On behalf of the Work and Pensions Committee, it is a pleasure to open the first debate that we have held in Westminster Hall. We have published two full reports up to this point in time. One is “Youth Unemployment and the Future Jobs Fund” and the other is the report that we are discussing today, “Changes to Housing Benefit announced in the June 2010 Budget”.
We had hoped that the Government response would have been with us a bit earlier, but it arrived a bit close to the wire. We were able to agree it in our Committee meeting yesterday morning, just after we had grilled the Minister, who is here today, on his pensions policy and thrown him out. The members of the Committee now have copies of the Government response. Obviously, part of the reason for the debate today is to discuss the report in general and the Government response.
I will give a bit of history about the genesis of the report that we are debating today. We decided that it was important to produce the report after the announcement about housing benefit in the Budget last June. However, as soon as we announced the inquiry and published our terms of reference, the debate about housing benefit and local housing allowance moved on. So this report is quite narrow, in that it looks almost exclusively at the LHA and the situation in the private rented sector. That is because at the time that the report was produced, it had not been recognised that there might be implications for the public rented sector, and particularly for local councils, due to the changes to housing benefit. That became clearer as we carried out our inquiry, but by that time we were already tied in to the terms of reference that we had sought evidence on, and we were not in a position to change those terms of reference. However, I am fairly sure that the debate about housing benefit and the LHA will continue, and hopefully this afternoon we can tease out some of the additional issues that we were unable to cover in the report.
We need to begin with the items in the Government response that we welcome. We made a number of recommendations in our report about the need for robust data and robust independent research. That was because when we took evidence, we found that charities working in the homeless sector often said that the changes to housing benefit would lead to mass homelessness and were unlikely to lead to private landlords reducing their rent, whereas the Government said, “No, they won’t. There might be a bit of homelessness, but not really that much, and yes, the whole point of this policy is to force private landlords to reduce their rent.” Until the policy is in place and has been working, it is impossible to test which of those two diametrically opposed views is the right one. That is why we are pleased that the Government have recognised the need for good, solid, independent research, because that will be the only way in which we can tell whether the policy has had the intended consequences and ensure that it does what it says on the tin.
I do not know whether this was a success for our Select Committee, but many people were delighted that the Government decided to drop the 10% sanction on housing benefit for people who have been on jobseeker’s allowance for more than a year. That proposal caused a huge amount of angst among a large number of the people from whom we took evidence, and the issue was raised on the Floor of the House and in debates in Westminster Hall. It seemed grossly unfair, and it certainly would not have done what the Government alleged it would do, which was to act as a work incentive—if anything, it would have acted as a work disincentive.
That proposal woke up the public rented sector—particularly the housing associations—to the full implications of some of the proposals that the Government were coming up with, because a large number of housing association residents are on JSA. The housing associations faced the prospect of losing 10% of their income at a stroke as their residents were sanctioned. The residents might have done everything that the Government asked them but have been unable to get a job, because the labour market in their area was such that they could not find one, yet they would still lose 10% of their housing benefit. It seemed strange to us that housing benefit would be sanctioned for actions in relation to a completely different benefit. I am pleased that the Government have seen fit to drop that proposal, which is incredibly important.
Much of the debate about housing benefit has focused on the caps or on the situation in London, which has helped to obscure what could happen elsewhere in the country, and some of the knock-on effects for the public rented sector. That was because it was much easier for the tabloid newspapers to latch on to stories about “£1,000-a-week housing benefit claims”, when in fact such claims were a small minority of all claims. It is often the case that it is not good practice to introduce policy based on the few rogue examples rather than on the position that most people find themselves in.
Despite that, and despite the fact that the LHA was increasing and in general covered rents, there were already shortfalls for some residents. Many claimants were already making up the shortfall between what they qualified for with regard to what they could get in the broad rental market area and what their actual rent was. As part of our inquiry, we visited a citizens advice bureau where we met an elderly gentleman who was already having to supplement his housing benefit to the tune of about 10% of his very limited pension. He was a prime example of someone who had found it very difficult to get a tenancy in the private rented sector, because as soon as landlords heard that he was on housing benefit they turned him away. “Lying” might not be quite the right word to use, but he “failed to inform” his landlord that he was actually an LHA recipient when he signed the lease on the accommodation that he was in at that time. He knows that he probably would not have been able to get that lease if he had told his landlord that he was an LHA recipient.
That is one likely problem with the Government’s approach. The assumption is that people will be able to move and that they will be able to find accommodation within the bands that they can claim for, but that is not necessarily the case. Although the Government response says that landlords will reduce rents in many areas, it is definitely the case that in large numbers of areas—my area, for example—demand already outstrips supply, and landlords will quite easily be able to get tenants who are not dependent on housing benefit to live in their properties. Therefore, the choices of those who are dependent on housing benefit will be squeezed and become ever narrower. They do not have the choice to go into the public rented sector, because there is already a shortage of supply there.
The Government’s response is a bit complacent in saying that landlords will reduce their rents. Even if they do so in one or two areas, I suspect that in the majority of the UK they will not, and it will be very difficult for people to find anything to rent. In places where there is very little choice anyway, such as rural areas, choice will be further narrowed, and it might be impossible for people who are on housing benefit or local housing allowance to get anything with a rental price anywhere near what they can claim in benefit.
I have received a briefing from the Residential Landlords Association on that precise point. It says that in relation to a survey it conducted:
“71% of respondents said that they would not decrease their rents. A recent study for the British Property Federation put this figure at 88%. Although the Government’s whole case is based on the assumption that this will happen our survey evidence (along with that carried out by the Local Government Association in London) contradicts this.”
Does my hon. Friend agree that we can already market-test to some degree? In my borough of Trafford, for example, we already know that two-bedroom properties in the private rented sector are heavily oversubscribed. The market is unlikely to reduce rents when it can readily let to people who are not in receipt of local housing allowance.
Indeed, and there is the same situation in my constituency, where there is a housing shortage. Even people who work in the oil industry—a fluid population that comes temporarily to work in the offshore sector—have great difficulty in finding housing. There are jobs in certain areas and people flock to them, but those people often cannot take up the employment, because they cannot find accommodation. Those people are in the private rented sector and can afford fairly high rents, and their situation probably has more to do with rent inflation in Aberdeen than with anything that has happened as a result of local housing allowance. The Government have sometimes given the existence of the local housing allowance as a reason for rent inflation in the private rented sector, but in certain areas it has nothing to do with the allowance, simply because there are not enough LHA claimants to have that kind of market effect.
One aspect of the housing benefit reforms that we congratulated the Government on is the fact that disabled people who need a non-familial person to stay overnight will be able to claim housing benefit to cover the extra room required for that carer, which is, in itself, a good measure. It was a recommendation made by the Select Committee in the previous Parliament, and I have to say that the then Labour Government did not agree to implement it. However—there is often an “however” in all this—as a Committee we realised that even if the person looking after a disabled person is a relative who does not need space in the house, there might, for example, be a need for more space for wheelchairs, or an extra room for dialysis machinery. Disabled people need large houses, for which they would not qualify on the basis of their family size, for all sorts of reasons.
I was disappointed by the Government’s response on that issue:
“Housing Benefit is not designed to meet every individual circumstance and it would be complex to introduce different rules for the situations such as those described by the Committee”.
That is poor, because council tax benefit and the tax itself can take account of people who need extra room. If someone can prove that they are in a bigger house than they would otherwise occupy because they need extra room for a wheelchair, the local authority places the house in a lower council tax band. That is quite simple and straightforward, and it is not particularly difficult. I am disappointed that the Government have not recognised that such extra space might be imperative for disabled people. It is doubly imperative that the Government recognise that, because the proposals also introduce an under-occupancy rule, of which disabled people could fall foul simply because they occupy a house that is bigger than the one that they would need on the basis of the number of people in their family.
The Government also completely miss the point of the Committee’s recommendations regarding the possibility that someone with a disability who has had their house adapted has to move because they do not qualify for a house of that size, or because the house is too expensive. Their house, whether in the private rented or social rented sector, will no longer be covered by housing benefit. The Government’s response is, “Well, we’ve got the nine-month transitional protection,” or “There might be something in the discretionary housing payment that can be used.” The Government’s response suggests that disabled people will be able to move just like everyone else. Well, the answer is, “No they will not.” It is incredibly difficult, as it is, to get accommodation; it is almost impossible to get accommodation that is already adapted; and it is very difficult to get accommodation that can easily be adapted. For someone who has already spent a lot of money—out of their own pocket or through facilities grants—not only on making their home accessible, but on adapting the bathroom and kitchen and doing all the other things that need to be done, the Government are saying that it will somehow be okay, because if housing benefit is changed such people will be able to move and replicate those facilities somewhere else, but only in a smaller house or a cheaper area. That is not possible, and a lot of disabled people will be distressed by what I see as complacency by the Government.
I know that the Government say that all that will be covered by the discretionary housing payment. In fact, their response to our report seems to say that the payment will be a panacea. I came across mentions of the payment so often that I counted them, and it appears 20 times in a relatively short document. The discretionary housing payment will be the solution 20 times—it is mentioned three times on page 11 alone. So, £190 million is going to go an awfully long way and do an awful lot, and I am fairly sure that the Minister himself recognises that it is not elastic and will not cover all that the response says that it will.
I, too, noted the many references to the discretionary housing payment as the solution to the hardship and risk of homelessness identified in our report. Does my hon. Friend agree that it is not only about whether that payment can possibly be adequate, which looks unlikely, but about the fact that it is discretionary? That introduces further uncertainty for families and households about the stability of their home.
That is the problem. As well as the discretionary element, council tax benefit will be devolved to local authorities, although only 90% of it, and that as well will be discretionary to the local authority. The discretionary element must cover not only older people but disabled people, young people, large families and multi-generational families, perhaps from ethnic minorities, yet it will be up to the local authority to decide who receives it. I suspect that most local authorities will have a pecking order of groups that they think are worthy of support, leaving the groups that they do not think are worthy of support at the bottom of the heap.
There is another dimension to the problem that my local authority has raised with me. This is a period in which local authorities are strapped for cash and reducing staff, yet the changes will place greater burdens on them, which might extend the length of time required to make the discretionary decisions, making the people waiting for those decisions even more anxious and concerned.
Governments and local authorities are often accused of making people suffer a postcode lottery. The fact that yet another matter will be open to the discretion of local authorities with tight budgets could create a strong postcode lottery dependent on area, not just in different parts of the country but in neighbouring areas. That will lead to uncertainty among claimants, who will not know when they sign a lease whether they will receive discretionary housing payment or not. There will be new claimants, and those sitting in houses in the hope of receiving discretionary housing benefit might have months of worry—perhaps will have even started to look for other housing—before knowing whether they will be covered by their council’s discretion and receive the money.
I suspect that in many areas, because the money will not go far enough, the discretionary housing payment might cover some but not all of the gap between people’s rent and their housing benefit and local housing allowance, so the anxiety about whether they will have to move will continue even after they are awarded the discretionary housing payment.
The other panaceas that the Government seem to think will solve a lot are the nine months’ transitional protection, which was mentioned only four times in their response rather than 20, and the independent review, which is mentioned throughout the document, although I did not count how many times. Phrases such as “the independent review will be comprehensive” and “it will cover” crop up throughout the report, as though we will have to wait for the review before some of the questions are answered. That is particularly worrying.
Another issue that we considered was the shared room rate, which the Government say in their response will be renamed the shared accommodation rate. It is meant for younger people, who are expected not necessarily to have single tenancy of a complete property but to share with others. It is proposed to raise the age limit for the shared accommodation rate from 25 to 35.
I am not sure that the Government have thought through the implications. I held a housing summit in Aberdeen to which a lot of people from the public rented sector came along, particularly from housing associations, and they were greatly exercised. Do the Government know how many houses in multiple occupation exist? Is there enough accommodation for that group of people? In my area, there are virtually no HMOs, because it is quite complicated and bureaucratic to register as one. A number of people who fall into the category will not be able to access a room in shared accommodation. Have the Government considered changing the rules to make it easier to share? It is illegal for tenants on housing benefit to sub-let, and there are all sorts of other barriers in the rules that make it difficult for people on housing benefit to share housing.
Have the Government considered the divorced or separated dad who is 34 years old and has access to his children at the weekend? What will it mean to bring children into a house in which other people live? Have the Government considered the child protection issues involved? Will the single room rate apply to the divorced father under 35 who looks after his children one or two nights a week?
What research have the Government done to ensure that accommodation for that group exists at all? In some rural areas, there are no HMOs. Will young people all be expected to flock into cities and more populated areas if the accommodation for which they qualify does not exist in their area?
Does the hon. Lady agree that it is particularly unreasonable to require expectant mothers to share accommodation up until they give birth? The last thing I can imagine wanting to do, having just given birth, is suddenly to find somewhere new to live and move house. That is completely unacceptable.
Indeed. I know from the homelessness legislation that that problem already exists. Lots of young pregnant women come to my constituency surgery who are living in mum’s spare bedroom or on her couch, but the homeless section will not see or deal with them until the day the baby is born. Usually the homeless section is sympathetic and will try to find them somewhere, but I suspect that that might happen only in Aberdeen, where there is not as much pressure on the social rented sector as in London. Such young women are often in a state of anxiety because they do not know what they will be taking their baby home to. They worry that it might be a damp room in a shared house somewhere.
My hon. Friend lays her finger precisely on a constituency case that I had. The mother involved gave birth to her baby in the local hospital, the baby was ill and my constituent’s medical team would not allow her to take the baby back to where she had come from, as it was overcrowded, seriously damp and totally unsuited to a sick child. As a result, additional costs were laid on the national health service due to the complete unacceptability of her living arrangements at the time.
I suspect that most hon. Members will have similar examples in their constituency.
The Government’s response lists the various groups to which the shared accommodation rate—I have got so used to calling it the single room rate that I am finding it difficult to change—will not apply, but it is not clear how all the housing benefit changes will affect those living in supported accommodation, especially those who receive a mixture of Supporting People money and housing benefits, which is often a complex package of benefits, to allow them to live with support in their own home or shared accommodation. Will the Minister say a bit more about that?
Our report also considered work incentives, which were the main rationale for the Government’s changes—well, I suppose that the main rationale was to save on the housing benefit budget, but the second was to improve work incentives to ensure that work always pays.
I congratulate the Select Committee on its excellent work, and the hon. Lady on a very good exposition of some of the worries and potential issues with regard to the reforms.
As a non-member of the Select Committee, I would be interested to know where the Opposition parties are coming from on the overall thrust of the reforms. The Labour manifesto in the 2010 election said:
“Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.”
It is my understanding that that is a major thrust in the thinking behind some of the reforms. Does the hon. Lady agree with the manifesto of 2010? I would find that helpful to know, as background to the more detailed debate.
As we are speaking, perhaps the hon. Gentleman could read the report, where he will discover that the Select Committee recognised that housing benefit needed to be changed, and that the costs of housing benefit should be under control and affordable. There is no dissent from that. In terms of the Government’s response, the Government agree with the Committee, even within the ambit of the importance of getting the right amount of money to the right person to ensure that those who are on housing benefit are not experiencing a luxurious lifestyle, though I have to say they are not. That is where much of the problem in the debate came: the often overblown claims in some of the tabloid papers. One must remember that local housing allowance was set at broad rental market area level. Although the overall cap is £400, in a lot of areas it was already not possible to get that level of housing benefit or local housing allowance anyway.
If Jonathan Lord has now had the opportunity to consider the Government’s response, I wonder whether he was as struck as I was by the recognition that, after the introduction of local housing allowance, it was found that most low-income working households do pay a rent slightly lower than the local housing allowance rate for the property they occupy. It was only slightly lower—that rent was usually 90% or more of the local housing allowance rate. The differential between those who were in work and those not, in terms of rent paid, was relatively low. The make-up of the two groups often accounted for quite a lot of that difference. Those who were in work and having to pay rent were often young professionals, for whom occupying rented property would be a transitional step through to property ownership.
Very often, partly because of the publicity and the tabloid headlines, the assumption is that people on housing benefit are always out of work, when that is certainly not the case. In fact, in London it is particularly important that if low-paid people are to get work and to have work incentives, housing benefit must be set at the right level. The danger is that the gap between what they can get in housing benefit and what they can afford is too great; they end up not being able to get accommodation in the area in which they are working, which is even more important.
Is one of the problems not the fact that local housing allowances have driven up rents for everybody in the private rented sector, including people who are working? That has had a knock-on impact on both those who are receiving the LHA and on those paying all their rent. Even where the difference between those who are not receiving LHA and are paying the rent themselves is 90% of LHA rates, that is higher than it would have been had the rents not been driven up in the first place. It has a much broader knock-on impact across society.
Earlier in my contribution, I said that I do not believe that is the case in Aberdeen. Wherever the housing supply is less than the housing demand, it is the lack of supply and the ability of those in work to pay higher rents that drives up rents, not the level set for the local housing allowance. It is a chicken and egg situation. Why was the local housing allowance set at that level for that broad rental market area? It was because of the average house rental price in that area.
Jenny Willott will have constituents in the private rented sector who will already, without any changes, be supplementing the local housing allowance out of their other benefits, in order to be able to afford the house. If rents were being driven up to local housing allowance levels, we would have seen a much smoother curve in the cost of all housing. All housing would cost the local housing allowance, but very often it still costs a lot more. That has been the problem that many are facing. It may be true in some areas, but that is what one hopes the research will find: that in the odd area a large number of people in the private rented sector are also on housing benefit. I understand that Blackpool is one of those areas. In such areas it may be the case that private rents have gone up to the LHA.
However, I do not believe that would be the case in more affluent areas. Unfortunately, in areas where that has happened, unless landlords reduce rents, we are still in a cycle of people not being able to afford the housing or to get other housing that they can afford, because of the changes. I have not said anything about the changes from the 50th to the 30th percentile: that also comes into play in a different area.
I was going to say something about the importance of housing benefit to work incentives. Perhaps that is something the Minister could answer. We know that housing benefit is to be in the universal credit, but we do not know the details of how it will be treated. One fear is that if housing benefit comes in as a flat level rather than the actual cost of the housing occupied, there might be a disconnect between what someone has to pay out and the effective withdrawal rates, so universal credit would not operate as it is meant to and ensure that works pays in all cases.
I am coming to the end of my comments, and I appreciate that I have not covered everything in the document. I mentioned that I held a housing summit—predominantly for housing associations but including those in the social rented sector in my constituency. The reason for that was that it became apparent that not only were there knock-on effects from the private rented sector that would result in higher demand for their properties, but there are also Government proposals that would affect them directly.
The biggest one that worried housing associations and the social rented sector is the under-occupancy rule, as it will affect all social rented housing as well as the private rented sector. The fear is that there will not be enough accommodation of the appropriate size for people to move. Consider the case of parents in their late-50s occupying a three-bedroom house, because it was the family home in which the family grew up before leaving. They have fallen out of work, which might be exacerbated by the increase in the state retirement age to 66. In their late 50s or early 60s, for the first time in their lives, they are now dependent on housing benefit in order to pay the rent, but they will only get housing benefit for a one-bedroom property, because that is all they will qualify for. Can the Minister say how the amount they get will be calculated? It could be, in an area such as Aberdeen, that what they pay for their three-bedroom council house is less than they would get in local housing allowance, even after the changes, for a one-bedroom flat in the private rented sector. There is a false economy if they are being forced to move into something more expensive, which they will get because it is in the private rented sector.
I could be flippant and say that there will be plenty of one-bedroom flats available because all the 25 to 35-year-olds will have had to move out of them to go into shared accommodation. However, I do not think that the 60-year-old mum and dad are going to move into the equivalent of a one-bedroom student flat, which a younger person has moved out of. This will cause great anxiety and worry. A lot of people will probably stay where they are, but they will be very short on the rent.
I know that the Minister is particularly concerned about pensioner poverty, but a large group of people who have fallen out of work towards the end of their working lives and who cannot get their state pensions until they are 66 will get caught up in this issue; it will not affect people who are over pension age, but it will affect those who are just below it, whose last years before they get the state pension will be spent living in poverty. They could become the group with the highest levels of poverty. The issue really must be considered. The social rented sector is particularly worried, because a lot of those people are already in the sector, and there is simply not enough stock to allow people to be moved around and housed according to the new occupancy rules.
When Labour was in government, many Opposition Members said it would be unfair for older people to have to sell their houses to pay for their care. They also said that it would be unreasonable for them to have to sell their houses because the council tax was too expensive. However, the Conservative coalition Government are saying that it is perfectly acceptable for those living in the social rented sector to have to move at a time in their lives when they should be settling down and moving towards retirement. The issue is a great concern, and people are very exercised by it. In rural areas, of course, there may not be houses of the appropriate size because they do not exist. People will therefore face an enormous shortfall between their rent and what they can get under the occupancy rules because of where they live.
I could say a lot more, but I am conscious that I have taken up a lot of time.
On under-occupancy, my local council has a terrific record on providing social and affordable housing. Like other hon. Members, however, I have many constituents who need larger houses. Sometimes, they are on a waiting list for years to get one. Across the country—I have asked about this on the Floor of the House—hundreds of thousands of people are taking up space that they no longer need. Does it really make sense to have all those people waiting for appropriately sized accommodation, while others are being subsidised in the social and affordable sector and sitting on properties that are far too large for their current needs?
I hazard a guess that the group of constituents the hon. Gentleman is talking about—we all have them—are not sitting in one-bedroom properties, but two-bedroom properties, and they will be looking for three or four-bedroom properties as their families grow. However, the people who are over-occupying will qualify only for a one-bedroom property, and in places such as Glasgow, there are simply not enough one-bedroom properties in the social rented sector to cover the number of people who qualify only for a single-bedroom property.
On that very point, I have a briefing from the National Housing Federation, which states:
“There is a very limited supply of one bed properties into which people will be able to move. In 2009, just 38,700 one bed housing association properties were let to people of all ages in England. By contrast, the DWP’s impact assessment identifies 240,000 households who fit the size criteria…Most of these people will see a cut in their benefit with no prospect of being able to move to a smaller social home.”
That gives some of the figures. The problem is the mismatch between what people will now get housing benefit for and the actual housing supply. We also have to remember that housing associations and councils are no longer building houses. In fact, the housing summit that I hosted made it clear that housing associations, in particular, are afraid that they might not be in a position to build any more new houses. At the moment, banks regard them as a fairly low investment risk, because they know that housing associations will be paid housing benefit directly for residents who are on it. Under the move to universal credit, housing benefit will no longer be paid directly to the landlord, which will undermine housing associations’ ability to borrow, because they will no longer be seen as low risk.
Alternatively, housing associations might have a large number of tenants in properties that are over-occupied, so they will see a shortfall in housing benefit. On a number of different fronts, therefore, housing associations could see arrears build up, because people can no longer afford rents as a result of the changes to housing benefit. If housing associations are then seen as no longer being a safe investment bet, they will not be in a position to build the new houses that are required. Some housing associations have gone down the route of shared equity and all sorts of other things, but all that is under threat because of the housing benefit changes. That was outwith the scope of the Committee’s report, but it certainly needs to be considered, and I hope that we will return to it at some time in the future.
I know that I have not covered everything and that I have covered only bits and pieces, but I have talked for a long time, so I hope that hon. Members will have a flavour of some of the issues. Yes, we welcome some of the things the Government have said, but we are generally quite disappointed by their response and by their view that £190 million of discretionary housing benefit will somehow magic away a lot of the problems resulting from the changes. I hope that the Government are listening and that the Minister can answer at least some of our questions—if he cannot do so, I am sure that he can write to us.
I warmly welcome the report of the Work and Pensions Committee. I congratulate its Chair and her team on such an excellent piece of work.
The report and the evidence given to the Committee show that the Government are prepared to attack the most vulnerable in our society in pursuit of their blinkered cuts agenda. The so-called reforms to housing benefit demonstrate, sadly, that the nasty party is alive and kicking—and kicking the poor especially hard.
The Government response, which was published today, does not adequately address the concerns raised by the Committee’s report and by the expert witnesses. It is a shame, and perhaps rather telling, that the Government chose to publish their response on the morning of the debate, giving little time for proper scrutiny of it.
As the Committee notes in its conclusions, it was told that a few highly publicised cases of large families in high-rent properties in central London have been used to distort public perception of the scale of the problem. With the assistance of the right-wing press, the coalition tries to justify the housing benefit cuts by presenting housing benefit as an area of waste.
I accept, as hon. Members have said, that these isolated cases are anomalous and are not the norm. However, does the hon. Lady really think it right, especially in a time of economic hardship, that hard-working families see other families living in properties, perhaps in central London, worth £1.2 million, when they could never possibly aspire to live in such houses on their salaries and wages? Does she agree with the cap that the Government still intend to introduce?
A tiny number of high-profile cases have completely distorted the whole debate. Yes, there will be a few cases that cannot be justified, but I do not think that they should be allowed to dictate a policy that will be so punitive towards the poorest and most vulnerable.
On precisely that point, I, too, was somewhat disturbed by the Prime Minister’s absolute adumbration that such cases were the norm for people who claim housing benefit, so I tabled questions. We are talking about precisely 90 families, who are all in central London. They are all large families, usually from ethnic minority communities, who have come to this country because we offered them asylum.
I am enormously grateful for that information, which clearly sets out what we are dealing with. We are not dealing with the manufactured scenario in which hard-working families support the housing costs of huge numbers of workshy people who are wasting taxpayers’ money, which is the story being put about. The evidence given to the Committee shows plainly that that approach is inaccurate and irresponsible.
Let us remember that only one in eight of all housing benefit claimants is formally classified as unemployed. The rest include people on low incomes, pensioners, carers, and people with disabilities who are unable to work. We must challenge the myth of the workshy.
We had a thoughtful exposition from the Chair of the Select Committee, and I now hear a diatribe about the nasty party. First, I remind the hon. Lady that the Government are a coalition, as is evidenced today, and secondly the characterisation is totally wrong. I used to be the housing chairman in a London local authority and am now the Member of Parliament for Woking. There are many hard-working people in Woking, including the ethnic minority communities, who would love large houses in the centre of London, but it is just not tenable.
Thank you, Mr Sheridan. My question is whether the hon. Lady will withdraw her uncharacteristically barbed remarks, when she can see from the Government’s response that we are trying to get the housing benefit system back into kilter. At a time of economic difficulty, there is a need for a fairness test. I bring her attention back to those hard-working families who see others living in ridiculously large houses.
I should be delighted for the housing benefit changes to be challenged under a fairness test, because any sensible fairness test on what is proposed shows that it fails a fairness test over and over. I am not delivering a diatribe. I am making a point. The media coverage and the language used, from the Prime Minister downwards, give the impression that there are many people who are simply workshy. To begin to challenge some of the stereotypes, it is important to state that only one in eight of all housing benefit claimants is formally classified as unemployed. I should love to withdraw the remarks I made about the nasty party, but on the basis of the information I have I cannot. The fact that the Lib Dems have now joined the nasty party does not make things better. It makes two nasty parties instead of one.
However, I should like to get on to the serious points. Many people who depend on housing benefit to get by in Brighton and Hove are in work. To be exact, 31% of people who receive LHA are in employment. They rely on housing benefit but they fear they will be forced to move away from the higher-rent areas where they work, such as my constituency of Brighton, Pavilion. As part of the June 2010 Budget the Government announced an intention to uprate LHA rates by the consumer prices index from April 2013. That measure, which is now in the Welfare Reform Bill, will make rents increasingly unaffordable for local housing allowance claimants throughout the country as the rates are linked to inflation rather than the real cost of rents.
Without access to adequate temporary support with housing costs, people who lose their jobs may be forced to uproot their families and move to a new area, undermining their efforts to find employment and get back on their feet. That is graphically demonstrated by new research by Shelter and the Chartered Institute of Housing, which shows that by 2025 nine out of 10 homes will be unaffordable to local housing allowance claimants in Brighton and Hove. The research found that in Brighton the areas with the most locations of employment were quickest to become very unaffordable, with the more remote rural areas and the eastern coastal area, which has relatively high unemployment, remaining relatively affordable. For many, therefore, the cuts to LHA will force them to move and make it difficult to retain their jobs, because it will be too impractical or costly to commute from the cheaper areas they will be forced to go to.
Once the cap on rail fare increases is raised to 3% above inflation from 2012, and the arrears caused by the shortfalls in housing benefit have really started to pile up, the Government’s housing benefit cuts will mean that many will find themselves in a new benefits trap, removed from their communities and newly unemployed. When working parents in receipt of LHA are forced to give up their home and move to a cheaper area, they will struggle to afford the astronomical child care costs they need to pay so that they can work, because they will no longer live near friends or family members who might have helped with child care in the past.
The proposal for LHA to be set at the 30th percentile of market rents—down from the 50th percentile or median rate—and the proposal to link LHA increases to the CPI will have a hugely negative impact on my constituency. Brighton and Hove has one of the largest private rented sectors in the country, comprising 28,000 homes—almost a quarter of all the city’s housing at 23%. My surgeries are already full of people who are struggling to pay rent and to find alternatives to cramped, overcrowded and overpriced accommodation. The Government’s plans can only make their situation worse. The increase in housing benefit bills over recent years is not, as the Government would have us believe, the result of an epidemic of scroungers. As the evidence to the Committee makes clear it is due to considerable growth in the number of people who are being forced into the private rented sector. In Brighton, Pavilion, for example, someone would have to earn more than £50,000 a year to buy an averagely priced house. No wonder that 11,000 households are on the waiting list for affordable housing in the Brighton and Hove area. At current rates, that list will take more than eight years to clear.
Brighton and Hove city council acknowledged to the Committee in written evidence that the housing benefit changes could increase homelessness applications. Indeed, the Committee reports the fears of numerous expert witnesses that evictions and increased homelessness will be the results of the policies. The Committee concludes that large families, young people, older people and disabled people may be particularly affected. It is plain from the evidence given by Brighton and Hove city council that the reality of those changes for people who are already struggling in my constituency will be even greater shortfalls between benefits and rents than already exist.
Perhaps I may give the House a few figures. In the city council’s evidence to the Committee, it acknowledges that a total of 721 pensioners will not be able to meet their rent, while 250 pensioners who could previously meet their rent will have an average weekly shortfall of £7, and a shocking 471 pensioners will have a new average shortfall of £31.76 a week. Some 2,500 working families will not be able to meet their rent, and more than 1,400 of those families will have a new average weekly shortfall of £33.70. There are 2,386 families with children who will not be able to meet their rent, with 1,122 of those families facing a huge new average weekly shortfall of £41.94—about £175 a month. I could go on, but the House gets my drift.
It is not okay to sit back and wait to see whether landlords will drop their rents. The Government are being far too complacent in their response. Landlords are under no obligation to reduce rents. Some may do so, but many may not, and it will be the vulnerable people, including pensioners, children and people with disabilities who will suffer the most. The way landlords respond to the cuts will vary depending on their local private rented sector market, as well as on their own financial circumstances. Many landlords will shift to the non-LHA market and LHA claimants are likely to be ghettoised in lower-rent areas, living in poorly maintained houses in multiple occupation. It is not good enough simply to hope that the cuts to LHA will lead to a fall in rent levels, when people’s homes are at stake.
What of young people—another group identified in the Committee’s report as particularly affected? It is clear that young people will be very hard hit by the shared room rate announced as a follow-up to the June Budget proposals, as part of the October spending review. Now consideration is being given to extending that rate to include people up to the age of 35, and that will have a hugely negative impact. The paltry shared room rate already results in single claimants experiencing unsustainable shortfalls between their rent levels and housing benefit entitlement. Those shortfalls are more acute for younger claimants. Given that it is already extremely difficult for young people to find accommodation at the pitiful shared room rate, the proposal to extend the age group of those who must try to survive on it in the housing market will make it even harder for young people to get accommodation. I fear it is very likely that the proposal will lead to an increase in youth homelessness.
The Government like to present the shared room rate proposal as an extension of the idea of a group of young friends living together as their children might after university. That is a seductive argument, but only because it is so simplistic. There is a variety of reasons why shared accommodation is not always a suitable option for claimants. People with behavioural or dependency problems, and people who pose a risk often need to live on their own. As I said earlier, under the policy even expectant mothers will be expected to share until they give birth. Even if sharing is not a problem for an individual in principle, where is the accommodation to be found? It is wholly unacceptable for the Government to take the approach of implementing the policies before they have assessed what the likely outcomes will be. In answer to a parliamentary question, the Government stated that
“the increase in the age threshold for the shared room rate announced in the spending review will affect around 88,000 claimants.”—[Hansard, 1 November 2010; Vol. 517, c. 538W.]
However, the Department for Work and Pensions has not yet published an equality impact assessment on the shared room rate proposal. That is expected to be published with draft regulations. How can we have confidence in a Department that is prepared to make such a proposal, which is likely to lead to massive inequality and hardship—particularly for young people—without doing the equality impact assessment first?
The Government’s agreement, in response to the Committee’s report, to undertake a review of the housing benefit cuts taking effect this year is welcome as far as it goes. Such reviews will be essential if these damaging proposals go ahead. However, it is clear from the expert witnesses who gave evidence to the Committee and, indeed, from my constituents that the cuts being implemented will lead to hardship for many vulnerable people. Reviews are one thing, but the fact is that there is more than enough strong evidence of widespread concern over the likely effects of these measures to show that they ought to be dropped, and dropped now.
Not only are these cuts socially devastating, they make no economic sense. It is clear from the Committee’s report and the number of times that it suggests in its conclusions and recommendations that money will be needed to address the negative consequences of these proposals, that the funding announced for discretionary housing payments is not enough. As the Committee rather gently puts it, the money is
“intended to provide a solution to a very wide range of identified areas of concern”.
That is very true. Even if we put fairness aside and look solely at the money, it is clear that the short-term budget savings from housing benefit cuts are highly likely to be eclipsed by a mounting bill to the taxpayer, as the knock-on consequences of homelessness, job losses and overcrowding impact on people’s health and employment prospects.
Instead of attacks on housing benefits and cuts to other schemes that help people in housing difficulty, such as the support for mortgage interest schemes, we need a major investment in new affordable housing and measures to bring empty properties back into use. We need simple measures, such as a reduction in VAT on repairs, to encourage people to put older properties to better use, and we need proposals to support housing co-ops and other forms of affordable housing, not measures that drive up social housing rents to 80% of market rent. The Committee’s report and the evidence it received makes it clear that if we are to reduce the housing benefit bill in the long term, we should build more affordable housing. Of course, that should be green, decent and fuel-efficient housing.
In conclusion, the proposed reforms are nothing less than brutal. The Government’s U-turn on the punitive proposal to punish people who are on jobseeker’s allowance for more than a year by cutting their benefit by 10% shows that the Government are on the back foot over their nasty housing benefit cuts. Thousands of people are losing their jobs and they do not want that safety net left in tatters. The coalition seems to want us to ignore the fact that we do not all start out with equal life chances and opportunities. A fair society redistributes wealth from the rich to the poor, not the other way around. The coalition’s plans are punitive, destructive and costly, and people deserve better.
I am pleased to have an opportunity to contribute to the debate. I congratulate my hon. Friend Dame Anne Begg who chairs the Committee. This is the Committee’s first report and she has led us well to some excellent conclusions. I will concentrate my comments on evictions and homelessness, which I believe will affect many people in my Stockton North constituency, as well as across the north-east of England and beyond. The Government’s proposed cuts will, of course, have that result.
It is worth remembering some of the things that we heard while taking evidence. The Committee took extensive evidence from many organisations and interested parties on the subject. We took much evidence from Shelter, which—among other things—told us that 147,000 families with 250,000 children and 20,000 households with people over 60 would be put in serious difficulty by the proposals, and that is not just financially. The Mayor of London estimated that there would be a 50% increase in homelessness in London, costing £78 million for the 5,000 households in the city that could be placed in temporary accommodation.
There is more—much more. Nearly 3,000 people in the small borough of Stockton-on-Tees will lose out by at least £7 a week thanks to the changes. Most of those people are in my Stockton North constituency rather than in Stockton South, which is represented by a Conservative Member. To some people, £7 is not a lot of money. However, that can represent food on the table for a family for two or three days. Large families are particularly vulnerable to the changes proposed by the Government and could face temporary homelessness, especially in central London. There will also potentially be an increase in poverty, including child poverty.
I make no apology for referring time and again to Shelter, which is one of the most credible organisations that I know. It, along with other organisations, has expressed concern that the number of households living in overcrowded properties will increase as a consequence of the reforms. According to Shelter’s written evidence, 1 million children are living in overcrowded conditions across the country, which is not only a problem for large families. Shelter also estimates that 72,000 families with 129,000 children may be forced to move out of their existing homes and that children will be uprooted from schools, which impacts on their education and social development.
It is likely that the reforms will lead to a significant movement of local housing allowance claimants from higher to lower rent areas. Those areas are likely to be relatively deprived and lacking in job or training opportunities, transport links, good schools and so on. The reforms have other wide-reaching effects, which can only add to the considerable burden on already stretched local authorities and on resources such as schools and doctors at a time when local authority spending is being decimated by the Tory-led Government. In the Stockton borough, there is a 28% cut in grant over the next two or three years, most of which is front-loaded.
My hon. Friend Caroline Lucas mentioned that it is important we do not detach housing benefit from the broader issue of affordable housing provision and the difficulties for first-time buyers, especially in London and the south-east—although it is a problem across the country. The Government say that they will build 150,000 new affordable homes over the next five years, but that is less than a third of what the country actually needs. I recognise that Labour could have done much more in government to secure more adequate provision of social housing, but it is important to recall that, when we came to power in 1997, we were left with a £19 billion maintenance backlog by the previous Tory Government. I often wonder what the picture would be today if we had been able to spend that £19 billion on building new homes.
The Tory failure to fund the upkeep of social housing meant that hundreds of thousands of families were living in substandard and even dangerous conditions. Through our decent homes programme, council-owned homes have been fitted with more than 700,000 new kitchens, more than 500,000 new bathrooms and more than 1 million new central heating systems. More than £33 billion—£21 billion of it from central Government—has been invested in social housing, and we have reduced the number of non-decent social homes by 1.5 million. Yes, that created tens of thousands of jobs, but those jobs have now gone, forcing more people out of work and making them dependent on the kind of allowances we are debating today.
The Committee made a series of recommendations around the issues aimed at getting a balanced approach to change, and the Government responded just over 24 hours ago. Apart from the stark statement that the Government consider the estimates made by witnesses to have been exaggerated and that, in any event, the extra £190 million of funding will meet the challenges, however great, the response offers limited consolation to the people who will be most affected by the changes. Like others, I am not sure that the £190 million will go anywhere near to meeting the transition costs and other challenges. Paragraph 30 of the response states:
“If landlords reduced rents by £10 a week there would be a significant reduction in the number of customers in receipt of Housing Benefit under the Local Housing Allowance Scheme that would face a shortfall.”
There are two problems with that. First, I remain to be convinced that the claimed downward pressure on rents will happen, regardless of the number of people in receipt of that benefit. Secondly, why should families and individuals who have so little to start with have to face cuts in their weekly income for some politically motivated reason that I fail to understand?
Yes, I have heard the arguments, such as those made by Jonathan Lord, who has left the Chamber, about it being unfair for people on benefits to live in the same or even better homes as people in employment. However, we surely do not accept the Daily Mail-type rhetoric that suggests the bulk of families on benefits are wasters and scroungers. They are not, and it is time we saw evidence of the care that the Government claim to have for our most needy. The Daily Mail line is disproved best by Shelter’s evidence that 0.01% of the entire local housing allowance caseload is represented by households claiming the maximum rent available.
Apart from the welcome decision to see sense and abandon the punishment of people on jobseeker’s allowance by fining them 10% of their housing benefit for being unable to find a job within 12 months, I am disappointed by the Government’s response to the report, which contains a set of recommendations put forward with the full agreement of the Select Committee. We have had a very thin response, indeed. As the Government’s programme is rolled out and the experts who gave us evidence are proven to have had well founded fears, I hope that the Government will take corrective action quickly and not allow a new underclass to be left deeper in poverty and struggling to find a home.
I wonder whether, with my hon. Friend’s experience as a local councillor, he has been able to quantify how much extra it may cost local councils to deal with the homelessness that will arise as a result of the Government’s proposals, and, indeed, the increase—perhaps return—of the bed and breakfast, which will be the only alternative that many people will have, as a result of being forced out of their homes?
I do not currently have the specific details relating to Stockton-on-Tees, but I know that there are anxieties about everything, from how the council will deal with housing benefit in the future, to how it will deal with the people who are going to lose their jobs, as its responsibility is removed. It expects a considerable influx of people into the housing department seeking accommodation and further help. Whether that will be available, I do not know, and that is all the more reason why, as the Government have been proved to have been wrong on this issue, they will need to take quick action and correct it.
A number of hon. Members have mentioned that the Government’s proposals have been driven by the portrayal, in the right-wing media, of scroungers and so on. While I agree with hon. Members who say that that media portrayal is inaccurate and unfair, we should also make it clear that the Government’s proposals are not driven by that portrayal.
Today, the Liberal Democrats have been called the nasty party. Although Caroline Lucas was not a Member of this place prior to the general election, the principle was established in the previous Parliament that there should be a cap on housing benefit on local housing allowance. Dame Anne Begg will remember, when we were both members of the Work and Pensions Committee in the previous Parliament, that the principle that nobody should be entitled to a house of more than five bedrooms was introduced by the previous Government on the basis that it was not fair that people should have an endless capacity to have houses that were costing taxpayers a significant amount of money. We can therefore argue about where the cap should be set, but the principle was set, and hon. Members in all parts of the House agreed that there should be a cap of some sort to ensure that there is fairness for those working on low incomes and to ensure that they do not feel at a disadvantage in their communities in comparison with those who are not working and are receiving LHA.
As I have said, I was a member of the Work and Pensions Committee in the previous Parliament. One recommendation that the Committee made, in one of the final reports that we published in the previous Parliament, was that there should be additional rooms available on LHA for people who need carers. I would like to put on record that I am really glad that the Government have now introduced that. When we took evidence prior to the election, that situation seemed to be very unfair, and the evidence we took included some upsetting stories about how that had affected people’s lives. I am glad, therefore, that that has been put right.
I want to flag up a number of issues about which I have concerns, and I would be grateful if the Minister were to respond to them in his summation. One concern relates to the broad rental market areas, which have been an issue for a period of time. The Committee looked at that issue in the previous Parliament and raised it as a concern. However, the Government are proposing to change the centile, so that LHA will be based on the 30th centile. Whether the BRMAs are working effectively becomes an even more important issue, because it has an even more noticeable impact on the amount of LHA that claimants can receive as a maximum.
Some BRMAs have serious internal problems within an area, which then create barriers to the labour market. The most often quoted example is the city of Cambridge. The area covered by the BRMA includes the city centre, which has very expensive properties, and a significant rural hinterland, where the properties are very cheap. That means that the centile is skewed by the large rural areas. If people then end up living in those areas, the jobs are not there and it makes it difficult for people to access the labour market. The opposite effect, as the hon. Member for Aberdeen South has said, has been seen in Blackpool, where the cheap areas are in the town centre and the rents there have been driven up by a significant amount. That has effectively priced working families on low incomes out of the town centre and made it difficult, particularly in a job market that is heavily reliant on seasonal work, for people to keep their accommodation.
As well as the well-known examples of Cambridge, Blackpool and others, there is a significant problem in London, where the BRMAs are enormous. People moving from one area of a BRMA to another are not moving within a small area. It may be that there are entire boroughs within a BRMA where there is almost no affordable accommodation for people receiving LHA. I know that a number of London MPs are concerned about how exactly that might work. The principle, therefore, of changing the centile from the 50th to the 30th, if the BRMAs work properly and effectively, might not be too problematic. Where BRMAs are not working, however, where they are too big or where they have internal problems, those issues will be exacerbated by the move from the 50th to the 30th centile. I hope that the review of the housing benefit proposals, which was mentioned in the other place by Lord Freud, the Minister with responsibility for housing benefit, will look at BRMAs, which have not been examined properly, have been a problem for a number of years and have not been taken seriously.
In Wales, BRMAs are coterminous with local authorities, which seems to be more effective because it tends to involve a smaller area. People tend to have their community, and, as the hon. Member for Brighton, Pavilion has said, their support network—their friends and family—that they need to be able to stay in work, and they tend to be in the same local authority area. By reducing BRMAs to a more practical size, we may be able to overcome a lot of problems that might otherwise arise with the change to the centiles.
On the shared accommodation rate—I shall probably call it the wrong thing as well in this debate—I share the concerns raised by other hon. Members. I completely understand the rationale behind it of ensuring that people who are receiving LHA are not at an advantage over people who are working and not receiving benefit. My personal view, however, is that it seems to be based on a London-centric view of the world. In London, a lot of young people under the age of 35 live in shared accommodation. For those working in London, it is difficult to afford a one-bedroom property. Outside London and outside of the expensive parts of the UK, in a lot of areas young working people under the age of 35 are perfectly able to rent a one-bedroom flat. That is certainly the case in my city, Cardiff. We may find that we are putting young people up to the age of 35—I would like to think that that is young—at a potential disadvantage, in comparison with other people.
I agree wholeheartedly with what the hon. Lady is saying, but it is actually much harder for those who are dependent on housing benefit to lead the kind of shared life that I think the Government envisage. Students sharing flats are not dependent on housing benefit and are therefore not hidebound by the rules of housing benefit and what can be rented as a result of housing benefit, and neither are groups of young professionals who might be sharing a house or a flat. They are not hidebound by the rules of tenancy agreements and what is legal and what is not illegal. Part of the problem is the lack of houses in multiple occupancy to which people on housing benefit can have access.
The hon. Lady makes a valid point. In areas of my constituency, a large number of students live in shared accommodation. If they are in a house in multiple occupancy, most students are not going to want to share with somebody who is on housing benefit, partly because it makes it difficult for council tax exemption and things like that. As soon as there are different people with different exemptions and different rules, as the hon. Lady has said, the financial arrangements for a household may become complicated.
Finally, the other issue about which I have some concerns is the move to uprating rents in line with the consumer prices index, rather than with average rents. The issue is a difficult one to resolve, and I completely understand why the Government have decided to propose the change. Increasing the local housing allowance in line with rents has, in large parts of the country, driven up rents significantly. As the hon. Lady has mentioned, if we set the LHA at the median rent, and if all the landlords currently charging less than that bring their rent up to the median, then the median rises. Rents inevitably go on an upward bend, which has happened in significant parts of the country.
I appreciate that the Government are tackling that issue to ensure that it does not happen and that people have a fair crack of the whip. No only are there implications for the vast amount of money that the Government are spending through the LHA, but there is a knock-on impact on those who are not receiving the LHA in a local area and are renting privately. It can make it even more difficult for those on low incomes to afford appropriate accommodation.
I have some concerns, however, about uprating rents in line with the CPI. The index reflects inflationary increases, but it is not designed to reflect changes in the housing market. I am glad that the Government will be reviewing the decision in a couple of years—2014, I think—after seeing the impact. If the LHA is not keeping track with what is happening in the rental market, we could end up with a big gap separating those on the housing allowance and those paying rent. That might have a serious impact on those people’s ability to get into work, as well as all the other positive things the Government are driving forward.
A number of hon. Members have mentioned that the whole situation is driven by our not having enough social housing in the UK. It is crucial that we build more social housing, if we are to tackle any of the issues.
To get in my party political pop for the afternoon, both the previous Labour and Tory Governments sold off more than they built, which is why we are in such a mess in the first place. After the Thatcher-Major Government, by 1997 there were 1.1 million fewer social homes, which is a huge number. Then, after 13 years of Labour in power in this country, there was still a drop of another 250,000 in social housing. By the time Labour left power last year, there were 1.7 million families on housing waiting lists, which is such a vast number that it will take much greater changes than those to the housing benefit rules if we are to do anything about it.
I am glad that the Lib-Dems in government are ensuring that something will happen. The Under-Secretary of State for Communities and Local Government, my hon. Friend Andrew Stunell, announced that more than 150,000 affordable homes will be built over the next four years. That is a start, although clearly not enough when we have such a massive deficit of social housing in this country. At least it is progress in the right direction, rather than going backwards. I hope that, whatever we think about the changes, people will fall in behind the building programme to ensure that it happens, so that we can make some progress and people can afford homes to live in.
I must say to the Minister that the Government response to the Select Committee report adds insult to injury. The insult was the Government’s failure to give the House their response to the report earlier than this morning. Committee members were in a privileged position: we got our less-than-glossy copies yesterday morning, I believe at about 9.25. What was injurious was that the Government seemed not to have read the report.
I freely expect the Government not to listen to anything that the Opposition have to say about proposals, but I am stunned that they ignore what a Select Committee puts before them, given that the Committee’s findings are based not on our own experience as constituency MPs, but on a great deal of informed experience and evidence given to us by organisations whose only reason for being is attempting to prevent people becoming homeless or dependent on housing benefit. I have with me about a third of the briefings that I—in common with every other Member of the House, presumably—have received from such organisations. Almost without exception, the recurring theme coming through from such reports is the failure of the Government to listen to what they are being told or to take on board the dangers inherent in their housing benefit policy for the most vulnerable in our society.
We can all quote chapter and verse from our own constituencies about what the danger and damage will be. Jenny Willott spoke of the Government’s policies being London-centric. Would that they were, because it seems to me that the Government totally ignore any of the individual situations that can be found up and down the country, that people are in and will remain in, even though they are in work.
Many of the most low-paid in this country are utterly dependent on housing benefit, and they are certainly not pulling in rents that would keep in fine fettle a house worth more than £1 million.
The contribution of London Councils stated:
“Housing costs are over 50% higher than the national average…child care costs are around 25% higher than the national average…Transport in London costs on average £10 per week more…than…in other metropolitan areas.”
We are told that the whole thrust behind the Government’s policy is not simply to cut money out of housing benefit or to fill up that big black hole of national debt, but to encourage people to get back into work. However, according to London Councils:
“Added to this, Londoners face extra difficulties in moving into employment, with greater competition for entry level jobs. Many of these entry level jobs do not include a London weighting to reflect the higher in-work costs in the capital…The impact on jobseekers in London has been highlighted in research carried out by Reed in Partnership”— presumably more evidence the Government know nothing about—
“where the move into work costs on average £639.40 over the first month (including childcare), over £150.00 more than for the rest of the UK.”
Other briefings also pointed out a genuine and well-based fear that the Government’s proposals will inevitably lead to greater levels of homelessness, which would mean a greater need for local authorities to house, unless the Government propose removing the statutory obligation on them to put a roof over a child’s head. Anything is possible with this Government—they might be intending that, but they have not said it yet. However, if the statutory requirement remains, local authorities will have to house children.
Without any question, every single piece of evidence presented to us shows that the people who will be most affected by the Government’s proposals are the most vulnerable. Such people tend to be single parents with children, or families on very low pay with children. We are looking at a situation in which we might go back to the dreadful days, which I remember well, when families were existing—certainly not living—in ghastly bed-and-breakfast hostels.
Crisis, in its briefing to the Select Committee, said that at the moment the cost of a room in a bed-and-breakfast hostel could be £60 a day. How will the Government save money if that is indeed the future for many families, not only in London but throughout the country, if the proposals go through without any consideration?
As my hon. Friend commented on the Government response to the arguments put forward, not exclusively by the Select Committee, we are not inventing these things, which come not only from direct constituency experience, but from organisations that are expert in the field. They say, for example, that if people with a disabled child need an extra room, or space for a wheelchair or a dialysis machine, the Government’s response is, “Oh well, we can’t be expected to meet the requirements of every single individual in this country.” Why? I thought that one of the first responsibilities of Government is to protect the citizens of this country. Surely protecting children, the disabled and the elderly is a vital part of any Government’s job.
In their response to the Select Committee’s report, the Government have failed markedly. There is lack of attention to detail. As most hon. Members who have spoken have said, the Government apparently believe that the additional £190 million that they have managed to find will cover all the additional costs on local authorities, for people who cannot meet their rents, and that that will be the panacea and remove everyone’s problems. We all know that that is ridiculous, because it will not. There will be a nine-month transition. Really! Nine months’ transition will do nothing except exacerbate the justifiable anxieties of people who know that they are being threatened and may have to move home.
When the noble Lord Freud gave evidence to the Select Committee, he was very sanguine about people who may have to move from central London boroughs to outer London boroughs. He could not give any fine detail of what properties could be affordable and available in outer London boroughs. He rested his contribution on the statement that there is a 40% churn annually of people moving house. He could not tell us what sort of families that 40% churn represented, and I think it highly unlikely that it included people with disabilities. I am pretty sure that it did not include families with children, because the monstrous aspect of the Government’s proposals is not only that people will lose their homes—they will—but that children will lose their place in school. They will then have to try to find another place in another school. The evidence from Lord Freud’s officials on school place vacancies bore no relationship to any figures that I have heard. There are two London boroughs in my constituency, and a desperate shortage of school places not only in junior schools, but in secondary schools. Yet according to the Government, the rest of London is awash with empty school places. I would be interested to know where they are, as would many of my constituents.
Another issue that Lord Freud completely discounted in his evidence about people having to be moved from central London boroughs to outer London boroughs was of people having to look for work. Again, he was remarkably sanguine about the cost of travelling. I had three constituency cases only this morning. In one of those, parents with three children aged nine to three are forced to live with their in-laws: six adults and three children are living in a four-bedroom house. The house is owned by the in-laws, but it is extremely difficult for the local authority to find anywhere for that unit with three children to live other than in the private sector.
Despite the Government’s pronouncement that landlords will be only too happy to lower their rents when housing benefit goes down, there is a marked reluctance on the part of private landlords to accept tenants who receive housing benefit. In my constituency, almost without exception, there is a gap between what landlords charge and what housing benefit pays. That gap will only increase because of the Government’s proposals.
Another issue that I find bemusing is the Government’s argument that the proposal is not just about saving money, but is a real plus and an incentive for people to find work. The majority of people I know who are on housing benefit in my constituency, setting aside the fact that they may be disabled, work. They are in low- paid work, but they are expected to move somewhere else to find jobs, so central London will be bereft of all those jobs on which higher earners are dependent to be able to do their jobs. Quite how that will be a big plus in revitalising our economy is beyond my comprehension.
I have always had a rule, Mr Sheridan, that if one cannot say what one needs to say in 10 minutes or less, one should not rise to one’s feet. As I am in grave danger of breaking my own rule, I had better draw my comments to a conclusion.
When the evidence in a Select Committee report is so irrefutable and it is of such importance to so many individuals and families that the Government get it right, it is absolutely scandalous that the Government response should be so flabby and patronising. The Government patted the Select Committee on the head, but they examined none of the real issues. Given the huge wider changes that they are introducing throughout the welfare benefits system, it is to be hoped that they will begin to do a little more research and take seriously the evidence that is out there.
As others have done, I congratulate the Select Committee, on producing such a comprehensive report into the Government’s proposals in the June Budget. I also congratulate my hon. Friend Dame Anne Begg on her thoughtful, balanced and comprehensive introduction to the debate. It is a great credit to the Select Committee that the report sought to be so balanced, and that the Committee so rigorously examined the proposals. It is striking and a tribute to the generosity of my hon. Friend’s character that the report ended up being just a touch more generous to the Government than to itself in terms of the Government’s impact assessment, which warned of the danger of increases in the number of households facing rent arrears, eviction or presenting as homeless, and of rising crime, increased pressure on the legal aid budget, increased overcrowding, disruption to children’s education and lower educational attainment.
The Social Security Advisory Committee also comprehensively rubbished the proposals, and warned of unintended and perverse consequences of the changes, which will in many cases lead not only to hardship, but to additional expenditure in other areas of Government service.
Just for the record, will the hon. Lady confirm that the SSAC produced its report before the nine-month transition period, before the October and April changes were brought together and before the 10% housing benefit change was reversed?
I certainly confirm that. I am happy to commend the Government on their decision to withdraw the proposal to reduce housing benefit by 10% for people who have been on jobseeker’s allowance for more than a year. I also accept entirely that there has been a phasing in of the cap on housing benefit, which particularly affects central London. As the Minister knows, that was more than compensated for in cash terms by bringing forward the reduction to the 30th percentile for housing benefit for local housing allowance claims, which affects the rest of the country for new claims.
We have heard a range of contributions this afternoon. My hon. Friend Glenda Jackson was highly critical of the proposals, and she raised concerns about their impact particularly on families with children. She made it clear that one of the areas that has not been properly addressed by the Government and many commentators on this agenda is the variance between London housing costs and those in the rest of the country.
Jenny Willott raised a number of thoughtful and important points about the structure of the broad market rental areas and the complex lives of real individuals who will be affected by the move to the single-room accommodation rate. She made an important point, which I accept entirely, when she said that one reason why we have a dilemma about how to pay for low-income households and housing is due to a 30-year-long reduction in the availability of social housing. I do not want to divert too far from the central topic—I know you will not allow me to, Mr Sheridan—but in 1997 the Labour Government inherited social housing stock in such a poor condition that huge investment had to go into improving the physical conditions of council housing through the decent homes initiative. I have gone on the record extensively over the years to say that I, too, regret that we did not build more social housing. We would still, however, have had a significant number of low-income households in the private rented sector, and we would still be facing some of the same problems.
My hon. Friend Alex Cunningham drew attention to the risks of homelessness and eviction in another part of the country. This debate has so often focused on London, and it is good and right for us to recognise that it is not only a London problem. Caroline Lucas spoke powerfully about the experience of a city with a large private rental market, where the changes will have a profound impact in terms of squeezing out low-income households on local housing allowance across the city.
Since the cuts were introduced by the Government, the debate has concentrated largely on London and a few individual cases. It was good to hear many speakers emphasise that such cases involve a tiny minority of larger households living almost in very high-value properties, something none of us would defend. As the Select Committee report reflected, depending on which figures one uses, the few thousand cases that are at the significantly higher end of the cost market are an issue that the Government could have tackled, if they had wanted to. They could have confined themselves to that, but instead we have almost 1 million—936,000—households that will lose by an average of £12 a week over the course of a full year, once housing benefit changes to the local housing allowance are introduced. It is important that the public understand the sheer scale and spread of the changes, and there will be a nasty shock starting in April with the new cases calculated on the 30th percentile and the other changes phased in later.
It is important that those who listen to our debates understand whether the hon. Lady opposes all the changes. She has mentioned 1 million losers.
Does she accept that roughly 500,000 households would have lost in any case through the abolition of the £15 excess, which the previous Government were going to implement but put off until after the election? Does she support those losses affecting 500,000 households, or does she oppose them?
It is right that the Labour Government intended to remove the £15 excess. However, the Minister will accept that the sheer number of people who will lose as a consequence of these changes far exceeds the small number of high-profile cases to which people on his side of the argument usually confine the debate.
We have rehearsed this argument before, so I do not want to spend too much time on it. None the less, the argument was made again during yesterday’s debate on the Welfare Reform Bill that housing benefit is out of control. We know that expenditure on housing benefit increased from £11.5 billion to £21.5 billion over the decade, and only half of that is down to inflation. Social housing rents have risen significantly as a consequence of rent restructuring, and above all—this is the key factor and the reason behind so much concern in the Labour party—case loads have risen. Case load increase has been the main driver of increased expenditure on housing benefit. In the two years since the local housing allowance was fully extended across the country, 87% of the rise in that allowance was driven by case load. During those years of recession, almost half that case load involved either people in work, or those on jobseeker’s allowance who were therefore connected with the labour market and seeking to get back into work.
It is also worth emphasising that local authorities have been making far greater use of the private rented sector in order to place homeless households. That is not a party political point, because the previous Government did that as well, reflecting the shortfall in social housing. In the past year, 60,000 households were placed in the private rented sector at far higher unit cost than if they had been in social housing. Many of those high profile individuals who found their stories in the Daily Mail and the Daily Express were placed in that accommodation by a local authority, because it had no other place in which to put them.
Professor Wilcox was, I believe, an adviser to the Select Committee and has worked extensively for the Department for Work and Pensions. Writing in the new UK Housing Review, he refuted the central Government claim that the local housing allowance was the main driver of inflation in costs:
“The Government have argued that increased rents charged to clients reflect exploitation of the housing benefit regime by private landlords and that this has also been a substantial factor accounting for rising programme costs. The evidence for these claims is not robust. Even if it is assumed that all the above-inflation rise in private rents is attributable to landlord action, this would account for only 10% of the total cash increase in Housing Benefit over the decade.”
We therefore have a rising case load, including a rising case load of those in work, of people who are at risk of losing a substantial share of their income either from April or during the 9 months afterwards. There will be new claims, and many of those people will be forced to move.
We already know that 47% of all local housing allowance tenants have a shortfall between their current rents and the allowance—I stand to be corrected if that is wrong. Therefore, the ability of tenants to absorb an additional shortfall is already small. We know that a substantial number will need to move to a reduced and continually decreasing pool of available property. The National Housing Federation has stated that in London alone, 160,000 claimants will need to fit into 46,000 homes.
There will be a major movement of people. Jonathan Lord made the case that his constituents find it hard to justify people living in high rental areas, and that they want to see costs come down and fewer people living in expensive areas, which may well be true. I understand that concern and that members of the public, particularly outside London, find it a struggle to justify those rents. There is less of a clamour, however, among the communities that seek to accommodate all those who will be required to move, whether that is further out into Brighton, to the edges of London or outside London.
It is worth reflecting on the response given by the London borough of Barking and Dagenham to the housing benefit cuts. Barking and Dagenham is one of the cheapest areas in the south-east, and it is likely to receive a large number of out-movers. I will quote its report:
“Given that Barking and Dagenham has the lowest private rent levels in London…it would be logical to expect that displaced households might…of their own choice look for private rentals here,” or they might be placed there by other local authorities.
“Such an influx would place additional pressures on waiting lists, social, educational and welfare provision as well as greater demands for support in preventing debt and homelessness.”
It has been estimated that at least 3,000 households will seek to move to Barking and Dagenham. The report goes on to say:
“If rental demand does decrease and housing benefit claimants do migrate to the borough, this may have a significant impact upon the Council’s ability to move its own residents from waiting lists” into local accommodation. That would lead to increased tension between Barking and Dagenham residents and in-movers—as we know, Barking and Dagenham is a community where we do not want to increase tension between in-movers, many of whom will be black and minority ethnic, and the resident population.
The areas that will be expected to accommodate out-movers are not prepared for it financially: they do not have the resources; they do not have the school places; they do not have the social capacity; and many of them are seeing their grants cut as well. The move to using the consumer prices index will further ratchet down the availability of accommodation until, as the Cambridge centre for housing and planning research has shown, 34% of all local authorities will, within a decade, be unaffordable to everyone on the local housing allowance.
The Minister will say that discretionary housing payments will meet the shortfall and take the strain. It is welcome that additional money has been put into the discretionary housing payment pot and into the homelessness prevention fund for local authorities. However, it is estimated that that money will assist only about 60,000 of the total pool of households. Conveniently, 60,000 is also the figure for the households placed by local authorities in the private rented sector. It will therefore go no further than merely meeting the shortfall of local authorities’ placements of their own homeless households. If it is asked to stretch further, it will not meet the shortfall at all. Therefore, as welcome as the money is, it will go only a very short way towards offsetting the disadvantage.
The measures will mean homelessness, hardship and all the risks set out in the Select Committee report, the Social Security Advisory Committee report and the Government’s own assessment. They will mean, as we have heard, that huge numbers of people who are currently in work—including 1,000 local housing allowance claimants in my borough alone—will lose and lose big. Those people have jobs, and they will be forced a long way out of inner London. They will, of course, face commuting costs that make it extremely difficult for them to make work pay in the new environment.
I want to say a few words about the measures on social housing under-occupation, which so far have not received the attention that they deserve, because they are being phased in a little later than those relating to the private sector local housing allowance. We have seen the equality impact assessment released yesterday by the Department, and we know that the introduction of the size criteria for social housing will affect an estimated 670,000 people throughout the country. That number will rise as the pension age rises. It is 32%—almost one in three—of all housing benefit claimants in the social rented sector.
Most extraordinarily—I think this astonishing—the equality impact assessment states that the number of people with disabilities who will be affected by the change is twice as high as the number of people without disabilities. The Government are seeking to require, in two years’ time, 450,000 households with a disabled recipient of housing benefit to move to an alternative property. That is what the impact assessment says—450,000. The figure is 670,000 people in total. If those people do not move, they will face a shortfall of £13 a week between their rent and their housing benefit. Not only is that a disproportionate and extraordinary impact on older and disabled people, but one wonders how on earth the whole policy of downsizing in relation to the under-occupation rule will work. The total number of households that moved in the social rented sector in the last year for which figures are available was less than 200,000. In 24 months’ time, the Government will expect 670,000 people to try to avoid a penalty on their housing benefit by moving to smaller accommodation. That is three times more than the total number of people who get moved in the social rented sector every year.
Housing authorities, housing associations and councils simply will not be able to meet the demand for downsizing. The position is even worse, because there is a huge regional disparity, with by far the highest level of under-occupation in the north-west of England and by far the highest level of overcrowding and pressure on housing in London and the south-east. Local authorities will not necessarily be able to meet even the demand in their own local authority area. They will be seeking to obtain accommodation from other local authorities in other areas at the very moment when local authorities are tightening their criteria for housing allocations. Westminster council—my local authority—has just announced a 10-year residency qualification for people seeking to move into the area. It will not be offering any of its accommodation to people outside the area who are seeking to downsize.
The sheer mismatch between the legal duties on local authorities and housing associations, their own lettings criteria, their homelessness duties and reasonable preference requirements and what the Department for Work and Pensions expects to happen is extraordinary. I asked the Minister parliamentary questions to try to find out, before we got to the Welfare Reform Bill, what the practical implications of the measures would be. Of course, the reply that I get is that the Minister and the Department are still working on what the practical implications will be.
The scale of the problem is far greater than the Government have admitted, including in their response to the Select Committee. There will be huge practical difficulties in implementing the policies, which I suspect will end up in many cases either not saving any money or being completely impossible to implement, leading to greater responsibilities and homelessness costs in relation to other authorities. That is before we get into the extraordinary situation in which the new affordable housing delivery programme—150,000 new homes—welcomed by the hon. Member for Cardiff Central, will involve higher levels of housing benefit than most properties currently in the private rented sector, thereby pushing up the housing benefit bill at the same time.
A great deal of work needs to be done by the Government to see whether any of the proposals are workable, let alone able to accommodate the sheer hardship and social stress that will be caused by them. It would be nice to be able to house people who are on low incomes and in need for nothing, but that is not a possibility. We have to work with the resources that we have. What the Government are proposing will potentially create a perfect storm of housing need and difficulty with implications going far beyond the housing sector.
Let me begin, quite properly, by congratulating the Select Committee on its thorough and detailed report and by thanking members of the Committee and other hon. Members for their contributions to the debate. Members of the Committee and other hon. Members who have spoken have a lot of expertise on the benefits system in general and on housing and housing benefit in particular, and we have all benefited from that expertise today.
It would have been nice if the Government response to the Committee had been available slightly earlier than the day before the debate, but it was in the hands of the Committee yesterday, ahead of the debate, as I was keen for it to be. Rather than my standing up here and giving the Government response and then everyone going away and deciding what they thought about it, the Government response was already in the hands of the Committee and, as we have seen, members of the Committee have been able to read it, form a view and give further feedback, which has enabled us to have a useful dialogue this afternoon as part of the conversation. From that point of view, this has already been a worthwhile afternoon and a valuable process.
I thank the Chair of the Select Committee, Dame Anne Begg, for acknowledging some of the important steps forward that have been made since the Committee’s report was tabled. There was some suggestion that we had paid no attention to it, but in her opening remarks, the hon. Lady graciously flagged two particular areas in which there has been significant progress since the Committee’s report was produced. One was on research into the impact of the changes. The other, which was the subject of several paragraphs of recommendations from the Committee, was on the previously proposed 10% cut in housing benefit after a year on jobseeker’s allowance.
It is tempting to say that Government responses to Select Committee reports should be judged by action, not words. If a Select Committee recommends a specific change in policy, and a change in policy subsequently takes place, it is a little ungenerous of members of the Committee to say, “Ah, yes, but the wording of the response was not good enough,” or something similar, especially if it were done at significant cost to the Exchequer. The hon. Lady, of course, was characteristically gracious.
It may help if I update hon. Members on where we are on monitoring the impact of the changes. The Committee issued a press release to accompany the report three days before Christmas—it is good to see that they were working right up to the deadline. In it, the hon. Lady said that
“it is too early to determine if this will happen in reality, which is why it is hard to say exactly what the impact of these changes will be.”
There is an element of uncertainty, which is why we always intended to commission research and to monitor the impact of the changes. Discussions with their lordships prompted a fuller discussion of the form that it would take.
The research that we undertake will be independent. It will include comprehensive primary research on the effect of the changes on different types of households in a range of areas. The debate has shown that the impact of housing benefit in Blackpool is different from that in Cambridge or central London. We accept that, which is why the research will cover the whole of England, Scotland and Wales. It will be done over the next two years, due to a factor that was given insufficient attention in our debate. With a nine-month transition period, and with no change happening until the anniversary of claims, some people will not be affected by the change until December 2012.
That is the roll-out period, which is significant. Rather than there being a day when everyone’s housing benefit is reassessed, with everyone competing for the same properties, new tenancies will be dealt with under the new rules, which is precisely the point of the exercise. We did not want people to be locked into new tenancies at above the new limit, day after day and month after month, only for us to say, “Oh, no, we’ve cut the limits, so the decision that you made three months ago is not valid.” Instead, from April new tenancies will come under the new rules, so people starting new tenancies will face the constraints that anyone else will face, as we discussed earlier, rather than having a more generous system. It is right to make new tenancies under the new rules and to give existing households more time to adjust.
That is a helpful question. We are talking about what happens after April. For people who are working but who become unemployed post-April, it will clearly be a new claim, and it will be dealt with under the new rules. The fact that they happen to be living in the same house as before will not affect the claim. However, as their circumstances change, they will face the new regime. They will have to decide whether to take the new rules—the new regime—and stay where they are. For example, if someone becomes temporarily unemployed but has a pretty good chance of getting a new job—many folk who become unemployed are typically back at work within three to six months—a short-term period on a tighter housing benefit regime can be accommodated before moving back to work.
The hon. Lady asked about the existing case load and the protection that we give those cases. The majority of relatively minor changes in circumstance will not affect ongoing entitlement.
I am grateful to the Minister for allowing me to interrupt him again. In many parts of the country, the shortfall will be relatively manageable, which would accommodate his point about people being temporarily out of work. In London and some other high-cost areas, however, the difference could be £5,000 or more over three months. In those areas, the shortfall will be such that people who lose their jobs will also lose their homes.
The phrase “lose their homes” is rather evocative and misleading. When people say that they have lost their home, they are usually describing repossession—their home; their loss. What the hon. Lady describes is someone who has presumably managed to sustain a very high rent—if the shortfall is £5,000 in three months, the rent must be enormous.
The suggestion that the taxpayer should keep paying a vast rent while the claimant decides whether to stay in the property brings me back to my fundamental concern about the tone of the debate, which relates to balancing the responsibilities of the individual and of the Government. It was evident to some extent in the remarks made by the hon. Member for Aberdeen South, and particularly in other contributions, that almost every combination of circumstances, every possible need and every possible variation was deemed to be responsibility of the Government.
Glenda Jackson mentioned our response to the Committee’s report and some specific needs. For instance, she said that people living in a larger house might need somewhere to put a wheelchair and questioned whether it should be included in statute. The implication of what Committee members were saying is that they did not want it decided on a discretionary basis, but wanted it written into law. The point about our allowing an extra bedroom for carers is that we have legislated for it; after deciding on a category of clearly identified people and clearly specified needs, we wrote it into legislation, and it has become a right. However, there is a dividing line between identifiable, clearly categorised groups with particular needs and the much broader group listed in the Committee’s recommendations that may need a room for a wheelchair or something else.
The question is not, “Do we give a damn?”—I am sorry; I mean, “Do we care?” The hon. Lady implied that the Government do not care and that we are telling people to get lost. No; as my hon. Friend Jenny Willott said, the Government believe that some needs should be written into statute, which we have done in cases where previous Governments did not act. However, other needs are so diverse that we should have the local flexibility to respond when the need arises. That is better than sitting down in Whitehall, trying to think of all possible circumstances and writing primary legislation to deal with them, which is not a sensible way to proceed.
That is not what I or others were asking for. In other areas, we use proxies or other measures to help passport people into getting greater help. For instance, there is a good chance that someone on the highest rate of the disability living allowance care element will need extra housing. That factor would give them the right to apply for more housing benefit. It works with the council tax system, under which those who need more space as a result of a disability can get the council tax reduced to a lower band. It is straightforward and simple. The problem with discretionary payments is that not everyone gets them, because they can be refused.
The hon. Lady has said that proxies can be used, which means that we can identify categories of people to whom additional concessions should be made. That is what we did with the extra bedroom for the carer. The report specifically mentions people who need an extra room for a wheelchair. People on certain rates of disability benefit will almost certainly have a wheelchair but live in a house that can accommodate it; others will live in houses that need another room for the wheelchair. Rather than trying to categorise everyone in the same way, the flexibility of the discretionary system allows us to cater for those differences.
I was pleased to hear the hon. Member for Westminster North say that we have to work within our resources. That was a heartening comment, because every pound spent on another recipient or on further delays and concessions—on everything that has been asked for today—comes either from someone else covered by the housing benefit system or from our contribution to tackling the deficit, which is one reason for the reforms.
Alex Cunningham said that it is a difficult time for local government, implying that the Government just fancied cutting council budgets by 25% because of what he called an evil Tory-led, or Liberal Democrat-Conservative coalition plot. We all knew that this would happen, because substantial cuts in local government were coming down the track anyway. It is important to acknowledge that that is the backdrop against which we are operating. This is not an environment in which there is money kicking around. It is not as if we can resolve all these problems and delay tackling the remorseless rise in the housing benefit budget. Every £1 billion that goes on housing benefit every year is £1 billion that the low-paid, hard-working taxpayers, who are our constituents, will have to find.
There would have been cuts under a Labour Government as well, but they would have been spread over a longer period of time. Does the Minister not accept that the pressure on local authorities today in dealing with all the inquiries from people who are worried about the Government proposals is just adding to the strain that they are under at a time when they are losing staff and more people are coming through their doors?
As the hon. Gentleman has said, local authorities are making plans to reduce staff over the coming years. Some local authorities have chosen to frontload more than is necessary—more than is proportionate to the cuts that they have had—for their own political reasons. Nobody disputes that this is a difficult financial environment for local government; it is. Part of the problem is that spending has been allowed to get so out of control that we have had to rein it in rather rapidly.
I will give way to the hon. Member for Westminster North in a second. One of the reasons why deficit reduction is so vital is that so many items of spending have become too large. Some of the concessions that we have talked about would be £100 million here or £500 million there. Very soon they add up to serious money.
Let me make one thing clear. Of course the financial context is important. When I used the word resources, I was not only talking about money, but making an important point. With the social housing stock, we only have so many units into which we can pack people on lower incomes. We know that many people—we know how many—need to be accommodated in the private rented sector, and we know the geographical distribution of those properties. One of my big concerns is that we are attempting to do something with that that cannot be done.
That is where I fundamentally disagree with the hon. Lady. The flaw in her analysis is this static view of the world: housing stock and the private sector is as it is and nothing can ever change. The figures that she quoted from the impact assessment assume that nothing changes. The losses she quoted assume nothing changes. Nobody can find somewhere cheaper to live; they just stay where they are and lose the money. Rents do not go down; they stay exactly as they are. The impact assessment from which she quoted is the worst-case scenario.
However, what actually happens is different. Let me give an example. If we were able to reduce rents by £10, that would wipe out nearly 500,000 people with shortfalls. One of the questions that was asked in the debate was: how will landlords respond? Guess what? When landlords were surveyed, they said, “Oh, we won’t cut our rent.” Well, there is a shock. Of course they would. They do not want these cuts because they are the ones who will be most affected. I was very surprised by Caroline Lucas for whom I have a lot of respect—sadly, her contribution was 90% polemic and 10% substance—because she seemed to be defending private landlords. They are the people who get this money. They are the people who have got the £21 billion that used to be £11 billion 10 years ago. I did not know that they were her best friends. That is where the money is going.
The question is: if we go to direct payment in cases in which it will secure a tenancy, will landlords bite? We have 1 million private sector tenants on housing benefit. We have all seen adverts that say, “No housing benefit” but there are also 1 million people with private sector landlords getting housing benefit. Therefore, someone out there is renting to people on housing benefit. If a private sector landlord is renting to someone whose housing benefit gets squeezed and they or the council says to them, “You can have a guaranteed rental stream straight into your bank account month after month if you will reduce your rent to a level that will enable the tenancy to carry on” that is hugely attractive. It is turning a tenant into a triple A credit-rated tenant rather than someone who may or may not pass on the rent.
I will give way in a moment. Landlords are quite clear that that is hugely attractive to them. It is worth shaving the rent for, and that is often all that it would take.
It is actually possible to accept the Minister’s argument. The problem is the Government are about to introduce universal credit, which will make direct payments impossible, unless he has a different idea.
We are focusing specifically on the roll-out of these changes over the next two years. Over that period, before universal credit comes in, this mechanism will be in place. Clearly, there is plenty of time to work out ways of underwriting the rent to the landlords combined with the universal credit. The crucial point is that this is a transitional issue, although there are longer-term aspects as well. It is in this transition—the crucial period in which the housing market adjusts—that the mechanism will be most effective.
May I make a suggestion to the Minister? It is that very point that concerns the housing associations, which already have direct payments. They are terrified that under universal credit, there will be no direct payment, which could undermine their whole ability to get us out of this mess by building more houses because they are not able to borrow the money. That is a serious concern.
Indeed. In co-operation with our colleagues at the Department for Communities and Local Government, we are working through the way in which we can ensure that these affordable rent tenancies—80% of market rent tenancies—have a guaranteed revenue stream that will enable the investment to take place and those discussions are ongoing.
I apologise for coming in so late. I absolutely agree with the Minister when he says that landlords will inevitably adjust. That is what the private sector does. When the benefit changes, there will be so many tenancies affected that there will be a sizeable effect on the market. The Opposition sometimes forget that this is about not just cost-cutting but fairness and balance. We must remember the taxpayer in all of this. In Acton, we had that amazing example—some called it grotesque—in which a family was plonked into a house that was worth well over £1 million. Very few people in Acton can afford to live in a house of that value. There are some really unfair things that must be addressed.
I am grateful to my hon. Friend for setting that context. During the course of this debate, one or two hon. Members have said that this is all about chasing the headlines in the red tops—the tabloids—and it is that that is shaping policy. Clearly, this is not a policy about a small number of extreme cases. The hon. Member for Hampstead and Kilburn says there are about 90 cases, but let me give one example. The top 5,000 cases of people to whom we pay housing benefit cost us £100 million a year. For 5,000 people to live in properties—
The hon. Lady can have 5,000 families, but she is, I think, losing sight of zeros. For someone in the Department for Work and Pensions, £100 million does not seem such a big figure, but it is a colossal amount of money that is not providing value for the hard-pressed, low-paid taxpayer, who often does not live in brilliant accommodation. It is not a good use of £100 million.
I will try to make this my last intervention. Given that the Minister says it is a colossal amount of money, does he agree that introducing affordable rents in the social rented programme, which will add £200 million to the cost of housing benefit, is also not a good example of joined-up government?
As the hon. Lady knows, a lot depends on who takes those tenancies. If they are people who would have been in lower-rent social tenancies, the housing benefit costs will be higher, but if they are people who would have been renting in the free-market private sector, the costs could end up being lower. The numbers that she quotes are spurious.
I want to know the Minister’s evidence for believing that landlords in the private rented sector will lower their rents. That certainly was not the finding of the National Landlords Association, which I mentioned earlier in the debate. Surely it is dependent on whether there is an excessive amount of empty properties, which, in a constituency such as mine, or any in central London, is an absurd premise. For all the properties concerned, there are many more people who are willing to take them on.
I have a number of observations to make. First, the hon. Lady cited “evidence” that was not evidence at all, of course. It was a survey of the people who stand to lose from the policy, who mysteriously wanted to undermine the policy. When we talk to landlords’ groups—as we do—it is absolutely clear that direct payment is a prize for them. I hope that she does not argue with that statement. It is self-evident, blindingly obvious and common sense.
Landlords clearly value direct payment. There is no doubt about that. It is common sense and stands to reason. I do not know if the hon. Lady accepts things that stand to reason, but it is patently obvious that landlords value direct payment. There is an economic value to direct payment. It offers certainty as opposed to uncertainty. That can translate into lower rent. If landlords have a choice between the rent that they previously charged with uncertainty about whether they get the money, and a slightly lower rent with certainty of getting the money, landlords will go for certainty every time. That is common sense.
In a moment. The hon. Lady also said, “Where are all these properties? There is this massive, pent-up demand and these landlords will just go somewhere else.” If there is that massive, pent-up demand, why have landlords not already gone somewhere else? Why have they not already increased their rents beyond what housing benefit covers today? Why are they not already renting to non-housing benefit tenants? There is a reason why they rent to housing benefit tenants: they get the money, particularly with direct payments.
Oh, I am most grateful to the Minister for giving way. The words “direct payment” never passed my lips and as I said in an earlier intervention, I would be grateful if the Minister could try to answer the questions that I put to him. Then there is the issue of why landlords are not renting to others outside the housing benefit sector. As I have pointed out, there is a growing trend that private landlords will not accept tenants whose rent is paid by housing benefit. In my constituency and contiguous constituencies, I do not see a massive increase in signs showing places to let.
I hesitate to bring facts into the debate, but the number of properties in the private rented sector with tenants on housing benefit, which the hon. Lady says is falling and indeed she also says that such properties are hard to find, has risen since November 2008—
Across the country. It has risen since November 2008 by 440,000. To listen to the hon. Lady talk, one would imagine that tenants on housing benefit cannot find anywhere to live. There are 1 million tenants on housing benefit in the private rented sector. To listen to her, one would think that those people do not exist. Unfortunately for her, I am afraid that what she describes is at variance with the facts.
As such a wide range of issues were raised during the debate and a number of hon. Members have contributed to it, I will make a bit more headway and then I will be happy to give way again.
I was about to describe the evaluation and assessments that we will be carrying out, because a lot of the points that were raised during the debate were about particular groups of people. I want to identify the facets of the research that we will be undertaking.
To ensure that we gather the evidence required on key areas of concern, such as the behavioural and market responses of claimants, landlords and external organisations, we will commission primary fieldwork that will cover a number of issues, which I will now take the House through. They are: homelessness and moves; the single shared accommodation rent, which I will come back to later because there were a lot of misconceptions about that during the debate; the impact on Greater London, which is explicitly in the terms of reference for the research; the impact on rural communities, which I think has been mentioned in the debate; the impact on black and minority ethnic households, which has been mentioned; large families, family life and children’s education, and schools, for example, were mentioned in the debate; older people, who were mentioned in the debate; people with disabilities; working claimants; landlords, and housing and labour markets. There will be comprehensive evaluation that will start imminently and that will run over a two-year period. We will be watching—very carefully—what goes on and we will be reforming the system, with measures such as the allocation of discretionary housing payments.
Discretionary housing payments are quite important. Although the allocation of those payments for 2011-12 has been determined, the allocation has not been determined beyond that time. The total budget has been determined and it will treble. This year, it will be £20 million and then it will be £60 million a year for the next three years. We will treble the total budget. However, where the money goes will be informed by the early roll-out and by the research. We will base the policy on the evidence about the impact on the ground. If there are particular areas—hot spots—where there is particular pressure, we will be able to gear the discretionary housing payments money to those areas.
I enjoyed the observations of the hon. Member for Aberdeen South, who is the chair of the Work and Pensions Committee, about how often we refer to discretionary housing payments. I take her point. I read the Government response myself and I noticed the same thing. However, there is a reason for it. It is that the Select Committee’s report quite properly identified specific sets of circumstances that need to be addressed and they will be addressed by a response that is tailored to the local situation. If there are particular geographical areas where there are particular local pressures—we heard about a number of such areas during the debate—the DHP system will be tailored to those areas. It is almost a circular argument. That is the reason why the DHP system is our answer to most of the questions put to us, because it is the best way to respond to different but equally significant local issues of the type that have been raised during the debate.
I now come to the issue of the shared accommodation rate. Technically, I know that the title of the Committee’s report is, “Changes to Housing Benefit announced in the June 2010 Budget”, but as the shared accommodation rate was covered in the report I will address it.
The question is, “Why do we pay a shared accommodation rate to the under-25s only, because many young people are sharing and is it fair”—to come back to the point about fairness made by my hon. Friend Angie Bray—“that someone in their early 20s on housing benefit can, in principle, get a flat to themselves but someone in their early 20s who is in work and beyond the reach of the housing benefit system has to share, because they cannot afford a flat of their own?” That is the thinking and in fact that was why the shared accommodation rate was introduced. I think that it was introduced about 15 years ago, if I remember correctly. It has certainly been a feature of the system for many years.
When we have looked at the 25 to 35 age group, we have found it striking that a very high proportion of individuals who are not on housing benefit in that age group are also sharing accommodation. The number of people sharing accommodation does not tail off dramatically at the age of 25. More than 40% of non-students—single people—in this age range are sharing accommodation in a range of situations.
Various questions were asked about shared accommodation during the debate. For example, “Is any of this sort of accommodation available?” One of the notable things is that about 50% of those being paid the shared accommodation rate now are over 25. We have to think about that for a moment. The shared accommodation rate is only imposed on the under-25s, but if someone applies for housing benefit from shared accommodation and they are over 25 they receive the shared accommodation rate, even though they could receive housing benefit for a one-bedroom flat. There is a set of people over the age of 25, therefore, who could receive housing benefit for a one-bedroom flat but who are living in shared accommodation. That suggests, first, that some of those people have chosen to do so and, secondly, that the properties of that type exist. That helps to counter the suggestion that those properties simply do not exist.
Of course, there will be local variations. I accept that point and I will come back later to the point about houses in multiple occupation. However, I think that the hon. Member for Aberdeen South, the Chair of the Select Committee, wants to intervene.
Again, I suspect that the group of people that the Minister is talking about were already in that shared accommodation, which illustrates that people do not like to move house because of the upheaval involved. It also illustrates that not everybody is out to milk the system and receive the maximum amount of housing benefit. It does not illustrate at all what the Minister said it illustrated.
I do not think that I have ever said that everybody is out to milk the system. Moreover, the hon. Lady is guessing what the figures tell us. Clearly, the information demonstrates that such properties exist. It was asserted during the debate that, “You just can’t find these properties”.
Let me just explain what I mean by that. The hon. Lady and others said that we are expecting young people to live in HMOs and that those HMOs may not be there. However, to qualify under the shared accommodation rate, someone does not have to be in an HMO. For example, someone could be a lodger. Her Majesty’s Revenue and Customs already runs the rent-a-room scheme, whereby owner-occupiers can receive several thousand pounds a year in tax-free rent simply by renting out a room. Someone renting in those circumstances would qualify for the shared accommodation rate. There are statistics about HMOs, licensing and all the rest of it. However, if we think that things will be a bit tight and that some people might face unemployment and therefore will need some extra income, we might find that more owner-occupiers in a particular area are renting out spare rooms. That might be a very rational thing to do and that will increase supply. But of course the entire debate that we have had today has been based on the assumption that nothing changes. What we are saying is that this change will create a new demand for these shared rooms and spare rooms, and the market will to some extent adjust. That is part of the story.
I have a feeling that it might have been the previous Government, in whom the hon. Lady was a Minister, who introduced the rent-a-room rate. The point about the rent-a-room scheme is to try to make better use of the housing stock. I will not dwell on the social housing overcrowding measures—they are in the Welfare Reform Bill and are not the subject of this report—but I will say that much of what the Government are trying to do is about recognising the limitations of the existing social housing, private rented and owner-occupied stock, and making better use of it.
We have here a classic example. Rather than pay a 29-year-old single person the full housing benefit for a flat of their own, we could pay them housing benefit that enables them to live in a spare room in someone’s house, which would be good news for the person who owned that house, would free up the one-bedroom flat and would save the taxpayer money. I have no idea why the hon. Lady opposes that idea, unless it is on the grounds that it is better value for money. [ Interruption. ] I am sorry, but I have not given way. I am trying to manage my time, because we have covered a very wide range of topics.
I have covered the fact that accommodation does not need to involve HMOs, and I have raised the rent-a-room scheme. As soon as I talk about, “living with family”, everyone will throw their hands up in horror and say, “You can’t possibly expect people to do that,” but there are diverse circumstances. For example, there is a set of people in their late twenties who live at home with their parents—I think they are called the boomerang generation. For them, it is a rational thing to do, and it enables them perhaps to save up for a deposit on a house. There is also a set of people who live close to family and have a good relationship with them—there are lots of caveats to that—to whom we pay housing benefit for the full rent on a one-bedroom flat just for themselves, when they have family down the road who could accommodate them at no cost to the taxpayer. At a time when money is tight, asking them to consider that option seems entirely rational and a sensible way to use the existing housing stock.
The hon. Member for Aberdeen South spoke about the housing market in her own constituency. I do not think that anyone is saying that all housing rent inflation is about the LHA. I do not think that I have ever said that, and I am not aware that any of my ministerial colleagues have either. I do not dispute for a second that in Aberdeen and other places local market factors drive up rents. However, it is clear that rising real rents are part of the story. In response to Professor Steve Wilcox, whom I know well because I have written papers with him, our breakdown of the growth in housing benefit between different factors suggests a significant role for rent growth. Let me just take Members through how we get to that.
In the past decade, between 2000-01 and 2010-11, the cash increase in spending on housing benefit was £10.5 billion. It is worth reflecting on that £10.5 billion increase over 10 years, and there is no sign of that increase easing off. With another billion, another billion and another billion, doing something does not seem particularly deplorable. Out of that amount, £5 billion is straight inflation—what we would have expected on the strength of inflation—£2 billion is real terms social rent growth, £2 billion is real terms private rent growth,
£2 billion, right at the end of the period, as the hon. Member for Westminster North said, is case load growth, and about £500 million is the child benefit disregard. Real rent growth, therefore, is not only about the LHA, but it is a significant contributor to the growth in spending.
The challenge for us, as a Government, is whether to just sit back and take it, letting private landlords go on increasing rents above inflation year after year, and saying, “Yep, that’s fine, we’ll pay that,” without trying to put a brake on it. That is where CPI comes in. I have seen the projections. If CPI is done for decades, it of course has the sorts of effects that were described in the Shelter research mentioned by the hon. Member for Stockton North and, I think, the hon. Member for Brighton, Pavilion, who has now left us. CPI is not for ever. We have said that CPI on the LHA rates will be introduced in 2013, and will be reviewed at the end of the comprehensive spending review period in 2014-15. At that point, we will look at the impact, but what CPI will do is put a brake on the expenditure. Housing benefit expenditure is like a runaway train—nothing seems able to stop it—and we have to try to get the housing market to structure itself differently, rather than keep feeding the runaway train.
No. The hon. Gentleman, possibly with my help, might be confused. We have already had lengthy debates on CPI as a measure of inflation for uprating benefits, and our judgment is that it is the most appropriate measure of inflation. What I am talking about here is what we do to the LHA rates in 2013. We will put a brake on them rising faster than inflation for two years, and at that point we will look at the impact. That is all I am saying. We are putting in place a mechanism that will cause a pause in that remorseless rise, and I have heard almost nothing in this debate about how we will tackle the growth, apart from building more houses, which is vital—in the past year, we have had the lowest rate of private house building on record, or certainly for a very long time. The argument appears to be, “Lie back and take it,” but that is not the action of a responsible Government.
My hon. Friend the Member for Cardiff Central raised the issue of broad rental market areas, which is relevant in the CPI context. If LHA rates are to be subject to CPI, ideally the broad rental market areas should not move around because the base figure subject to CPI would not be clear. The broad rental market areas must be frozen at the point at which one goes to CPI, and the question is what they would be at that point. My hon. Friends the Members for Cardiff Central and for Cambridge (Dr Huppert) have properly highlighted the problems with the city of Cambridge and the wider area of Cambridgeshire, and although there have been changes to the BRMAs around that area, the idea is that they will be fixed in 2013. My hon. Friend the Member for Cardiff Central mentioned coterminosity with local authorities, in relation to Wales, and that is one of the options being considered. It is an option that has a number of attractions. In London, it would mean that the BRMAs were smaller, and the affordability figures would therefore be within a tighter geographic area. We would be unlikely to make significant changes this side of 2013, partly because every time the rules are redrawn, another set of gainers and another set of losers are created. So, we would rather do that at the point of moving to CPI in 2013.
Local authority boundaries are not without their own problems. Many of my Liberal Democrat colleagues represent seats in Cornwall. Cornwall is now a unitary authority and the whole of Cornwall would be one BRMA—I think that BRMAs can be smaller than that. My colleague who represents Land’s End, my hon. Friend Andrew George, and my hon. Friend Dan Rogerson might have views about the interchangability of their two areas. There is no simple solution, but we are certainly looking at local authority boundaries in response to the points that my hon. Friend the Member for Cardiff Central has raised.
Universal credit has been mentioned, and it was asked whether housing benefit would go in at a flat rate. The details of that will be discussed more in the Welfare Reform Bill Committee, but my certain understanding is that the intention is not simply to have a “so much for housing” number in the universal credit. I think that the approach will be much more tailored, but I am sure it will be discussed much more fully in the Committee.
On the under-occupation rules, it was asked whether people would be moving from three-bedroom houses to one-bedroom flats. The data show that about three quarters of the under-occupation in the social rented sector is by only one bedroom, so the move from three bedrooms to one bedroom would represent perhaps a quarter of the change. The impact might not be quite as great as I think the hon. Member for Westminster North suggested, but we have just published some more data on that.
I am grateful to the Minister for giving way again; he is being generous. We will be addressing this issue in the Committee on the Welfare Reform Bill, so we must think about it.
In my contribution, I mentioned that the total number of transfers in social housing stock in one year was only one fifth of the total number of people who will need to move to avoid the under-occupation penalty after its introduction. Has the Minister thought about that and discussed it with the Department for Communities and Local Government? Surely any penalty applying to people in the social security system must be avoidable. The question is whether the capacity in housing stock makes the under-occupation penalty avoidable.
It is important to remember that we are discussing a change that will not be introduced for more than two years. The fact that local authorities and housing associations know that the change is coming two years down the track will affect tenancy decisions and allocations now, so it will be part of the mix. Putting someone into a property that they are under-occupying, knowing that in a few years’ time they will not be covered by housing benefit, would raise issues. The situation will be ameliorated partly by forward planning. However, these are issues in the Welfare Reform Bill rather than the report. I fully accept that they are important issues and will need to be managed.
I propose to allow the Chair of the Select Committee to respond at the end of the debate, if she would like to do so, so I will leave some time for that, but first I will consider some of the main themes that have emerged during the course of this debate. The dropping of the 10% cut after a year was an important theme of the report, and we have heard several hon. Members discuss their quite proper concerns about that. We took the view that the measure was not necessary after 12 months on benefit, given the introduction of the Work programme, which will support people, and the universal credit. We took account, obviously, of what the Select Committee and others who made representations had to say. Naturally, I was pleased that the proposal was withdrawn. It is another example of how we have responded to the proper concerns raised by the Select Committee.
Since the proposals were first published, they have been considerably improved. On the nine-month transition, the changes will start to have an impact from April, but rather than a cluster of people chasing after the same properties, we will see the rental market start to adjust. Landlords will adjust their rent-setting behaviour; we will see whether the mechanism that we have implemented—direct payment, where that enables a tenancy to happen—is working; and we will be able to refine it over the next nine months before almost nobody with an existing claim starts to be affected. I stress that people will not be affected until the anniversary of their claim. For some people, that will be 18 months or more. The process will be gradual, giving us a chance to monitor what is going on and to consider the allocation of discretionary housing payments as we go, which improves the proposition considerably.
To draw the threads together, one thing that strikes me about this debate is that it is clear that whoever was running the country at this point would have done a number of the things that we have done and are now being criticised for. We have heard figures quoted on the losers: 500,000 people will lose an average of more than a tenner a week from the abolition of the £15 excess. The previous Government decided to delay that change by a year, because there was an election coming, but we are going to do it, yet the figures for losses have all included that. It would be unfortunate if anyone gained the impression that we are making new policy and new decisions. This would have happened anyway and was part of what was planned.
As my hon. Friend the Member for Cardiff Central said, the previous Government applied bedroom caps. They drew the line at five, and we draw the line at four, but the principle is identical. The outgoing Administration stood on a platform of restricting housing benefit to what somebody in work could afford. What does that imply? The 30th percentile. Using the 30th percentile, getting rid of the excess and applying bedroom caps is virtually there. I hesitate to say this, but almost everything that we are doing is Labour party policy, yet the Opposition suggest that this is some sort of evil right-wing plot to attack the poor.
The idea is that the housing market is not static. It is influenced by what the Government do. We cannot spend £21 billion a year subsidising rents without influencing the housing market. Does anyone think that if we abolished housing benefit tomorrow, it would not have a massive effect on the rental market? It would have a huge effect. We are players in the market, and we have a huge effect.
Our challenge is to ensure that the system is fair. In most rental market areas, 30% of properties will be affordable. There will be a transition to the new system of at least nine months for existing tenants and up to a year after that to ensure that in difficult local situations treble the amount of discretionary housing payment will be forthcoming. The fact that the budget is £20 million this year and will be £60 million in two years’ time, repeated over a three-year period, indicates that we accept that there will be difficult individual cases in which adjustments must be made, which is why we have provided the money.
I do not apologise for tackling something that has gone untackled for too long. The budget was growing remorselessly by billions year after year. We must ensure that taxpayers’ hard-earned money is well spent, and we believe that the housing benefit changes will make that difference.
With the leave of this Chamber, I will make a few closing remarks. We have heard that only one in four housing benefit claimants is unemployed. The proposed changes will therefore affect many people who are working hard to make ends meet, and they could force many of them further into poverty. At the extreme end, we could return to homeless hostels and large numbers of families living in bed and breakfast accommodation. That would be a tragedy after the previous Labour Government’s success in almost eliminating such accommodation and dramatically reducing the number of rough sleepers.
Even if we accept the Government’s intention that people should not be over-housed or living in accommodation that they cannot afford, the proposals will force many people and families to move house. We know that moving house can be very stressful: indeed, it is said to be the most stressful event in a person’s life after the death of a loved one and divorce. Even if we accept the Government’s assurances that people will not be made homeless and will be able to find accommodation of the right size at an affordable rent, all of which is questionable, large numbers of people will be unable to avoid the stress of moving house as a result of the proposals.
I am glad to have had the chance to debate this important issue. I am sure that hon. Members will want to return to it on many occasions in the coming months as the proposals are rolled out and begin to affect all our constituents.
Question put and agreed to.