Select Committee on Social Security Minutes of Evidence


Examination of witnesses (Questions 40 - 59)

TUESDAY 20 JULY 1999

RT HON ALISTAIR DARLING, DR STEPHEN HICKEY and MR NEIL COULING

  40. Are we talking about weeks rather than months?
  (Mr Darling) We have made it very clear that all the consultation has to be out and concluded so that we can lay draft Orders towards the end of this year with a view to getting them on the Statute Book by April next year. There are three further consultation documents to be published, one on regulation, one on trustees and alternative governments, they will go out in the next few days, and the final one is on tax matters and on parallel running. I cannot give you a date for that, but what I can tell you is the Government needs to have reached a concluded view so as to lay the necessary Orders on the Statute Book by April next year.

  Dr Naysmith: Thank you.

  Chairman: Before I ask Karen Buck to look at some of the areas relating to Housing Benefit, can I apologise in advance as I have some duties on the floor of the House with a ten minute Rule Bill in a few minutes' time and I would like to hand the chair over in my temporary absence to Chris Pond. Could I pass the chair to Chris Pond and ask Karen Buck to introduce some questions about Housing Benefit.

  (In the absence of the Chairman, Mr Chris Pond was called to the Chair)

Ms Buck

  41. Can I start by asking if you could briefly map out an analysis of the problem of Housing Benefit as you see it and in so doing could I just ask if you could clarify a point that has concerned me a little bit when looking at the departmental report, which is that if my understanding is correct, the departmental report forecasts that the number of rent allowance claimants will rise by 349,000 over three years, but actually what has been happening in recent years has been a fall both in expenditure and in the number of rent allowance claimants. What has been happening over progressive departmental reports in recent years has been a retrospective downgrading in the number of people who are actually receiving rent allowance. The 1998-99 Report was actually three per cent down on the figures that had been reached previously. I am not asking for you to comment on the detail, but I just wondered, given that that is a significant rise set against what appears to be a background of falling demand, what assumptions are underpinning that increase?
  (Mr Darling) There are two separate issues here. One is, you are right that the number of clients that we deal with did take and has taken a dip over the last two to three years, although our assumption is that it will level out so that the number of people you are dealing with will rise suddenly, but we expect it to remain fairly constant over the next 50 years or so. We think that expenditure will carry on going up partly as a result of a change to rent structures and partly because private sector rents have generally gone up in line with earnings over the last 30 or 40 years and we do not see why that should not continue. I think the fundamental problem with Housing Benefit is not the fact you have got to pay it, there are other difficulties you have got to deal with. Firstly, it is very difficult to administer because there have been different rent regimes set up over different years usually all with transitional relief. Any one office can be dealing with several different regimes. Secondly, its administration is very variable across the country. Some local authorities are good and some of them are pretty bad. It is open to fraud, collusion with the landlord, other ways of defrauding the system. So far as the private sector is concerned, if the landlords put up the rent then the Housing Benefit goes up with it. So there are all sorts of difficulties that need to be addressed. You will know that the Government plans to publish a Green Paper on housing and I make the point that housing policy and housing support are inextricably linked. We plan to do that later this year and we will then set out our thinking both in terms of housing policy and the housing support that goes in line with that. Of course, in the meantime you will be aware that so far as DSS is concerned, we have put in place a number of initiatives that will help save money, particularly so far as fraud is concerned with the "do not redirect" system where the post office will not send on Housing Benefit cheques. We have given local authorities direct access to our computer systems. We are trying to simplify the administration. We are giving local authorities help with prosecution and so on. What the Government is looking at at the moment is whether or not more radical reform would not be better no matter how difficult that might be.

  42. Last year the Government announced a plan to review Housing Benefit to simplify the procedure and to make it fair and to deal with some of the diverse incentives. Given that the housing Green Paper will come out, let us say, at the end of the year about the time that radical reform, if applied, is considered, it will probably be into the next election, could you just tell me what happened to last year's announcement and whether there are going to be interim proposals to tackle some of those issues of administration and efficiency?
  (Mr Darling) I can tell you what we have done, but you will appreciate I cannot tell you what we are about to do.

  43. I was thinking about whether there will be other initiatives.
  (Mr Darling) As I said to you, we have already taken a number of initiatives to improve the administration of Housing Benefit, the verification project that we have put in place to ensure that councils get claims right before they pay it, better systems for checking with the information the Benefits Agency holds. I think you have been to the Lewisham prototype which showed how councils and the DSS can work closer together, getting one claim filled in and being processed once rather than several times. The new ONE service will help. We have taken various initiatives to cut down on fraud. We are steadily applying a tighter control to Housing Benefit expenditure. What we need to look at is whether more radical restructuring of the system and reordering of the way in which it works would not be better in the longer term. There may be further steps we can take in the shorter term. I am not in a position to say yet.

  44. I was really just looking to see whether the results of that review were going to be published at some stage with interim proposals or whether the whole thing has been subsumed into the Green Paper.
  (Mr Darling) If there are things the Government can do now as opposed to things that may take some time then we would be daft not to make improvements now because if you look at the amount of money that we spend on Housing Benefit, which is about £11 billion and it will carry on rising, we want to make sure that we take every possible step to control how much we spend that we should not be spending.

  45. As I understand it eight per cent of Housing Benefit claimants are in work, a very small proportion of the total number of claimants. Is not the problem with Housing Benefit that so few people can claim it in work? Is there not also a risk that the Working Families Tax Credit will float a proportion of those people off it entirely and therefore make that trap sharper?
  (Mr Darling) I think there are a number of problems. A lot of people do not know they can claim it in work. Part of the work disincentive is that people spend sometimes weeks getting on to Housing Benefit and are most reluctant to take a job in that they fear they will have to go through all this again if it does not work out. As I say, a number of them do not know they can still get Housing Benefit depending on the circumstances and yes, you are right, Working Families Tax Credit will help, but we still have the problem with Housing Benefit in that you can have very high rates of reduction, 95 per cent sometimes, which is a work disincentive. So what we want to do, as we are doing right across the board, is to ensure not just the help we give people but the systems we operate are all designed to show and to ensure that you are much better off in work both in terms of the hassle you have to endure in getting there and in terms of the amount of money you take home in your pay packet at the end of the week or the end of the month. You can make a certain amount of changes to Housing Benefit that will ease that, but we do need to look at more fundamental changes to that system to ensure that people can see a real benefit when they go into work.

  46. The Budget 99 Report laid out some of the framework for that radical thinking and made reference to the fact that "Many other European countries have a flat rate element in personal housing support", that tenants on Housing Benefit in this country have relatively little stake in their housing costs because the costs of reimbursing them in full pushes up the welfare bill. I just wondered if you could comment on the detailed research which has come out which shows that those people in the private sector where local rents are used to cap Housing Benefit contributions have had very little success in using that as a leverage on their rents? I say that with heartfelt passion because I probably represent a constituency on the sharpest edge of the housing market, where my surgeries are full of people who are in the private sector and are meeting £20 or £30 of housing costs out of their Income Support because they cannot bring their rents down.
  (Mr Darling) I represent a very similar constituency albeit 400 miles further north, but it is the same problem. This is why I said right at the start that you cannot divorce the system of financing housing support from the housing support system itself with housing policy. There are many places where there is not a great market in housing and you take it or leave it. That is why whatever proposals we publish have to take account of the fact that you need to look at the housing market itself as well as whatever system of support you give. The other thing you have to bear in mind is that in your constituency and in my constituency their problem is a lack of accommodation. There are other parts of the country where they cannot let the stuff partly because of the rent structures and so that is why it is most important we look at these things as part of a housing policy as opposed to a Housing Benefit policy.

  47. I am very pleased to hear you say that. Is there not an issue in terms of social security being inevitably a national policy and yet there being such huge variations in the housing market? One of the implications in Budget 99 that appears to be the framework for Housing Benefit review is that there is a desire to see those variations widened to increase the social market in housing, tying rents to capital variations, increasing their variation and then if you introduce a flat rate component into that housing cost is not the inevitable consequence going to be either that you have a huge number of losers subsidising their rent out of other income and so possibly cutting into your child poverty objectives or you are moving people around the country perhaps in the opposite direction to your labour market mobility strategy?
  (Mr Darling) You raise all sorts of issues which again lead us to the conclusion that we have to look at this whole thing in the round, we have to look at a housing policy in its totality. We also have to ensure that whatever we do does not undermine other objectives such as alleviating child poverty, it is no part of our function to do that. To that extent what we pay in Housing Benefit is linked to what we might be paying in other benefits as well. You tend to be looking at the total income that is available in that house to feed and clothe children, for example, and so on. These are all issues that need to be looked at. The other thing that we are very mindful of is the fact that the housing market is very, very different in parts of the country and the places in terms of labour mobility you might want people to go are not always the places where there is lots of housing. So it is a complex area. You said we started looking at this last year and yes, we did, but we need to make sure we get it right. So far as winners and losers are concerned, we want to ensure that when we make changes we do not expose people to situations that cannot be justified. As you know, one of the principles that underpins all our benefit reforms is that we make sure that people who are on benefit at the moment do not lose out because it would be grossly unfair to do that. I think that particular difficulty is one that we will certainly address.

  48. I have two last points. One is the point of introducing a two-part system of the flat rate component and the Housing Benefit component. Does that not risk recreating some of the problems that we had with the poll tax where when people had responsibility for meeting 20 per cent contribution themselves it led to a total administrative and arrears problem?
  (Mr Darling) The Government's thinking is still developing. The Green Paper is not going to be published tomorrow morning, it will be published towards the end of this year. There are answers to a number of the things you are saying which I am not able to share with you at the moment, suffice it to say that once we have made our proposals we will make them in a way that meets our objective of ensuring that the system is easier to operate and that it is fair to the tenants that we have to deal with, that is very, very important. There are a number of issues that we need to look at and we need to get right before we are in a position to publish. We are not just doing this for the sake of it. It is like many other things in the British benefits system, if you look at them you can certainly conclude that we would not have started from here, but we are here and what we have to work out is where we might better be and how to get there. That is why these things sometimes take time.

  49. In the Budget 99 document there is the explicit wish to link rents more closely to the size, location and quality of the property and hearing everything you say about the need to look at policy in the round, is there not a risk that that also runs counter to the social exclusion strategy by making it more difficult for people on Housing Benefit or benefit generally to live in the more expensive parts of the country? Is that not a risk? Is that not to a certain extent what happened with the council tax benefit restriction, i.e. people are meeting their contributions out of Income Support because they happen, through no choice of their own, to be housed in expensive and large properties in expensive parts of the country?
  (Mr Darling) Look at Housing Benefit generally, it is perfectly true to say there are 101 different problems, which is just about every possible thing that you consider, that we have got to try and crack. I think one of the difficulties at the moment with our rent structure is that the rents of houses bear no relationship to their value, to the facilities. You can be paying an awful lot of Housing Benefit and a lot of rent out for properties that are terrible and at the same time we have got other properties in other parts of the country where the rents are so high people would love to take them but they cannot afford to take them, which is why I am saying that when we publish our housing proposals you will see that they have to look at all these issues and many of them are very complex. We have to make sure that once we reach the stage of determining what course of action might appear attractive from a pure housing policy we see how that relates to policies on social exclusion, how that relates to our objective of eradicating child poverty. Housing by its very nature is extremely complex and an extremely difficult area, which is why the Government is spending some time on trying to get it right. You are right to say that there are many, many issues that you have to consider.

  Ms Buck: Thank you.

Ms Shipley

  50. Secretary of State, do you consider the introduction of parental leave important?
  (Mr Darling) Yes.

  51. Why?
  (Mr Darling) Part of our whole philosophy is that we ought to do everything we possibly can to improve the well-being of children. Part of that is money either directly from the Government or ensuring that we will see the maximum possible return from their work and part of that is also parental presence in the house which is very important. In all these things, anticipating your next question, which is no doubt why do you not pay for it—

  52. No, no, no. I was going to ask if you see that in the context of your welfare reform programme.
  (Mr Darling) What we are trying to do is to bring about a change of culture in the system. Many employers in the future will see the value in a total employment package of not just child care but also pension contributions and all the rest of it looking at things in the round, but what we want to do is gradually change that culture and the culture of some parents as well. There are a number of fathers, for example, where the idea of spending an inordinate amount of time with their children is not one that always crosses their mind.

  53. So the suggestion is up to three months. Given what you have just said, how do you see yourself changing the culture because obviously just introducing the notion that it is possible to have it is not enough?
  (Mr Darling) I think the fact that it is possible and people become aware of it will change people's attitude towards it. No doubt people who are in work who are negotiating with their employers will start to look at these things. Ten years ago the idea that a man might want to take time off after the birth of his child would be looked at as something weird. In fact, 50 years ago the idea of a man wanting to be anywhere near his wife or partner at the time the child was born would be seen as extremely weird, so these things change but they do take time.

  54. So are we just waiting for time to change it or is there anything else that you have in mind that is going to help?
  (Mr Darling) I think the fact that that facility is open and the fact that people are becoming far more aware of these things will bring about a change in culture far more quickly than you might think.

  55. I agree with you, I think it is actually a really important step forward that there will be a legal right, but I am extremely concerned, given some of the representations that we have had, that there will be quite a lot of resistance and I am sure you are aware of where this is coming from, the Institute of Directors, CBI, small businesses, those sorts of groups are resisting. How do you see that interface between what you want to deliver for a better social make up and a better way forward with resistance from employers?
  (Mr Darling) There was going to be a lot of resistance when we were talking about the minimum wage and the Government spent a lot of time talking to employers trying to win people round and all the prophets of doom (I see that their representatives have now left us) were proved wrong and the minimum wage is accepted and I would be surprised if it does not become, as it is in America, something that people accept and they hardly comment upon. As far as parental leave is concerned, of course there are concerns, especially with small employers if you are employing three or four people and you think of how you will cope when somebody is away. The working hours that were reduced over the years and the concept of equal pay, all these things take time, but I firmly believe that time spent convincing someone of the soundness of your argument is time well spent, which is why I do not make any apology at all when you deal with people on the other extreme who say that you have not gone nearly far enough, you should be doing this, that and the next thing. That is no way to win people over. At the end of the day you are dealing with sometimes quite difficult or complex relationships at work. We want to make it work. So the first stage is to make sure this is on the Statute Book. If you look at the other labour market changes the Government has made, we are making significant changes. Things that even five years ago were regarded as being completely off limits are now being accepted.

  56. I agree with you at that level. It comes on to the bit that you have obviously already identified as the problem areas, like the take up in particular for low income groups which is anticipated by those who represent the groups as likely to be very low simply because they cannot afford it. When there are various benefits available it is not really that group, it is the next group up, it is that poverty trap thing again, how are we going to address that if we are going to bring about this change?
  (Mr Darling) You are referring to the group who are not on benefit but people who are not terribly well paid.

  57. Exactly.
  (Mr Darling) Clearly that is something where again over time we will need to consider what we can do there, but if you work for somebody primary responsibility for your leave and your employment conditions rests between you and your employer, not with the state. Clearly it is something that the Government will reflect on from time to time. The main objective here is to get the idea accepted. We are giving a facility here. There is a statutory right to get time off, but whether it comes with pay or whatever is really a matter for the employer and employee to resolve.

  58. But then that really does socially exclude from this policy quite a large group of people who will not have that economic leeway within their household budget to allow them to make that choice and it is going to be the lower income people that are going to be left out who perhaps one would want to target more than any other group. Do you not think that we should be looking at some form of parental payment?
  (Mr Darling) As you know, these lines are not always carefully drawn and you could end up subsidising an employer because the state is paying for something that they might otherwise pay for. As I said to you, we are in the early days here. This is a new concept, the idea that you can be away from your work on your parental leave and just as with employers so with the state, we need to see how that evolves and how that develops. There are, as you know, entitlements to certain benefits now which may be available to people in work as well as out of work, but what we wanted to do was to put in place the facility to take leave and to get that accepted. Wherever you draw the line, even if you have got people who are on benefit anyway, if you draw the line some further way down the track you are always going to get people on the other side of it who will say, "Hold on, that is not fair because I am earning just a pound more" and they will have a legitimate complaint.

  59. One of the witnesses put forward to us as a way of getting round that particular problem the idea of a flat rate payment and the exact figure, assuming 15 per cent of men take up the entitlement and 50 per cent of women, providing it is a flat payment of £100 a week, was £285 million. As the Secretary of State for Social Security does that frighten you, the possibility of the Government picking that up?
  (Mr Darling) The things that tends to frighten me is that lots of people come along with proposals that amount to only £5 million or only £250 million.


 
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