Housing Benefit (Amendment) Regulations 2010
Rent officers (Housing Benefit Functions) Amendment Order 2010

The Committee consisted of the following Members:

Chair: Mrs Anne Main 

† Buck, Ms Karen (Westminster North) (Lab) 

† Glindon, Mrs Mary (North Tyneside) (Lab) 

† Green, Kate (Stretford and Urmston) (Lab) 

† Greenwood, Lilian (Nottingham South) (Lab) 

† James, Margot (Stourbridge) (Con) 

† Lloyd, Stephen (Eastbourne) (LD) 

Paisley, Ian (North Antrim) (DUP) 

† Pawsey, Mark (Rugby) (Con) 

† Phillips, Stephen (Sleaford and North Hykeham) (Con) 

† Phillipson, Bridget (Houghton and Sunderland South) (Lab) 

† Pincher, Christopher (Tamworth) (Con) 

† Pritchard, Mark (The Wrekin) (Con) 

† Raynsford, Mr Nick (Greenwich and Woolwich) (Lab) 

† Rudd, Amber (Hastings and Rye) (Con) 

† Selous, Andrew (South West Bedfordshire) (Con) 

† Smith, Miss Chloe (Norwich North) (Con) 

† Webb, Steve (Minister of State, Department for Work and Pensions)  

† Wicks, Malcolm (Croydon North) (Lab) 

Marek Kubala, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee 

Monday 20 December 2010  

[Mrs Anne Main in the Chair] 

Housing Benefit (Amendment) Regulations 2010 

4.30 pm 

Ms Karen Buck (Westminster North) (Lab):  I beg to move, 

That the Committee has considered the Housing Benefit (Amendment) Regulations 2010 (S.I. 2010, No. 2835). 

The Chair:  With this it will be convenient to consider the Rent Officers (Housing Benefit Functions) Amendment Order 2010 (S.I. 2010, No. 2836). 

Ms Buck:  It is a pleasure to serve under your chairmanship, Mrs Main, and I am grateful for the opportunity to debate in more detail the two proposals before us. I must apologise to the whole Committee, because I am suffering from an appalling cold—I hope that there will be a degree of injury time if I explode into coughs and sneezes. 

We do not intend to oppose statutory instrument No. 2835, which allows for the provision of an additional room for carers of people with disabilities, which I welcome, and makes provision in certain cases for the direct payment of housing benefit to landlords. That is a sensible and necessary move, particularly in the context of the negative changes set out in the order that we are debating today. That provides for a number of changes to local housing allowance: it removes the £15 excess, or shop incentive, that was introduced when the local housing allowance was first brought in; it restricts local housing allowance payments to the 30th percentile, rather than the current 50th percentile; it introduces a cash cap on local housing allowance payments, which will particularly affect London; and it reduces the maximum number of bedrooms to which any claimant household is entitled from five to four. 

Since the Budget, when the proposals first entered the public domain, there has been a significant re-phasing of the housing benefit cuts in order to shift the burden away from existing claimants, who gain up to nine months transitional protection, and on to new claimants, bringing forward the new claims to be affected by the 30th percentile from April 2011 while delaying the introduction of the cap. The introduction of a modest amount of time to allow local authorities and households to deal with the very harsh proposals that the cap will introduce is welcome. None the less, the measures that we are debating today will mean that, after the stripping out of the £15 shopping allowance, which was introduced in last March’s Budget by the previous Chancellor of the Exchequer, 640,000 households—nearly 2 million people—will lose an average of £9 a week, rising to £23 a week in London, and that will happen over the course of one year. The sheer scale of the proposals is

only slightly ameliorated by the delay in the introduction of the cap, as nothing is changed in any meaningful way for the long term. 

We know that the proposal relating to the 30th percentile will introduce an earlier restriction on housing allowance for households across the country. Indeed, one of the biggest impacts of the re-phasing has been to delay to some extent the impact in London, but to bring it forward in the rest of the country. That will mean that 90% of local housing allowance claimants in Yorkshire and Humber will lose out, as will between 80% and 90% of claimants in Wales, the east midlands, the north-east, the west midlands, the east of England and the south-west. In the north-west, 131,000 will lose out, which is more than 80% of all claimants. In Scotland, 51,000 households will lose out, which is 78% of claimants. The impact assessment produced by the Department for Work and Pensions shows that in 81 local authority areas the average loss will be £10 or more a week and that the average reduction in residual income for people on low incomes, or on jobseeker’s allowance or equivalent benefits, will amount to 7% of their disposable income. 

Taken overall, 

“What that approach means is that if there are nice areas where people want to live and nasty ones where they do not, the people on housing benefit then end up in the nasty bits. It is straightforward. Unless localities are defined to include only areas where rents do not vary a great deal for comparable property, we could bring about ghettoisation. I do not say that hysterically, but I see it as a real danger. That would be contrary to much of what the Government want to do in mixing tenures and social groups.”—[Official Report, 9 January 2003; Vol. 397, c. 150WH.] 

Furthermore, 

“There is a strong London dimension…because average housing costs in the capital are substantially greater than elsewhere. Most people would not think that that is because of quality. People who pay high rents for overcrowded rented accommodation in…London are not having a whale of a time”.––[Official Report, Child Poverty Public Bill Committee, 27 October 2009; c. 183.] 

Those statements were made by the Minister, who will respond to this debate, prior to the introduction of the local housing allowance and last year in the Committee that considered the Child Poverty Bill; at that time there was a degree of cross-party consensus on what radical change to housing benefit in the private rented sector would mean. The Minister may have changed his mind, but, to paraphrase Keynes’s favourite phrase, that is not because the facts have changed. 

The Minister, in his previous incarnation, would have been quick to point out that we could see a rise in absolute and relative poverty between now and 2013—of 100,000 and 200,000 respectively. That is absolute and relative poverty among working households with children and working-age households without children. The variation from the Government’s future poverty estimates is entirely accounted for, according to the Institute for Fiscal Studies, by the fact that the IFS calculated the impact of the reforms to local housing on poverty rates, whereas the Treasury did not. 

The Government have used four reasons to make the case for the radical cuts in housing allowance set out in the order. They claim that housing benefit is out of control, they assert that the local housing allowance is driving rents up, they quote extreme cases from the pages of tabloid newspapers, and they argue that local housing allowance benefit benefits non-working households compared with their working peers. I shall briefly go through those four reasons. 

Is local housing allowance and benefit out of control? The explanatory notes point out that housing benefit expenditure increased from £11 billion to £20 billion over the decade to 2009 and imply—virtually state—that that was primarily due to increases in rent. The notes fail to point out that the figures include social rents as well as private sector ones, and social rents, as we know, rose during that period due to rent restructuring and stock transfer. The figures have a starting year when housing benefit expenditure was stable or falling, not when it started to rise. That covers a lengthy period when the Department for Work and Pensions would simply not have known the extent to which either rents or case load were driving costs. Expenditure is expressed in cash terms and not real terms, and it takes a decade over which house prices more than doubled. 

If our starting point, as it should be, were the time when housing benefit began to rise and when we had the data to understand what was driving the changes, the picture would look rather different. Recently, case load has had the most significant impact—up 41% since 2008, at a time when expenditure on housing benefit in the private rented sector rose by 48%. To put it another way, case load, and case load alone, has driven 87% of all growth in recent years. The latest figures show that housing benefit case load is still increasing, and is currently 10% higher than it was in March this year. Most of the increase in expenditure since the start of the recession in 2008 has come from case load, and the larger part has come from those who are either in work or connected to the labour market. 

Has local housing allowance driven up rents, as Ministers like to assert? Initial analysis of the best available data, including answers to parliamentary questions that I tabled, indicates that in housing-benefit-dominant markets, the market is not driving rent increases, and that increases in the local housing allowance since 2008 have been in most cases modest and in some cases negative. 

The Government also like to cite the extreme cases. In fact, they have chosen to concentrate on the cases that drive the argument for the housing benefit cap, but the cap accounts for only £65 million out of the £1 billion that is due to be saved. We ask questions because it is frequently asserted that people are claiming £100,000 a year in housing benefit. When that is challenged, it turns out that there are just five cases in the whole country in which housing benefit recipients are receiving money on the scale that has dominated the local press. The overall average housing benefit award is just £84 a week and the average council tax benefit award is just £50 a week. Taken together, the scale of payments is completely different from those few extreme cases that distort the entire argument. With just £65 million being spent on those particular cases, the Government have decided to take £1.6 billion of expenditure out of housing benefit. 

The other frequently quoted argument is that people on housing benefit can obtain property that their working peers cannot afford. Just under half of all claims in the private rented sector in respect of working-age claimants are from people in work or on jobseeker’s allowance. The research commissioned by the Labour Government, carried out by the university of Birmingham and published in the autumn concluded that— 

The Chair:  Order. May I draw the hon. Lady’s attention to the fact that she is going off the topic? We are talking

about the amendments that relate to the cuts and benefits, rather than about Labour party research into what people currently pay. 

Ms Buck:  I will take your advice, Mrs Main, and not go into too much detail. However, I was seeking to make the argument that the scale of cuts, the cap and the move to the 30th percentile have been driven by a set of arguments that is not substantiated by the research carried out by the Department for Work and Pensions. 

Stephen Lloyd (Eastbourne) (LD):  The hon. Lady says that the average is only £84 a week. If that is true, what is the problem? 

Ms Buck:  I am sorry that I have not made myself clear. The research that I was talking about is Government research. It was commissioned by the outgoing Labour Government and published by this Government, the Department for Work and Pensions. It concluded that there was no evidence to support the argument that low-income working households were disadvantaged when it came to claiming the local housing allowance or that people who were not in work were able to obtain better-quality accommodation than their working peers. Indeed, it made the argument that those two groups were the same people and that low-income working households and households out of work were frequently moving in and out of the same category. That answers, I believe, the question of the hon. Gentleman. 

As all the evidence shows that housing benefit expenditure has risen primarily because of case load in the private rented sector and there is not evidence to support the argument that it is inflated by rents or that local housing allowance policy inflated rents, I do not see that it is possible to make the cuts that this Government propose without having a very negative impact on both low-income working households and those who are out of work. 

Stephen Lloyd:  I appreciate the hon. Lady’s point. The reality, however, is that if the research shows that the average is £84 a week, then the Government’s proposals to reduce it are still going to end up far higher than £84 a week. Essentially, therefore, do the data not back up the Government’s case that there will not be that much of an effect? That is what I am driving at. 

Ms Buck:  I am afraid that I do not quite understand that argument. The Government are taking £1.6 billion out of housing benefit expenditure, and that has to come out of the money that people have available to pay their rents. There are only two possible ways in which that money can be saved. It either has to come from the pockets of low-income households, whether in work or not, or from the money that is available to rent, either because landlords will reduce their rents—and I will return to that—or because people will have to leave the accommodation that they currently occupy to find cheaper accommodation. That, of course, is the heart of the impact of these changes. 

We know that the impact will fall on out-of-work households, including many families and some pensioners. It is worth saying again—we tried to make the point when we debated the matter on the Floor of the House—that the constant reiteration of the argument that housing

benefit is purely of benefit to out-of-work households is demonstrably wrong. Almost half of all households in the private rented sector are already in work. 

The impact of the changes will be, first, that people will have to move out of their present accommodation on a significant scale. London Councils estimates that more than 82,000 households, many of them in work on low incomes, could lose their homes as a result of the changes. That could equate to as many as 250,000 London individuals. Shelter estimates that between 69,000 and 135,000 households face that prospect as well. Where will families go when they are forced to move from the properties they live in, which can be up to the 50th percentile of properties in their local areas? 

We also know that there are not enough cheap rented homes below the 30th percentile to accommodate those people on local housing allowance. The limit below which claimants are allowed to claim currently takes in some 50% of rents in the local area and that allows 1.5 million households to rent their homes. The Government will now require those 1.5 million households, which comprise 40% of all tenants in the private rented sector nationally, to be squeezed in 30% of the homes available. That will mean that there will be three private rented sector tenants on housing benefit for every two homes that are available. 

Regional and other variations make this position even more complicated. In London, for example, the largest private rental market is in central London, which is more expensive. The Government want people to move to the fringes of London—to Enfield, Barking and Dagenham—but the private rented sector there is significantly smaller. There is not enough capacity in many of those places to allow households to be able to move into them. It is estimated that there is a London-wide shortfall of 34,000 homes. 

Mark Pritchard (The Wrekin) (Con):  As a former London councillor, albeit many moons ago in the early 1990s, the hon. Lady will know that immigration is the key driver for housing demand and capacity. Yet today the right hon. Member for Morley and Outwood (Ed Balls) spoke about an open doors policy, rather than a cap on immigration, which would at least address this issue. 

The Chair:  I trust that the hon. Lady will not be led down that route. 

Ms Buck:  Mrs Main, I am encouraged by you not to move into that blind alley. 

The demand for housing across the piece in all sectors is not met by housing supply. We cannot go into a wider debate to work out whether that is about immigration or other forms of housing supply. We must constrain ourselves to asking whether enough homes will be available in London and other parts of the country, because the policies apply throughout the United Kingdom. The answer is no. That constraint applies not just within the capital, but in broad market rental areas and in boroughs. 

People will be expected to move far greater distances than the Government are allowing for. It is estimated that it will take on average three years to accommodate the outflow of people affected by the cap—delayed as it

is, but none the less coming in a year’s time—and the move to the 30th percentile. It will take three years for all tenants in the private rented sector, whose homes are unaffordable because of the Government’s key proposals, to find alternative homes. What will happen to those households in the meantime? They will make homelessness applications. I do not doubt that that was why the Government delayed the introduction of the cap. The Mayor of London, Boris Johnson, and his staff, made it clear that in London alone the implications of the cap on housing benefit meant that more money would be spent providing temporary accommodation for homeless households than would have been saved as a consequence of the Government’s cut. We expect homelessness applications to rise and we expect there to be fewer savings as a consequence. 

At the moment, homelessness applications are already rising. Before any cuts come into effect, there has been a significant increase of 17.2% in homelessness applications in the previous quarter in the country as a whole and in London. 

Mr Nick Raynsford (Greenwich and Woolwich) (Lab):  Does my hon. Friend recognise that concerns about increasing homelessness are shared not just by Opposition Members? The Government’s own impact assessment, published less than a month ago, says clearly in paragraph 82: 

“the impact assessment recognises that there are a number of risks as follows: increases in the number of households with rent arrears, eviction and households presenting themselves as homeless”. 

Does she not think that that is extraordinary? Should not their response to the Social Security Advisory Committee’s sensible— 

The Chair:  Order. The right hon. Gentleman should bear in mind that interventions should be brief. He has given the hon. Lady plenty to answer in his first intervention. 

Ms Buck:  My right hon. Friend is right. I was going to mention the Government’s impact assessment, which is devastating. I wonder how it can possibly have been signed off, because had it been written by the Chartered Institute of Housing or Shelter it would have been comprehensively rubbished. As my right hon. Friend says, that document mentions 

“an increased number of private rental evictions, increase in debt recovery, homelessness and insolvency applications” 

and 

“Possibly an increase in general non-compliance with civil judgment orders…as a result of the increased pressure on household incomes resulting from reductions in benefits.” 

It talks about 

“increases in possession type claims for rent arrears” 

and tenants in rural areas finding it 

“difficult to access alternative affordable accommodation and may be forced to move considerable distances”, 

with consequences for 

“their community support networks…and access to employment”. 

The impact assessment mentions adverse impact 

“on the wellbeing of families and children which it is not possible to quantify”, 

including adverse effects on health and mental well-being. It also mentions an adverse effect on children’s educational

achievement, particularly those forced into overcrowded accommodation away from their extended families. It mentions families needing additional support, including 

“those with a history of anti-social behaviour who require rehabilitation”, 

which would 

“affect the…stability of the family” 

and the communities where they are forced to move to. 

Amber Rudd (Hastings and Rye) (Con):  Is the hon. Lady aware that the Government have put aside £190 million in additional funding to provide for difficulties to do with the change, which they recognise? 

Ms Buck:  I recognise that. I am also conscious that, depending on which figure is used, that will provide amelioration of about 7% towards the total loss of housing benefit. I will come on to that in a second. 

It is extraordinary that a Government document, their impact assessment, can on one hand propose cuts in housing benefit and, on the other, talk about a disproportionate impact on education authorities that will receive an outflow of families and children from higher-cost areas, blithely encouraging them 

“to build temporary classrooms in the short term, or consider capital projects in the long term, or to relocate children to a school further away” 

at a time when those local authorities are being expected to accommodate cuts of up to 20% in their budgets. 

Kate Green (Stretford and Urmston) (Lab):  Is my hon. Friend aware of the considerable concerns expressed by some local authorities, which will receive an influx of families from high-cost areas, about the heavy and high risks to child protection in those boroughs, as was highlighted particularly by the leader of Haringey council the other day? She estimates that some 40 families in need of social services protection have arrived, but she does not have the resources to provide it. 

Ms Buck:  I am indeed aware of Haringey council, which is where the tragic case of Baby P took place. Its budget is being cut severely, yet it is being asked to recruit additional social workers to deal with the number of children with safeguarding concerns who have moved in. It is extremely worried, as are other local authorities that expect inward migration, because—almost by definition—a large proportion of the families who will be forced to relocate are vulnerable. Many of them have been placed in precisely the private rented accommodation in which we now deem that they can no longer be accommodated, by local authorities under the prevention and release of homelessness duties. 

It is also extraordinary and perverse that 70,000 households in one year alone should have been moved by local councils—mostly, but not entirely, in the south-east and London—into private rented accommodation in order to prevent those families from making an official homelessness application and being held in temporary accommodation. They are the same households that we are now asking to uproot themselves yet again in order to move even further from their employment, their children’s schools, their family networks and every other form of support. 

Christopher Pincher (Tamworth) (Con):  Does the hon. Lady recognise that there will be ways for families to stay in the homes that they currently occupy? For example, they should be able to negotiate a lower rate with their landlords, which can be facilitated through direct payments from councils to landlords. Surely she will agree that it is also possible for those people to look for greater employment. One of the problems with the current system— 

The Chair:  Order. I remind the hon. Gentleman that interventions should be brief, not a list. 

Christopher Pincher:  I will intervene again. 

Ms Buck:  I will welcome further interventions from the hon. Gentleman because he is absolutely right: the path is indeed open to negotiate a lower rent. However, I think it extremely unlikely that that will happen. In local authorities such as the London borough of Brent, rather than Knightsbridge or Mayfair, landlords of three-bedroom properties—we are not talking about five or seven bedrooms, or about mansions—would be expected to absorb a difference of £150 a week, which is £7,000 a year. How many landlords will be able to take a hit of that level on their rental income? 

Kate Green:  Will my hon. Friend also comment on why landlords would be likely to reduce rents when in my own borough of Trafford, for example, it is estimated that, following these changes, 10 households will be chasing each two-bedroom property available for private rent? 

Ms Buck:  My hon. Friend is absolutely right. This is another oddity of the Government’s thinking. If the market is believed to work so effectively in so many instances, why does the Minister not think that it will respond when large numbers of households flow out of higher-cost areas into lower-cost areas? That will almost inevitably have the effect of driving the rents up. That is exactly what the landlords say. 

To answer the point made by the hon. Member for Tamworth, 48% of tenants in the private rented sector—the figure comes from the Minister—already have a shortfall between the rents that they are charged and the housing benefit or local housing allowance that they are able to take. 

Bridget Phillipson (Houghton and Sunderland South) (Lab):  On that very point, is my hon. Friend aware that even in areas such as Sunderland, where rents are often lower than in London, many families, particularly vulnerable ones, will pay extra in order to find the right kind of property in the right kind of area? I am thinking in particular of victims of domestic violence who may move to be nearer a supportive family in order to benefit their children’s education and to support child care. 

Ms Buck:  That is absolutely right. The fact of the matter is that so many—not all—of the households under discussion involve people who are either vulnerable or have particular reasons or needs to be in a given area. Of course, there are a few cases in which people have

taken advantage of the system; that will always be the case, and it is always good to find ways of bearing down on that. 

Overwhelmingly, however, people make their choices about where they are going to live because of other factors—connections to employment, children’s schools, relationships with their families and so on. That has been even more the case in recent years. 

Amber Rudd:  Is the hon. Lady aware that in certain areas, such as mine in Hastings, it is the vulnerable people who have particular trouble in making payments because the payments are no longer made directly to the landlords? The new measure means that when the landlord reduces their rent, which in Hastings is expected to be by about £10 a week, the landlord will get the payment directly. Hopefully, the measure will encourage such reductions. There is a clear advantage to private-sector landlords to give up a bit of money to get a guarantee. 

Ms Buck:  I do not disagree with the hon. Lady. Given what is being done here and the amount of money that is coming out of the system, the least that the Government can do is introduce a note of security for landlords. Those who operate on the margins will be influenced by such a move. There is no doubt that there will be landlords who will retain good tenants; they will take a hit on their rental income to keep good tenants. Some might have been on the verge of withdrawing from the housing benefit sector and now will not do so because there will be some security in their payments. 

Set against that, however, is the bigger picture. Some £1.6 billion is being withdrawn from the market. We will have other landlords—we do not know how many—who will say that the risk of debt and default is now so great that they will not go into the housing benefit market. When people talk blithely about the private rented market and how available it is to low-income families, they forget that whole swathes of the sector are already barred to people on local housing allowance. 

It is almost impossible for people on the streets or at the end of a telephone to obtain private rented accommodation in large parts of the country. Landlords do not want to take the risk, which is why in areas such as mine the local housing allowance payments are only a small proportion of the total rented sector. 

At the moment, rents are rising; they are not falling. We do not know in every single case, in every part of the country, whether rents will fall as a consequence of what the Government are doing. No doubt some will; I am absolutely sure that some rents will come down. I suspect that such reductions will be most pronounced in parts of the country where the local housing allowance constitutes a larger proportion of the total rented market. However, in the most expensive areas, and in whole swathes of the country—not just in London—where it does not constitute a large part of the private rented sector, rents will not come down. 

Meanwhile, rents are going up. FindaProperty.com, which was deployed by the Secretary of State for a somewhat dubious purpose, argues that rents in London have broken through the £20,000 a year barrier. LSL Property Services reports continuing rises.

SPAREROOM.co.uk found that 40% of landlords only receive enough in rent to cover their mortgage payments. Last month, the Royal Institute of Chartered Surveyors said that 39% of surveyors were seeing rents rise against 27% seeing a fall, and 86% of surveyors in London reported that rents are rising. Demand for rental property is strong, which is pushing up prices. 

Margot James (Stourbridge) (Con):  Is the hon. Lady not being overly pessimistic about the liberation of more properties for social housing tenants? Some 40% of private rented properties in this country are funded by DWP benefits. If the situation is so dire in certain areas, as she suggests, surely with 1 million empty homes in this country, the private sector will come in and release more properties for social housing tenants—particularly when the Government pay housing benefit directly to landlords, as my hon. Friend the Member for Hastings and Rye mentioned? That will make a huge change in my constituency. 

Ms Buck:  I cannot see any connection between the empty homes and the private rented sector, given that the Government are pushing down, rather than forcing up, rental payments for people on housing benefit. I do not know why that would bring extra properties into the sector. I do not think landlords see it as part of their core business to make provision for people on housing benefit; they are traders in the market and they will respond to the market. The Government are saying that the current 40% of claims in the total private rented sector will move from 50% to 30% of properties being available, which will increase the pressure. I do not see that that has any influence on increasing the supply of property. 

Mark Pawsey (Rugby) (Con):  The hon. Lady has told us that rental prices have been going up. Does she accept that the very existence of this generous scheme has driven rents up? 

Ms Buck:  No, I do not. I am sorry that the hon. Gentleman was not listening when I was speaking earlier. All the evidence demonstrates that what he suggests is simply not the case. The latest available data, including those given in answer to parliamentary questions I have asked, confirm that increases in the local housing allowance since 2008 have been modest and, in some cases, negative. The Government are wrong to argue that local housing allowance has been a major driver of increased rents. 

I want to draw my remarks to a close, as I am sure that one or two Members wish to contribute. Government Members have referred to the discretionary housing payment. Indeed, throughout the Government’s impact assessment and explanatory notes, it is made clear that the DHP will mitigate the cuts in housing benefit, and I am sure that it will to some degree. I accept that more money is going in; but, none the less, £1.6 billion is coming out as a consequence of these measures, and available money for the discretionary housing payment and the small amount of additional money from the Department for Communities and Local Government’s homelessness grant accounts for about 7% of that expenditure. 

My local authority says that it could to help a very small number of cases with the discretionary housing payment, yet my borough alone has 1,600 working households on local housing allowance. The discretionary housing payment will be available to help only a tiny number of people, such as those with disabilities and those living in pensioner households. It is designed and being sold as if it will be enough to offset almost the entire £1.6 billion; in fact, we are talking about a handful of cases in each local authority. 

I want to conclude by asking the Minister a few questions. Going back to my opening remarks, between the official impact assessment, the June Budget and the publication of the regulations, the cap—the principal driver in the publicity surrounding the argument for changing the housing benefit payment levels—was delayed until next year. The movement to the 30th percentile has been brought forward to April next year for new claims only. However, the words “new claims” cover a multitude of sins. I should like the Minister to respond to some very specific questions. What estimate has he made of the number of claimants who will be affected by changes in the period April to September? How many of those will be existing claimants who lose protection, as opposed to genuinely new claimants? 

Can the Minister confirm that people will lose their transitional protection if there is a change of circumstances over which they have no control, especially given the fact that we have only about 14 weeks before new claims are affected by the move to the 30th percentile? Can he also confirm that such changes may mean that people may be affected detrimentally if they take a job? That is the very thing that we want them to do and is the thrust of the Government’s welfare reform proposals, but if someone takes a job, it breaks their housing benefit claim. That aspect of the reforms will disproportionately affect lower-rent areas—not London—and many constituencies represented by hon. Members here today. People take a job at a relatively low level but they have lower rent, and their income can float them off housing benefit entitlement. If something happens to that job—for example, they lose it or their hours are reduced—they lose their transitional protection and will immediately fall to the far lower benefit. 

Can the Minister confirm that the transitional protection will be lost if someone leaves or joins the household; for example, when a household with a three-bedroom entitlement goes down to a two-bedroom entitlement, perhaps when an adult child leaves home? 

Can the Minister confirm that the following changes would normally be treated as a review for local housing allowance purposes: when a young person who is aged 24 turns 25 years old; when any child reaches the age of 16; where there are two children of the opposite sex and the youngest turns 10; at the birth of a new child, or when any member of the benefit unit, or a close relative with no separate right of accommodation such as a grandparent living with their son or daughter, dies, regardless of the number of rooms in the calculation, which is known as the death of a linked person? In all those cases, I understand that transitional protection does not apply. In huge numbers of those cases, we are encouraged to have a sense of security about the delay in the introduction of the cap, but it seems that variations of circumstances will plunge people, in some cases overnight, into a loss of benefit that, at its most extreme in central London, can be more than £100 a week. 

Given the importance of getting that right and the amounts that might be involved, will the Minister issue additional guidance to local authorities that emphasises the need to ensure that any claimant, whose claim is suspended but subsequently reinstated, is correctly treated as an existing claimant with transitional protection? Likewise, will he issue fresh guidance to ensure that local authorities treat anyone who makes a new claim in April but who has a genuine case for backdating to before the new regulations came in, such as a bereavement or a serious illness, sympathetically? 

I am sorry that that was lengthy speech, but I tried to give way to a number of hon. Members. My firm contention is that the scale and speed of the changes in housing benefit will lead to increased homelessness, a probable an increase in the costs of homelessness and a great deal of misery. We have seen, from the Institute for Fiscal Studies, the likely impact that the changes will have on the poverty figures, despite assurances from the Government that child poverty figures would not be affected. We have seen the impact that the changes will have on working households. We are hearing the fears of local authorities that will be in receipt of large numbers of out-moving households and the disruption that that is likely to have on the families concerned, and on education, social and other services. 

The underlying logic of the Government’s position does not stand up to scrutiny. Even at this late stage, I sincerely hope that the Government will think again. I fear that in a few weeks’ time, everyone in this room will be astonished at the personal circumstances of the people in their surgeries; people who are unaware at the moment that they will be facing absolutely calamitous consequences for themselves and their families. 

5.13 pm 

Amber Rudd:  I should like to address the issue of the movement of people from one area to another. The hon. Lady referred to the “nasty bits” of particular areas. I take issue with that phrase, whoever used it previously, but let us dispense with it. In Hastings, we have good bits and—shall we say?—different bits. There will certainly be movement within that area. I have spoken at length to the housing authority. It does not expect what has sometimes been stated in the press, which is some sort of apocalyptic drive from different boroughs to areas such as Hastings. What it expects and hopes for is what we have had, which is a reduction in rents. Hastings is the sort of area referred to by the hon. Lady. We have low rents and vulnerable people. The proposal for private landlords to be able to receive some direct payment for the first year and possibly for the second year is welcome and will help some vulnerable people to get back on their feet. 

Kate Green:  Obviously, we all expect that some landlords will reduce rents and that the prospect of direct payment will assist them in considering whether they might be prepared to do so. Can the hon. Lady—or if not the hon. Lady, then the Minister in his remarks—explain how that will work once the universal credit is introduced, because that will offer no scope for direct payments to anyone other than the main recipient of the household benefit? 

Amber Rudd:  I will leave it to the Minister to answer that wider question, because the universal credit will have many benefits in trying to co-ordinate such issues.

Housing benefit, as we know, often makes up the most important element of the package that enables people, and vulnerable people in particular, to live. Last week, I was at Xtrax in Hastings, which is a youth centre that provides important drop-in services for young people. In particular, it provides accommodation. People, and young people in particular, often have to give up security to find overnight accommodation, and the Government are most concerned with those particularly vulnerable people. Although there will be big changes, it is impossible for us all, as we sit across the Committee from one another, to anticipate exactly how the private sector will respond, but it seems clear that we cannot go on in this way. 

Margot James:  Does my hon. Friend agree that as 40% of landlords get their business via the Department for Work and Pensions—through housing benefit—it is in their interest to reduce rents and to expand their market accordingly? Surely that is a key point. 

Amber Rudd:  Yes, it is. We come back to the fact that, in any market, any one buyer that is buying 40% of what is on offer is bound to influence the rate at which the price is set. There is, however, also uncertainty; no one can be absolutely sure how the private sector will respond. 

To return to the point that I was trying to make earlier, we have to agree that we cannot go on like this. There are two reasons for that. First, if housing benefit carries on at this rate, it will grow to a level that we cannot afford. If it were unreformed, housing benefit would cost £25 billion by 2015-16, so we have to make some changes. 

Stephen Lloyd:  Is my hon. Friend aware that, for existing customers, when the changes go through, some 80% of cases will have a shortfall between housing benefit and rent of less than £10 a week, and that in 32% of cases there will be no increase or shortfall at all? 

Amber Rudd:  That is an encouraging statistic to be on the receiving end of, because one is encouraged to think that landlords will take on a sum of £10 a week, particularly in the light of the benefit of security against the reduction in rent, to which we referred earlier. 

There are two main points: first, the national picture, which is that we have to reduce overall costs to balance the budget at some stage; and, secondly, the issue of fairness, which is predominant as the Government try to look after people. It is much fairer to have a system that reduces from the 50th to the 30th the percentile at which people are able to rent. It will be harder for the private sector to respond to that, but it seems absolutely unfair that people who cannot afford such amounts, but who work full time, should live in less good or less nice places. 

Ms Buck:  They do not. 

Amber Rudd:  Some of them do. We can deal with anecdotal evidence as well as the evidence from the statistics that we receive. I welcome the changes on the principle of fairness. 

5.18 pm 

Mr Raynsford:  I want to raise four points, the first of which is about rents. A great deal of nonsense has been spoken about the issue, and it is important that we are as dispassionate and objective as possible when we assess what is likely to happen. I agree with the hon. Member for Hastings and Rye that we cannot anticipate what the private rented sector will do. That, of course, is also the view of the Government’s impact assessment, which concludes, on paragraph 82: 

“The overall economic impact of the measures cannot be quantified with any degree of certainty as it is not possible to predict the behavioural effects of tenants or their landlords.” 

That pretty clear view of the Government’s was signed off by Lord Freud, so it might be thought to be a bit odd that the same Lord Freud—one of the Minister’s colleagues from the other place—said in evidence to a Select Committee at the beginning of last month, which was subsequently quoted in the press, that 

“we are expecting a large number of people who receive less Housing Benefit to be able to negotiate their rents downwards and that the landlords will move to the new” 

lower rate. The Government can have it one way or the other, but I cannot believe that the same Lord Freud who signed that impact assessment, which stated that we cannot anticipate the economic consequences, should be so emphatic in his belief that there will be a downward pressure on rents. 

As several hon. Members have said, there might well be downward pressure in some areas in which housing benefit constitutes a large proportion of the market and landlords, fearful of losing that, will be willing to accommodate a reduction. However, there will be counter pressures in other areas because, as we all know, the housing market has been in serious difficulty over the past two or three years because of the recession and as the output of new homes has reduced to historically low levels. As a result, more people who might have expected to be able to buy are looking for rented accommodation. The two markets are not separate. In many parts of the country, and particularly in our capital city, the private rented sector caters for people looking for accommodation as an alternative to owner-occupation and to those looking for it as an alternative to social rented housing, and the borderline between the two can move very quickly indeed. Any pressure on landlords to reduce their rents could well result in them simply putting up a notice stating, “No housing benefit applicants”, and letting only to people who can afford to pay the rent. 

All the evidence that I cited in the debate on the subject in the House last month, which came from estate agents and those with expertise in the private rented sector in London, indicates that upward pressure on rents is continuing not just at a normal rate, but at an exceptional rate, because of the shortage of owner-occupied property. That factor makes it difficult to sustain the argument that there will be downward pressure on rents in London and other parts of the country that have similar market conditions. 

Amber Rudd:  I take issue with your suggestion that there is a confluence— 

The Chair:  Order. I remind the hon. Lady that I am not making any suggestions. 

Amber Rudd:  Thank you, Mrs Main. 

I take issue with the point that there is a fungibility between the private and public sectors in areas where the public sector is a major landlord. In my experience, what actually happens is that there are large areas in certain towns or boroughs where the public sector takes over blocks or streets, and then a dividing line develops between the sectors. The public sector, as a landlord, dominates certain areas, but it is not one flat next to another, and so it sets its own market in certain areas. 

Mr Raynsford:  I thought that I had made the point that those effects might apply in some areas of the country where there is a heavy preponderance of housing benefit lettings. There are other areas—I must say that the city of London and the surrounding south-eastern area is a substantial part of the country with regard to numbers of people and, in particular, the number of housing benefit recipients—in which I frankly do not see that logic, because there is a transfer between the two sectors. 

Yes, there are some parts of the market that are exclusively for one or the other. I do not expect housing benefit applicants to move into expensive mansion flats in the constituency of my hon. Friend the Member for Westminster North, for example, or other such parts of central London. That is a private sector market. Equally, there are some particularly poor-quality units that would be used almost exclusively by people receiving housing benefit, because anyone else would be reluctant to put up with the awful conditions. Between those, however, there is a fluid and flexible pattern of private lettings. One cannot simply discount the wider economic impacts of shortages of housing leading to upward pressure on rents from private lettings, because those will drive the market and completely overwhelm any pressure that comes from Government to try and force down rents as a result of housing benefit changes. 

Christopher Pincher:  Does not the right hon. Gentleman also accept that the current system involves an upward lift in rents? Given that the current system costs on average £9 a week more than the previous system, does he agree that that pushes up rents? 

Mr Raynsford:  As my hon. Friend the Member for Westminster North made only too clear in her excellent opening speech, a series of very different patterns affects rent levels. Some of those factors relate to the pressures in the private sector that I have described, which have nothing to do with housing benefit, while some are to do with the change in the composition of the people who occupy housing benefit lettings. We have seen a significant increase in those who had been economically active, but who subsequently lost their jobs or changed to short-time working as a result of the recession and have moved into housing benefit. Some of those people will be occupying accommodation that is more expensive than that occupied by other housing benefit recipients such as smaller households, single people and elderly people. Those movements—that churn in the number of recipients—are a factor. It is completely simplistic to say, “Oh well, just look at the figures from three years ago and look at them now; the increase is entirely to do with housing benefit.” That is simply not a tenable argument. 

Mark Pawsey:  Does not the right hon. Gentleman accept that the doubling in the payment of this benefit over the past 10 years has simply lined the pockets of private sector landlords? The measures are intended to address that, which is beneficial and something that he should admire. 

Mr Raynsford:  As my hon. Friend the Member for Westminster North made clear, given that a large number of recipients are social housing landlords—whether local authorities or housing associations—it is difficult to assume that the majority of the increase has been used for the purpose that the hon. Gentleman specifies. Yes, there are 1.4 million private tenant recipients of housing benefit, but that is against a total of 4.8 million housing benefit recipients, the majority of whom are in the social rented sector. 

As the hon. Gentleman has raised that point, let me come on to say that the Government whom he supports propose massive increases in rents for social housing tenants. They propose that new tenancies will be introduced at 80%— 

The Chair:  Order. We are straying somewhat from the topic, and I ask the right hon. Gentleman to address his remarks to the scope of the order. 

Mr Raynsford:  Yes, Mrs Main. I am addressing my remarks to the impact of rent increases on housing benefit demand, which was raised by the hon. Member for Rugby and goes right to the heart of the Government’s case. I was simply making the point that the Government’s policy is to increase rents disproportionately for social housing tenants, which must have a housing benefit impact, unless they expect people to be evicted from housing as a result of those changes. The Minister for Housing and Local Government has assured me that that is not the Government’s intention, so there is a question about the consistency of the Government’s policy, given that there are those who advocate higher rents for social tenants and those who say that the housing benefit bill has risen too much and must be cut. 

I urge Government Members to think about such issues, because the victims are those who struggle to find accommodation that they can afford and who have depended in the past on housing benefit to support them either in social housing—housing association or council housing—or in private rented housing. There is a very important issue here about whether the Government are serious about trying to address housing issues in a compassionate and fair way, or whether they are simply being opportunistic and cutting the budget while forcing up rents and saying that it is someone else’s problem. 

Apart from the arguments about rent, the Government should address the response of the Social Security Advisory Committee more seriously than they have done. That is the Government’s own advisory committee that comments on major changes in social security regulations or legislation, and its report on these proposed changes is absolutely damning. Government Members who support the changes and propose to vote for them should be aware of what their Government’s Social Security Advisory Committee has said about those changes: 

“In our view these proposed measures are neither a coherent expression of the Government’s objectives for improving incentives and making work pay, nor a certain formula for achieving savings

to the public purse as a whole. At the same time, the rationale for the measures suggests that the underlying problem that needs to be addressed is one of under supply of affordable housing, particularly in economically vibrant parts of the country. 

All the evidence we have seen from both the Department and from the many respondents to our consultation exercise suggests that these are high risk measures. If they go ahead, in around six months, and again at twelve months time, and at relatively short notice, the vast majority of HB recipients in the PRS will find themselves facing new – or increased – shortfalls between their HB and the rent they have contracted to pay. As one of our respondents noted: ‘… there are few or no comparable precedents of such large income shocks affecting such a large proportion of households within a housing sector simultaneously.’” 

I will not quote the rest of the report, but I urge hon. Members to read it. The Government’s Social Security Advisory Committee is damning in its comments, and it urges the Government to think again, because this is not just a matter of accountancy and saying we have to make the changes to reduce the deficit, but something that will impact on the lives of millions of our fellow citizens, whose life chances and opportunities will be damaged. 

Stephen Lloyd:  If the right hon. Gentleman believes that it is unacceptable to introduce a cap of £1,600 a month on rental housing benefit, what cap would he be comfortable with—£50,000 per annum or even £75,000? 

Mr Raynsford:  I thought that it was already clear that the major impact of the changes we are discussing is from the move to the 30th percentile for the local housing allowance. We have made it very clear that we do not oppose some caps, if they are properly calibrated and assessed in a way that does not have the disastrous consequences that some people fear the present caps will have. However, we are totally opposed, as are all the people who have looked dispassionately at the evidence, to moving local housing allowance to the 30th percentile because it will have wide-ranging impacts. That is the thing that will impact on my constituency, because we expect only two households in Greenwich to be affected by the cap, yet some 2,500 households will be worse off as a result of changing local housing allowance to the 30th percentile. The Social Security Advisory Committee finds that completely unacceptable, and it urges the Government to withdraw the change. I hope that Government Members will think again before railroading through changes to social security regulations that will have such dire consequences for the lifestyle of many of our constituents and fellow citizens. 

These changes are not well thought through. The Minister knows perfectly well that there has not been a proper appraisal of the cumulative impact of all the proposed changes. We have not yet got on to the other changes, and I am not going to do so now, because it would be out of order to discuss them, but he knows perfectly well that the further changes coming down the line—the change to the consumer prices index from the retail prices index, and the introduction of reductions— 

The Chair:  Order. The right hon. Gentleman is not going to go through the list. 

Mr Raynsford:  Okay, I will not go into them, but those further changes will compound the problem. However, even before they make an impact, the changes we are

debating will bring hardship to hundreds of thousands of people who are living on low incomes. 

Amber Rudd  indicated dissent.  

Mr Raynsford:  It is no good the hon. Lady shaking her head, because they will. The evidence is there, and if she votes for these regulations, she will rue the day, because people will start coming into her constituency surgery in a few months’ time, as they will come into all our constituency surgeries, talking about the terrible consequences of the reductions in their income and living standards that are a result of these changes. She, like every one of us, will feel uncomfortable, but she will feel even more uncomfortable having voted for them. 

5.33 pm 

Malcolm Wicks (Croydon North) (Lab):  It is proper that we are giving the statutory instrument close attention, because, as we have heard, it deals with some of the most vulnerable citizens in our country. I have a number of questions, but first I want to say that I remember how, in the early years of the past decade, we moved towards this reform to introduce housing allowances. We did it after careful thought, careful piloting and careful evaluation. 

In my judgment, that contrasts with the rushed reform that we are now seeing from the Minister and his team. It is worth remembering that one of the rationales for the housing allowance was that we should give more power and more choice to tenants. We were moving towards a situation in which too much of the money was going straight to the landlord. The tenant, therefore, was becoming powerless, and we wanted to bring some choice and freedom back into the equation. 

That is why I, for one, would be nervous if we went too far down the path of reinstating the housing allowance as a direct payment to the landlord, thereby cutting out the tenant. We need to do that in difficult cases, such as where the rent is not being paid or in cases of drug addiction, but we should be careful about moving too far in that direction. 

As I said, I have a number of questions. One is about the figure in the explanatory memorandum, which has already been touched on, that states: 

“In particular, over £3 billion of spending in 2009/10 can be attributed to growth in private sector rents since 1999.” 

Given that we are talking about a 10-year period, with costs, including inflation and all that, will the Minister say more? Presumably, rents in general were increasing at that time. Could he say more about why he feels that rent allowance is particularly relevant in that regard? In other words, could he disaggregate that figure for us? 

In respect of the impact in London in particular, paragraph 7.5 of the explanatory memorandum says: 

“Local Housing Allowance rates will be set at the 30th percentile rather than the median point of the rental evidence ensuring that, except in some London areas affected by the caps, at least a third of properties rather than 50 per cent are affordable to Housing Benefit tenants.” 

Will the Minister focus a bit more on London? With regard to “some London areas”, can he say which those are? Can he say how many of our fellow citizens in London will be affected? Will he spell that out? Those of us in London are particularly concerned. 

Paragraph 7.7, which has been mentioned, says: 

“Options open to people who see a reduction in their Housing Benefit might be to negotiate a lower rent with their landlord”. 

There has been some discussion about that, and it has been conceded that that may be possible in certain parts of the country. However, I doubt whether it is a real possibility for many Londoners. Will the Minister say more about that, telling us what research has been done and what consultations have been held? Given the rental market, which my right hon. Friend the Member for Greenwich and Woolwich has just explained—his expertise is well recognised—does the Minister seriously think that in pressure points in Greater London, and perhaps in other parts of the country, it is really possible for a tenant to negotiate a lower rent with their landlord? 

Another option is for people to “take up employment”. People want to do so, if they are able bodied, but given that unemployment is rising does the Minister feel that the job opportunities will be there in future? 

We are told that people can 

“make up the rent from other sources of income”. 

That is always possible when we are talking about a few pounds a week, but when we are talking about the significant amounts of money and extra rent that will have to be met by the tenant should she or he wish to stay in their property—as many would, because their families and local schools are there—how much extra money does he think that these poor people are able to produce? I hope that the Minister is paying attention. 

I welcome the fact that there are now transitional arrangements. We Opposition Committee members recognise that housing benefit required reform—we said that in our manifesto—but we are worried about the impact on Londoners. This is a rushed judgment. I fear that many people from pressure points, such as Westminster and Kensington, could come to my borough of Croydon, because there will not be other options. The impact on social services, schools and housing—there are large numbers of people on our housing waiting list—could be incredible. 

I read in a newspaper at the weekend that many people in the Conservative Government now think of themselves as Maoists, as they rush to reform— 

The Chair:  Order. May I gently chide the right hon. Gentleman and remind him that it is a coalition? 

Malcolm Wicks:  They are a Tory-led coalition Government, Mrs Main. I was about to recognise the importance of the coalition by saying that I do not know whether these Maoists wave little blue books or little orange books. The Maoists at least had a long march, but this is more of an ideological leap in the dark. 

The Chair:  I call the Minister. There may be a minute at the end to offer Ms Buck the opportunity to respond. 

5.39 pm 

The Minister of State, Department for Work and Pensions (Steve Webb):  As expected, given the membership of the Committee, there have been well informed and worthwhile contributions from all parties, showing the strength of the House in debates such as this. 

Rather than just go over the things that we have already discussed during six hours in the main Chamber, I want to draw the Committee’s attention to things that have changed since then, which are reflected in the regulations. 

The right hon. Member for Greenwich and Woolwich mentioned the Social Security Advisory Committee. Of course, the SSAC’s report was not about these regulations; it was about the previous proposals, which were amended in the light of the SSAC’s proposals. For example, the transitional arrangements were not considered by the SSAC, because it did not know about them. 

Mr Raynsford:  Will the Minister concede that the local housing allowance—the change to the 30th percentile —is exactly the same proposal as was previously brought forward, and that it is responsible for the large bulk of the losses that we have been debating this evening? 

Steve Webb:  No, because it is subject to transitional protection, which is the point. In other words, the changes will apply to new claims from April. I shall explain how the transitional protection will work, as well as the other changes that we have made. The original proposal was for two changes next year, which would have affected existing tenants—there would have been one in April and one in October. That would have created two lots of upheaval for existing tenants. 

This is part of the response to the issue of staging; on the face of it, staging is superficially attractive, but what it does is take existing tenants, change their rules once and then change them again. We decided to get the changes in straight away—next April—for new claims, precisely to stop new claims from starting at the sort of exorbitant rents that some of my hon. Friends have referred to, so that we get the inflow on to more sensible rent levels. 

With existing tenants, people who claim housing benefit have their claim reviewed on the birthday, or anniversary, of their claim. For example, someone who took out a tenancy in March 2011 will not have it reviewed until March 2012, and will then have a further nine months before the cuts come in, around December 2012. So some people will not be affected for two years because of the transition. On average, however, the period will be about 18 months. 

Kate Green:  Will the Minister accept that even if there is now some delay before all housing benefit tenants are affected by the changes, the fundamental thrust of the Social Security Advisory Committee’s argument remains—that housing benefit tenants will be worse off and will face rent shortfalls, in some cases? 

Steve Webb:  No. The quote that the right hon. Member for Greenwich and Woolwich read out from the SSAC’s report specifically said if this happens in “six months”, and then in “twelve months”. He also talked about these things happening suddenly, but the changes that we are proposing are sensible and rational; they indicate that, while the thrust of the policy remains, the implementation will be improved by the scrutiny that it receives. 

Next April, we will get the first new claims, which will be constrained by the caps at the 30th percentile. So, from next April, people will be facing the same disciplines

that low-income working households are already facing in relation to the rents, properties and areas that they can look at. That is quite right, and it will come in from April. 

Gradually, as we reach each anniversary of each existing claim, local authorities will be able to see what is going on. They will see each renewal and they will start to see how many people are affected and in which parts of the borough. People will start to make decisions about where they live. There will be a very gradual roll-out nearly two years from now—18 months-odd from next April—and all the issues about individuals and local authorities having time to adjust will be far easier to handle because of the revised way in which we are dealing with this. 

Ms Buck:  Will the Minister advise the Committee what the difference will be in the savings projected for 2011 and 2012, consequent on the changes? 

Steve Webb:  We have had to find a small amount—not very substantial, relative to the total savings—to make the improvements. Obviously, we get extra money by bringing the change in October 2011 ahead to April 2011, but we spend money on the nine months’ transitional protection. We put in a relatively small amount, which, from memory, is about £10 million, but it is at the margin. Essentially, this is a revenue-neutral change but it is operationally a better one, because we deal with the new claims once, and early. That makes people make better choices initially, and we give existing tenants nine months’ transitional protection. 

The hon. Lady asked about transitional protection and how it will work, and I wish to put on the record a few points about that. She quite properly raised the issue of people who take a job. Taking a job does not affect transitional protection unless someone comes off benefit altogether. Changes affecting household composition will affect the transitional protection in some circumstances, but—to go through some of the circumstances that she mentioned—increases in size will not end protection unless someone would be better off; someone could give up transitional protection in return for a bigger benefit. 

Children turning 11 and needing a separate bedroom or someone turning 16 will not affect transitional protection. If someone dies, the existing protection will apply for up to a year. I hope that clarifies some of those points. 

Ms Buck:  I cited the example of someone who took a job that floated them off the local housing allowance entitlement, but in the volatile employment market their earnings or job changed, and in quite a short period they started claiming again. That would be a new claim would it not? 

Steve Webb:  A lot would depend on whether they had taken a job that enabled them to retain some housing benefit. 

Ms Buck:  They did not. 

Steve Webb:  Clearly, if someone comes off housing benefit, has a job and then makes a fresh claim, that will be a new claim. There is no question about that. 

My hon. Friend the Member for Tamworth made an important point about the importance of direct payment. Local authorities will be able to say to a landlord, “If you reduce your rents to an affordable level”—we will provide guidance on that, but it will broadly be the level of the local housing allowance—“you will get direct payments.” We have all heard examples of landlords who are unwilling to rent to people on housing benefit. That is often because they do not think that they will get the money because of problems with the flow of cash. The certainty of that revenue stream must have a cash value. 

One point often forgotten is that, although we get aggregate figures for shortfalls, in many cases shortfalls are relatively small. We are not talking about landlords slashing their rents; we are talking about a relatively small change in rent in return for the certainty of a revenue stream. That will make a big difference to a lot of people. As my hon. Friend pointed out, discretionary housing payments will be trebled in the year after next, and applied in cases where the difference in cost is too great for it to be credible to believe that the landlord will cut the rent, or where there is particular vulnerability or need. 

Mr Raynsford:  Does the Minister agree with the view expressed in his Department’s impact assessment that it is 

“not possible to predict the behavioural effects of tenants or their landlords” 

with regard to the changes? 

Steve Webb:  This is a case of being damned if you do and damned if you don’t. If we publish a report with precise figures about exactly what will happen, people say, “Of course you don’t know; how can you possibly be that precise?” If we accept a degree of uncertainty, we are condemned for not knowing the impact. 

A question was asked about consultation. We are in regular contact with landlords groups, for example, which make it clear that direct payment is critical. The criteria in the legislation state that in return for enabling someone to sustain an existing tenancy, or start a new one, the local authority will be able to make direct payments if the rent is affordable. That is a crucial change. 

Kate Green:  Will the Minister address the point that I raised with the hon. Member for Hastings and Rye about how such a direct payment will work once the universal credit is introduced? 

Steve Webb:  That is a perfectly fair question. The universal credit will not start until 2013, and it will be phased in for people who are currently out of work, for example, or those most affected by moving into work. There are perhaps three or four years before that becomes a more general provision, and we will have time to work out how the two systems will interact. The crucial question is about how we move from this system to the new system; that is where there will be upheaval and it is why the option of direct payment is crucial at this point. 

My hon. Friend the Member for Hastings and Rye made a point about the extra money that is to be provided. I accept that, if the discretionary housing payments were to be spread thinly, like a thin smearing

of butter across the entire nation, they would be very thin. That, however, is not the intention—that was a helpful analogy, I know. The point of the exercise is to focus the money where it is most needed. In some parts of the country, the changes will have a relatively limited impact, but the money will be focused on those places where they have the greatest impact. A total of £130 million extra will be spent on discretionary housing payments. 

The hon. Member for Westminster North mentioned the £10 million identified by the Department for Communities and Local Government specifically to prevent homelessness in London, but she did not mention the further £50 million that the Department will find over the period of the comprehensive spending review for housing advice and, where people have to move, for assistance with removal costs and so on. A total of nearly £190 million is to be spent over the CSR period, to ease the transition and get to a more rational system. 

A point was made about where rental properties are, and the fact that no one wants to rent to housing benefit tenants and so on. It is worth reflecting that between November 2008 and February 2010—the period for which we have the most recent figures—there were an extra 400,000 tenancies on housing benefit in the private rented sector. 

Mr Raynsford:  It is the recession. 

Steve Webb:  Yes, it is the recession, but people have to live somewhere. If one had listened to the debate so far, one would believe that landlords do not want to rent to housing benefit tenants and that there is no additional supply forthcoming. In the last 18 months, an extra 400,000 properties have been put forward, specifically for renting to the group that we are talking about—private rented sector tenants on housing benefit. 

Ms Buck:  Is it not the case that, in many instances, these will be people who were in a tenancy and then fell out of work? It is not necessarily the case that unemployed people are looking for new properties. 

Steve Webb:  But we have been hearing that landlords do not want to rent to people on housing benefit and this demonstrates otherwise. People will still be falling out of work, obviously, in the normal course of the economy, over the coming years, and the question is, “Where will the properties come from?” The evidence of the last 18 months is that 400,000 additional properties, over and above the ones that were already in the system, have been put forward. 

In her introductory remarks, the hon. Lady referred to the issue of—[Interruption.]  

The Chair:  Order. There is some conversation going on and it is very difficult to hear the Minister. 

Steve Webb:  Thank you, Mrs Main. The hon. Lady referred to the issue of cross-party consensus. Indeed, there is more of that than one might imagine. The hon. Lady referred to the issue of the cap and quite rightly pointed out that this is a relatively small part of what is going on. However, I want to quote to her something that is relevant to this issue, which comes from The Times earlier this year: 

“Hundreds of out-of-work families who have been living in expensive homes at the taxpayers’ expense are facing eviction after changes to housing benefit announced yesterday…Housing benefit will be capped…meaning 13,000 families, mostly in London, will have to move out of their current property into somewhere more modest.” 

The then Secretary of State, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), said: 

“It isn’t fair for the taxpayer to fund a small minority of people to live in expensive houses which hardworking families could never afford”.” 

How right the previous Secretary of State was when she said that in March. 

On the one hand, the Opposition are saying, “Well, we should vote against the order”, and on the other hand they had quite similar plans, including regarding the cap, as I have just indicated. Then, when we come on to the percentile issue, the shadow Secretary of State, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), told a conference on 5 November, before we had the changes on phasing: 

“If the government produce a proposal for a staged and more limited percentile reduction over a number of years - that could avoid the risks of higher homelessness and additional costs…then this is something we would consider.” 

In other words— 

Kate Green  rose—  

Steve Webb:  If the hon. Lady will allow me to finish, the point that the right hon. Member for Croydon North made was, “Well, it’s all rushed and we ought to think about it and we ought to pilot it and the shadow Secretary of State wants us to phase it in over a number of years and not go quite so far”. However, as we have heard from my hon. Friends, there is a bit of a fiscal crisis. We are £150 billion a year down and the leisureliness of housing benefit reform for the last 13 years is what has got us into this mess. In other words, yes we are introducing— 

Kate Green  rose—  

Steve Webb:  If the hon. Lady will allow me, I have about four minutes to try to respond to the whole debate. I hope that she will forgive me, because I have given way already several times. 

The point is that, yes, we can always take longer and the right hon. Member for Paisley and Renfrewshire South is in a sense in a slightly different position from the rest of the Opposition Front-Bench team, because I am aware of his track record as a reformer of the local housing allowance and his view that ideally we should be paying to tenants. However, the thing that is probably going to help most of all, in what we are doing, is the provision of “something for something”—we will pay directly to landlords, if we can get the rents down—and that is something that the previous Government never did. 

Ms Buck:  I just wanted to say that, if the Minister has more to say in response to the debate, I would be very happy to waive my right to respond to allow him more time. 

Steve Webb:  Lovely. I shall gratuitously use all seven minutes remaining, in that case. 

A number of other issues were raised and I just want to reflect on one or two of them. The hon. Lady quite properly mentioned the research by the Institute for Fiscal Studies. She knows that I spent nine very happy years working for the IFS and I think that its analysis is helpful on this issue. However, I think that the IFS would accept that its analysis is inevitably partial, because it does not allow at all for changes in rents. It is not an unreasonable assumption, because if one is crunching the numbers one assumes that the rents will not change, but of course rents are bound to change. The hon. Lady said that rents will change, because £1.6 billion is being taken out of the system. 

So rents are bound to change and because of the rewards that we are giving to landlords who take direct payments we know that we will have a downward impact on rents because of that change. If that were factored into the IFS numbers, would child poverty go down or go up? We do not know, because the IFS did not factor it in. Again, the IFS figures do not allow for the fact that some people will move property and they will move to somewhere that is within housing benefit. Therefore, the loss that is scored on the IFS analysis will go. The IFS does not allow for that. 

The hon. Lady says that thousands—I think that she said tens of thousands—of people will move all over the capital and beyond, and then she quotes an analysis that assumes that nobody moves house at all. One or other scenario must not be true, or indeed possibly both of them. 

There will clearly be an impact, but the hon. Lady said that the high cases that we read about in the tabloids are extreme and unrepresentative. I will therefore not take the highest one, 10 or 50 rents. If one looks at the highest 5,000 rents, one will see that they are costing us £100 million a year—for just those 5,000 households. We could have leisurely reform and reflect on whether it is okay to spend £100 million of low-paid taxpayers’ taxes to enable 5,000 people to live in properties they could never dream of, but the Leader of the Opposition, who wrote the party’s manifesto, did not think that that was a good idea. So why did the Opposition not do something about it when they were in office? 

Ms Buck:  Is the Minister starting from the assumption that there are parts of the country in inner cities—I am talking about boroughs, not neighbourhoods such as Mayfair on Knightsbridge—where no one should be allowed to live on local housing allowance? 

Steve Webb:  The proposition is that the choices made by individuals who claim local housing allowance should be similar to the choices made by someone in low-paid work. That is the principle that the hon. Lady does not accept, but to me that seems to be the fundamental fairness issue. When I heard about it—she quoted my words from a while ago—that point was not something on which I had reflected. When it became apparent to me that we are asking people in low-paid jobs to live in worse housing than the people—[ Interruption. ] I absolutely accept that there are some people in low-paid jobs who are on housing benefit, but the choices made by people in low-paid jobs are more constrained than those of the

people on housing benefit who are clearly living—even when the caps are introduced—in places where we are paying rents of £20,000 a year. For that sum to be taken out of someone’s post-tax income, one would have to be earning £80,000 a year, on typical shares of housing. 

Ms Buck:  The London average. 

Steve Webb:  The hon. Lady says that that is an average. Whether the taxpayer should be paying £20,000 a year, even after we implement the order, seems a perfectly reasonable question. We have stopped at £20,000. Is it the Labour party’s position? It was about to cap rents. Perhaps it is no longer supporting the cap, but in the debate, it said that it was. Which is it? Opposition Members have said that they would consider phasing. Knowing that we were coming to the debate, I had hoped to hear from the hon. Lady a more specific position. The party has had months to consider the matter. What would it now recommend? 

Kate Green:  I am grateful to the Minister for giving way; I know that he has little time. Looking at what might be an appropriate tapering of the extent to which housing benefit supports low-income households with their rental costs, will he explain how, if the Government control 40% of the private rented sector housing market, as he and his ministerial colleagues have said, it will be appropriate to put housing benefit tenants in a position where only 30% of properties are going to be available to them in the future? 

Steve Webb:  The idea of the 30th percentile is saying that if one takes a broad rental market area, which we are looking at the boundaries of, because that is obviously an issue of concern, a third of properties would be affordable—that is the idea of the threshold. It does not seem to me unreasonable, given that that is not a figure plucked from the air, but the constraint and the choice that people in low-paid jobs already take; those are the properties that people go for. 

By having a downward impact on rents, which is what we believe the policy will do, we will get better value for money for the taxpayer. That is the crucial thing. There has been discussion here and lots of different statistics about how far the figures have been driven up by higher rents and how far by recession and case load, but it is quite clear that LHA rents have been rising faster than non-LHA rents. To give the hon. Lady just one statistic, LHA rents have risen faster than earnings in the past 18 months. If we are inflating the market in that way and pumping billions and billions of pounds in, I think, as was said during the debate, the idea that we are not having an impact on rent is frankly absurd. 

To conclude, it is necessary to get a grip on the ever-increasing cost of housing benefit, which is being changed in the light of consultation to create a much fairer system. That will give a transition for individuals and local authorities to make better preparations, and I commend the regulations to the Committee. 

Question put and agreed to.  

Resolved,  

That the Committee has considered the Housing Benefit (Amendment) Regulations 2010 (S.I. 2010, No. 2835). 

Rent Officers (Housing Benefit Functions) Amendment Order 2010 (S.I., 2010, No. 2836)

Motion made, and Question put, 

That the Committee has considered the Rent Officers (Housing Benefit Functions) Amendment Order 2010 (S. I., 2010, No. 2836). —( Ms Buck. )  

The Committee divided: Ayes 10, Noes 7. 

Division No. 1 ]  

AYES

James, Margot   

Lloyd, Stephen   

Pawsey, Mark   

Phillips, Stephen   

Pincher, Christopher   

Pritchard, Mark   

Rudd, Amber   

Selous, Andrew   

Smith, Miss Chloe   

Webb, Steve   

NOES

Buck, Ms Karen   

Glindon, Mrs Mary   

Green, Kate   

Greenwood, Lilian   

Phillipson, Bridget   

Raynsford, rh Mr Nick   

Wicks, rh Malcolm   

Question accordingly agreed to.  

5.59 pm 

Committee rose.