Rent Officers (Housing Benefit Functions) (Amendment) Order 2001

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The Parliamentary Under-Secretary of State for Work and Pensions (Malcolm Wicks): May I say, Mr. O'Hara, that is a pleasure to serve under your chairmanship? I thank the hon. Member for Hazel Grove (Mr. Stunell) for the way in which he has brought this matter to hon. Members' attention; it reflects a keen concern for his constituents. However, some of his use of language undermined his rational argument, and I will return to that. I will make a statement on our policy and then deal with questions that the hon. Gentleman raised. If I cannot deal with all of them, or feel that he would be helped by further information, I will write to him.

Housing benefit is an important priority for the Government and my Department and I am keen to ensure that its delivery is improved. We have already made a positive start. Our priorities are to drive up standards of service, tackle fraud and error, reduce barriers to work and tackle social exclusion. The order forms a small but significant part of a much wider picture. It defines areas, by reference to which rent officers make determinations in relation to rent for housing benefit purposes. The order makes

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amendments to the instrument applying in England and Wales and the instrument applicable in Scotland.

Rent officers play an important part in the administration of housing benefit in the deregulated private rented sector and we should pay tribute to their work. That sector is not subject to rent controls, so it is vital that we exercise control over housing benefit expenditure and ensure that the needs of people receiving benefit are balanced against those of taxpayers. If I remind the Committee that housing benefit expenditure represents some £11.7 billion annually, hon. Members will understand that we must sometimes make difficult decisions about reference rents and what is applicable in terms of housing benefit.

Mr. Boswell: I invite the Minister to consider whether there is a distinction between the entirely proper need to provide a mechanism in the housing benefit system for restraining excess rents–possibly a consensual rent–which would result in excess benefits, and a collective action to drive down the rent reference level for a whole class of persons resident in a particular locality or neighbourhood.

Malcolm Wicks: I understand that our general policy must not cause injustice; we are always watchful to avoid that possibility. However, I also understand the difficulty of always achieving fairness, which is judged by the affected individual. As a Member of Parliament from London, I am aware of the difficulties.

If I make some progress, it will serve the Committee. It would be helpful to begin by reminding hon. Members of the policy on housing benefit in relation to private sector rents. The overriding principle is that the rent of people receiving housing benefit should not exceed the broadly average rent level for similar sized properties in the same locality. The broadly average rent level is referred to in legislation as the local reference rent.

Rent officers determine the level of local reference rents. They look at rent levels in the claimant's locality for similar private sector properties that are not occupied by people receiving housing benefit. They disregard any rents that are unrepresentative–exceptionally high or low–to avoid skewing the calculation. If I remember my statistics lessons correctly, the officers seek a median rather than a mean definition of average. The remainder of the rents are then averaged to produce a broadly average rent for the locality.

Local reference rents are used in the housing benefit calculation. In that way, although they are a control on housing benefit expenditure, they are also market led: they move up or down if the market moves up or down. Rent officers review local reference rents regularly.

The fundamental issue is the way in which rent officers determine localities, because the size and position of the locality will determine the mix of rents, which in turn will affect the local reference rent level. Some might argue that using fixed boundaries

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such as local authority areas would be reasonable; however, that would not reliably reflect the market. Over time, market forces inevitably change the size and shape of localities. Therefore, we rely on rent officers to set localities, because they possess the required expertise, judgment and local knowledge of the property market and are able to address the realities of the private rented sector.

When the Rent Service for England determined the locality in the Stockport area as the whole of Stockport metropolitan borough council, it was challenged in court in the case of Dinsdale and others. The court's judgment was that the Rent Service had not acted unreasonably: the term ''locality'' could have different meanings and need not be tied to a formula. However, the case was appealed. The Court of Appeal concluded that the rent officer had erred in regarding Stockport as a locality and stated that a locality should signify an area no larger than it needs to be to allow a rent officer reliably to make the specified calculations.

We had two difficulties with that. First, the application of the test suggested by the court would have resulted in a substantial increase in the number of localities. Our policy is that local reference rents should reflect the generality of the market. Thus, they must be based on an area large enough to take account of the bigger picture, which reflects a more generalised choice of housing. Localities are intended to reflect the qualities, both good and bad, of an area.

Secondly, the test suggested by the court would not have been practicable for rent officers to operate. The Rent Service for England estimated that it could have meant the number of localities increasing more than fivefold in central London and nearly tenfold in the Greater Manchester area. Across England alone, the increase was estimated to be from 400 to 4,000. It would have taken longer for rent officers to process cases, involving delays for claimants, and put an extra administrative burden on local authorities. That would not have been in anyone's interest. We therefore considered it imperative to legislate quickly.

The old orders referred simply to the term ''locality''. The amendment order goes further into rent officers' work by defining ''locality'' as well as ''neighbourhood'', because localities comprise two or more neighbourhoods.

Mr. Boswell: I appreciate that the Minister wants to make progress, but will he make it clear that the order will not engineer the reduction of the 400 current rent areas–whether they are localities, neighbourhoods or whatever? He has suggested that they might increase tenfold and become unmanageable, and I have some sympathy with that point. However, if he wanted the system refined so that the tests became cruder and dirtier and only a few areas existed for a local reference rent, the Committee should be told.

Malcolm Wicks: I can put the hon. Gentleman's mind at rest. It is not our intention to reduce significantly the number of areas. Indeed, the purpose of the order is to return to the status quo before the court case but with greater clarity. It may be that, because the Rent Service and the rent officer need

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to examine and review changing housing markets, the number may increase or decrease by a few in certain conurbations or regions. One would expect that. However, we are determined to return to the position before the court case, which has been the same under a few different Governments.

The term ''vicinity'' is also defined in the amendment order. It comes into play, for example, where the rent officer considers that the tenant's rent is significantly higher than the landlord might reasonably expect. In such cases, the rent officer determines an appropriate rent and, in doing so, examines similar tenancies in the same vicinity.

By amending the legislation as a matter of urgency, greater certainty was restored quickly and rent officers did not have to spend time determining the extent of areas by reference to the court's test, only for that to be replaced by amending legislation at a later date. We moved speedily. The hon. Member for Hazel Grove made much of the fact that we published the order on 4 November, which, he pointed out, was a Sunday. What actually happened on the Sunday was that the hapless Minister who was working on his red box–namely myself–signed it. Although the hon. Gentleman made much play of the Sunday, it tells us much more about the unfortunate leisure pursuits of the Under-Secretary of State for Work and Pensions than it does anything more sinister. It was laid before the House on 5 November. The hon. Gentleman will tell me that that was Guy Fawkes day, and he can make of that what he wants, but I am afraid that the Sunday was a red herring.

We had to move quickly or new guidance would have been needed and rent officers would have needed additional training on the court's interpretation of locality, only to have that changed by later secondary legislation. Had we waited for the conventional 21 laying days to expire, the Rent Service for England estimated that 46,000 determinations would have arisen within that time. That would have been chaotic as well as pointless.

Hon. Members will wish to know that we are considering whether the various rent officer orders can be made even clearer, so there will be more consultation and hon. Members will have the opportunity to discuss the matter. We aim for more transparency, and we shall consult the local authority associations in the normal way before laying further amending legislation before the House.

I shall now deal with some of the points raised today. Because of the rush, we could not consult as much as we would have wished. However, we informed the local authority associations of the changes and gave them the opportunity, albeit with a short deadline, to discuss the matter with departmental officials.

As for local reference rents in Stockport, it might be most helpful to the hon. Member for Hazel Grove if I write on any details that he may wish to know about. From April 1996, Stockport had two localities for local reference purposes–area A, the outer and more affluent part of Stockport; and area B, the inner area. As the hon. Gentleman noted, that was reduced in

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December 1998 to one area. The impact of that change on the two old localities was as follows. The local reference rent in a two-bedroom dwelling in area A went down by £5 a week; in area B it went up by £2.50 a week. I am not saying that such a change in the local reference rent is insignificant; I know that, for the lower-income constituents whom I seek to help, a few pounds is a great deal of money.

The figures that I have given are average, and other changes will be at the extremes. However, I put it to the hon. Gentleman gently–we have had a good debate–that it is unhelpful to project those figures as ''cleansing'', because some of us remember that word being used in the former Yugoslavia. The hon. Gentleman can correct me if I am wrong, but although most appellants got the result that they wanted of higher local reference rents–although in some cases by only a few pounds a week–for one constituent the result was the reverse, to the tune of about £26 a month. That shows how complicated and complex the matter is, but its impact is not quite as chaotic as the hon. Gentleman suggests.

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