Lord McKenzie of Luton (Lab)
My Lords, in the spirit of comradeship and friendship with the Liberal Democrats, we are very happy to support that request.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
I think there were two parts involved in that question, so let me go through them. In answer to the first part, I will meet the noble Baroness and the CPAG. In answer to the second, I am happy to meet her and the CPAG.
Lord Freud
My Lords, Amendment 46E would apply the affirmative procedure to the support for mortgage interest loan regulations as recommended by the Delegated Powers and Regulatory Reform Committee. The committee opined that these are novel provisions which are likely to have a significant impact on a large number of people. This is true, but the part which is novel is the change in this support from a benefit to a loan. In all other aspects the level of support offered and the way the system will be administered will simply replicate the existing system. The committee made its recommendation before your Lordships debated these measures in detail. I have been quite clear about how the new loan system will be implemented and that the regulations we will bring forward will replicate the existing SMI system. Using the affirmative procedure for these regulations would therefore not be a good use of parliamentary time.
I will come to the government amendments, which may actually be the real palliative here because we will have SSAC reports in this area. If they come up with something there is space within the negative procedure to bring issues before the House. The committee did not have that information about what we were planning with SSAC. I should also point out that the current SMI regulations are subject to the negative procedure.
Amendment 46F would prevent the Government from changing the benefit into a loan for those on state pension credit. It would allow regulations to be made to create a system of grants for pensioners’ mortgage interest. This would mean that pensioners would receive help with their mortgage interest as a grant rather than a loan and that that would be the case indefinitely. In this context that would be unsustainable and clearly unfair on the taxpayer. It is not right that taxpayers, many of whom of course cannot afford to buy their own home, are subsidising the acquisition of what in many cases is a very substantial asset. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides and the Government will not recover the loan until the property is sold. With pension credit claimants, it is most likely that this will be on their death and therefore will impact not on them but on the beneficiaries of their will. My noble friend made the point that they may not be that pleased, but the balance is between them and the taxpayer.
I shall pick up on some of the specific points. Pension credit claimants will have access to passported benefits such as funeral payments. We would normally provide advice through a telephone conversation and the advice will focus on the circumstances of the individual concerned with regard to their options, asking whether they have alternatives available such as downsizing or help from relatives or their heirs. I think that the noble Baroness should take my last word on the issue of who would do this as I wrote in my letter. To the extent that that contradicts what I said earlier, it should be the latter. Our view is that whatever theoretical potential conflict there might be, we will make sure as we set out the arrangements that there is no conflict in the way it is done. I think that that is what I expressed in my letter, although perhaps not using that language.
Let me reassure noble Lords that the Government will seek to recover the debt only up to the level of available equity when the property is sold. Any outstanding debt will be written off. The amendment would also provide powers to introduce regulations to introduce a waiting period for pensioners before they can receive help. There is currently no waiting period for help with mortgage interest for pensioner claimants and it is not the Government’s intention to introduce one. With those explanations, I urge noble Lords not to press the amendments.
Amendments 47 to 49 and 83 provide that loans for mortgage interest regulations made under the Welfare Reform and Work Bill are submitted to SSAC, the independent statutory body that provides impartial advice on social security and related matters for consideration. With the introduction of the new loans-based scheme, help with mortgage interest will no longer be a part of benefit entitlement. However, we recognise the important role that SSAC plays in the scrutiny of regulations and have accepted the recommendation of the DPRRC to provide that regulations relating to loans for mortgage interest fall within the remit of SSAC. I have just realised that I slightly misspoke when I implied that the committee might not have both those bits of information. Perhaps I may also withdraw that point.
The amendments also ensure that certain decision-making rules in the Social Security Act 1998 apply to decisions about SMI loans in the same way as they apply to decisions about benefits. In particular, this will ensure that an appeal may be brought against a decision relating to a mortgage interest loan in the same way as an appeal may be brought against a decision relating to a benefit. This means that applicants will have the same appeal rights as under the existing provision for support with mortgage interest, ensuring fairness for applicants of the new loan provision. They will allow the department to supply information about SMI loans within the broader welfare system to persons who are concerned with the provision of welfare services. For example, it will allow the Secretary of State to share information with those providing free school meals and health benefits such as free prescriptions, so that recipients of SMI loans can access these “passported” benefits. I think that that picks up on the point made by the noble Baroness about concerns with the passporting issues.
The final amendment is a minor and technical change to the Long Title. The purpose of SMI loans is to prevent repossessions. All types of mortgages and loans are eligible for support under the new loan system. This change ensures that the Long Title accurately reflects the contents of the Bill by including a reference to “other liabilities”.
Baroness Sherlock
My Lords, I thank the Minister for that response. I hope that he will take away again the point about the DPRRC. I certainly welcome the move to refer the regulations to SSAC but, welcome though SSAC is and much as I respect its expertise, it is not Parliament. Parliament should have the opportunity to debate this. He mentioned that the DPRRC recognises that regulations for loans for the grant scheme were negative. I am working from memory but I think that the committee pointed out that, had the draft regulations been available, it would have recommended negative in the ordinary run of things because the original regulations had been negative. In fact, the draft regulations were not available, which is why it recommended the affirmative procedure. Will he go away and think about that?
The fact that the Minister said that the service normally will be by telephone gives me a glimmer of hope that the department might be willing to consider a face-to-face service for vulnerable consumers. I hope he will consider that. I will not take on the point made by the noble Lord, Lord Young, although I disagree with him. Given the lateness of the hour and the fact that we went around this issue fairly effectively in Committee, I will set that to one side. I thank the Minister for his other comments. I hope that when he looks at the record he will check the presumptions that I have made as to the operation of the scheme. Should any of those prove to be wrong and not to have been corrected by him, I hope that he will write to me. On that basis, I beg leave to withdraw the amendment.
Lord Freud
“( ) In section 170 of the Social Security Administration Act 1992 (Social Security Advisory Committee), in subsection (5)—
(a) in the definition of “the relevant enactments”, after paragraph (an) insert—“(ao) sections 16, 17 and 19 of the Welfare Reform and Work Act 2016;”;(b) in the definition of “the relevant Northern Ireland enactments”, after paragraph (an) insert—“(ao) any provisions in Northern Ireland which correspond to sections 16, 17 and 19 of the Welfare Reform and Work Act 2016;”.”
Lord McKenzie of Luton
My Lords, we support each of the amendments set down in this group and have added our names to some of them. On Amendments 50, 51 and 52, we join other noble Lords in congratulating the noble Lord, Lord Best, on his negotiating skills—doubtless assisted in that endeavour by the noble Lord, Lord Kerslake—and the Minister for listening and helping with at least a partial solution.
The deferral of the rent reduction programme is clearly welcome. The clarification on the comfort in respect of LHA caps is clearly important as well. The more that the Minister can say on that, the better. My noble friend Lady Warwick has outlined some of the problems because of the known existence of that aspiration. The Minister could, I hope, therefore go further. It is always the way that Ministers come forward with concessions, and then everybody piles in and wants just that little bit more, but this is a very important issue.
That raises the question of where that leaves the amendments, as the Minister’s proposition in his correspondence effectively covers co-operatives, almshouses and community land trusts, as well as housing associations. Are the Government going to accept the amendments, substitute something for them or simply rely on what is on the record of this debate?
The noble Lord, Lord Kerslake, spoke to Amendments 53, 61 and 63, each of which we can support. He stressed the importance of an independent evaluation of what has gone on, in good time for rent policy for the subsequent period to be settled. In respect of Amendments 61 and 63, the noble Lord explained the importance of flexibility in respect of new-build, particularly for schemes of marginal feasibility. We had a very helpful meeting with members of the Bill team and the noble Baroness, Lady Williams, on this. Hopefully, embedded in this long list of government amendments is one that addresses that issue specifically. It may not necessarily have the breadth or flexibility the noble Lord is seeking, but I think it at least seeks to address the principle.
Amendment 59A, in the name of the noble Baroness, Lady Manzoor, proposes a report on local housing allowance rates. We debated this in Committee, but the Minister probably still owes us a reply. The purpose of that discussion was to recognise that, with the moratorium following the 1% limitation, LHA rates are increasingly going to move away from the reality of what renting in the private sector actually entails.
The noble Lord, Lord Ramsbotham, was clearly pleased with the outcome for almshouses. All in all, we should be grateful to the Minister for responding as he has—or hopefully will—at the Dispatch Box in confirming this. This is a real issue of substance which was worrying many people.
The noble Lord, Lord Best, is probably happy with the definition of supported housing that we have here, which is the broadest possible. I know there have been issues with specified support—what is in and what is out—but I take it from the correspondence and what has gone before that the moratorium is in respect of the widest definition of supported accommodation.
Lord Freud
I will start by picking up a point made by the noble Lord, Lord Ramsbotham, on unintended consequences. The House of Lords has done its job in alerting us to some unintended consequences in time for us to sort them out. I know that I rely on this House for that again and again, and in this case I express my gratitude to a number of noble Lords—with the noble Lord, Lord Best, leading the field—for enabling us to deal with these issues.
Let me now do the business on these amendments. Amendments 50 and 51 would exempt housing co- operatives, community land trusts and supported accommodation, while Amendment 52 would extend that exemption to almshouses. I will just make a few comments before I turn to the rent reductions in social housing. We face a challenge on the overall housing benefit bill and believe that social housing providers need to play their part in helping to bring that bill down. However, we also recognise the vital role that many housing providers play in supporting people who need the most help.
The Government have always made it clear that our policy will protect the most vulnerable members of society. To achieve that, the Bill has built into it the flexibility to except some social housing and provide exemptions for providers facing financial difficulty as a result of the reduction. We have also made several amendments to the Bill, including some today, which we believe will be helpful.
Baroness Warwick of Undercliffe
Might I press the Minister for a moment on the LHA cap issue? I am not quite clear about what he means. He said that he could not be specific, and I understand that, but I am very conscious of the uncertainties that boards now face as regards the decisions they have to take in the next few weeks. Do we take it from what he said that the slate is clean as far as they are concerned, there is no assumption that the LHA cap will be applied and that the outcome of the review will look at this afresh?
Lord Freud
There will be a review, which will look at how we fund. We have given ourselves a year to come up with that, so clearly they can look to that in the medium term. However, I have already said that we accept that it is urgent to make sure that their immediate concerns are taken off the table, and we are working to make sure, as we look forward to a more fundamental review, that those protections in that short-term period are in place.
Lord Kerslake
The proposal with regard to the exemption and flexibility for the regulator in those difficult circumstances is entirely welcome. Although it does not go as far as I sought, it is a very helpful move indeed, so I thank the Minister.
Lord Freud
“(b) regulations under section 26 of that Act, or(c) Part 1 of Schedule 2 to that Act.””
Lord Freud
Lord Freud
“(i) was payable at the beginning of 8 July 2015 by the person who was the tenant of that social housing, in a case where 8 July 2015 is the relevant day,(ii) was payable at the beginning of the relevant day by the person who was the tenant of that social housing, in a case where the relevant day falls after 8 July 2015 and the person who was the tenant at the beginning of 8 July 2015 continued as tenant until at least that later time,(iii) is likely to have been payable at the beginning of the relevant day by the person who was the tenant at the beginning of 8 July 2015 if the person’s tenancy had continued until at least that later time, in a case where the relevant day falls after 8 July 2015 and the person who was the tenant at the beginning of 8 July 2015 ceased to be the tenant before that later time, or(iv) is likely to have been payable at the beginning of the relevant day by a tenant of that social housing, in a case where there was no tenant at that time and sub-paragraph (iii) does not apply,”
Lord Freud
“(6A) The Secretary of State may by regulations define “formula rent” and may, in particular, provide that it is a rent set in accordance with a method specified in the regulations.
(6B) Regulations under sub-paragraph (6A) may, in particular, make provision by reference to—
(a) the standard published in January 2015 by the regulator under section 194(2A) of the Housing and Regeneration Act 2008 (the powers of the regulator to set standards relating to levels of rent),(b) Rent Standard Guidance published in January 2015 by the regulator, or(c) Guidance on Rents for Social Housing published in May 2014 by the Secretary of State.”
Lord Freud
“(3A) Regulations made by virtue of subsection (3) may, in particular, provide for section 21 or Part 1 of Schedule 2 to have effect with modifications.
(3B) The modifications that may be made by virtue of subsection (3A) include (but are not limited to) modifications that—
(a) provide for the maximum amount of rent to be increased from year to year by no more than a percentage specified in the regulations;(b) provide for the maximum amount of rent to be determined by disregarding the effect of a temporary reduction or waiver of rent;(c) provide for the maximum amount of rent to be determined by reference to a different period;(d) provide for section 21(1) or paragraph 1(4)(c) or (5)(c) or 3(4) of Schedule 2 to have effect as if it referred to a different percentage;(e) provide for paragraph 1, 2 or 3 of Schedule 2 to have effect as if the social rent rate were uplifted by a percentage specified in the regulations;(f) provide for paragraph 3(2) or (3) of Schedule 2 to have effect as if paragraph 3(2)(a)(ii) or (3A)(a)(ii) referred to a different percentage;(g) provide for the maximum amount of rent to be determined by reference to what would have been the amount if an exception in regulations under section 22 or paragraph 5(5) of Schedule 2(including an exception making such provision as is described in section 22(7) or paragraph 5(7)) had not applied.(3C) Regulations made by virtue of subsection (3B)(d) may not provide for a higher percentage to have effect.
(3D) Regulations made by virtue of subsection (3B)(e) may, in particular, make provision in relation to cases where an exception in regulations under paragraph 5(5) of Schedule 2 making provision about social housing which satisfies conditions prescribed by the regulations as to design, facilities, use or the provision of support to tenants applies.
(3E) Regulations under subsection (1) may not provide for a maximum amount of rent payable by a tenant of social housing in respect of a relevant year, or a part of a relevant year, which is less than the amount that would be payable by the tenant in respect of that period if the rent was payable at the social rent rate in that period, in a case where an exception in regulations under paragraph 5(5) of Schedule 2 applies.”
Lord Freud
Lord McKenzie of Luton
My Lords, we strongly support the amendment moved by the noble Baroness, Lady Meacher. Indeed, it replicates part of an amendment moved in Committee by the noble Earl, Lord Cathcart. We know from the Government’s point of view that there is an article of faith here. Their starting point is that they overwhelmingly want and expect universal credit to be paid as a single monthly payment in arrears to the claimant. We know that there are opportunities for alternative payment arrangements and my noble friend Lady Sherlock set down our understanding in responding to the amendment in Committee.
The issue of eight weeks has been raised, but it is not eight weeks before you get to a solution. As I understand it, the guidance states that, when arrears reach one month’s rent, the DWP will review the situation—I am not sure how long it takes it to do that—following notification by the claimant or landlord. When they hit two months or eight weeks, either the landlord or the claimant can request an APA. Again, I think the point was raised about how long it takes the DWP to respond to those questions. Even then, there is no automatic right to one because the Government are still clinging to the concept that managing benefits should mirror choices in managing money which they say that those in work have to make.
The issue is one not only of having a nominal system in place under which alternative payments can be made, but of how those are put into practice and what realistic timescales are involved. Even if it were on the dot of eight weeks, that is a time for a landlord to wait. Some landlords might be left in a marginal economic situation.
A question was posed about what information we have about claimants of universal credit and other benefits being effectively denied access to properties available for rent. It might be quite hard to get hard statistics on that, but it would be interesting to know what the department has. The landlords fear, even if they may ultimately get paid, that they will have to wait eight weeks or even longer before they get their money.
My noble friend asked about what is happening with universal credit and how many people are in the system at the moment. At December 2015, there were 287,000 universal credit claims—I think that this is internal management information and therefore not fully verified—and some 37% of those payments included a housing element. Again only preliminary analysis showed that 19% of those had a managed payment to the landlord. I suppose that that gives a glimpse of something that is working to an extent, but clearly is not working in a sufficiently robust way to address the very real concerns that have been raised.
We debated this endlessly during the passage of the Welfare Reform Bill. My noble friend will remember it, and jam-jar accounts have featured already this evening. The arguments were strongly made against not only monthly payments but the opportunity for direct payments, particularly in relation to housing. My noble friend Lady Hollis made an extremely important point that the fundamental is a roof over your head—pretty much everything else flows from that. How can you get a job if you do not have secure accommodation? How do the kids get to school if you do not have secure accommodation? It is a fundamental issue. Just a relatively small change to the system, giving people the choice of having direct payments, means the prospect of removing what is clearly a growing problem, as explained, and fixing it in an effective way, so we support the amendment.
Lord Freud
This amendment requires the Secretary of State to make regulations that would allow universal credit claimants to opt to have the housing cost element of their award paid direct to the landlord, irrespective of the reason. One key principle of UC is that the single, monthly payment mirrors the payment of monthly wages that most claimants would receive if they were in full-time employment. Whether they are receiving UC or are working, tenants need to make similar decisions on managing their money, including paying their own rent.
The Government understand that a move to a single, monthly household payment is a significant change for many claimants and that some will require help and support. Regulations came into force in February last year to allow DWP to inform social landlords whenever one of their tenants makes a claim for or is awarded universal credit with housing costs or when an existing universal credit claimant moves to one of their properties. This enables the social landlord to decide whether the claimant requires advice, support or assistance in budgeting so that they can manage their rental payments.
There will, of course, be instances where the claimant needs additional support and, to this end, the Secretary of State already has powers to pay all or some of a claimant’s UC entitlement to a third party through alternative payment arrangements—or APAs, in the trade. There are three APAs: paying rent directly to the landlord; making more frequent than monthly payments; or splitting the payment within the household. APAs can be considered by the Secretary of State at any point during the universal credit claim, whether at the outset or later on, if a claimant cannot manage the monthly payment arrangement.
Recent improvements allow the landlord to email their APA requests, which are dealt with in a matter of days as a priority—so some of the early teething problems as we started rolling out the system have been addressed to speed up that process. Wherever possible, these arrangements are time-limited and delivered with appropriate budgeting support to help claimants make the transition to monthly budgeting.
The arrangement also covers claimants who are in rent arrears, and managed payments to the landlord will be considered where claimants have arrears of at least one month due to repeated underpayment or where the claimant owes arrears of at least two months and is at risk of eviction. These protections, combined with the measures enabling landlords to recover arrears from a tenant’s UC award, already mitigate any impact on landlords’ income or on homelessness.
We are in fact making a series of initiatives in this area and one of the most interesting is the trusted partner trials, where we are working with local authorities so that they decide the people who should be put on an APA, at least initially, and then look to see the budgeting support that a person needs to run their own funding.
Picking up the point made by my noble friend Lord Cathcart on experience, in terms of arrears we did an elaborate direct payment project and we found that, in the early stages, the numbers who paid in full were running at 95.5%, compared with 99% of those where the state paid. However, by the 18th payment—these were weekly payments in the comparator in this project—the direct payments figure had risen to 99%. Interestingly, this happened when the removal of the spare room subsidy came in, and those tenants who had become used to managing their own rent handled the removal of the spare room subsidy better than the ones who had been on the state-managed payments system. That is not surprising because the managed payments system is not necessarily an easy option where there are reductions for non-dependants, the spare room subsidy and so on, because the claimant will still need to pay the shortfall to the landlord.
The other factor, which I am surprised that noble Lords have not clocked, is that a large number of the families on universal credit are in work. It is not like the old legacy system where you have one lot out of work and one lot in work; this is a blended group and people are moving from the out-of-work group into the in-work group. Therefore, the idea that you can be halfway down the taper—in the jargon—and have a managed payment would be incredibly hard for any organisation, including the DWP and the tenant, to manage. Two million households is equivalent to a quarter of the case load.
Baroness Hollis of Heigham
The noble Lord makes our point for us. If a substantial number of people are in work and managing fine—as, indeed, is the case; it is one of the reasons for supporting UC—they will not seek alternative payment arrangements. Who will seek them? It is those who have the self-knowledge to know that they are vulnerable when it comes to paying their rent, given the pressure of debt payday loans and all the other debts they may accrue. If they are being hounded, as we know they are, what will go first is the money that should be earmarked for their rent. I urge the Minister not to superimpose on people who find it hard to manage assumptions about how those of us with rather more comfortable incomes and reliable monthly salaries handle our accounts. It can be a very different and very difficult world.
Lord Freud
The core reason why I dislike this measure—and I do dislike it, so it is not a question of persuading the Secretary of State—is that we can actually see this situation right now. Interestingly, my understanding from conversations I had with welfare rights people in the 1980s was that they were against managed payments because they disempower tenants. It is funny that the political debate has come full circle. If you say that tenants can choose but you have an imbalance of power between the landlord and the tenant, which is the reality, you will find very quickly that every tenant will choose to have a managed payment because they will be told by their landlords—who would love to have someone with an AAA credit rating paying them—“You must have a managed payment”. That is what has happened. Some 93% of people in social housing choose to have a managed payment. They are disempowered, which makes it hard for them to get back into work—I think the noble Baroness is shaking her head, as a landlord. You say lots of good things—
Baroness Hollis of Heigham
I have spent years in either local authority housing management or housing association management. I have represented, possibly unlike the noble Lord, a council estate—one of the largest in the city of Norwich—and day by day, week by week, year by year, we went knocking on doors. We know what we are talking about.
Lord Freud
Perhaps I should not have personalised it.
The reason this idea of choice does not work is that it is too attractive for a landlord to have an AAA income stream. That is why the solution of the noble Baroness, Lady Meacher, cannot work. It is a retrograde step away from claimants being job-ready. We know that we need to give an enormous amount of help to people with budgeting, and we are doing so. We are looking to social landlords to help us with that, and many are doing a great job. But I am afraid that I must ask, with some passion, that the noble Baroness withdraws this amendment.
Baroness Meacher
It is extremely late but I would like to thank the noble Earl, Lord Cathcart, the noble Baroness, Lady Hollis, and the noble Lords, Lord Layard and Lord McKenzie, for their very helpful and powerful contributions. The Minister and I will have to disagree passionately about this issue: I do not think we are going to agree. The Minister is right that landlords have a lot of power. They will walk away. Why should they let out their properties and not have their rent paid? They will not do it. That is my big worry—I say that seriously to the Minister: they will not do it. One can talk about budgeting help and all sorts of things but this is very difficult. As benefits reduce, people are going to find it incredibly difficult to manage at all. They simply will not be able to leave any money in the pot until the end of the month to pay their rent because of the pressures they will be under. I profoundly and passionately disagree with the Minister, as much as I respect and like him. But what am I supposed to do but withdraw my amendment?
Lord Freud