Housing Benefit

Jonathan Lord Excerpts

Thursday 10th March 2011 Westminster Hall

[Dame Anne Begg]

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.

[Jonathan Lord (Woking) (Con)]

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.

[Dame Anne Begg]

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.

--- Later in debate ---

[Dame Anne Begg]

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.

The hon. Member for Cardiff Central (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.

[Jonathan Lord]

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?

[Dame Anne Begg]

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.

--- Later in debate ---

[Caroline Lucas (Brighton, Pavilion) (Green)]

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.

[Jonathan Lord]

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?

[Caroline Lucas]

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.

[Caroline Lucas]

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.

[Jonathan Lord]

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.

[Jim Sheridan (in the Chair)]

Order. Interventions are becoming a bit long. Does the hon. Gentleman have a question he wants to ask?

--- Later in debate ---

[Jonathan Lord]

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.

[Caroline Lucas]

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.”—[Official Report, 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.