voluntary policy, and my department is taking forward discussions with the National Housing Federation and housing associations to ensure that the majority do so. Early indications are that housing associations are interested in adopting a voluntary policy and, as these conversations develop, I will bring forward more detail.
The noble Lord, Lord Foster, asked about the data from the right to stay—I think he called it—in 2012. We did not collect those data because so few housing associations and local authorities operated it, and that is still the case today.
No, I am afraid not.
Amendments 69D and 76A, tabled by the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, would have the same effect as the previous amendment: they would make the policy voluntary for local authorities. I have explained why that is not our preference.
The noble Baroness, Lady Hollis, asked how pay to stay would work with taxable years. We have not yet decided how it will work. We have not decided whether it will be calculated by looking at taxable income and we are also considering whether it should be based on previous income or current income.
Can the Minister help me on this? Under UC and so on, we are dealing with real-time information, where people’s income fluctuates month by month. Does this mean that the Minister will not be interested in that fluctuation month by month in terms of the taper? As far as local authorities are concerned, and as far as I can see, they will be required to have personally tailored rents, probably revisited every month, and a different rent for every house in the street. The Minister may go on to answer that, but as far as I can see, almost no thought has been given in all the papers that I have read to the interaction between what is proposed for local authorities and what a fellow department, DWP, is seeking to achieve.
My Lords, on the interaction between UC and the policy, we are doing as a priority a piece of work to explore that relationship, but there will obviously be an exemption for those on housing benefit. Officials and I have given some thought to that very point about fluctuations from month to month—for example, for someone who is on a zero-hours contract. That is the very type of thing we are looking at in terms of making this policy fair, because there will be many situations where that is the case.
My Lords, I may not have articulated it properly, but that is the very sort of issue that we are looking into. I hope that in due course we will see an equitable conclusion.
The noble Baroness, Lady Lister, asked about the equality impact assessment. As if by magic, by the end of this week—in fact, as we speak—I believe that it is going on the Bill website, and I have asked for a copy to be sent directly to her. If by Thursday it is not with her she knows where to come.
I take the point made by the noble Baroness. I can give her that confirmation today.
The noble Baroness, Lady Hollis, talked about the problems relating to data sharing. We will come on to this issue in a later group. Suffice it to say for now that HMRC will not collect any new information. The landlords collect it and confirm it with HMRC. It is a criminal offence to disclose HMRC data unlawfully, but as I say, we will come on to this matter in a later group.
The answer is yes. The landlord will collect the information and confirm it with HMRC, which is slightly the other way around, if that makes sense. As I say, perhaps we should leave the discussion about HMRC—
My Lords, landlords collect the information and they send it to HMRC. It is not a question of HMRC collecting any new information; HMRC will not be doing that. Perhaps we should park the HMRC issue because we will come on to it in a later group.
I turn to Amendment 70D tabled by among others the noble Lords, Lord Best and Lord Beecham. This would give local authorities a choice about how to set rents for high income social tenants. Taken together with previous amendments that seek to make the policy voluntary, this would mean that a number of different approaches would be taken up and down the country. As I have said, that is not our preferred route as we want a consistent approach for all local authority tenants. This is best achieved by the introduction of a taper, which I hope I have covered thoroughly already. Regulations under this clause will be used to confirm the taper.
Housing associations will be free to decide on the most appropriate level of rent, although we hope that the majority will copy the approach of the taper that will apply to local authority tenants. The housing associations we have spoken to have suggested that this will be the most likely scenario.
Amendment 70E would enable local authorities to decide how rents should be set, presumably after they had taken the decision on whether to adopt a policy. I refer the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, back to the previous discussions and the commitments I have given on rents by way of a taper. This will apply to all local authority tenants and will link rent rises to increases in household income.
Amendment 75C, tabled by among others the noble Lords, Lord Best and Lord Kennedy, would change the status of the guidance issued by the Secretary of State. Local authorities will be very clear that if they are to be required to operate the policy, they need guidance about the steps they should take. The purpose of guidance will not be to prescribe exactly the processes and technical support needed to operate the policy within an authority but it may set out, for example, how income has been defined under the policy and the types of evidence that may be acceptable to help to verify declarations made by tenants. I am sure that noble Lords will be interested in any guidance that we intend to issue, and I will certainly share it when it becomes available.
Amendment 79C is concerned with the approach for non-declaration of rents by social households. I thank the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, for the amendment and I will turn to the reasons for the power in a separate part of the debate. This amendment seeks to make the power voluntary for local authorities, but we believe that where action is needed for tenants who do not declare, the approach should apply consistently across the country. We are considering how this power could also be used by housing associations in discussion with them, and I am clear that there should be a fair and consistent use of the approach for non-declaration.
Finally, Amendment 81, tabled by the noble Lords, Lord Kennedy and Lord Beecham, would mean that payments made to the Government under the policy could not be based on an estimate of the rental income increase or on a formula approach based on a set of assumptions. We have not taken a decision on the approach as further engagement with local authorities is necessary. I think that also answers the point put by the noble Baroness, Lady Hollis. However, there needs to be flexibility in the power to ensure that the most appropriate approach can be taken. I will carefully consider both the benefits and the drawbacks to an approach based on actual receipts and one based on estimates. Engagement with local authorities will continue over the next month, and the issue of how to return money will be at the top of the agenda. We will listen carefully to the arguments before making a decision.
As I have said, I recognise why there is a desire for local authorities to operate this policy voluntarily, but I hope I have done enough to persuade noble Lords why that would not be the best way forward. The Government have a clearly stated policy that high income social tenants should pay a fairer level of rent. On that basis, it is only fair that it should apply consistently across local authority tenants. I have outlined why we cannot do the same for housing associations, but that we are working closely with them to ensure they take up the policy. Alongside this, I have provided confirmation of our commitment to a taper that will meet a reasonable level of the costs of operating the scheme for local authorities. On that basis, I ask that the amendment be withdrawn.
I think I heard the noble Baroness correctly, but I might be wrong, when she said earlier that council tenants receive a taxpayer-funded subsidy. If that is the case, will she say a bit more about it?
My Lords, I talked about council tenants on higher incomes benefiting from a taxpayer subsidy when many people in the private rented sector who are on lower incomes would not be able to avail themselves of such a subsidy.
Could the noble Baroness specify what form that subsidy takes? Certainly in the local authorities I am familiar with, the rents charged cover maintenance, repairs, collection, administration and the like, and receive no taxpayer subsidy—unless the Minister is saying that anything below market rent is a subsidy by definition, which I think is an absurd position. As far as I am aware, there is no subsidy. Perhaps the Minister can specify in what ways the taxpayer subsidises council tenants.
What the noble Baroness is saying is that every time private landlords’ rents go up, the subsidy to council tenants from the taxpayer is increased. That is Orwellian.
My Lords, I think that we will have to agree to differ. I recognise that there are different opinions across the Committee on this, but I have made the point because social rents are lower than market rent.
Market rents are artificial. There is nothing God-given about market rents because they are determined by landlords, largely on the basis of a shortage of affordable housing anyway. In so far as there is a subsidy, surely it is the subsidy that is paid in the form of housing benefit for private tenants, about which the Government propose to do nothing at all.
In addition to that, the noble Baroness referred to the need for consistency across all local authorities. She has not made an argument for that, she has merely stated it as a given. The Government do not take the same view about council tax. They did in a sense when they introduced the poll tax, and they seem to be making the equivalent mistake here with local authority rents. It is an absurd proposition that the same system should apply across all local authorities irrespective, for example, of the value of the housing and average local incomes. Where is the justification for the simple assertion that that must be the basis of the scheme?
I am sorry, I thought that the noble Lord was going on to make a speech. The fact is that generally social rents are cheaper than market rents, although they have been going up at a higher rate than rents in the private sector. I do not think we can compare this proposal with council tax because different areas have different needs in terms of the services they provide.
My Lords, I am grateful to all noble Lords who have joined in this debate. As has been the pattern in other parts of the Bill, we have started with a lengthy session which has looked at the full policy implications in this area. There are a lot of amendments yet to come on pay to stay, but I think we have already aired some of the broader policy issues.
The noble Lord, Lord Shipley, commented on the administrative costs of handling this scheme, to which many other noble Lords drew attention. We will come to Amendment 75A and have another go at that issue, which is clearly very important if the scheme will cost an awful lot of the money raised just to administer. That is money just going round in circles and achieving nothing at all.
The noble Baroness, Lady Hollis, explained to us how the interaction with universal credit is likely to work. The Government would be well advised to take her advice on board. She is a great expert on these matters, and the descriptions of how monthly adjustments would need to be made sound absolutely horrendous. The noble Baroness described it as an administrative nightmare. There is a very high likelihood that the computer would collapse as a result, so some more thinking is clearly needed.
The noble Baroness, Lady Lister, who is a great expert on benefits, talked about the work disincentives of which we have perhaps not spoken enough, and how second earners would be the most adversely affected. She told us—I did not know this—that the same system was tried in Germany and discontinued on the grounds that it was administratively too cumbersome and too expensive to continue, which was very interesting. She also expressed the view on behalf of many tenants that the insecurity that this measure breeds has been very disruptive. The noble Baroness, Lady Bakewell, echoed those thoughts and gave us a real life example.
We now have it on the record that the taper will be there, along with my hope—I am afraid that is all it is—that the Government will go for the lower of the two options, having now put them both on the table. In the case quoted by the noble Baroness, Lady Bakewell, the combined income of the two people living in the home in Camden came to £46,000, so they would be over the threshold by £6,000, leading to a £12 a week rent increase. An increase of £12 a week would be no fun for those two people. However, that is very different from worrying that the rent would be doubled or even trebled, which had been the fear at one time. We must bear that in mind.
The noble Duke, the Duke of Somerset, also drew attention to the administration costs involved and to the IT that would have to be brought in. The noble Lord, Lord Foster, asked what had happened to the 2012 voluntary scheme. Has there been any assessment of whether that has been worked? If it has been working well, why are we talking about this whole new scheme? The noble Lord, Lord Campbell-Savours, is extremely worried about the breach of privacy by private companies with all this means testing. An army of snoopers would be required to keep checking on everybody if this goes ahead, as it might.
The noble Lord, Lord Beecham, brought us back to the key point that these amendments are about council autonomy. He talked about naked centralism and the many unspecified requirements, and the noble Lord, Lord Shipley, rightly referred to more Henry VIII powers coming through in regulations. We are still mystified as to how all these things will work through.
The Minister responded with a bit more detail. She told us that local authorities will get their reasonable costs reimbursed for handling all of this. The Bill’s impact assessment estimates the kind of cost that local authorities might incur. If I have calculated correctly, it looks like about £15 per case; everybody on housing benefit is taken out of the equation and the remaining one-third of council tenants are kept in. So, the amount that might be regarded as reasonable by the Government looks like about £15 per case. However, it is clear from what we have heard today and from submissions we have received that the administrative costs will be far more than £15 per case. Bristol calculated it at £36, but that was because it still has a team doing housing benefit and could tack that on. When universal credit comes in, Bristol will be in a different position and will have to have new staff. New computer programs will have to be written to handle all of this, and they are bound to go wrong. An appeals system will probably be needed to follow this through, which costs serious money. The phrase “reasonable costs” will need a little bit more work.
If the Government will not accept that councils should decide their rent policy for themselves and a compulsory increase is to be set for the whole country, to take the point made by the noble Lord, Lord Beecham, consistency in itself does not sound like a great virtue. There are huge differences around the country in the level of rent, and between the market rent and the council rent in particular areas, although in some areas they are very much the same. There are huge differences in local incomes and the incomes of council tenants in different parts of the country, so one would have thought it necessary to tailor such schemes to match local circumstances. A consistent approach across the country will therefore not really work, but if the Government are determined to press ahead, I hope the lower taper will be chosen. On that basis, I beg leave to withdraw the amendment.
Amendment 69C withdrawn.
Amendment 69D not moved.
Moved by Baroness Lister of Burtersett
70: Clause 78, page 34, line 10, at end insert—
“(1A) Any regulations made by the Secretary of State shall not apply—
(a) to people aged over 65;
(b) to people who have a registered disability;
(c) to people on zero hours contracts;
(d) to people with seasonal contracts of employment;
(e) to households where one or more members is in receipt of employment and support allowance (ESA);
(f) where a household member is in receipt of care;
(g) where a member of the household is a carer for another household member;
(h) to those living in supported housing; and
(i) to households in receipt of housing benefit.”
My Lords, I rise to move Amendment 70, in my name and that of my noble friend Lord Kennedy of Southwark, to give my noble friend a bit of a rest. The amendment would exempt a number of particularly at-risk groups from pay to stay, but I will speak solely in relation to disabled people and carers for whom there is a particularly strong case for exemption. My noble friend will address the other groups included in the amendment later.
“exemptions can be made and we will consider carers carefully. We recognise that, in certain circumstances, exemptions may well be needed, and we are thinking through that process carefully”.—[ Official Report, Commons, Housing and Planning Bill Committee, 3/12/15; col. 482.]
That is welcome. I particularly welcome the fact that the Government are considering exempting carers, not least because the means test, as I said earlier, will take no account of the cost of caring or disability. Carers UK has summarised what these costs are, based on the findings of its Caring & Family Finances Inquiry. They include higher utility bills, not just in winter when there is more prolonged and intensive use of energy, but when the weather is warmer. Many disabled and older people are unable to regulate their body temperature. The use of specialist equipment, such as electric wheelchairs and hoists, as well as greater use of appliances, such as washing machines, takes its toll in energy bills. Other costs include higher transport costs and higher than average expenditure on food and cleaning products, with some having to pay for incontinence pads. Carers UK points out that because such costs can take up a high proportion of income, even if the household’s taxable income is above the threshold, their disposable income could be well below it. Increased housing costs could well push them into debt. In such a situation, even a few additional pounds under a taper could prove the straw that breaks the proverbial carer’s back.
A related issue is that of disabled people themselves—notably disabled people in adapted homes. In its response to the consultation, Habinteg, a housing association with long-standing experience of providing homes for both disabled and non-disabled tenants, echoed the point about additional costs associated with disability, and pointed out that these are not necessarily covered by disability benefits. They are even less likely to be covered by disability benefits, given what we have heard in the media over the last day or so about further savage cuts to personal independence payments. Habinteg suggests that the result could be discriminatory, and I here note my thanks to Jenny Morris for drawing my attention to Habinteg’s response. Once again, an equalities impact assessment would have been helpful. I appreciate that it is going on the website as we speak and that I will receive a personal copy, but it suggests that the likely impact on disabled people, carers and other protected groups has not been taken into account in the drawing up of the policy.
Aspire, an organisation supporting people with spinal cord injuries, sent me recently published research undertaken by researchers at Loughborough University—I declare an interest as an emeritus professor there—that studied people with spinal cord injuries living in adapted and non-adapted accommodation. The report cites the UN convention on the rights of disabled people, which emphasises the vital role that suitable housing plays for disabled people, as does the Government’s Office for Disability Issues. To summarise the findings:
“Living in an adapted house had a positive impact on the health and wellbeing”, of people with spinal cord injuries and the family. The report continues:
“It created the conditions and an environment for people to have a good quality life, to manage their physical health well, to be happy, and to sustain meaningful relationships. In contrast, for those who lived in an unadapted house, health and wellbeing was negatively impacted on and, over time, deteriorated substantially”.
It damaged physical and psychological health, with potentially very damaging consequences.
Last November, Stacie Lewis, a mother of a severely disabled daughter who has cancer herself, wrote a piece for the Guardian website. After years of struggle the family had recently moved into an accessible, new-build house, which will, nevertheless, require extensive adaptations. Her husband’s income is above the threshold and she is now understandably worried about what this might mean for them. She pointed out how little suitable housing there is available for disabled people and that they therefore rely heavily on social housing. Her family waited three years for that home. She asked,
“what kind of economic sense does it make for the government to spend thousands to adapt our home and then throw that investment away by forcing us out?”.
Let us hope that it does not come to that, but it is a highly pertinent question.
I cannot believe that the Government would want this policy to lead to some disabled people having to give up their adapted home because they can no longer afford to live there. A similar point on high-value sales was raised by my noble friend Lord Beecham on Thursday. I suspect we are talking about a relatively small group, but the impact on the well-being of disabled people and their families could be huge. It would make no sense, from the point of view of housing stock, not to exempt those in adapted accommodation.
Following a similar logic, will the Government undertake to consider exempting victims of domestic violence whose homes have been adapted under the sanctuary scheme? Although they are not covered by the amendment, I am sure that my noble friend would be happy to include this group. Again, probably very few of them would be affected, but if that is the case, what is to be lost by exempting them?
Given that Mr Jones’s statement about considering exemptions was made on
My Lords, I shall speak on Amendments 70B and 75B, and in support of the other amendments in the group. I apologise for not being able to be here for the debate on the first group, due to other long-standing personal commitments. I also declare my interest as chair of Peabody and president of the Local Government Association.
The amendments before us seek to address the issues of feasibility and deliverability, and propose phasing in the changes over time, starting from April 2017. They also suggest that we have a pilot scheme before we move to full operation of the policy. Of all the parts of the Bill—there are some very contested parts of it—this is without doubt the part on which I have had most correspondence. It comes not just from organisations, but from a greater number of individual tenants. These tenants are people who have typically worked hard and got on in their life, and now are genuinely worried about their future security. This part of the Bill introduces in the name of fairness a proposition that is, in many ways, deeply unfair, bureaucratic and centralist in its nature. It departs very substantially from the original intent of the policy, developed during the coalition, which was to tackle those on very high incomes of more than £60,000, developed in response to one person: the trade union leader Bob Crow. The proposition that went in then was flexible and voluntary, and local authorities got to keep the proceeds.
We are now talking about people who earn half the amount that was part of the previous debate. Inevitably, this draws in much wider ranges of tenants and of complexity. This is what we are now grappling with. It is also mandatory, so the ability to adjust at local level does not apply. I am struck by the contrast between the debate we had on right to buy and this debate. Indeed, I feel that the two are in complete contradiction. In that part of the debate unfairness abounds, but it is justified in the name of opportunity, so existing tenants in a housing association will receive a very substantial cash bonus—a subsidy, if you like—to enable them to purchase a property. But they can take advantage of that subsidy only if they are in a position to and have the means to proceed with a mortgage and the deposit. The cost of that subsidy will, effectively, be funded by those who need new accommodation and those opportunities will no longer be there because the bigger properties will be sold. They, effectively, are paying for the subsidy by the denied opportunity.
When I raised the one-for-one policy in the right-to-buy debate, the Minister argued for flexibility to allow for different circumstances and suggested that a one-for-one policy in the Bill would be inflexible. However, in this part of the Bill we move in an entirely opposite direction and suggest that a central, top-down approach is needed regardless of local circumstances. One or other approach must be right.
Many tenants have said to me—I believe correctly—that there is now no revenue subsidy for social housing. In fact, we moved away from a revenue-subsidised model a number of years ago, so it is misleading to suggest that the taxpayer is subsidising these tenants. What we have is a cross-subsidy model for the provision of new properties—that is to say, housing associations build and sell market properties and use the profits to cross-subsidise social rented properties. They achieve that with very low or, often, no government grants at all. This is the right way to think about subsidy because it works through individual choice rather than coercion.
In this policy, tenants who have taken up their property in good faith, with a level of rent and an expectation that that rent would rise in line with inflation, will now face a significant increase in their rents, notwithstanding the taper, which I welcome. Of course, they have already paid higher income tax, so this is in effect on top of their additional income tax. It seems to me that, even with the taper, this can and is likely to be quite significant. Therefore, the choices for them will either be to pay the higher rent, to move into market-rented properties, again at an even higher rent, or to think about buying at a point when they are not ready to purchase the property, all of which seem poor outcomes from a policy.
I now move on to the implementation issues, which are the substance of the amendments. There are significant implementation issues here, and it is for the simple reason that neither the housing associations nor the local authorities are tax collectors: they have none of the capacity needed to get this policy right. I include housing associations here because, although this will be a voluntary policy, the Government have—as the Minister just said—made it clear that they are expected to implement this policy over time. To make this work in a way that is in any sense fair or reasonable, they will need to be in an equal position to HMRC as regards information. It seems patently unlikely that they will be in that situation.
The complexities and sums of money involved make it essential that we have an effective operating system. The consequences for individual tenants if this is not right will be severe indeed. I will give four examples of the practical implementation issues that really concern me. First is one that has already been raised in this debate: household incomes fluctuate very significantly over time, sometimes from week to week and certainly from month to month. If the policy is based on the income of a tenant the year before, it will lead to grotesque unfairnesses as their income position changes. Secondly, if the household has a young person in it who is also working, will their income add to the total assessment of income? We know that lots of young people are living at home now for the simple reason that they cannot afford the soaring rents, so what choice will we be giving that young person? There is every prospect that they will choose to stop working to remove the penalty on their family. That would be a very poor situation indeed.
Let me give two further examples, which are real-life examples drawn from the Family Resources Survey. The first is a London household of council tenants made up of four adults, at least one of whom is a pensioner and at least one of whom has a disability. The current household taxable income is £58,000, so if the taper was 10%, then their extra monthly rental charge would be £150; if it was 20%, it would be £290. These are very big sums for some very stretched people. If this feels like an outlier case, it is not. Out of the households likely to be affected that are council tenants and not currently claiming housing benefit, 37% include at least one disabled adult. We are talking about significant numbers of people here.
My final example is of a family outside London: a young couple in their 30s who live in the south-east with a current household taxable income of £40,000. A 10% taper would add £83 per month; a 20% taper would add £186 a month. It is not just a London problem: it is a problem in places that have high rental income, full stop.
Given these issues, we need to think very carefully about how this policy will be implemented and how it will take effect. To go ahead with this in a situation where we truly do not understand the full impact—where there has been no pilot, no feasibility study and no proper impact assessment—seems unwise, to put it at its most mild. I understand and am totally sympathetic to the Minister’s predicament here, but in truth we should not proceed in the absence of clear information about the impact of this policy—vital information that would make a difference to people’s lives. Even with more detail, there are basic problems with the model, and they come from the table starting at too low an income level. That is the basic problem, and it will be bureaucratic and fraught with unintended consequences. There is a risk that, in the end, it raises so little income that it proves a worthless process in the first place. It is imperative that we do not take a leap into the dark here: we should pilot this scheme, take account of new tenants coming into it and see how it goes. My preference, quite clearly, would be to remain with the voluntary scheme that has not really had time to be tried and tested. If the Government insist on pressing ahead, however, I beg them—and I will go that far, given the impact it will have on people—to properly pilot it and to phase it in before we implement it at large. We could be heading into a terrible mistake.
My Lords, I have not been participating in this Bill, but I have presided a few times in my role as Deputy Chairman. I know that the very last thing that your Lordships need is new people coming in and making speeches on it, so I will be very brief in supporting my noble friend Lady Lister’s proposals concerning carers and people with disabilities. I declare my interest as vice-president of Carers UK.
Your Lordships will have heard from my noble friend about the associated costs of caring and disability. There are costs associated with higher utility bills, higher transport bills, buying products providing personal care and so on, but I also want to mention the question of savings. That these households sometimes look as though they have reasonably high incomes does not take any account not only of the extra purchases that they have to make and the extra bills that they have to pay, but of their efforts to save for a time when their caring needs and responsibilities will become more acute. With 55% of carers in the Carers UK family and finances inquiry stating that they used their savings to meet everyday living costs, the ability to save is very important for them. Carers do try to plan in this very responsible way for how they will meet those needs as the caring needs become greater. Four in 10 carers end up in debt as a result of caring, but this rises to 69% if they have used up their savings or had no savings to begin with. While the Bill allows these new regulations to specify things that are or are not to be treated as income, it would be highly impractical to include all the expenditure on the extra-cost items associated with caring and disability. A much clearer definition is needed to ensure that carers, and those households with a disabled member, are not unfairly affected. I hope that the Minister can tell the House what plans are being developed to ensure that carers and households with a disabled member are not perversely affected by the new regulations.
My Lords, I will be brief. There are a couple of amendments in this group in my name and in those of my noble friends Lord Kerslake and Lord
Low of Dalston, and the noble Lords, Lord Kennedy and Lord Beecham. I also entirely support the amendment on rent to buy in the names of the noble Lords, Lord Lansley and Lord Young of Cookham. The amendments in my name go together: the first would mean that only new tenancies after April 2017 would attract higher rents for higher-earning tenants, and the second would mean that any existing tenant—unaffected, therefore, by the new measure— would not face the higher rents if they transferred for downsizing or overcrowding reasons. The deterrent effect on people moving to make better use of social housing would be avoided.
Clearly, for the 350,000 tenants facing an uplift in their rents, this would bring a sigh of relief if government applied the new regime only to those who could make a decision about accepting a tenancy on the basis of knowledge of what their rent was going to be. However, I fear that this amendment—however fair and reasonable—may not get much traction with government, at least until we come to that later group of amendments and consider the administrative costs of pay to stay if applied to all existing tenants, with all the hassle involved, as opposed to their being relatively straightforward if applied when councils are considering allocating a new tenancy.
I also support my noble friend Lord Kerslake with Amendment 75B, which proposes the piloting of the pay-to-stay arrangements in a number of areas before the scheme is rolled out to the whole country. The Government are piloting the voluntary right to buy for housing association tenants in five areas. I know that all parties are gaining invaluable insights from that exercise, which has already started. Pay to stay is at least as complex and has at least as many imponderables. What works in Maidstone may not work in Middlesbrough; what works in Brighton may not work in Burnley. A pilot in several places would shed light on the kind of variations most appropriate in different circumstances. I would obviously prefer local authorities to make their own decisions locally.
My Lords, very briefly I will speak to Amendment 82A, in my name and that of my noble friend Lord Young of Cookham. I was encouraged by what my noble friend the Minister said in her statement on the previous group to believe that it is the Government’s understanding that those in rent-to-buy agreements would not be considered as high-income social tenants to whom a higher rent would apply. The purpose of our amendment was to ensure that that is the case in relation to housing associations that publish a policy. Clearly, the amendment would not be needed if the Government could put on record that housing associations with such a policy would not be able to include rent-to-buy agreements in the scope of such a policy as intermediate rents are excluded.
My Lords, this group of amendments largely looks at conditions of exemption to the pay-to-stay provisions proposed by the Government. All the amendments in the group bear the names of either myself or my noble friend Lord Beecham, with the exception of Amendment 82A put down by the noble Lords, Lord Lansley and Lord Young of Cookham. Their amendment identifies an omission and seeks to correct it. It is welcome but, as the noble Lord, Lord Lansley, said, the Government seemed to confirm that it is not necessary.
Amendment 70 is in my name and that of my noble friend Lady Lister. It seeks to put in the Bill a number of exemptions to which any regulation made by the Secretary of State under Clause 78 would not apply. My noble friend Lady Lister moved the amendment, which is at this stage only a probing one that seeks to highlight a number of problems with the across-the-board application of these regulations, making people pay to stay in their council property.
The noble Baroness, Lady Williams, may shortly tell your Lordships’ House that none of these exemptions are necessary. Maybe when we hear the Government’s response, we on these Benches will come to the conclusion that some of them are not. However, senior citizens who have worked all their lives, people with registered disabilities, or households with people in receipt of care or where a member of the household is a carer for another person living there are such exemptions: the Government should seek to protect such people from this unfair policy that will make life difficult for people on quite modest incomes.
Could the noble Baroness respond to the comments made by my noble friend, apparently attributed to Marcus Jones MP in the Bill Committee in the other place? That would be very helpful. If not, could she write to us about that? It would also be helpful if she provided more information about the work the department is doing in this respect.
I recently saw a job advertisement, I think in the Evening Standard, from a London Borough recruiting parking enforcement officers. The pay was about £21,000 or £22,000 a year. I thought, “Two parking enforcement officers living in the same property in London would be deemed high-income social tenants”. That is ridiculous. I agree with the noble Lord, Lord Kerslake, who said that this policy evolved under the coalition and today, under the Conservative Government, has been pitched at a much lower level to catch a lot more people, many of whom can in no way be regarded as high-income earners. Couples earning more than £30,000 outside London are not high-income earners in any respect. If would be helpful if the noble Baroness explained how this policy has evolved since last year’s election.
Amendment 70B in the names of the noble Lords, Lord Best, Lord Kerslake and Lord Low of Dalston, and of my noble friend Lord Beecham, seeks to make these regulations effective only for new tenancies granted after April next year, again as a mechanism not to penalise those presently holding a tenancy.
Amendment 70C seeks to afford some protection for a tenant following a mutual exchange or transfer. I signed up to it, along with the noble Lords, Lord Best and Lord Low of Dalston. It raises a particular issue regarding mutual transfers and could even encourage people to undertake such a transfer, perhaps releasing a larger property to a family. It may not be quite right but I hope the noble Baroness can see the problems that will be created and the issues that regulations will have to tackle to avoid some real injustices coming out of this ill-thought-out policy.
Amendment 74, in my name and that of my noble friend Lord Beecham, seeks to provide some protection for affected tenants by building in a process of external valuation of high-income rents. Even with the much talked about taper the Government have said they will introduce, some external valuation of the rent must be of benefit to tenants and would help to bring some element of fairness to this most unpopular policy.
Amendment 75, in my name and that of my noble friend Lord Beecham, seeks to bring in the higher rents over a period of time: first, a notice period of one year before the new rents become payable; then some transitional protection as the tenant moves to the higher rent. This, in effect, is the taper the Government talked about and on which we will need to see much more information.
Amendment 75B seeks to pilot these proposals, as the noble Lord, Lord Kerslake, referred to them, in a number of areas before rolling them out across all local authorities. Of course, this was used in respect of the new requirements in the Immigration Bill for landlords to check tenants’ documents to satisfy them that they are able lawfully to rent a property. I know the noble Lord, Lord Best, was involved in the evaluation process in that respect. He spoke about how well the pilots had gone. It would be beneficial for the Government to adopt a similar pilot approach here.
Amendment 76 is similar in its intention to Amendment 70B. This is an interesting group of amendments, raising real, practical difficulties. As with previous groups, I may have some further questions for the noble Baroness as she responds to the debate.
My Lords, this second group of amendments is concerned mainly with exemptions from the policy and seeks to put a substantial amount of detail into the Bill about who the policy should apply to. Of course, it is important that where there is a strong justification for an exemption, we consider it carefully. We are doing just that, and putting the detail in the Bill would prevent us thinking through the pros and cons of potential exemptions carefully. We need some flexibility to conclude our work and put detail in regulations.
I will start with Amendment 70, tabled by the noble Lord, Lord Kennedy, and the noble Baroness, Lady Lister. It specifies a wide range of groups that the policy should not apply to. As I have explained, we do not want to put this detail in the Bill but I will outline my position on each of these groups. First, while I do not immediately see why someone on a zero-hour or seasonal contract whose household income is above £30,000 should be exempted, I recognise entirely that it will be important to build in some flexibility for households where income fluctuates, as I mentioned earlier. I will return to that issue later.
I am also not attracted to an exemption for people over 65. Income from pensions can be considerable and it would not be right to exempt a group of people who are mainly retired but where the annual income is greater than that of people in work. That strikes me as quite unfair. Having said that, we are of course giving careful thought to the issues of different pension incomes, including the treatment of Armed Forces pensions.
I am very sympathetic to the suggestion that we should consider how to protect those with a registered disability or who have significant caring responsibilities. However, we must recognise that even in these scenarios the household income may, in certain circumstances, be high. It would not be right on that basis simply to provide an exemption for whole groups. A better approach may be to design the policy to ensure that income from certain state benefits is not included in the eventual definition of income.
I will turn to the definition of income more generally in a later grouping but it is worth highlighting now that the disability living allowance is not a taxable benefit. It is unlikely that we would include income from this in the final definition of income. Carer’s allowance is a taxable benefit but this does not automatically mean we must include such income in our eventual definition. We will give this careful thought, and I welcome the views of noble Lords on it. The noble Baroness also mentioned the impact on certain protected groups. The data from the Family Resources Survey have been analysed to consider the impact on different household types. This is set out in the—now infamous—impact assessment.
I hope this section of the debate has persuaded the Committee that we are giving the issue of exemptions careful thought. I am happy to meet noble Lords privately on this issue, as I recognise how important it is.
Amendments 70B and 76, tabled by the noble Lords, Lord Kerslake, Lord Best, Lord Kennedy, Lord Stoneham, and Lord Beecham, seek to restrict the policy to new tenants only. In most circumstances, new tenancies of social properties should be given to those in most housing need, where they are below the income thresholds that we have set. Those in the greatest need of social housing are therefore more likely to be new tenants with an income under the proposed thresholds. It is existing tenants who are more likely to be on higher incomes, and the policy should apply to those currently living in social housing.
I have already outlined the Government’s significant home ownership offer to existing tenants, particularly those on higher incomes, and I would encourage all tenants to look at the opportunities that are available, but it would not be right to exclude existing tenants from the policy.
Would the effect of encouraging people on higher incomes to buy their houses not be, ultimately, to diminish the number of houses for those who cannot afford it and who, apparently, the Government want to help?
The Minister has just said that the object of the scheme is to get people with higher incomes to pay the full rent, move out of the property or perhaps buy it—she was talking about Help to Buy. The effect of that, ultimately, is to diminish the pool of houses available for rent by the people whom she thinks need support.
My Lords, that is why we have right to buy and why we have a programme in place to build so many houses, of different tenures, in the course of this Parliament. It is not undermining it; it is making sure that there is a more level playing field for both tenants on higher incomes and the new tenants, whom I referred to as being in genuine housing need. That is not to say that the other tenants are not also in genuine need.
Amendment 70C seeks to exempt households which exchange their property for another social home. I thank the noble Lords, Lord Best, Lord Kerslake, Lord Kennedy, and Lord Low, for this amendment, but I do not see the rationale for it. If a household is on a higher income, then the rules should apply equally, regardless of whether they exchanged their property voluntarily or not. Those households would be subject to the taper arrangements that I have set out at length. I am also reluctant to provide an exemption for homes that have transferred as part of a large scale voluntary transfer. For example, for homes that have transferred to a housing association, the policy should apply if the housing association has a voluntary policy in place. We want housing associations to adopt voluntary policies, and so my instinct is that there should not be an exception for properties transferred.
Amendment 74, brought forward by the noble Lords, Lord Kennedy and Lord Beecham, seeks external valuation of high-income rents. I do not believe this is necessary. An external valuation is not only unnecessary but would add bureaucracy, cost and delay. I have confirmed that we will be introducing a taper, which will be the basis of rent setting. It will also be important for the Government to articulate how the process of establishing a market rent value for properties should work. The powers in the Bill can also provide tenants with an appeal mechanism if they feel that their rent levels are wrong. This is an important protection and we intend to use regulations to give tenants this right of appeal.
Amendment 75, also tabled by the noble Lords opposite, would provide for a notice period of one year before the rent becomes payable and transitional protection as the tenant moves to the higher rent. I am not sure how this would work, because rent setting is usually done around three months before a new rent year. Providing for a notice period of a year before the new rent comes in would mean that the rental amount would not be consistent with changes in household income over the notice period. As I have already said, we are giving careful thought to how income and implementation would work.
Would the Minister please repeat her statement about the difficulties caused by rents changing as a result of this policy, particularly in the period between notification and payment? The whole push of our previous two hours’ discussion has been that she is producing a system in which every tenant will pay a different rent—probably month by month—according to what is happening to their earnings.
I will repeat my statement. Rent setting is usually done around three months before a new rent year. Providing for a notice period of a year before the new rent comes in would mean that the rental amount would not be consistent with changes in household income over the notice period. However, I will return to rent reviews shortly.
Amendment 75B, tabled by the noble Lords, Lords Kerslake, Lord Beecham and Lord Stoneham, seeks to pilot the policy before full implementation. I recognise that pilots have some benefits in certain circumstances, but it would not be workable here as it would be unfair on tenants in those areas. The policy must apply nationally from April 2017. Although we will not be piloting the policy, I recognise that we need a strong approach to implementation. Local authorities have told us that they need time to put in place the arrangements for implementing the policy. That is a fair request. My department is pushing forward with engagement, and the next few months will be critical. We intend to issue guidance to ensure that authorities are ready to operate the policy, engage with tenants, and set correct rents from April 2017.
I will also take this opportunity to update the Committee on engagement with tenants. We need to make sure that they have the best source of information and advice. Our engagement strategy includes a plan to talk to tenant representative groups and Citizens Advice. For example, it will be important for them fully to understand the commitment I have given to bring forward a taper to ensure that rent rises are affordable.
Finally, Amendment 82A seeks an exemption for rent-to-buy schemes. I can confirm to the noble Lords, Lord Lansley and Lord Young, who tabled the amendment, as well as to the rest of the Committee, that the policy will not apply to tenants in a rent-to-buy or shared ownership property. I have already reinforced the point that the home ownership offer to tenants, particularly those on higher incomes, is very important. I would rather see those households taking up the offer of home ownership than facing higher rents under the policy for high income social tenants. I hope noble Lords will feel able to withdraw their amendments.
Many of the amendments in this group are probing ones and these matters would be better left to regulations. However, we come back to the problem: we have not got any regulations so scrutiny is extremely difficult. That leaves us having to put down amendments on these issues to try to drag out the Government’s thinking. At the end of the day, the amendments are on the Order Paper today only because the Government have sought to push the Bill through at such a pace and not wait for the regulations to be made.
My Lords, the Minister has now said twice that, under her proposals, any household paying a higher rent under pay to stay should, instead, be thinking about right to buy, and that she would prefer them to do that. If they are local authority tenants, can afford to do so, and wish to, they will already have taken this up. Why does she think they have not? One reason is that, with renting, changes in housing benefit and UC can be made in the course of the year if income fluctuates and circumstances change—the very situation which tax credits were devised to adjust. If you commit yourself to buying a property, no such consideration takes place of whether you can, or cannot, afford your mortgage repayments. If you are struggling with your income, your zero-hour contract has collapsed, or your partner has gone somewhere else, you are still stuck with it. Tenants may, therefore, have very good reasons—this obsession with pushing those who have chosen not to buy into right to buy, and whipping them there by virtue of the pay-to-stay rent policy, is disgraceful.
Perhaps I could add one further point. It is perfectly possible to pilot this in a way that would not be inequitable to tenants. What you would be piloting is the information-gathering on income and how the different exemptions and changes might work on the ground. You do not need to change the rental position. What we really need to know is: does the system work in a way that is effective and fair? It would be perfectly possible to do that, modelling the system at local level without disadvantaging those tenants who were part of the pilot.
I have a final final question for the Minister. She said that the Government are going to discuss matters with Citizens Advice and tenants groups. I very much welcome that. But are we to infer from that that until now they have not discussed the scheme and how it might work—that they will be discussing the final scheme, as it were, and how both groups might advise residents, as opposed to involving them in the first place in designing this scheme?
Perhaps I might make one final comment—it will be my last on this group. Will the Minister agree to reflect on some of the comments made in this debate and the previous debate, particularly the comments of my noble friend Lady Hollis? In the previous debate we were talking about income levels and rent levels changing almost weekly or monthly, but here the Government want a consistent level. For me, the two debates highlight some inconsistency and we need to look at that. Again, we do not want to get ourselves into difficulties in the future.
My Lords, the noble Baroness, Lady Hollis, said that I said that higher-income tenants should think about buying. It was not a direction for higher-income tenants to think about buying but, going forward, they may well think about buying—86% of people aspire to own their own home. This may be the opportunity for them.
The noble Lord, Lord Kerslake, said that the pilots need not be inequitable because they do not need to introduce the new rents. I would have thought that the reason for the pilots would be to see how the new rents actually work.
The noble Lord, Lord Beecham, asked about the CAB and whether conversations were going on. We are in continued engagement with the CAB and other—
With respect, I welcome the fact that discussions are going on. My question was: were there discussions with those organisations about the whole policy before the Government settled it?
I will have to get back to the noble Lord on that precise detail. Somebody asked me a fourth question—I think it might have been the noble Baroness, Lady Hollis—but I did not write it down fully.
My Lords, a number of different points have been raised in what we call a wide-ranging debate, albeit a relatively short one. I was particularly struck by what the noble Lord, Lord Kerslake, said—it was echoed by the noble Lord, Lord Best—about the need for a pilot; otherwise, it is a leap in the dark. It is disappointing that there is resistance to the idea of a pilot—although I have to say, after the pilot we had under the Immigration Bill on the right to rent, my enthusiasm for pilots has rather waned given how that one has panned out.
I am grateful for what the Minister said in response to Amendment 70 in so far as she said that the Government are sympathetic to the position of severely disabled people and people with caring responsibilities. But then she pointed out that household income may be high. As in our previous debate, she did not really address the point about how you cannot look just at income, you have to look at needs—what is being met by income. Yes, needs would be partly met by exempting certain benefits: but, as Habinteg points out, even if people are receiving those benefits, they go only part of the way towards meeting the needs associated with disability and caring.
I am not asking her to come back now but I would be grateful if she could address in any subsequent letter the specific point about people in adapted accommodation. It is a really important point and, as I said, a similar point applies to victims of domestic violence under the sanctuary scheme. For the record, the Minister appears to be nodding—I think in acceptance that this is an issue.
I thank the Minister for what she said about the possibility of a meeting. But it would be important to bring in those who work directly with carers and disabled people because they can bring an expertise to that meeting that I cannot, and I would want to know what they felt about different approaches to exemptions that would best meet the needs of carers and disabled people, in the spirit of the kind of engagement that she was talking about. Again, I detect a slight nod, so I hope that might be possible.
Going back to some of the issues that have just been raised about the right to buy, I was very struck by some of the people who wrote to me and came to see me, who either said that they had deliberately, as an act of principle, not bought their home or said that there was no way they could even countenance buying their home on their income—so it really is not any kind of answer.
Can the Minister say when we will have the information about what the regulations will say with regard to exemptions? Will it be before Report? If it is not before Report, we will just be working in the dark again on Report.
My Lords, as I said earlier, I will get information about regulations in so far as I can by the end of the week. I cannot undertake to get information on exemptions by Report, but by the end of the week I will have as much detail as possible on some of the regulations that are coming forward and, most importantly, the timeline for them as well.
My Lords, I think we recognise that the Minister is doing her best to be helpful but does she not think that this is a little odd? She had a firm view about pensioners—that they should not be exempt from pay to stay—but she did not really have a clear view on whether any of the other groups mentioned in the amendment would be entitled to some consideration or exemption from pay to stay. We are in Committee, the Bill having gone through the other House, and the Minister still cannot help us—I am sure she would like to—as to who will be caught by this policy.
I am grateful to the Minister. She is clearly trying to be as helpful as she can be, but if we really are not going to have this information by Report, we will just go through all this again, which is in nobody’s interest. We are not asking for the actual draft regulations but the information about which groups will and will not be exempt. That is the least we can expect by Report. But on the basis that we are not going to get anything more now, I beg leave to withdraw the amendment.
Amendment 70 withdrawn.
Moved by Lord Best
70A: Clause 78, page 34, line 10, at end insert—
“( ) These regulations shall not provide for an increase in rent chargeable to a tenant by a local authority greater than 5% per annum or the Consumer Price Index plus 2%, whichever is the lesser.”
The amendment would limit annual rent increases to a maximum of 5% or to inflation measured by the consumer prices index plus 2%, whichever is the lesser. Obviously, this would moderate rent increases in any one year for higher earners. If the weekly rent is currently £100, the increase would be no more than £5. A household with earnings of £5,000 over the threshold seems likely to face an increase in rent of £500 per annum, or £1,000 if the Government, very unkindly, choose the higher rate set out in the Minister’s letter to us.
This amendment would stage the £10 a week increase over two years or over four years for the higher taper rate. The Government still get their extra income but the increases are phased. Those who are on still relatively low incomes—just £5,000 per annum above the somewhat arbitrary limits of £30,000 outside and £40,000 inside London—will certainly feel the pinch from a significant hike in their rent. Giving people time to readjust their household budgets by phasing the increase seems the right thing to do. Set alongside the 1% rent reduction for four consecutive years, this measure would certainly ease the transition. I beg to move.
My Lords, I support my noble friend in his Amendment 70A and I echo his words about easing the transition, but I speak mostly to my Amendment 77A in the group. It concerns income variability in the context of pay to stay, which is something I raised at Second Reading. I realise that it has already been mentioned in both the previous groups by the noble Baroness, Lady Hollis, the noble Lord, Lord Kerslake, and others, and also that the Minister indicated when she replied to the first group that the Government are looking at “an equitable conclusion” to the issue. Nevertheless, I would, as usual, like to put a rural slant to add to and help the much-needed thinking on this issue, and perhaps put some rural flesh on the bones of the problem.
It is very much a feature of rural life that many, both young and old, are self-employed. Indeed, I have always been proud of the fact that of those who are below the poverty line in rural areas, statistics show that 22% are self-employed, while of those below the poverty line in urban areas only 8% are self-employed. In other words—and this is what makes me proud—we in rural England, when in economic difficulties, have a greater tendency to get off our backsides and turn our hand to whatever comes along in order to resolve our problems. In Cornwall I believe the self-employed figure is as high as 28%, but that probably just exemplifies the nature of the local economy there—a high summer tourist trade and only odd jobs available during the winter months.
The point I am making is that these sorts of people can, in some years, be very successful. The whole family can all find themselves with work. Although there is probably only one member of the household with a regular job on a living wage, the others could all get lucky and push the total household income up well over the £30,000 figure stipulated in this section of the Bill, for a brief period of time. Therefore, it is really important that the Government are aware of these quirks of fortune in rural families and, for that matter, in many urban families too, especially those on zero-hour contracts, as the noble Baroness, Lady Hollis, pointed out. The point being that after a good year of combined family incomes of sometimes well over £30,000, the same family might find themselves back down to £20,000 or less the following year.
Therefore, my amendment is designed to encourage the Government to think very hard about that sort of variability and put in place some sort of long-term averaging system—I stress long-term—to iron out the highs and lows of rural and urban life. This whole scheme makes some limited sense in principle: those in assisted rental accommodation who greatly increase their income should perhaps move to pay a market rent. However, the scheme itself is so full of pitfalls, and what my children call heffalump traps, that it needs either withdrawing or serious wholesale amendment, perhaps after some of the preliminary pilots mentioned by the noble Lord, Lord Kerslake, and particularly across a whole range of areas, which should include a rural area.
My Lords, I shall speak briefly to the amendment as the arguments have been well made by the noble Lords, Lord Best and Lord Cameron of Dillington. The key issue is the difficulty of implementation and potential sources of injustice to individuals who face sharp rent increases. To the extent that it is possible to phase in those rent increases, the impact on individuals is likely to be less. This is, indeed, consistent with the approach taken in the past when there have been movements of rent towards more comparable rents—the so-called convergence policy that worked across individual organisations. Therefore, it is applying the same principles to individuals in relation to their rent movements as are applied to organisations which have moved towards rent convergence. This is more consistent with the implied contract to the tenant, who took on the property at a given rent and had a reasonable expectation that their rent would not be subject to sharp movements as a consequence of government policy. That is why this is an amendment worthy of the Minister’s consideration.
My Lords, I support the comments of the noble Lord, Lord Cameron of Dillington. The rural situation is different from the urban situation and it demands a degree of care to put this proposal into operation. I am not sure the noble Lord’s proposal is the right answer but the question is one that has properly to be asked. Again, it emphasises the problem we have when we do not know the regulations or the details, because the Government may well have thought about all these things and we are going to have regulations and details that will cover it. However, until we have those it is very difficult not to talk about all the possible computations that may arise. There is no other way we can do it.
One of the difficulties of employment in rural areas is simply that it is extremely volatile and families can have very different incomes at different times. It is difficult for families to think other than that. Of course, the reason they are living together in one of these houses is that there is no alternative. In rural areas the moment that a house becomes available, it is sold at a price that cannot be reached by these people. I make the point to my noble friend that the number of second homes in the village of Walberswick in my former constituency has now risen to four in ten. Any house for sale is sold to somebody from outside. That is why homes provided by the local authority or others are so important in the rural economy. That is why so many families have a number of wage earners within the family living in the same house. However, their wages are not easily computed one year to another.
If we have a system that does not take that into account, then it will bear more unfairly on rural areas than elsewhere.
Any of us who have represented or live in rural areas recognise it is very often true that as a nation we do not take rural areas as seriously as we ought because they do not have the megaphone of the city, or the metropolitan voice—most journalists come from towns. I beg again that the Government take this situation seriously and arrange for an answer—it may not be this one—that recognises the volatility in rural wages.
My Lords, my name is attached to Amendment 79A in this group, along with that of my noble friend Lady Bakewell of Hardington Mandeville. However, I also support Amendment 70A and other probing amendments.
Amendment 79A is our attempt to consider the threshold, which the Government had defined as £30,000 outside London and £40,000 inside London, and which the amendment increases to £40,000 outside London and £60,000 in London. It is a probing amendment. However, our view is that the taper starts too low at the figures that the Government originally decided on. Therefore, I hope there is an opportunity for them to look carefully at whether there is a good case, as we think there is, for the minimum threshold to be much higher. That would save a great deal of administration and associated costs. Be that as it may, I hope the Minister will explain why those figures are deemed too high, because I suspect they are more reasonable than the ones on which the Government have decided.
My Lords, I raised a number of questions at Second Reading which never got a reply and, as they are relevant to this group of amendments, I thought I would have another go.
The first follows directly from what the noble Lord, Lord Shipley, just said: why was it decided to reduce the earnings threshold from that in the existing voluntary scheme? Am I correct in thinking that there is no intention to increase the threshold in line with average earnings, thereby pulling more and more tenants into the net of pay to stay? If so, why? What protection might there be for vulnerable tenants unable to provide the necessary documentation? Crisis has raised concerns that they could be liable for the full market rent, regardless of their actual income. We can think of a lot of situations where there may be good reason why someone has not provided that information, but it would be totally unfair for them to have to pay the full market rent.
Finally—I did not raise this at Second Reading, but I raised it two groups of amendments ago and the Minister did not come back to me—there is the whole question of the lack of equivalisation. There will be such a crude means test that takes no account whatever of family needs. We are not treating like with like; we are treating the same income to meet rent, regardless of how many mouths have to be fed from that income.
My Lords, I start by apologising for not having participated in debate earlier, but I was on duty in the Moses Room. I support Amendment 77A. I may have missed some of the issues raised in previous debate, but there is variability not only because someone’s income may be derived from self-employment. It could be because they are employed but subject to a zero-hours contract. It could also be because the household changes.
I do not know whether we yet have a clear definition from the Minister of what will constitute the household for this purpose. Under the voluntary scheme, it was the tenant and the spouse, although there is also reference to the two highest earners. It would be helpful to have the intent clarified. Clearly, if it is the whole household, or all of the adults in the household, that can change. In many ways, that is more likely to change in an urban than a rural area. However, that is a key issue, as is the basis of the income. Will the Government try to use real-time information, which is fraught with challenges, or work on a preceding-year basis, around which the voluntary scheme was structured? If the latter, there are more likely to be variations between the base year and the year to which the rent levels are to be applied.
This whole approach is fraught with difficulties, but until we have clear definitions of household income and the basis of that income, we will struggle with the outcome.
“high income cannot be set at a level lower than median incomes”.
As I understand it, the effect of that would be to raise the threshold by from about £30,000 to £40,000 on properties outside London and from £40,000 to more than £50,000 in London.
My Lords, could the noble Lord repeat that? I could not quite hear the beginning of what he said.
Amendment 79 states that the definition of high income cannot be set at a level lower than median incomes. That would raise the thresholds, would it not? I do not like the system at all, but that at least raises the level at which people would start to pay a higher rent. Will Ministers seriously consider that amendment?
I really want to talk about Amendment 72, which provides that the amount of rent to be charged to high-income tenants is,
“to take into account the need to promote socially cohesive and mixed communities”.
That is a very important issue. The other night, I was talking about what happened in west Cumberland, when I was minded to support right to buy early in the 1980s. Some of the estates in my area had a high density of renting populations, and I did not believe that was particularly good for social cohesion. I believed at the time that the introduction of the right to buy in areas such as mine in the north of England would help social cohesion by widening aspiration within communities.
The provisions of the Bill make me worry that as property is subsequently sold, which is what will happen, there will be pressure due to higher rents being demanded. In employment law, I think it is called constructive dismissal; in this field, I would call it constructive eviction. That is what people will feel: they will be all but evicted by the requirement to pay higher rents.
I am losing my train of thought. Perhaps I should give in at this stage. I will retake my seat and gather my thoughts. I am very sorry.
My noble friend is not the only one in danger of losing his train of thought as the Bill goes on and on and on.
Last Monday, I asked the Minister a question about affordability. I cited the case of the son of a friend living in Hackney on a modest income. He has since been in touch with me again and emailed the Minister—I do not know whether she has received that or whether it is lost in the deluge of emails that may be descending on her as the Bill goes forward. His case exemplified the problems occasioned by the proposed pay-to-stay provisions. He and his partner live in a three-bed council house in London Fields in Hackney. They have a nine year-old child. He also has two children by a previous marriage—I was in error in saying that there was only one; actually there are two—who are in the house from time to time. He is financially supporting them. The current rent is £720 a month, whereas the cheapest equivalent private rented property would cost about £2,300 a month, with the average costing about £2,500. He earns roughly £21,500 per year before tax and his partner earns £19,000, so they would be just over the limit. Clearly, they could not afford the private sector accommodation. He says,
“the thought of renting in the private sector in and around London with a family and being on a fairly low income is scary. The current housing situation … is scary. The fact that we are lucky enough to have a council house and pay a truly affordable rent is the reason we can survive”.
He points out that because of the pay-to-stay dynamics he would be in a position of not wanting a pay rise, and perhaps even asking for a reduction of hours.
In fairness, that was before what we are beginning to hear about the taper had come to light. The noble Lord, Lord Best, earlier referred to a letter, which he implied had information about the level of taper and how it might apply. Neither my noble friend nor I—nor, as far as I am aware, my colleagues on these Benches—have yet received that letter. Maybe it was just directed to the noble Lord, or maybe the letter is in the post—it would be helpful to see something in writing—but when the Minister replies it would be helpful if she could explain how she envisages the scheme working on the basis that there would be a taper.
Originally, London councils estimated that 28,000 households would be affected, with rents rising more than threefold. That now seems to be unlikely in terms of the level of increase given that there is to be a taper, but perhaps the Minister could give an indication—again, it may not be immediately available—as to how many households would be affected in London, where I guess the pressure is likely to be most acute, on the basis of the new taper.
Interestingly, reference has already been made by, I believe, the noble Lord, Lord Foster, to the DCLG’s consultation in 2012 on a pay-to-stay proposal. Then the threshold was going to be £60,000—actually, they started off looking at £100,000 a year income triggering this. So I ask the Minister, on what basis was the revised figure of £60,000 reduced to the proposed £40,000 in London and £30,000 elsewhere, assuming that in the letter that we have not yet seen, those basic figures remain the same? I take it that it is the taper that is the subject of clarification, rather than the starting point.
The Chartered Institute of Housing in its response to that consultation warned of the risk of perverse outcomes of the policy, including tipping households on the margins into housing benefit, discouraging tenants from working or increasing their earnings, making communities less balanced—the point made repeatedly by Members and recently by my noble friend Lord Campbell-Savours—as low to middle-income families move out, and causing major problems in costs to councils and housing association in administering the scheme. The institute asserted that it thought that the income levels were too low—they may have been raised but the implication at the moment is that they have not. It points to the different treatment of local councils and housing associations, which has been mentioned—the former will have to pay income recovered to the Treasury, while housing associations will be allowed to keep the increased rents to invest in new homes. That anomaly needs some explanation.
The institute suggested a household earning threshold of £50,000 per year, annually uprated. It pointed out that with the £30,000 threshold outside London, two adults with two children in a three-bed house in the more expensive parts of the country would be eligible for housing benefit, as matters stand, in 53% of council areas, rising to 96% for those paying an affordable rent, and 100% paying the market rent. So there is a distinct impact even on that lower threshold of families still in receipt of benefit. As for the definition of household income which does not require HMRC to disclose information for non-dependent adults—we will be looking at the HMRC role in a subsequent group—if the HMRC is not enabled to make that information available, there is a question about how robust the information will be in assessing the household income where there are such non-dependent adults.
Overall, the institute predicted that the poverty trap would widen and a couple with two children paying £75 in rent per week would effectively face a marginal rate of tax of 90%. Presumably that would vary now because of the taper, so the effect would not perhaps be as drastic as it suggested, but it is still likely to be significant. The LGA research showed that on the initial basis 214,000 households would be affected and it thought—but again this is probably overtaken by the taper—that 60,000 families would probably have to leave their homes. It would be interesting to see whether the Government have made any estimate of the situation, as it now appears to be shaping up, compared to what the LGA had thought would be the case, both in terms of the total number of households and those who might have to leave their homes. I assume that some work has been done on that. Of course, nothing of this kind is shown in the impact assessment.
In my own authority of Newcastle, a small sample indicated—again, this may be lessened by the introduction of the taper—rent rises of between £45 and £69 per week for as many as 1,500 houses. I am not clear about how the taper will operate over the period of time. If it is to be a flat 10% increase, that is one thing, but if it is to go up by 10% per year cumulatively over time there will still potentially be a significant number. Again, it may not be possible for the Minister to clarify that tonight, but that would be helpful.
Amendment 71, which is in my name and that of my noble friend, would insert a requirement for regulations to take into account affordability. Amendment 72 adds the need to promote socially cohesive and mixed communities—the very matter referred to by my noble friend Lord Campbell-Savours. Crucially, at the time, Amendment 73 would introduce a taper relating to income and rent charged. Now we know that the taper will come in, and so to that extent Amendment 73 becomes redundant—or, to put it another way, the Government are accepting that and we await the detail.
There has been much speculation about this taper and until last Wednesday it was all rumour—it had been in the previous weekend’s press. Last Wednesday night, in the hours before Thursday’s sitting, the noble Baroness wrote to Members indicating that the taper would be introduced and she enclosed a consultation document, which comprised all of five pages of text and the Government’s response of equal length. However, the effect of the latter was merely to report that a taper would be applied; no details of the scheme were available at all. Perhaps there has now been a subsequent letter, which we now await with interest. This comes five months after the consultation closed; it could hardly have been a very elaborate consultation on the basis of the five pages that were sent to interested parties. One has to ask what on what on earth took so long to produce a response that is so empty of content. This looks to me rather like legislation on instalment plan. It has certainly taken a very long time. Even now, most of us are not aware of what is pending.
Moreover—I need to refer to this matter because it is constantly being iterated in the media—the Minister’s letter repeats the entirely incorrect claim that there are 40,000 households of incomes of more than £50,000 a year receiving a taxpayer subsidy to remain. There is no taxpayer subsidy. On the other hand, the taxpayer is subsidising private landlords charging ever-higher rents through the ever-higher rise in housing benefit. Nothing at all is being done about rents in the private sector—as opposed to what is happening in the public sector, where they are going to be pushed up. It seems to me a remarkably strange position for the Government to get into, even on purely financial grounds.
Amendments 78 and 79 flesh out the proposals for a taper and require high income to be set by reference to incomes in the area as opposed to a national figure and defined as income in the top quartile of that area rather than some one-size fits-all formula applied to severally to London and the rest of England. Amendment 79 prevents high income being set at a level lower than median incomes, as my noble friend said.
These and other amendments seek to provide flexibility and a realistic scheme under which people on what can only be described as modest incomes are not hit by unreasonably large increases, especially when it suits the Government to cut rents for all council and housing association tenants with adverse consequences in both sectors for investment in their stock. That is incompatible with everything that has been said about improving the stock and the need for new and better housing.
My Lords, I thank all noble Lords who have debated these amendments. I should say to the noble Lord, Lord Beecham, first, that I think that his letter may be in the post, just as the noble Lord, Lord Campbell-Savours, may have two letters in the post—this one and the one to which I referred earlier. I turn to the noble Lord’s various questions. He asked how many people in London were affected; there are around 46,000 social tenant households with incomes of over £40,000 who could be affected in London. That includes both local authority and housing association tenants, should the housing association wish to implement this.
I turn to the large group of amendments on income and rent setting. I start by reiterating the commitment I have given to introduce a taper, which will see rents rise gradually as income rises. I give advance warning that this commitment will be the basis of my response to most of these amendments.
I remind noble Lords of the purpose of the clauses to which the amendments relate. Clause 79 will set out a definition of high income and say how this will be calculated. It should be made clear that, in the context of the policy, the income threshold will apply only to the tenants or joint tenants and their spouses or partners. Clause 79 also allows that regulations can specify certain important aspects of that calculation, including the definition of high income for different areas, such as is the case with London; the clause also allows Government to specify what should, or should not, be treated as income for the purposes of the policy. As I mentioned earlier, when we are looking at possible exceptions of groups from the policy, Clause 79 would allow us to make sure they are not adversely impacted.
Clause 80 will make sure that landlords have the power to require the necessary information of households and that reasonable timeframes are provided for the submission of this information to the landlord. In the event that households fail to provide this information, Clause 80 would sanction that rents would automatically rise to a higher level than they may normally pay. This increase in rent should encourage prompt declarations, in a proportionate way. Protections under Clause 82 will ensure that rents will return to their normal levels once the necessary information is declared. This also applies to those tenants whose income falls below the high income threshold following a change of circumstances.
The noble Baroness, Lady Lister, asked me—I think in this group, although time blurs the groups into each other—about particularly vulnerable people who have had a crisis and are not able to provide information. As we work through this aspect of things, that will become clearer, but I am mindful of when that might provide a real problem, particularly for people in crisis.
Clause 83 will give local authorities the power to change tenancy agreements to apply the policy. This clause, most importantly, would give tenants the right to appeal the calculation of their income should they believe that they are incorrect. Clause 83 is fundamental in ensuring that tenants have the opportunity to challenge a calculation, and that a proper process is in place should they wish to do so.
I thank the Minister for giving way. We know that appeals procedures usually take several months; we also know from experience that people’s income fluctuates very widely. How would the Minister protect local authorities from having to recalibrate the rents to be charged each and every month to their tenants? How will the local authority ever stay on top of that information when the tenant is going to appeal continually and reiteratively, I suspect, on the basis of the misinformation of the local authority in imposing the last rent increase, which was based on information sent into them four, five or six months before? Surely, this is the point made by the noble Lord, Lord Kerslake—that the administration of this should have been piloted; then there would be a learning loop as to the problems. I would hate to have to do this, if I were in charge of housing in a local authority. The Minister is passing a nightmare over to local government with monthly, individually tailored rents as income monthly fluctuates.
The intention is certainly not that tenants would pay different levels of rent every month. That is precisely what we want to get right—to reduce the administrative burden and reduce the anxiety for tenants, particularly those with varying incomes, either month to month or week to week. That is the type of thing that we will work through with this.
My Lords, I am not going to give way.
Most importantly, Clause 83 will give tenants the right to appeal the calculation of their income, should they believe that they are incorrect. Clause 83 is fundamental in ensuring that tenants have the opportunity to challenge a calculation.
I will start with Amendment 70A, tabled by the noble Lords, Lord Best, Lord Cameron, Lord Kerslake, and Lord Kennedy. This amendment seeks to restrict the amount by which rent is increased within this policy. I have already outlined in some detail our commitment to introduce a taper to ensure that increases in rent are more closely linked to increases in income. This will ensure that rent rises are affordable and protect the incentive to find and keep work.
Amendment 71 seeks to establish a test of local affordability in rent setting. I thank the noble Lords, Lord Kennedy and Lord Beecham, for this amendment. The Government believe that this is best achieved through a correct setting of market rents within areas, and I have confirmed already that we are considering how this will work. We need to find an approach that can be easily implemented by local authorities but that is a fair representation of the market rental rate. This issue forms a key part of our engagement work with local authorities.
Noble Lords opposite have also tabled Amendments 72 and 77. Amendment 72 asks us to take into account the need to promote socially cohesive and mixed communities. I find this a slightly odd amendment, as I would have thought that the issue of low rents for households on high incomes is actually a divisive issue for communities. Social housing should be aimed squarely at those in real housing need, and it is absolutely right that when families need support they benefit from being in a mixed community. This is our policy.
However, there are more than 40,000 households with incomes of £50,000 or more who are benefiting from lower rents than their neighbours in the private rented sector. Far from being an issue, our policy aims to establish a level playing field across communities. It is worth pausing again here to consider the home ownership offer that the Government have for tenants of social housing, which they may wish to take up—but I am certainly not directing them to take it up.
Amendment 77 seeks to define high income in relation to average incomes in an area. Currently, the median household income figure is £26,000, which I should point out includes both working and non-working households. It is important to recognise that there are working households in the private sector on or below this median amount who are expected to find rents higher than that enjoyed by social tenants on similar incomes. On that basis, our starting threshold of £30,000 nationally is a fair point at which higher rents should become payable. I have already outlined our commitment to a taper to ensure that rent rises are gradual beyond this income threshold.
The noble Lord, Lord McKenzie, who is not in his seat, asked what constituted a household. There is a definition in the voluntary scheme; it includes tenants, joint tenants, spouses, partners and civil partners. That is the kind of thing that we are looking at.
The noble Lord, Lord Cameron, tabled Amendment 77A, which seeks to include a provision to take into account the variability of household income within the definition of high income. The amendment is unnecessary as we already have the power set out in regulations to treat variations in income within a year. That goes back to the point made by the noble Baroness, Lady Hollis. We certainly intend to cover this in regulations. There will be circumstances that are obvious candidates for inclusion, such as the death of a household member or a sudden and significant drop in income, but beyond that we must strike a balance between allowing a review of rent and minimising the burdens on landlords. We cannot have landlords constantly reviewing rents, for example, as the noble Baroness, Lady Hollis, suggested. There must be a sensible approach.
Amendment 79A, tabled by the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, seeks to put higher income thresholds in the Bill. We are not doing this as it would prevent us from bringing forward changes to the thresholds if the evidence supported a change. Our intention is to keep the policy under review and I am sure that that will be supported. I am sure—the noble Lord, Lord Shipley, confirmed this—that the purpose behind the amendment is to question the starting thresholds that were set at the Budget. We have said that rents should rise where household income is more than £30,000—£40,000 in London—but I once again draw attention to my commitment to put in place a taper. It will ensure that for those households on £30,000 the rental increase will be limited to a few pounds each week. While the starting incomes for thresholds are right, we have accepted that there is a need to protect work incentives and this is the purpose of the taper.
Amendments 79B and 79D concern the ability to raise rents where income information has not been provided by tenants. I thank the noble Lords, Lord Kerslake, Lord Beecham, Lord Kennedy, and Lord Low, for tabling these amendments as this is an important part of the Bill. I recognise why there are concerns about the power to raise rents for non-declaration. I will spend some time outlining how we see this power working. Tenants may be required to declare their household income and I have already outlined that we are thinking through the options for defining “income”. We are also considering what evidence is needed to support a declaration. It will be important for tenants to have plenty of time to gather this evidence and I have set out our intention to communicate this policy effectively to landlords and tenants groups.
It is, however, inevitable that there will be some households who, for whatever reason, do not declare details of their income. In these circumstances the Government face a choice. Do we make it a criminal offence or do we take a different approach? My preference is for the latter as a criminal offence seems entirely disproportionate. The power that we have taken therefore would give landlords the ability to set rents at the highest available in that area if there is a consistent failure to declare details of income. When I say “consistent”, I mean that there will be clear guidance for landlords on the amount of effort that they should put in to trying to contact tenants, and only when all of these approaches have failed should rents be raised.
I also make it clear that we do not see higher rental rates applying for the whole of the rental year. If raising rents for non-declaration spurs a household to take action to declare details of income at a later point in the year, the Bill allows for the rent to be set back to the correct level and regulations will set out this approach. I also give a firm commitment that we will clearly communicate this area of policy to landlords. Guidance will require them to set out the impact right from the start in all communications to tenants.
On Amendments 80B and 80C, tabled by the noble Viscount, Lord Hanworth, I refer back to some of the discussion on how reviews of rent could be treated. There will be certain circumstances in which a review of rent would be appropriate: for example, the death of a household member or a sudden loss of income. The power in question, however, deals primarily with circumstances when the income level of the household drops below the threshold for a high-income rent. In those circumstances we intend to use regulations to state that the rent levels should revert to the original level. This will include circumstances where rent has been raised as a result of non-declaration and it is subsequently determined that the rent level should remain as it is currently.
Finally, Amendment 82AA, tabled by the noble Lord, Lord Bassam, seeks a published review into the effect that the policy would have on community cohesion within all local authority areas. I have already expressed our intention to keep the policy under review and also explained my views regarding the detrimental effect that low rents for households on high incomes can have on communities.
What is the latest estimate of the number of households above the £30,000 and £40,000 thresholds? There must be a government estimate. If there is an estimate, does that not suggest that the work has already been done on the exemptions; otherwise, they would not have been able to produce an estimate?
My Lords, I have the figure for London, as the noble Lord, Lord Beecham, asked for it. There are around 46,000 social tenant households with incomes of over £40,000 in London, but that does not presume exemptions.
I still have not got the faintest understanding of how pay-to-stay rents will connect with people’s incomes and UC. Clearly, universal credit is established on a monthly basis on real-time information and in due course will include housing benefit, if that is a flow of income. How often does the Minister expect pay-to-stay rents to be adjusted by the local authority over the course of the year in the light of changing incomes as reflected in UC—monthly, quarterly, yearly? Every answer has a distinct downside.
As I think I have said to noble Lords on several occasions, this will be laid out in due course. Clearly, we would not want to be adjusting rents month in, month out for people. That is the sort of detail we will be working through, and it brings my thoughts back to a different policy brought in under the Labour Government—tax credits. You had to let the authorities know if your pay changed. The detail will be laid out in due course, as I think I have explained several times.
As I said, details on regulations and timelines will be with noble Lords before the end of the week.
I am sure the Minister has picked up from the debates on this group and the previous couple of groups that, the more we drill into this, the more and more complicated it is getting. She and her ministerial colleagues have some job to get this right. I am sure it will get worse. It is very difficult to get this right and, in some ways, I wish her all the best.
On another point, I think I heard the Minister give the number of people on incomes of more than £50,000. If she is using that figure in her arguments, why are we setting the rates for higher rents to start at £30,000 and £40,000?
My Lords, I was simply making the point that there are a high number of households with incomes of more than £50,000.
I get that point, but it is a bit odd that the Bill before us refers to incomes of £30,000 and £40,000, but in her argument the Minister uses an income of £50,000.
My Lords, I cannot speak for the Government back in 2012 and say how they arrived at their figures, as I simply was not here to be part of those discussions. However, I will try to provide some background for the noble Baroness.
I answered that in responding to a question from the noble Lord, Lord Shipley, about not putting the thresholds in the Bill because they might change.
My Lords, I apologise for my delay in rising to speak. I did indeed lead on this amendment, although I spoke to it very briefly compared with the debate that has followed. The rather modest recommendation in my amendment that these rent increases should be limited on the basis of 5% or inflation plus 2% is one of very many ways in which one could make a significant difference to people’s lives with the disruption that is still coming down the road, even with the tapers that we have heard about.
It may be that others have not read into the mysterious letter, which has gone to a number of noble Lords, what I have: that we have a choice of two levels of taper—10p in the pound or 20p in the pound. I hope very much that the Government will go for the 10p. Those are the options the Government are now seriously considering, and we have to accept that. It is a very much better deal than people had feared. Now, you would have to have an income approaching £100,000 in order to pay the market rent in Camden for some of the highest-value properties. The gap is so wide that at 10p in the pound or 20p in the pound, it will take a long time to fill it.
I shall not detain the Committee any longer. I apologise for being slow to get to my feet, and I beg leave to withdraw the amendment.
Amendment 70A withdrawn.
Amendments 70B to 75 not moved.
House resumed. Committee to begin again not before 8.53 pm.