Clause 16 - Loans for mortgage interest

Welfare Reform and Work Bill – in a Public Bill Committee at 4:30 pm on 13th October 2015.

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Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions 4:30 pm, 13th October 2015

I beg to move amendment 110, in clause 16, page 15, line 4, leave out “pay mortgage interest in relation to property” and insert—

“make owner-occupier payments in respect of accommodation”

This amendment replaces the description of the payments for which loans may be made with a reference to “owner-occupier payments” relating to the accommodation that persons occupy as their homes. The term will be defined in regulations (see amendment 116). This amendment also ensures that there is flexibility to provide support as regards all possible dwellings.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

With this it will be convenient to discuss Government amendments 111 to 128.

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

It is a pleasure to serve under your chairmanship, Mr Streeter. For the sake of good order, may I refer colleagues to the Register of Members’ Financial Interests to the extent that anything therein applies and ought to be declared?

I welcome the new members to the Committee and I wish well those who served on it before, particularly the right hon. Member for East Ham, who spoke eloquently in his contributions here and will be sorely missed on the Front Bench of the Labour party.

The clauses will change the way in which claimants with outstanding mortgages receive help from income-related benefits. I will be absolutely clear at the outset. The Government remain committed to helping owner-occupiers in times of need to avoid the risk of repossession. However, we believe it is wrong that taxpayers who are unable to afford to buy a home of their own are subsidising claimants who own their own homes. Taxpayers support a significant asset from which many homeowners are able to profit. It is our intention that help towards mortgage interest payments should be taken in the form of an interest-bearing loan that will be recovered from available equity once the property is sold. In that way, we will be able to provide a better deal for the taxpayer while ensuring that claimants receive the protection from repossession that they currently enjoy.

Moreover, the amendments will ensure that we do not exclude claimants who have non-standard financing arrangements from the offer of a loan, for example where a person has entered into what are referred to as alternative financial arrangements for purchasing their property rather than a traditional mortgage.

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Work and Pensions)

I am listening with care to the Minister because the change is radical compared with how things were done until now. I want to be clear about this. He has talked about the importance of protection from repossession, but can he confirm that the clause extends the period during which there is no assistance available when someone becomes unemployed from 13 to 39 weeks? Would it not make it more likely that homes will be repossessed if mortgage companies get no money at all for 39 weeks?

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

I am grateful to the hon. Lady for giving me the opportunity to make that point. She will be aware that, before the introduction of 13 weeks in 2009, the period was 39 weeks. There was a specific reason why it was reduced by the then Government to 13 weeks: it was the height of the recession. It was very difficult to get jobs and it was felt necessary to make that adjustment. The economic climate now is a lot different from what it was in 2009. When there are record levels of employment —unemployment is very low—and when we have the prospect of an economy that is recovering, we feel the time period should be brought back to what it was previously. There was no concern when there was a 39-week period when there were better economic circumstances. With the economy picking up, we feel that, as 39 weeks was fine in the past under a Labour Government, there is no reason why it should not continue under a Conservative Government.

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Work and Pensions)

The Minister says that he feels 39 weeks will be fine because it was fine under a Labour Government before the recession, but is the change to policy based on any evidence? Can the Government point us to any impact assessment or other information that will reassure us that homelessness will not be increased?

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

There is an impact assessment on the Government website and the hon. Lady is welcome to view it. She talks about evidence and I would have thought that record levels of employment for youth, women and the country as a whole is pretty strong evidence.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

It is interesting that the Minister has absolute confidence in economic stability, but it is not shared by everyone. House prices are rising and falling at different rates, and different job opportunities are available, in different parts of the country. May I be the first to offer the Minister the moniker of Minister for repossessions?

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

Sorry, I missed the hon. Gentleman’s last point. He was obviously trying to be witty and clever, but I am afraid that it was far too witty for this time of day.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

It has been a long day. My point is that the Minister will become known as the Minister for repossessions as a result of a retrograde step. Labour changed that policy in government to ensure that, having contributed to benefits through national insurance, people had support if and when they needed it. The Government are taking that support away and the Minister will become known as the Minister for repossessions.

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

May I gently say to the hon. Gentleman, who is new to the House of Commons, that, if he wishes to survive, he will have to get used to being called a lot of things?

We intend to ensure that, through the regulations, we cover financial arrangements alternative to traditional mortgages. The amendments will also ensure that claimants who live in non-traditional homes, such as houseboats or caravans, will also be offered a loan. It is important that support is available to protect the homes of all individuals, regardless of the type of accommodation they occupy. The amendments ensure that the technical  detail about calculating the amount of a person’s liabilities to make owner-occupier payments, and the maximum amount of those liabilities that can be met with a loan, will be set out in regulations.

The amendments ensure that regulations made under clause 16 requiring security for a loan may make provision for situations where there are alternative financial arrangements for a home, and ensure that the security can be taken in respect of a legal or beneficial interest in the person’s home.

Clause 17 allows for the detailed framework within which loans may be made to be put in place by regulations. That will allow for the tactical operation of support for mortgage-interest loans, which will provide fairness for taxpayers along with protection from repossession for claimants. It will also continue the current administrative arrangements that mean that payments of support for mortgage interest go directly to the mortgage lender.

The amendments to clause 17 are consequential to the amendments to clause 16. They replace the description of the payments for which loans may be made with a reference to owner-occupier payments, which will be defined in regulations. They will ensure that the loan scheme will be available to eligible claimants who have acquired their home through alternative finance arrangements rather than through a traditional mortgage.

Amendment 120 seeks to clarify what requirements a person will have to meet before receiving a loan. It ensures that regulations under the clause may make provision about entering into agreements with persons receiving loans. The Secretary of State will be able to specify terms in the agreement that he thinks fit, subject to any terms set out in the regulations. That will ensure that the regulations do not have to include every term that is needed in the loan agreement.

Amendment 128 is a straightforward, consequential amendment to omit the reference to mortgage payments in section 3A(5)(a) of the State Pension Credit Act 2002, which is about the meaning of payments in respect of accommodation. It mirrors the amendment to section 11 of the Welfare Reform Act 2012 in respect of an award of universal credit. The amendment is necessary because a person in receipt of pension credit will no longer receive an amount in respect of their liability to make mortgage interest payments. Instead, clause 16(1) of the Bill contains provision to enable support for mortgage interest to be paid in the form of a loan.

The impact assessment, which was mentioned earlier, is on the Parliament website and was published on 20 July.

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Work and Pensions)

That is why I am trying to clear this up. I was asking whether the impact assessment contains anything in particular on the effect of the changes in this clause, particularly with regard to extending the time that will be available. People will have to wait 39 weeks before they get any assistance with their  mortgage. Will that increase the amount of homelessness? That is an important piece of evidence that is sadly lacking when the Government are making proposals to extend the time period.

Although the Minister talks with great glee about full employment and this and that, he is changing the legislation so that, instead of people being given assistance to pay the interest on their mortgage, which has always been the system—the assistance pays not for the equity in a property but merely for the interest payments in order to keep people safe, warm and secure in a home—people will have to take out a loan against that property. Furthermore, the Government are changing the legislation so that people have to wait for an extraordinary, scary period of 39 weeks, during which they have to keep off those who actually own the property and who have mortgaged it to them. A person who has lost their job will suddenly have to fight off those who want to repossess the property.

In the real world, we all know that there may be a grace period, but 39 weeks is a very long grace period. My concern is that it will increase the amount of homelessness. Wrapping that together with the Government’s other housing policies, which are also having an adverse effect on homelessness, will increase the amount of homelessness. That is why I asked whether the impact assessment is helpful to the Government in reassuring all of us that the measure will not increase the amount of homelessness.

On the face of it, making a mortgage company wait 39 weeks will increase the number of repossessions. Frankly, if a mortgage company hears that someone has lost their job—the person might be in their late 50s—it might make an assessment and decide that that person is unlikely to get another job. There may be areas of Buckinghamshire, London and the home counties where it is relatively easy to get a job, but there are other areas across the country where, frankly, there are no jobs. The tragedy of Redcar, of course, is that when people lose their job, the chances of their being able to get another are practically nil. They certainly will not be able to get a job at a level that will help them to continue paying their mortgage.

Photo of Debbie Abrahams Debbie Abrahams Shadow Minister (Work and Pensions)

My hon. Friend has hit the nail on the head. In fact, the Money Advice Trust has made exactly the same point and has expressed its considerable concern about extending the period from 13 weeks to 39 weeks. The experience of all lenders and advice agencies is that early intervention is the key to resolving—

Mr Vara rose—

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

Order. The hon. Member for Islington South and Finsbury has tabled an amendment that we will consider later in our proceedings on this very issue. She may not necessarily want to emphasise the point at this stage. The intervention has gone on long enough that she may want to respond to her own colleague and then perhaps give way to the Minister.

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Work and Pensions)

I am grateful to my hon. Friend. I appreciate that I sound like a cracked record, but it is about evidence, evidence, evidence. What is the evidence that this change will help us? What is the evidence that  this will not increase the number of repossessions? Give us evidence and we would be interested, glad and reassured to hear it.

On the face of it, if someone does not pay back any mortgage for 39 weeks, their mortgage company will kick them out. A steelworker in Redcar might have a good mortgage, a family home and a good family wage one week, but the next week, they could be made redundant and no longer be able to pay their mortgage. The Government will not give them any assistance for 39 weeks. They would have no job and no prospects, and things could suddenly turn very nasty and difficult. Thirty nine weeks is a long period. They might be able to get a zero-hours contract. All I can say to that is: good luck with paying off a mortgage on a zero-hours contract.

As we said at the beginning of these proceedings, although the Government want to use the terms of clause 1 to be able to get up and brag about full employment or the progress towards that, we know that the definition of employment seems to be any work at all. The definition of employment is not the living wage, a wage that a family can live on or a wage that people can use to pay their mortgage..

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

I would make two brief comments. The Council of Mortgage Lenders has not said that the 39-week wait will drive repossessions. That is an eminently respected organisation, and it would have said if it felt that was the case. May I gently remind the hon. Lady that though she was not an MP at the time, the Labour Government from 1997 to 2009 maintained a 39-week waiting period? It seems ironic that what was suitable for a Labour Government for so many years is now felt to be inappropriate for this Government, particularly when our economic record is on the up and far better than it was under the previous Government.

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Work and Pensions)

I was an MP in 2005, and the difference was that there was real investment going on, homes were being built and the economy was working properly as opposed to fumbling along as it currently is and seemingly being fuelled entirely by rhetoric. It is all very well for the Minister to assert until he is blue in the face that everything is well, everyone is working, everyone is getting a great wage and there are no problems, but that is not the reality of people’s lives.

Mr Vara rose—

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

Order. The hon. Lady is giving way on Government amendment 110.

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

That is very helpful. As the Government amendment deals with houses, what I am about to say will be very relevant, particularly given what the hon. Lady said. She spoke about the huge amount of house building under the Labour Government when she was a Labour Member. May I remind her that the past five years have seen more affordable housing built than in the 13 years of the Labour Administration?

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Work and Pensions)

No. I do not agree. I am grateful for the Minister’s comments about the Council of Mortgage Lenders and its statement. I counter him with a statement from the Money Advice Trust:

“We strongly support the tabled Amendment 19, which would require that the waiting period before an application for a loan for mortgage interest can be made is retained at 13 weeks, instead of  the proposed 39. Lenders and advice agencies alike know from experience that early intervention is the key to resolving financial difficulty. The proposed 39 weeks will mean that claimants will be well over six months in arrears with their mortgage by the time SMI starts to be paid—by which time it will be significantly more difficult for them to resolve their financial situation.”

There are arguments both ways.

It is important that we look at what will happen. The Government have said a great deal about pensioners, about how they will look after pensions, about the triple lock and about this Government being friendly to pensioners. Is not there a problem that this measure will affect pensioners as much as it will affect anyone else? The particular difficulty with pensioners is that if they are expected to take out a loan against their property instead of getting relief on the interest, increasingly they will lose ownership of that property. As pensioners it will be even more difficult for them to work. In fact, the idea of a pensioner is that they do not work. The policy will increasingly eat away at an asset that cannot be expanded.

Is that not an asset that, as a matter of social policy, the Government expect pensioners to use in many other ways? I will not get into a detailed debate about the cuts in social care. Let us just say that I think there have been cuts in social care. I am sure that the Minister thinks that social care is marvellous so let us leave it at that. Are not pensioners expected to be paying for their long-term care out of the asset that is their home?

Many pensioners may have been tempted by the Government’s deregulation of access to pension pots. Memorably, the previous Pensions Minister said that he would be intensely relaxed if people were to take their money out and spend it on a Bugatti or whatever it was. Of course, deregulation and the access to pension pots means that people will have access to their pension funds, which they will be able to spend in advance of their pension. They will be expected to use their houses to pay for social care and if they need assistance with paying off their mortgage, that mortgage will not be available for them in any other way; they will be expected continually to take out more of a loan on the equity of the property.

It seems that pensioners are getting it from every angle, which is very far from the rhetoric we heard at the party conference about how much the Tory party is a friend of pensioners. It is interesting that this is the first—I suspect it will not be the last—occasion in which the Government are changing the game. The Government say they want to help people make the right choices. Pensioners, of all people, may be unable to make choices. They are coming towards the end of their lives and their options are limited. They are expected to take yet another charge on the one asset of value that they have—to continually take out a loan on their property, which their children may be expecting to have to help pay off their student loans or to set up in life.

We have heard that the average age for people to set up their own home now is in their 30s. Quite often, they rely on their parents to be able to help. The rules are being changed for pensioners. This is blow No.1; we will  see how many other blows there are for pensioners in the future. We will certainly ensure that pensioners hear the truth, which is that, despite the rhetoric, this Tory party which claims to be the friend of pensioners, is not. This is the first step in undermining all the promises the party made in its manifesto and at the last general election.

Photo of Shailesh Vara Shailesh Vara The Parliamentary Under-Secretary of State for Justice, The Parliamentary Under-Secretary of State for Work and Pensions

I simply make two responses. On pensioners, the hon. Lady conveniently overlooks that it is often the case that the asset is increasing in value. She also overlooks that the loan will eventually be paid when the house is sold. It is therefore a question of balance, and we have to ask whether it is fair that those who do not own a property of their own are through their taxes helping to pay others who own an asset that is increasing in value.

As for healthcare, I simply say to the hon. Lady that for many of those securing help in healthcare there is unlikely to be an overlap in terms of the equity in their property, as many of them are mortgage-free and sometimes have a second income or another income. They would not probably qualify for SMI in the first place.

Amendment 110 agreed to.

Amendments made: 111, in clause 16,  page 15,  line 13,  leave out

“amounts secured by a mortgage”

and insert “liabilities”.

This amendment and amendments 112, 113, 118, 122, 123, 124, 125 and 126 are consequential on amendment 110 which replaces the reference to mortgage interest payments with a reference to owner-occupier payments.

Amendment 112, in clause 16, page 15, line 16, leave out

“the mortgage relates to amounts used”

and insert

“a person’s liability to make owner-occupier payments was incurred”.

Amendment 113, in clause 16, page 15, line 18, leave out from “about” to “in” in line 19 and insert “—

(a) determining or calculating the amount of a person’s liabilities;

(b) the maximum amount of a person’s liabilities”.

Amendment 114, in clause 16, page 15, line 24, after second “a” insert “mortgage of or”.

This amendment ensures that regulations under clause 16 about requiring security for a loan may make provision for situations where there is no pre-existing mortgage over the person’s home.

Amendment 115, in clause 16, page 15, line 24, at end insert

“a legal or beneficial interest in”.—(Mr Vara.)

This amendment makes clear that regulations under clause 16 about requiring security for a loan may make provision for security to be taken in respect of a legal or a beneficial interest in the person’s home.

Ordered, That further consideration be now adjourned.—(Guy Opperman.)

Adjourned till Thursday 13 October at half-past Eleven o’clock.

 Written evidence reported to the House

WRW 44 Interlink Foundation, Agudas Israel of Great Britain and the Union of Orthodox Hebrew Congregations

WRW 45 End Child Poverty Coalition

WRW 46 Chartered Institute of Housing

WRW 47 Gipton Supported Independent Living (GIPSIL)

WRW 48 Chwarae Teg

WRW 49 Oxfam

WRW 50 Remploy

WRW 51 Money Advice Trust

WRW 52 PCS Union

WRW 53 The Almshouse Association

WRW 54 Equity

WRW 55 Radian

WRW 56 Council of Mortgage Lenders

WRW 57 Harry Warner

WRW 58 Trades Union Congress

WRW 59 Emma Hauxwell

WRW 60 Capsticks LLP

WRW 61 Kinship Care Alliance

WRW 62 Wigan Council, and Wigan and Leigh Homes

WRW 63 Supplementary evidence from Cllr Gary Porter CBE, Chair, Local Government Association

WRW 64 Parkinson’s UK