Housing and Planning Bill (Thirteenth sitting)

Gareth Thomas Excerpts

Thursday 3rd December 2015 Public Bill Committees

[Dr Blackman-Woods]

I beg to move amendment 211, in clause 74, page 30, line 13, at end insert

“and shall only apply where the costs of implementation are reasonable as determined by local authority or Housing Association Board of Trustees.”

The amendment would establish that the cost of implementing the high income rent regime provides value for money.

The amendment has two purposes. One is to flag up the additional costs that will be heaped on to local authorities and housing associations in administering the scheme. Again, a great number of the people who have written to us have said that they are concerned that, because they do not have many tenants who would be deemed high earners under the Bill, quite a low aggregate amount of money would be available; and that administering the scheme and having to find out all their tenants’ income could far outweigh any financial benefits.

The amendment is an attempt to test the Government on whether they have carried out any assessment of the likely income that would accrue to local authorities and housing associations across each area of the country and how much money they think councils and housing associations would have to spend gathering the data and administering the whole scheme, and being very clear that more money would be raised than would be expended. To my knowledge, that information is not in the public domain and was not in the impact assessment.

We are concerned that the proposed process is simply adding financial burdens on local authorities, whose budgets have been cut year on year in many parts of the country—my own council, for example, has had a 40% cut in its budget, with more cuts to come until 2019. The Local Government Association—it might be worth noting in passing that the LGA is Conservative-run at the moment—has voiced concern about funding cuts that have left its members with a £10 billion black hole. The LGA is concerned that the provisions in this Bill, including the costly the pay-to-stay scheme, will place a further burden on their finances.

Local authorities and housing associations have raised genuine concerns, as have co-operative housing groups, one of which says:

“Administering Pay to Stay would be complex and time-consuming. Given that our co-op is managed by its member/tenants, costly provision would need to be made to employ a professional to do this. A small co-op such as ours would find this difficult to manage.”

The question the amendment puts is this: what assessment has been made of the money that would be raised in each area for each housing association, and what are the estimated costs of the administrative burden being placed on housing associations, local authorities and co-operative housing groups?

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I rise to support the amendment. In doing so, I shall focus on the representations made to me about the plight of small co-operative and community-led housing associations—a point I put to the Under-Secretary of State in a previous intervention.

My hon. Friend the Member for City of Durham is right to say that the focus of concern for housing co-operatives has been on the administrative costs of managing pay to stay and its impact on the functionality of co-operatives. I take at face value the words of the Minister for Housing and Planning on housing associations. On Tuesday, he said:

“The Government trust housing associations to look after their tenants. We believe that they have their tenants’ best interests at heart and that they will use their discretion wisely.”––[Official Report, Housing and Planning Public Bill Committee, 1 December 2015; c.376.]

That was said in the context of other elements of the Bill, but surely it is equally appropriate in the context of pay to stay.

The Under-Secretary of State made it clear that he will consider the issue of housing co-operatives in relation to the regulations, and I very much welcome that. However, I say to him that many co-operatives, particularly those in London, have made contact—for example, Vine Housing Co-operative and Coin Street Community Builders have been in touch with me, and Edward Henry House Co-operative has made representations to us. They say that, because of the cut in rents being delivered in the Welfare Reform and Work Bill, there is no additional funding that they will be able to get to deliver some of the other proposals in this Bill and cover the administrative costs they will face.

The co-operatives are not, in the main, big housing associations with the scale to find efficiency savings naturally, not least because they do not usually have large numbers of staff or other resources. Much of the administration of housing co-ops is done on a voluntary basis, as part of the quid pro quo of being a part-owner of the housing co-operative. If pay to stay is introduced, Ministers will understandably want housing associations to have a series of monitoring arrangements in place. Those monitoring arrangements will inevitably create an additional burden, and at the moment small housing co-ops are struggling to see how they will be able to fund that. They also worry more generally for some of their members, who may face a sharp increase in the cost of staying in the housing co-operative, and therefore housing association, property. Rent arrears could also increase, which would be an additional cost. Because of the small nature of most housing co-ops, that would be difficult for them to bear.

For those reasons, I urge the Under-Secretary to look even more seriously at the potential impact on small housing associations. I will write to him separately outside the Committee, but I hope he will undertake to look at that letter and representations on this provision from housing co-operatives.

[Mr Jones]

I shall take the final point made by the hon. Member for Harrow West first. I will be happy to receive his representations, along with those from across the sector, on behalf of the smaller housing associations and co-operatives.

On amendment 211, we recognise that landlords will incur a cost in operating the policy and we have consulted on that. We have proposed that local authorities should be able to offset administration costs from additional income, and for housing associations the benefit from operating the system will far outweigh the costs. Regardless, our aim will be to design an approach that is as simple as possible to administer and we will take forward further engagement with landlords on that point.

The amendment is therefore neither necessary nor practical, and I hope the hon. Lady will seek to withdraw it.

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[Mr Thomas]

Is this not perhaps an example of the Chancellor giving with one hand and the Minister taking back with the other?

[Dr Blackman-Woods]

Absolutely. I draw the Committee’s attention to the written submission from the Home Group, which worked through examples of the effect on its tenants. It thinks that around 11% of its tenants will be affected, and that half of all local authority tenants—a huge number of people—could see really enormous jumps in the amount of rent they will have to pay. The written evidence works through just how serious the jumps in rent charges will be and the potentially devastating consequences for particular families. If the Minister is going to reject everything we put forward to make the scheme a little bit fairer, I urge him to look at what individual housing associations and local authorities are saying, because they are in touch with their tenants and will know the impact of the legislation.

I will not say too much about amendment 216, because it just carries on from amendment 214, but it tries to put some sense into the definition of a high rent with reference to average incomes in the area and with high incomes being defined by the top quartile of incomes in the area. If we were asked what we think is a high income, how many of us would say the statutory minimum wage? Who would? Quite frankly, no one with any sense would say that. We would all say, “Well, perhaps the higher quartile of incomes would seem to be a reasonable starting point.” That would vary slightly throughout the country—for example, in Yorkshire and the Humber the average salary is £23,000, compared with an average salary in London of about £40,000.

As I suggested earlier, we would relate the definition to what is happening to earnings locally, and it would also be understandable. It seems fair that we all understand how income has been assessed and why it has been judged to be a high income, rather than having it judged against the minimum wage, which, as I said before, seems extraordinary. If the Minister wants further evidence, there is yet another excellent submission from a housing association. This time it is from Riverside housing association—

[Mr Thomas]

One of the pilots.

[Dr Blackman-Woods]

Indeed. Again, with its tenants in mind it worked through exactly what the proposals will mean. It said that the impact of paying to stay

“is likely to be very high and vary significantly across the country. Comparing two local authority areas, Liverpool and Bromley, shows the difference an increase to market rent could mean for our tenants. At present a move to a market rent for a household at the £30,000 threshold living in a 3 bedroom house in Liverpool would result in a weekly increase of £35 (an increase of 38%). However for a similar family (now earning £40,000) living in a Riverside home in Bromley this would mean a staggering increase in weekly rent of £254”—

a 201% increase in their rent.

Riverside continued:

“This would mean that the household would pay around 50% of their gross income on rent, significantly above the accepted affordability threshold of 30% which is usually applied to net income.”

That is a staggering example, but it is just one out of many and would be duplicated again and again across all housing associations in all areas of the country. I use the example to demonstrate once again that the measures will have an impact on the amount of money that real people will have to pay to be housed.

[Mr Thomas]

Not only will that have an impact on real people, but might it not also have an impact on the taxpayer? My hon. Friend may have seen the modelling by Sovereign Housing Association showing that a typical household of two adults earning £30,000 and two children in a three-bedroom house would be eligible for housing benefit in over half of local authorities. That figure rises to some 96% for residents paying affordable rent. For those paying a market rent, the figure would be 100%. It cannot be right that the taxpayer will have to pick up the mistakes of the policy as currently drafted.

[Dr Blackman-Woods]

My hon. Friend makes eloquently the point that we made earlier. The lack of a cost-benefit analysis of the scheme is very unhelpful, because we would otherwise have those figures. We would know how much money is likely to be spent on housing benefit, how much it would take to administer the scheme and whether it was worth putting so many families through this extraordinarily damaging series of events.

Amendment 217 seeks to test the Minister on whether there is another way in which we could consider what might be a high income. If it is not to be above the median of rents set locally and if it is not to be in the upper quartile, what about three times the average income for the area? That is another way in which we could determine what would be a high income, but the Government have rejected that particular approach. Again, we have evidence from Mulberry Housing Co-operative:

“Our tenants will be unable to afford the massive increases in rents...This means the rents would have to rise above the household income of the majority, if not all, of our members. To afford this level of rent the household income would have to be in the region of £170,000pa. A household income of £40,000 would trigger rent rises that are impossible to pay for the ordinary workers who make up our Co Op.”

There we have it from the very people who run the co-op. Using the high-income level proposed by the Government, it will be impossible for people on such levels to pay the increased rent. I urge the Minister to reconsider the thresholds.

Finally, I turn to amendment 215. My understanding of the Government’s most recently published consultation is that they intend household income to be assessed only on that of the tenant and not that of other household members. The amendment seeks to discover whether that is wrong or whether the Government have not decided what they are doing. PlaceShapers and its members are concerned that if incomes beyond those of tenants are taken into account, current tenancy agreements will be called into question. It has asked, as have others, that only the income of tenants is taken into account. Otherwise, family units might be broken up, and it might be necessary for parents to ask an older child to move out of the property if they were not able to afford the higher rent.

Example after example has been given to us of the damaging consequences that the measure could have for households. I would be grateful to hear from the Minister whether only tenants’ incomes will be included, or whether a household will include an 18-year-old who has a part-time job stacking shelves in the local supermarket. Will the income of that adult child be taken into account?

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[Mr Thomas]

We know from the way in which the Second Reading debate and, indeed, debates in Committee have proceeded that the Government are not remotely interested in helping those on low or middle incomes who, although they may aspire to own their own home, cannot afford to do so at the moment. Surely the Government being willing to help local councils to build more homes for social rent with the resources raised under pay to stay might be one way in which they could ameliorate some of that deserved criticism.

[Dr Blackman-Woods]

Absolutely; my hon. Friend makes an excellent point. If the Government were genuinely committed to increasing the number of affordable housing units in this country and increasing housing supply across all tenures, they would take the opportunity to use this income to provide additional housing, rather than squirreling it away in the Treasury—we know not where; we know not for what purpose.

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[Peter Dowd]

It is a pleasure to serve under your chairmanship again, Mr Gray. As I looked across the room and saw the hon. Member for Thirsk and Malton, I was reminded of Dick Turpin—I am not sure whether he actually trod the roads in your area, Mr Gray—and of the fact that the proposals we are debating are of Dick Turpin proportions. They will steal money from local authorities. The difference between the Government and Dick Turpin is that at least he had the decency to wear a mask.

I would not trust the Government to come up with any estimates. The Office for Budget Responsibility, which is supposed to be independent, gets it wrong all the time. The Chancellor manages, using smoke and mirrors, to change the figures as he goes along. We cannot trust the Government’s formula for such estimates in the first place.

If the Government decide to pinch this money from local authorities, which are already significantly under the cosh, where will they get it from? Will they get it from the reserves that they think local government is awash with? They have no inclination to understand that problem. They have already made massive cuts of 50% or 60% to local government, which have affected its spending power, but they still intend to take even more cash off local authorities. That will have the effect of cutting services.

We also have to think about the practicalities. What about the period of reconciliation? What happens if local government has coughed up too much money? Does it get that money back? When will it get that money back, and over what period? Interestingly, I notice that subsection (4) states:

“The regulations may provide for interest to be charged in the event of late payment.”

The question arises of whether that will be reciprocal. If local authorities cough up too much money, will they be paid interest on that?

Local government is struggling financially, and the clause will only add to its burdens. Importantly, it will add uncertainty to local government finance, and that is not fair or reasonable. The Government are fond of saying that they do not want to outsource their responsibilities, but by taking this money from local authorities, they are outsourcing to local government their responsibility for making cuts. It is getting to the point where the Government talk about allowing local authorities to pay the money back in instalments, but on what basis? What is the formula? How will the estimate be arrived at? There is absolutely nothing about that.

[Mr Thomas]

Might this not be a helpful moment for the hon. Member for South Norfolk to intervene to tell us what the leader of South Norfolk Council thinks of the provision?

[Peter Dowd]

I wish he would. Of course, we need to take advice from the Prime Minister, in his campaign against austerity, about what he thinks about local government having more money pinched off them by his Government.

The proposal is not fair or reasonable. It will put additional stresses on local government; more important, it will put stress on the services that local government provides by asking it to pay up money without knowing how much it will have to pay, the basis on which the estimate will be made, whether it will get the money back off the Government if it pays too much, whether it will get any interest payments or when the reconciliation of the figures will take place. The proposal is an absolute mess, and the Government should think again.

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Question proposed, That the clause stand part of the Bill.

[Mr Thomas]

A stand part debate on the clause is an opportunity for us to explore in a little more detail why there is a disparity between local authorities and housing associations over who gets to keep any additional income raised under the pay-to-stay policy. In essence, as the clause is drafted, housing associations get to keep any additional resources under pay to stay, but local authorities have to return them to the Chancellor.

The question for Government Members to reflect on is why, say, South Norfolk Council should be treated differently from housing associations that operate in the South Norfolk area? Why should housing associations in Harrow retain some additional resources under pay to stay and yet Harrow Council will not be able to do so? I hope we will hear from the Committee’s answer to Robespierre.

[Mr Bacon]

rose—

[Mr Thomas]

I am grateful that we will now hear from him.

[Mr Bacon]

I was going to quote Mao Tse Tung earlier, but I gather that it is a sensitive point in the Labour party at the moment—although the hon. Member for City of Durham, who is not in her place, referred to a thousand flowers blooming, so she has already quoted him. Just to reassure the hon. Gentleman, the Housing and Planning Minister will be in my constituency tomorrow to visit a self-build project and separately I will see the leader of South Norfolk Council tomorrow evening at a Christmas drinks party. Therefore I—and the Minister, I am sure—will take the trouble to allay his concerns.

[Mr Thomas]

I am always tempted to agree with the hon. Gentleman, who I have always thought should be on his party’s Front Bench—that would be only an improvement on what we see before us today. However, I am slightly surprised that he did not commit to ensuring that the Minister not only visits that self-build project as he should—one hopes that it is a housing co-operative—but sits down with the leader of South Norfolk Council to explain why he intends to discriminate against South Norfolk Council as opposed to South Norfolk’s housing associations. It seems to be a bizarre and arbitrary distinction to make.

[Mr Bacon]

First, I assure the hon. Gentleman that South Norfolk Council does not feel discriminated against, because the leader of the council is so dynamic that he has found alternative routes provided by this visionary Government to set up independent commercial entities under the general power of competence. Secondly, I reassure the hon. Gentleman that Ministers tell me that they met the leader of South Norfolk Council yesterday.

[Mr Thomas]

Now that is good news. I hope that the details and minutes of that conversation will be published, because I was struck by the concern of the Local Government Association, sadly at the moment run by the Conservative party, and by its strong opposition to and concern about the distinction between housing associations, which will be able to receive the additional proceeds that might be generated under pay to stay, and local authorities, which will not be able to receive them.

I do not know whether the leader of South Norfolk Council is an active player in the Local Government Association and we do not know whether the leader of the LGA took the opportunity yesterday to bend the ear of the Minister on—

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[The Chair]

Order. Before any intervention, perhaps we should focus on the topic before us, rather on an amusing and amicable exchange.

[Mr Thomas]

I am very grateful for your protection, Mr Gray, from the hon. Member for South Norfolk.

My second key point is that the failure to allow local authorities to keep any of the additional rent raised further undermines the housing revenue account self-financing settlement, which was supposed to free up local government housing from central Government control, and further reduces the chance of local authorities being able to contribute new house building to address our national crisis. That settlement will be further put at risk by the rent cuts being pushed through in the Welfare Reform and Work Bill and by the forced sell-off of homes that we have discussed already.

I say gently to Government Members that I will have to be blown away by the oratory of the Minister not to want to press the matter.

[Matthew Pennycook]

My hon. Friend is making a good point about the clause that speaks to wider concerns with the Bill. On Second Reading, the right hon. Member for Arundel and South Downs (Nick Herbert) put it well when he said that many measures in the Bill, including this clause, cut against the grain of the Government’s laudable commitment to localism.

[Mr Thomas]

My hon. Friend makes an important point, which further illustrates the need for the Minister to be particularly convincing in his response.

Question put and agreed to.

Clause 79 accordingly ordered to stand part of the Bill.

Clauses 80 to 83 ordered to stand part of the Bill.

[The Chair]

In accordance with the programme order of 10 November, as amended on 19 November, we now come to amendment 93 to clause 92.

Clause 92

Designation of neighbourhood areas

[The Chair]

I call Gareth Thomas.

[Mr Thomas]

I am extremely grateful for your assistance, Mr Gray. In the spirit of moving swiftly through the passage of the legislation, I take the opportunity to move the amendment formally.

Amendment proposed: 199, in clause 74, page 30, line 4, at beginning insert “Subject to subsection 1(A)”.—(Mr Thomas.)

See amendment 200.

[The Minister for Housing and Planning (Brandon Lewis)]

I appreciate the ethos and the manner with which the hon. Gentleman has moved the amendment. It is one of the most succinct, direct and brilliant speeches that he has made in the past few weeks, and the first one that I have been almost tempted to agree with. Before we get to that point, however, I must say, on the amendment, that communities can already use neighbourhood planning to allocate land for housing development, including land put forward by housing co-operatives, which I know he champions, and has done consistently and superbly throughout this Committee. We all support housing co-operatives.

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The Bill makes provisions to ensure that more permissioned service land is available that is suitable for self-building and custom house building. To return to the conversation that we had a week or two ago, where a group of people want to build or commission their own homes next to each other so they can live as a community, the clauses in chapter 2 of the Bill allow that to happen. We fully support community-led housing development, and we have already put in place a range of mechanisms to support it. I hope the hon. Gentleman withdraws his amendment.

[Mr Thomas]

I am grateful to the Minister for the positive attitude with which he has clearly considered my amendment. It was certainly tabled before we had the opportunity for the helpful debate on housing co-ops and the applicability of the self-build and custom build provisions. There was a slight caveat in his willingness to recognise that housing co-ops are potential examples of self-building and custom house building. I say gently to him that some further clarity, perhaps by way of guidance to the parent bodies of the UK co-op housing movement, might be helpful by indicating what types of housing co-operative are covered in what circumstances by the self-build and custom build provisions.

[Brandon Lewis]

In the spirit of helpfulness, the hon. Gentleman makes a fair point, and I will consider how we can do something positive in that way.

[Mr Thomas]

That is the Christmas spirit kicking in, and I am grateful to the Minister for it. There is a parent body for the housing co-op movement. If he is willing to suggest to the relevant official in his Department that they communicate with that organisation, that would be additionally helpful.

I am grateful to both Ministers for the spirit with which they have engaged with the potential difficulties facing housing co-ops in the legislation, and particularly to the Under-Secretary of State on the concerns about pay to stay, which genuinely put at risk some of the smaller housing co-ops due to the administrative burdens involved. In the spirit in which the Minister has responded, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.