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We will evaluate this pilot closely. But I am clear that in the future, working with the Department for Work and Pensions, approaches that bring housing, training and employment together should be the rule, rather than the exception.”
I welcome the Government’s understanding of the interconnectivity of people’s social and economic circumstances that impact on their ability to work and thrive. I am making a call to action across Departments—the Government must take the right actions to help individuals and communities back to work. However, I believe that we have failed to consider properly the impact of a tax and benefits system that delivers a most extreme manifestation of the poverty trap.
My constituents are virtually imprisoned by the excessively high rents charged for temporary accommodation, which those on low wages can afford only because they are subsidised by the housing benefits scheme. We are talking about rents of more than £350 a week—not for a palace or a mansion but often for a two-bedroom flat above an insalubrious parade of shops or take-away establishments.
On one level of key importance, our Government are attacking the problem at the root by accelerating the creation of affordable housing. Housing that is available at a social rent will significantly improve the life chances of many of the people whom I represent, in all kinds of ways and not just in their ability to work. Additionally, I am pleased to welcome the small but significant step that has been taken in the right direction to reduce the depth of the poverty trap by disregarding child benefit as income when housing benefit is calculated. I believe that is an astute move, and I shall certainly support much more of the same.
I also welcome the Government’s undertaking to engage positively with the report of the London child poverty commission, and the review of working age housing benefit and its effectiveness in promoting work and fairness. I hope that someone from that review will take note of what I have to say today.
My message is that the housing benefit system is in desperate need of reform. To illustrate my concerns, I want to tell the story of a constituent of mine, a lone parent in her early 40s, who was working as an administrator at Guy’s hospital. She was renting privately and had good prospects, having been offered a promotion and additional hours. She wanted to purchase a property under the key worker scheme and was eligible to do so, but the high cost of living and private sector child care meant that she could not get a deposit together. However, she was still optimistic: she was still ready to go for it, and she came to see me to talk about the options available to her. It was gut wrenching for her that she could work only 16 hours a week and was thus not able to take up the promotion that she was being offered.
She then had to move out of her property because her landlord wanted to sell it. Her circumstances were really awful, through no fault of her own. She joined a scheme that allowed her a social rent for her home, but it was short-lived. She and her little girl found themselves in bed-and-breakfast accommodation, and things went downhill from there. From the bed-and-breakfast accommodation, she was moved—with debts—to temporary accommodation, and her rent escalated.
Her rent for a two-bedroom property—which is mostly paid by housing benefit—is £355 a week. She went to the citizen’s advice bureau and asked for a calculation of her in-work entitlements. She was really struggling to make ends meet and could not work out why she was not able to survive. It was explained to her that she would be only £50 a week better off in work, although that estimate did not include transport costs. She had to travel only a short distance on the Jubilee line, but unfortunately her transport costs came to £100 a month, which meant that she would be worse off working.
I hope that the House will bear it in mind that I have set out only the up-front costs involved. Working incurs many more costs that are not included in Jobcentre Plus calculations of in-work benefits. For example, a person’s eligibility to claim free school meals can be forgotten, and that can have a large impact on their finances. Sometimes, too, factors such as travelling time are not calculated properly, and that can have an impact on the amount of child care that has to be paid for. I hope that hon. Members will remember those little illustrations as I continue my speech.
My constituent is not working at the moment. She simply cannot afford to keep the roof over her head for herself and her child. She does voluntary work for a small charity to keep her hand in—ironically, it provides advice on employment and benefits, as well as running activities for children.
My constituent has told me about the depth of her despair. She said that the events that I have described came at a time of her life when she wanted to progress. She said that she is
“trapped in benefits, prevented from returning to work—all my wages would just go to pay the rent and I would be worse off.”
She had been on the housing waiting list for four years, and she has been bidding under the choice-based letting scheme for three years. She has been told that it will take a minimum of between five and six years for her to be rehoused in permanent accommodation. She contacted the council’s homeless persons unit and has repeatedly asked to be rehoused in a property that has a social rent as she is desperate to work. Unfortunately, the unit could do nothing to help her.
Mr. Lee Scott (Ilford, North) (Con): Does the hon. Lady agree that people in her constituent’s situation are not helped by the bidding process? It actually works against them and they go further down the list, as other people outbid them for properties. That is certainly the case in my constituency.
Lyn Brown: I take the hon. Gentleman’s point. In his constituency and in mine, the problem is supply, not that bad people are operating our council lists. There are too many people for too few properties, so we need to find a way of increasing supply to stop that.
John Penrose:
Does the hon. Lady agree that it is not just a question of sorting out supply, as that will inevitably have to be a fairly long-term solution to the problems she describes? Another alternative, which might be quicker to achieve, would be to reform housing benefit, notably to make it substantially simpler to administer so that we do not have the long lead times at the start of claims that my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) mentioned. There should
be much greater transparency in the calculation of local housing allowances; at present, they are largely secret, so when they are set too low, which sounds as though it may be one of the problems faced by the hon. Lady’s constituent, there is little comeback. Finally, withdrawal rates for housing benefit can be incredibly rapid, and the combination of that with other parts of the benefits system makes it extremely difficult for some people to remain in work—they are less well off in work.
Lyn Brown: I thank the hon. Gentleman, who pre-empts the content of my speech, as I was about to complain massively about the housing benefit taper. However, I was planning to take a long time doing it, to prolong the pain for my Front-Bench colleagues in the hope that it might bring about the change that I want.
My constituent is a woman of positive outlook. She has been a health service administrator and she wants to make her own way. She wants her child to witness and copy her work ethic and get on in life. She knows that being out of work is not a good example for her little girl. She is skilled, articulate and motivated. The last thing she wants is to be caged in unemployment for years to come, but that is her position. That pernicious, self-perpetuating cycle of dependency on housing benefit traps a significant number of my constituents in temporary accommodation and out of work. More than 4,000 households in the London borough of Newham alone are living in private sector temporary accommodation, which costs about £70 million a year.
Those people have years to wait before they can expect to receive a council property; the average wait for a three-bedroom property is 13 years—and we have 25,000 families on the housing waiting list. I have heard from constituents who have asked their managers not to give them a pay rise, as after the recalculation of their housing benefit they would be worse off. Other constituents would like full-time work, or to increase their hours, but they have discovered that if they work additional hours they may lose financially once housing benefit is withdrawn. I could tell many similar stories.
When people talk to me about returning to work, there is hesitation—I admit that to the hon. Member for Broxbourne—but not because they are feckless; they are fearful, in most cases rightly, that they will not be able to manage financially. There may be people who would advocate that my constituent returns to work despite being advised that she will be worse off by £50 a month, so I want to enlarge the picture to include other women I have met during my time as MP for West Ham.
I attended a focus group—for want of a better word; it was not a focus group, but I describe it as such because Members will know exactly what I mean—looking into regeneration for an area, and I interviewed two groups of women separately about their living conditions. I asked them what they wanted to see improved in the area and what steps they thought we could take to improve their prospects. We talked about the obvious things—schools, nurseries, child care, education, antisocial behaviour and health. Then I asked about work, and I did not expect their reaction. I was shocked to discover that eight in 10 of those women had heard and responded to the Government’s call to return to work but after a period of only months they had to cease working, completely defeated. They found themselves in increasing debt, unable to manage the costs of working, which
included housing, child care, school meals and transport. The calculations that had been made for them by professional advisers had been inaccurate or perhaps overly optimistic. Those women expressed complete devastation and despair that they had been defeated. Their confidence had been absolutely shattered by the experience. Before they went back to work they had not been in debt; they had found ways of managing. After going back to work they found themselves saddled with costs that they had not foreseen and they tried to soldier on hoping it would all work out—but it did not and it has left them crushed.
Despite recent falls in the rate of the probability of leaving work, lone parents are still almost as likely as non-lone parents to leave their jobs. One in five lone parents who leave income support return to it within six months; more than quarter do so within a year, a third within two years and almost two fifths within three years. Lisa Harker’s report on child poverty projected that if the rate of job exits among lone parents was reduced to that of non-lone parents, the Government’s target of 70 per cent. employment could be met with no increase in the number of lone parents entering work.
For some women, the loss of help with child care costs, rent and tax credit can mean that they face a marginal tax rate of 96 per cent. At the centre of that marginal tax rate is housing benefit and the problem centres on the 65p in the pound withdrawal rate of housing benefit as income increases. The Hills report, to which I have referred before, stated that a couple with two children paying a typical private rent of £120 a week—please: in my constituency we are talking circa £350 a week—would, as a result of reduced benefit and tax credits and a higher rate of national insurance, gain only £23 if their earnings rose from £100 to £400 a week. There is simply no incentive.
Lynne Jones: Does my hon. Friend agree that the Government would do more to achieve their target of helping more lone parents into work if they concentrated on overcoming the barriers to work and the difficulties of, for example, obtaining high quality reliable child care than by introducing sanctions and putting pressure on lone parents that could result in their losing their benefits?
Lyn Brown: I thank my hon. Friend for that intervention. I want a package that suits people’s locality. The workless population in West Ham is high, but there are reasons for that and we need to tackle them. One reason is the impact of the housing market on my community; people have to pay high rents. Another reason is the affordability of child care on a low wage. Even on the London living wage, it is hard to afford to live in our high-cost capital. The barriers will not be the same in other parts of the country, and we need an intelligent approach so that we can begin to overcome them.
For those in my constituency who are in temporary accommodation, and have high rent to pay through housing benefit, the impact of the Hills calculation is even bigger. In July, in his previous ministerial role at the Department for Work and Pensions, my right hon. Friend the Member for East Ham (Mr. Timms), my constituency neighbour, announced questions that the Government’s review of housing benefit would seek to answer. They include: does it help people into work?
Does it promote financial independence? Is it fair? Is it giving the taxpayer value for money? I may be pre-empting the conclusions of the review, but at present, I believe the answer to all those questions is no. From the experience of my constituent and others like her, it is clear that housing benefit actively hinders people in their struggle to get into work. It may promote financial awareness, I suppose; after all, many of those trapped on housing benefit have learned the hard way that they cannot afford to work and pay private sector rents. However, it does not give financial independence to those receiving benefit, as they are more likely than not to be trapped in a cycle of housing benefit dependency.
My constituent’s story, which is but one example of a much wider problem, shows that the system penalises many people in such situations. Pumping vast sums of taxpayers’ money—about £15 billion per annum—into the pockets of private sector landlords by paying the extortionate rents demanded is not good value for money. In many areas, such as mine, those vast sums of money can significantly distort local housing markets. Tapering housing benefit at a slower rate may prove to have the most immediate impact on the situation, even if only in certain regions such as London, until the large numbers of additional affordable houses funded by the Government are delivered. The London child poverty commission recommended a proposal to reduce the 65 per cent. withdrawal rate. As housing benefit calculations are based on income, net of deductions and additions, making it more generous does not have knock-on effects elsewhere, unlike changes to the tax credit system.
Pilot schemes, such as the working futures programme, which was partly conducted in my constituency, tell us what we already know: if families can access affordable rents, as a result of being provided with social housing, or housing at sub-market rates, they can afford to work, and often do. They want to do so. The people who come to see me want to work. The report’s conclusion—that block-grant subsidies to keep rents at sub-market rates are cost-neutral—suggests that it would clearly be worth implementing a similar scheme on a larger, longer-term level.
We, as well as benefit claimants, have a responsibility. Our responsibility is, first, to minimise hardship and, secondly, not to discourage independence and work. Rather than concentrating on choice for those who have less choice in a year than some of us had at breakfast this morning, we urgently need to take hard structural measures to reduce the impact of the property trap, which drives people from work and keeps working families in poverty. Housing benefit is central to that.
Most hon. Members on both sides of the House would agree at a fundamental level that the benefits system should incentivise work and provide a safety net for all. In its present configuration, in my constituency, the housing benefit system does not do that. I hope that the Government’s review will seriously explore possible methods of ensuring that it does. If housing benefit did all that, it would help to restart the stalled project to reduce child poverty in London; in contrast to the rest of the country, we have sadly seen very little improvement in that respect since 2000.
3.13 pm
Mr. Dai Davies (Blaenau Gwent) (Ind): I am pleased to follow the hon. Member for West Ham (Lyn Brown). All of us, no matter where our constituency, can appreciate what she said this afternoon. My constituency has one of the highest rates of incapacity benefit claimants in the country, so the Green Paper’s proposals will have a significant impact on the people who live there. The high level of IB locally probably relates to historical issues to do with mining and the steel industry, which go back many years. However, as we have heard this afternoon, all of us support a work ethic for individuals, and we must do all that we can to help those who can work to get into work.
On those lines, one issue that we have not really touched on this afternoon is the role of the general practitioner. The hon. Member for Broxbourne (Mr. Walker) spoke of our role in encouraging people into work. A lot more work needs to be done on general practitioners; certainly in my area, for many years they have perhaps seen the benefit system as somewhere for people to go, because there are no jobs. We definitely have to expand on the role of GPs in persuading people that the best medicine for them is probably work. Having said that, at present, the availability of work in my constituency is limited, to say the least. As manufacturing has taken a significant nosedive, we have been left with the service industry, which in the couple of months—or probably the year—ahead will experience a significant decline. I accept that we must do what we can to find work, but it will be difficult.
A lot of work needs to be done on social enterprise. A great deal of European funding has come into my constituency for that purpose, but we have only scratched the surface of encouraging people to be entrepreneurs and to set up their own businesses. We have heard a lot about small businesses, and help for them, in the past couple of months, but representatives of two such businesses have come to me in the past week, and loans from the bank are not a help to them. They are struggling to pay back what they already owe. It will be a huge problem to turn around some of the small businesses.
One of our major problems with access to work is transport. My constituency is among those with the lowest car ownership rates in the country. We have to try to get bus service providers to see that agreements allowing them to drive into industrial estates would benefit them, as well as other people. Many of our bus services drop passengers off far from those estates, and people literally have to walk miles to work if they do not have their own transport.
Another worry, given the present circumstances and the problems that we are likely to hit next year, is loss of income. Many families in my constituency survive on the minimum wage. A lot of people on incapacity benefit have a certain standard of living at the moment. The figures have been quoted this afternoon; if some of those benefits are to drop, it will have a significant impact on poverty in my constituency. It would cut the amount of disposable income available, so the local economy would experience a downturn, too. All those issues need to be considered carefully.
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