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6.27 pm
Mr. Nick Raynsford (Greenwich): I declare an interest: I act as a consultant to HACAS, the social housing agency. I have also written a book in the past on the subject of housing benefit, although it is now out of print and even if I had received any royalties in the past, which I did not, I certainly would not be getting any now.
This has been an interesting debate on an extremely important issue. We have heard a number of valuable contributions. I think particularly of contributions from members of the Select Committee, including my hon. Friend the Member for Birkenhead (Mr. Field), the Chairman of the Select Committee, and my hon. Friend the Member for Vauxhall (Miss Hoey), who has spoken most recently. They both made eloquent and telling contributions to our debate.
We have heard contributions from Conservative Members, revealing their interest and concern in a number of extremely important issues relating to social security and fraud, but in some cases revealing a certain touch of difficulty, if not ingenuity, in trying to reconcile their support for the Committee's recommendations with their opposition to the Opposition motion which seeks to give effect to a number of the Select Committee's important recommendations.
I also apologise to those hon. Members whose speeches I did not hear in full tonight. Unfortunately, tonight's debate has coincided with the sitting of a Standing Committee of which I am a member, and I was required to attend on three occasions, on all of which, I am pleased to say, the Government were defeated.
Housing benefit fraud is big business. It is also unique for, unlike almost any other big business in late 20th-century Britain, housing benefit and housing benefit fraud are immune to downsizing. While British industry and the British people coped with downsizing and recession--many losing their jobs in the process--housing benefit and housing benefit fraud have been oases of unparalleled growth. Indeed, if our gross domestic product were measured in terms of housing benefit expenditure and housing benefit fraud, we would unquestionably be one of the most successful countries in the world.
The scale of the increase in housing benefit expenditure has been phenomenal. It has almost doubled in real terms during the past six years--from £5.5 billion in 1989-90
to £10.8 billion in 1995-96. That has not happened by accident; on the contrary, it has been the direct result of Government policy. There has been an increase in the number of people claiming housing benefit--there were about 600,000 additional claims during that period--which reflects an increase in the number of people who are unemployed and the increase in poverty in the early 1990s recession. But the real reason for the huge increase in housing benefit expenditure, as the Select Committee's report so rightly highlighted, has been the exponential rise in rents as a direct consequence of Government policy.
Between 1988-89 and 1994-95, council rents rose on average from £19 a week to £35.80 a week; housing association rents rose from £23 a week to £43 a week; and private sector rents rose from £29 a week to £69 a week. Those huge increases directly reflected Government decisions to cut subsidies to local authority and housing association homes and to deregulate the private market. Ministers knew full well what the consequences would be. When pressed--we did press them--they repeatedly told us not to worry about rising rents because, in that felicitous phrase,
Mr. Heald:
The hon. Gentleman claims that deregulation was such a bad thing. Is he saying that he would go back to what we had before--the regulated private sector?
Mr. Raynsford:
If the Minister will bear with me for a moment, he will hear the full argument about the extent to which deregulation has not just led to a huge increase in expenditure but opened the door to a level of fraud that is a disgrace and that, instead of being used to help people in need, is lining the pockets of people who should not be receiving it. [Interruption.] Later in the debate--if the Secretary of State will contain himself--I shall explain some of the measures that Labour will take to ensure proper safeguards against abuse, and at that point the Minister will be well aware of what action a Labour Government will introduce to deal with the problems. We would not tolerate the extraordinary exponential growth in expenditure, which has been to little public benefit, over which his Government have presided.
In the deregulated private sector, average weekly payments rose from £21.06 in 1989 to £47.28 in 1994--a staggering increase of 125 per cent. The combination of that rapid expenditure growth and a deregulated environment provided an ideal framework in which fraud could thrive. Deregulation not only allowed huge increases in the amount of rent that could be charged but removed the previous safeguard that allowed local authorities to require a fair rent to be fixed by a rent officer. To add insult to injury, a significant extension of direct payments to landlords--rather than payments being channelled through claimants--offered even more enticing opportunities for fraudsters to cash in on the bonanza.
I ask the Minister to think about these figures. At the current average level of private rents, a landlord will receive for each tenant £2,458 per annum. The landlords
investigated by the London borough of Haringey--those with more than 20 claims--were receiving on average more than £49,000 per year minimum. These are the cases that the Secretary of State does not believe it is reasonable to investigate. He believes that it will be too burdensome on landlords to require them to be subjected to certain checks to see whether public money is going in the right direction. That is the legacy of the Conservative Government.
Mr. Bernard Jenkin:
I am sure that the hon. Gentleman and his party are committed to the fight against fraud, but will he demonstrate that commitment by referring to paragraph 59 of the Select Committee's report, which he welcomes in the motion? The paragraph refers to the harassment and the attempts to discreditMr. Bernard Crofton. Will the hon. Gentleman join me in condeming the Labour councillors who are responsible for that authority, and condemn what they attempted to do to Mr. Crofton? Will he undertake on behalf of his party to do something about their appalling behaviour?
Mr. Raynsford:
I am second to none in demanding tough action against fraud and in my support of local authority officers who take effective action against fraud, wherever they are. I have played a considerable role in recent weeks in trying to ensure that the London borough of Haringey responds positively and appropriately to the difficult challenges it faces. I hope that, in exchange, the hon. Gentleman will take a similar view of the behaviour of a member of his party who featured in an article in the South London Press, on Friday 22 March, which said:
The huge escalation over the years in housing benefit expenditure provided both the opportunity and the cover for a literal explosion in the number and scale of fraudulent claims. Rather than seeing the huge increase in public spending as a problem--which they would undoubtedly have done in any other part of public policy--the Tory Government, perversely, saw it as evidence of success. They claim that it achieved a magical recovery in the private rented sector and that therefore it is justified.
The harsh truth, however, is that the "magical recovery" has been far less dramatic than Tory Ministers would have us believe. Although the explosion in expenditure has been disproportionate, the number of new private lettings has not been. Despite all the assistance offered--not just through housing benefit but the equally lavish spending on the business expansion scheme and by abnormally favourable market conditions because of the depressed home ownership market--the total number of private lettings in England has recovered to a little over 2 million, which is almost exactly the figure the Tories inherited from Labour in 1979. Furthermore, with the ending of the BES subsidy and with long-overdue evidence of recovery in the home ownership market, most commentators expect that the revival in private renting, which was achieved at such huge cost, will not be sustained.
Let me make one thing absolutely clear: Labour wants to see a healthy private rented sector, but it must be economically viable in its own right and be dependent
on huge transfers of money through the housing benefit scheme. Reducing dependence on housing benefit makes sense in social and in economic terms. In case Ministers look doubtful, let me quote from their White Paper on housing, published a year ago, entitled "Our Future Homes". It stated quite correctly that
My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) rightly pointed out that the Government's response to the Select Committee's report was deplorably vacuous and lukewarm in respect of two specific recommendations for tackling landlord abuse more effectively. The Secretary of State is well aware of the evidence, quoted in the Select Committee's report, of extensive fraud perpetrated by landlords who receive a significant number of housing benefit payments in the London borough of Haringey. The study showed that the incidence of fraud among the claims investigated was more than 20 per cent., yet the Government consider it sufficient to undertake an assessment of fraud risk rather than act decisively to clamp down on such abuse.
The final irony--I urge the Secretary of State to listen; he might even enjoy the next passage--is that the landlords who have been the beneficiaries of this extraordinary largesse from the Government over the past few years are not generous with what they have received. They have not produced many new homes, as we have pointed out, and many of the homes that they have produced have been in poor condition. There are still a disproportionate number of squalid and dangerous properties in the private rented sector. To add insult to injury, the beneficiaries of all that public money resent the suggestion that action should be taken to clamp down on benefit fraud.
Mr. Geoffrey Cutting, representing the Small Landlords Association, is quoted in the 17 May edition of Inside Housing magazine--I invite Ministers to listen carefully--as saying:
"housing benefit will take the strain".
What a strain it has been. The average weekly payment of housing benefit rose by 100 per cent. between 1989 and 1994.
"A sobbing former Tory chief has been jailed for 18 months for mortgage and benefit fraud."
I suggest that the hon. Gentleman divert his attention to the failures of members of his own party.
"providing a subsidy to a local authority or housing association to enable them to charge a below market rent can be cheaper over time than paying housing benefit on a market rent for several decades".
In the meantime, we must take tough action to tackle the scandalous and expensive abuse of the housing benefit system that has been allowed in recent years as a result of Government action and Government inaction. Both have been prompted by the Government's ideological obsession with deregulation. Even today, that obsession is still rearing its head, being used as a justification for not taking action to tackle landlord fraud more effectively.
"the defrauding of landlords by the state far exceeds the defrauding of the state by landlords . . . When the state defrauds landlords they can expect landlords to respond by defrauding the state".
I should be interested to hear the Secretary of State's response to that thinly veiled incitement to malpractice. Will we hear an unequivocal, unreserved condemnation of that disgraceful statement?
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