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17 Feb 2011 : Column 1193

Jenny Willott: Like the hon. Gentleman, I was not a Member of Parliament at the time, but I would have expressed my disagreement with those views. Pensioners are among those in society with the lowest incomes, so they are most in need of protection. Anything that prevents them from falling even further behind, as they have over the past few decades, is a good thing. Since the link to earnings was taken away under the previous Conservative Government, pensioners' incomes have fallen significantly behind. Pensioner poverty is still at a disgraceful rate. I am glad to see measures being put in place today that will start to tackle that problem and stop pensioners falling further behind the rest of society.

Sheila Gilmore: Does the hon. Lady not accept that pensioner poverty was substantially tackled by the Labour Government, as pensioners were among 1 million people lifted out of poverty by their policies?

Jenny Willott: I absolutely accept that the previous Labour Government tried to tackle pensioner poverty by introducing pension credit, guarantee credit and so forth. However, the system they introduced has had a number of unintended consequences. It was so complicated that millions, or at least hundreds of thousands, of pensioners did not apply for the benefits to which they are entitled. The system is so degrading and complicated that they do not receive the benefits due to them. These are people living below the poverty line who are among the most vulnerable in our society.

Another unintended consequence of the system is that when people are working, they do not know whether they will end up better off when they retire. The system acts as a disincentive for people on low incomes to save. With auto-enrolment into pension schemes, I would like to see the means-testing taken out of the system so that people know that every penny they save when they are working and earning low incomes will benefit them in retirement. That is preferable to ending up being trapped, as a number of people are, in the pocket between those able to get means-tested benefits and those who are not. Although a lot was done under the Labour Government, the unintended consequences have, I feel, been quite damaging as well. The Office for National Statistics says that more than 2 million pensioners live in poverty; for me, that is far too many and I would like to see the problem tackled further.

Sheila Gilmore: Do I take it from the hon. Lady that she would support the raising of the basic state pension to the level of pension credit for everyone? Does she accept the consequential decisions that we would have to take as a society about the level of taxation appropriate to support such a change?

Jenny Willott: As the hon. Lady might well be aware, as a Liberal Democrat I stood on a manifesto that said we would like to introduce a citizen's pension, which would result in the basic state pension being lifted to the level of pension credit so that everyone who was retired would be living on a decent pension above, or at, the poverty line, rather than people having to go through the demeaning process of applying to the Government to lift their income above the poverty line. That would also remove the disincentive to save. Perhaps the Minister will say in his summation whether he agrees with me that we should introduce such a citizen's pension.

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Given that the Welfare Reform Bill was launched yesterday with proposals to update significantly the system of working-age benefits, will the Minister tell us what the Government will do to update the old-fashioned and outdated system of benefits that go to those of pension age? We seem at present to be able to think imaginatively about changes to benefits and state support, so I hope the Minister will tell us a bit more about what vision the Government might have for older members of our society.

2.56 pm

Dame Anne Begg (Aberdeen South) (Lab): It is nice to see such a large crowd of Members in the Chamber for this debate. I have attended benefits uprating debates for a number of years, and there are usually three people, possibly including one who really likes statistics, sitting somewhere on the Back Benches. As the Minister has suggested, the greater attendance this afternoon is probably a result of the fact that the entire basic indexation of the benefit system is about to change from RPI to CPI.

Benefits uprating orders are all or nothing orders; we cannot pick and choose what we want to be in them. There are bits that Labour Members are not particularly happy about, but we are happy with other bits, and if these orders do not get passed today no uprating will take place, which is the dilemma facing those of us who have concerns, particularly about the move from RPI to CPI for public sector pensions. I think I can speak on behalf of my party colleagues in saying that we will not vote against the motion, but neither will we necessarily vote for it. If the order does not pass, nobody gets anything, and we would not want that to happen.

The Minister is a very clever man, and I found his analysis fascinating. He gave a very clear and logical explanation of why CPI should be used as the inflation measure for indexation; everything fell into place, as we would expect from him. He said it is such a good measure that we are going to use it for public sector pensions, and, if we can get away with it, possibly for private sector pensions and occupational pensions. Apparently, it is so good that we are going to use it for everything except the basic state pension. I have no problem with the fact that the Government are increasing the basic state pension by more than the triple lock would have given, but this undermines the Minister's logical argument as to why CPI is so good. My right hon. Friend the Member for East Ham (Stephen Timms) picked up on this and I would like the Minister to explain his position. Why is the basic state pension going up by RPI, or 4.6%? CPI stood at 3.1% during the period; we are talking about last year's inflation figures here.

I am also delighted that the Government have recognised the importance of pension credit, which was introduced by a Labour Government, and of keeping that increase in line with inflation. Under the Labour Government, it was the pension credit element, rather than the basic state pension, that went up by the higher rate of indexation, because the Government wanted to narrow the gap between rich and poor pensioners and that was the easiest way to make sure the poorest pensioners got the most. Under this new uprating, however, pension credit is not going up by the 4.6% under RPI that the basic state pension is going up by. It is only going up by 3.6%, which is in line with neither CPI nor the triple lock. I am not quite sure where that figure has come
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from. I am not complaining that the uprating is not more than it should be, but perhaps it is less than the Minister was led to believe.

We can see from last year's figures and the indexation that we are looking at a CPI of 3.1% and an RPI of 4.6%. That is one third less. Many people are concerned about the compounding effect of CPI over the years on their take-home pension.

Stephen Lloyd (Eastbourne) (LD): Does the hon. Lady agree that even under CPI, because the coalition Government are linking it with earnings, that would be the equivalent over a full term of an additional £15,000 to someone's pension pot?

Dame Anne Begg: But that is assuming that the only income that pensioners have is the basic state pension, which is not the case. Most pensioners supplement the basic state pension with an occupational pension or, if they worked in the public sector, with a public sector pension. That is where the Government have sometimes missed a trick. In obsessing about the triple lock and the basic state pension, they have taken their eye off the ball with regard to all other pension income.

Because other pension income will be reduced as a result of the link with CPI, many pensioners will find themselves worse off, or certainly not as well off as they expected or as the rhetoric from the Government would suggest. To listen to the Government, one would think they are doing everything that pensioners ever wanted, whereas they have taken action only on the narrow area of the basic state pension.

We already know that inflation is going up. VAT went up, thanks to the Chancellor. The Opposition expect inflation to go up much further because we do not think the Chancellor has the right policies. We know from the most recent inflation figures for January this year that CPI is now up to 4%-good news, one would think, for pensioners-but RPI is up to 5%. It is that differential that will cause problems.

We are considering not just pensions, but uprating for the whole benefits system. Even the Minister must recognise that there is an enormous irony in using CPI to uprate housing benefit-CPI being the one inflation measure that does not include housing costs, notwithstanding the point that the hon. Member for Cardiff Central (Jenny Willott) made about the poorest people being in social housing. That is not the case in cities such as London, and it is not the case because of the shortage of housing.

We know that large numbers of people are dependent on housing benefit-or, more accurately, local housing allowance-and they will be hit. When the Select Committee on Work and Pensions looked into the matter, we thought there were some figures to show that within a very short time nobody on housing benefit would be able to afford houses in the private rented sector that fit into the 30th percentile.

Steve Webb: For the avoidance of doubt-this has been said incorrectly twice in the debate-the CPI includes rent, so it is owner-occupiers' housing costs that are not included. As rent is included in CPI, it is entirely appropriate to index housing benefit by it.

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Dame Anne Begg: CPI is still much less. Perhaps the average is taken from rent overall, not only in the private rented sector. That is where some of the differential might come from.

Jeremy Corbyn (Islington North) (Lab): My hon. Friend has made an important argument about the level of rent increases, particularly in the private sector in London, where rent increases and demand go up by far more than any rate of inflation or any other measurement. The Government's cap on housing benefit has the perverse effect of driving many of the poorest people out of central London because they will not be able to meet the rent demands and normal costs of living within the global cap on benefits.

Dame Anne Begg: My hon. Friend is right. There is a triple whammy on people who live in London in high rent areas: the local housing allowance is to be capped, possibly below the level of the rents; they will have access only to houses within the 30th percentile; and they will not see the inflationary increases in the indexation of their housing benefit to meet those conditions. They will be hit more than once with regard to the affordability of their rents. That certainly came over loud and clear when the Select Committee looked at what was happening to local housing allowance.

The effects of the Welfare Reform Bill have been mentioned. The universal credit will make it difficult to project benefit uprating into the future to work out what percentage of their incomes people are likely to loose. There will be no straight line from the current benefits to the universal benefit, because they will be mixed up. It is difficult to see what will happen. The compounding effect will probably be seen in pensions, particularly for those in receipt of the state pension, and the level of pension will be less.

In reply to my hon. Friend the Member for Eastbourne (Stephen Lloyd)-I am sorry, Madam Deputy Speaker; I always refer to fellow Committee members as hon. Friends-I said that the assumption is that the largest part of a pensioner's income is the basic state pension, but we know that for many people that is not the case. Even if the state pension makes up a large part of their pension, it is often not all of it. Many people on the lower pension are dependent on SERPS, which of course will now be moving up in line with CPI, rather than RPI.

On the basic state pension, I accept the Minister's figures indicating that it will rise from £97.65 to £102.15, an increase of around £4.50 a week. No one would say that that is wrong, because we all agree that £234 a year is great. However, the average public sector pension of £7,800 will be reduced by around £117 because of the difference between RPI and CPI. I am not very good at the arithmetic, but that means that instead of getting a rise in income of 4.6%, the people affected will get a rise of less than 2%. It is a rise, but it is not as much as they were expecting, and we must remember that we are living in a time when inflation is increasing.

A woman who receives the average local government pension of £2,600 will be £40 worse off than if her pension had been linked to RPI. If she has paid the small stamp, she might get no extra money through the basic state pension anyway, not even the compensatory increase in it. She might not have made full contributions
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and so will get some of it, but not all. The Government's proposal is unfair to pensioners, and it is particularly unfair to women.

My right hon. Friend the Member for East Ham has already mentioned the particular unfairness of raising the state pension age to 66 by 2020. To be clear on the Opposition's position, we have no qualms about raising the state pension age to 66 in principle, but we are concerned about the speed with which the Government are doing so. That overrides what was already in place for women who were born in the 1950s, who were going to see their pension age rise to 65 by 2020 anyway.

Women who began their working lives expecting to get a state pension at 60-that happens to include me-will now have to wait another six years for it. On a quick calculation, that will save the Government £32,000 on today's basic state pension. It will come out of the pockets of women who are roughly my age and will stay with the Government. We will have to increase the indexation an awful lot more to make up for the £32,000 that those women will lose as a result of the increase in the state pension age by six years.

I appreciate that the measure whereby women born in 1955 would have to wait until 2020, when they were 65, to receive their income was already in train, but what about the women born between 6 October 1953 and 5 April 1955, who had already made all their financial plans but will now have to work for more than one further year before they can receive their basic state pension? The Minister has said on numerous occasions that that measure alone will save the Government £10 billion. All that is a win-win for the Government: the Government win, because they do not have to pay the money out, and because they have changed the indexation. The people who lose are those who expected to receive their pensions at a certain point, and in this case those people are women.

I would understand the Government's rationale if the measure was part of their deficit reduction plan, but they have already said that they intend to get the deficit off the books in four years' time, and none of this stuff comes in until after the deficit is meant to have been reduced, so it cannot be part of a deficit reduction plan. The Government should be more honest. We have heard that the change to CPI is going to be permanent, so they should say, "We're doing this as a long-term measure, because we want to save money." That is part and parcel of what the Government are about: saving money.

Steve Webb: The hon. Lady is a thoughtful person who will know that there is an issue of short-term deficit reduction and an issue of the long-term sustainability of the public finances. Leaving aside the £1.3 trillion of public debt, which will still exist and need to be dealt with even when the deficit is no longer adding to it, does she not accept that the Office for Budget Responsibility has challenged the Government to do something the previous Government did not do and get a grip on the long-term sustainability of spending, particularly on older people?

Dame Anne Begg: My right hon. Friend the Member for East Ham claimed that there might be a case for deficit reduction in the short term. We are considering women and the accelerated increase in the state retirement age to 66, however, and, in terms of the 50-year pension
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policy and the long term, why could not the Government have waited another year or even two before equalising the state pension age at 66? The Minister keeps bandying about the £10 billion figure, but in terms of equity and fairness it would have been much more sensible if the Government had taken a long-term view. Theirs is a very short-term view, meaning that a large number of women-half a million-will lose out.

The Government could have introduced a measure that people considered fair, rational and part of a long-term decision to ensure that pensions are affordable, and it is ironic that, while they have made the decision on equalisation, they have forgotten about the long-term sustainability of the basic state pension. They have done so because the Liberal Democrats had an election promise-the one they seem to have kept to, when they have managed to ditch all the others-that was all to do with the triple lock. The Minister will not accept this point in the Chamber, although he might do privately, but the triple lock debate has skewed the Government's entire pension policy. We are not looking at the issue in the round or over the long term, when perhaps we should be.

We do not know what inflation will be in years to come, so in the private and public occupational pensions sectors in particular it is difficult to work out exactly how much people will lose compared with what they expected to receive. Lord Hutton, in his interim report, thought that on average they would lose up to 15% of their pension's worth, but I have seen lots of other figures for, and various calculations of, what a pensioner would have expected if their pension had been linked to RPI as opposed to CPI.

This measure cannot just be about paying off the deficit, because we know that the big-time savings kick in well after the Government propose to have paid off the deficit. The Government will win, but the people who will lose are, unfortunately, the pensioners of this country.

3.14 pm

Rehman Chishti (Gillingham and Rainham) (Con): I very much welcome these initiatives by the Government, as they will help to improve the quality of life of the elderly, who have given so much to our society, and that of the most vulnerable in society. It is absolutely right and proper that we help those who are most vulnerable.

I believe that the Government are right to use one index for uprating additional state pensions, public and private pensions and social security benefits, and that the consumer prices index is a more appropriate measure of changes in the cost of living than the retail prices index. The CPI is the headline measure of inflation in Great Britain, forming the target for the Bank of England's Monetary Policy Committee. The CPI excludes mortgage interest payments, which are not relevant to the majority of pensioners and benefit recipients. In fact, only 7% of pensioners have a mortgage, and working-age benefit recipients can get help with their housing costs. The methodology used to calculate the CPI takes into account the fact that many people tend to trade down to cheaper goods when prices rise; the RPI does not do that. That comprises a significant portion of the gap between the CPI and the RPI. In terms of population coverage, the RPI excludes the significant group of pensioner households who receive 75% or more of their income from the state; the CPI includes them.

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The intention of indexing benefits and pensions is to protect their purchasing power, not to give the highest increase possible. Increases in line with growth in the CPI maintain benefit and pension value, as well as putting the system on a more sustainable footing, allowing the Government to focus help where it is needed most.

Sheila Gilmore: If the change to the CPI is such a good move, why are the Government running scared of using it as part of the triple lock for the basic state pension this year and picking another figure out of the air in order, presumably, to make pensioners feel better about what is happening?

Rehman Chishti: The hon. Lady raises an interesting point, which I think was dealt with by the Minister. She refers to pensioners getting the right deal from the triple lock. It is important that we listen to what people in the third sector, not only politicians, say about how this will affect people. I have here a quote from Age UK's charity director, Michelle Mitchell:

Stephen Lloyd: I take my hon. Friend's point entirely. Does he agree that one of the profound advantages of the triple lock is that we will not have the deplorable situation of a few years ago under the previous Government, when pensions were uprated by 50p? There are real advantages to the triple lock: it means that people can be sure that they will have a decent minimum rise.

Rehman Chishti: The hon. Gentleman raises a good and pertinent point. He said 50p, but to be fair to the Opposition, I think that it was 75p. Even so, it was totally unacceptable. If we link that to other things that happened to pensioners and the elderly-for example, the closure of so many post offices that were a lifeline for them-it is clear that the overall package under the previous Government was completely unacceptable. This measure goes a long way towards improving their quality of life.

It is estimated that the average person retiring on a full basic state pension in 2011 will receive £15,000 more in basic state pension income, and that can only be a good thing. In the light of what I have described, it is absolutely right and proper. I fully support the move to the CPI and the wider package that the Government are putting forward.

Looking at the time and applying the principle that brevity is a virtue, not a vice, I will end my remarks.

3.18 pm

Hywel Williams (Arfon) (PC): I begin by welcoming the Government's change of mind on housing benefits. If that had not happened, there would have been a disastrous effect on constituencies such as mine which have high unemployment rates and slim prospects of people finding a job within a year. There will be a general welcome for that. I wanted to say that because I have campaigned about it in the past, as have many of my constituents.

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I should like briefly to refer to correspondence from pensioner constituents who are concerned about the change from RPI to CPI. At the very least, there is a problem of perception. People see that RPI for the third quarter of 2010 was 4.6%, whereas CPI was 3.1%. They see that the current rate of inflation under RPI is 5.1% and that it is 4% under CPI. Clearly, people are worried. People have made long-term financial decisions on expectations that might not be realised. I raised the triple lock in an intervention and I do not want to discuss it in detail, but I worry about its longevity because of concerns that have been expressed many times in the past.

I have received correspondence about CPI and RPI from the Public and Commercial Services Union, the Civil Service Pensioners Alliance, Age UK and my constituents. My attention has been drawn to some statistics and I would like to read them into the record. The PCS states that using the base of 1988, had CPI been used to uprate a £10,000 pension, its value now would be £18,035, compared with £20,935 under RPI-a difference of 16%. A pensioner on the median public sector pension of £5,500 who has been retired for 20 years would now be on £4,845-a loss of 12% or £655. It is those sorts of figures that worry people.

Obviously, CPI has been higher than RPI in some years-1991, 1993, 1996, 1999 and 2008-but the Treasury itself reckons that over the next five years, RPI will consistently be higher than CPI. Perhaps that is because of the predicted steeper rises in housing costs. I refer the House to table C2 in the Budget Red Book, which puts the overall change to 2016 of CPI at 13.7% and of RPI at 22.1%. That is a substantial difference. Of course, a gloss has been put on, but I will not go into that at the moment.

Naomi Long (Belfast East) (Alliance): One argument for the change to CPI is that many of those in receipt of a pension are insulated from fluctuations in housing costs because they are not paying a mortgage. However, does the hon. Gentleman agree that they often have other private housing costs that are not reflected in CPI, such as insurance costs and the depreciation of their properties?

Hywel Williams: That is a valid point. Of course, the variation across the country is quite substantial. I refer again to my own constituency, where there has traditionally always been a very high level of owner-occupation. There are older people who own their houses, but in other areas people are still paying off their mortgages. The figure of 7% has been mentioned-that is a lot of people who will be hit.

Sheila Gilmore: Does the hon. Gentleman agree that that figure might well grow in future? Given the level of borrowing that many people have made to buy properties, and that a lot of people are buying at a much later age, many more people are likely to move into retirement with a mortgage still to repay.

Hywel Williams: That is a very good point. Indeed, I think I might be one of those people. I understand that the average age of the first-time buyer is now 38. These are valid worries that people have.

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The arguments on RPI and CPI have been well rehearsed this afternoon so I will not go further into them. I have a great deal of respect for the Minister and I think he would agree with me and many other people that what we need is a bit of calm and consensus on pensions policy-something that has been lacking for 25 or 30 years. I worry that this change will not lead to consensus and that he might have fallen in with a bad lot.

3.24 pm

Gordon Henderson (Sittingbourne and Sheppey) (Con): A lot has been said about CPI and RPI, but I will avoid the technical aspects of that and restrict my comments to two others.

First, my hon. Friend the Member for Cardiff Central (Jenny Willott) mentioned that it was a Conservative Government who many years ago broke the link between the basic state pension and earnings. I was one of few Conservatives to oppose that at the time. About 11 years ago, when I was the parliamentary candidate in Luton South, I went to see the late Jack Jones, who was president of the National Pensioners Convention, to offer my support to the campaign to restore the link. Jack, sitting at the other side of a desk, was astounded that a Tory had come to offer his support, and he said, "Gordon, I really appreciate that you're backing me, but I have to tell you, son, you're never going to get your party to agree to restore the link." Jack died a couple of years ago, and I wish he was alive today to see that a Conservative-led coalition is restoring the link.

That is long overdue. I shall not make any partisan points about the previous Government not delivering, because looking after our pensioners is beyond party politics. When I supported the pensioners way back in 2001, I was one of few parliamentary candidates who went into the election wanting to restore the link-I was certainly the only such Conservative candidate-but it was not Labour party, Conservative party or Lib Dem policy at that time. I am delighted that we have moved on and that we will restore the link.

I am even more pleased with the Government, because many of the pensioners in my constituency did not want us just to restore the link to earnings, because RPI is sometimes higher than earnings. Jack Jones mentioned that too. We then started campaigning not for the restoration of the link with earnings, but to ensure that we used whichever of earnings inflation or prices inflation was the higher. As I said, I will not go into the technical differences between CPI and RPI, because the pensioners in my constituency just want a decent increase in their pensions based on the higher measure of inflation. The triple lock now includes the 2.5% stipulation, so if either inflation measure is less than that, the increase will be 2.5%. They welcome that, so I thank Ministers and my coalition Government for delivering on a long-standing promise.

The second aspect of the orders that I want to talk about relates to a problem that is experienced by many women pensioners who have worked in the civil service. I will give one example. One woman who retired early on a civil service pension came to see me in my surgery recently-I have written to the Minister, and hope to get a response some time soon. She had reached the age of 60, and told me that some arcane measure in the civil service pension scheme means that there is a reduction
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in the amount that is paid once someone starts to receive the basic state pension. I am not sure of the technicalities, but she explained how she was written to way back in November to say that now she was 60, her civil service pension would be reduced, because she was receiving the basic state pension. Of course, however, because she is a woman and the age at which women start to receive their pension is to be higher, she will not start to get her basic state pension until May this year. Although the period is only a few short months, there will be women for whom the gap is a lot longer. I would be extremely grateful if the Minister could address that point when he winds up. I listened carefully to his opening remarks, and I thought that he put forward a very good case for CPI which will help me when I talk to my pensioners. I thank him.

3.31 pm

John McDonnell (Hayes and Harlington) (Lab): I will not apologise for breaking the consensus-although I was about to apologise to the hon. Member for Cardiff Central (Jenny Willott), who welcomed the consensus across the House. I oppose the order, and will seek to vote against it. I do not accept that the installation of CPI will be of benefit in either the long term or the short term. I am grateful that the Government have not introduced it for the basic state pension at least for this year, but its installation across all the other benefits will result in detriment. To take £6 billion out of the payments to the poorest in our society is unacceptable. My hon. Friend the Member for Aberdeen South (Dame Anne Begg) said that the order is indivisible, so by not voting for it we would prevent other overall increases from going ahead. However, it is not beyond the wit of any Government to introduce another order within hours-or at least days-that could amend what is in this order to enable us to get some justice for pensioners.

I am reticent about criticising the Minister. I think that I have moved a Budget amendment on restoring the link with earnings every year for the past 13 years, and I think that we walked through the Lobby together on an annual basis in that endeavour. I am grateful, therefore, for the restoration of the link with earnings. I know that it was in the Labour party's most recent manifesto to restore the link in due course. I just wish that we had done it earlier, because that would have demonstrated our overall commitment to tackling pensioner poverty. However, I know how much the previous Government did to tackle pensioner poverty. Many people, particularly pensioners and many on benefits, are now living lives so much better than they would have been had it not been for the previous Government's policies.

I was a critic of the extension of the means-testing system. I thought that it was a disincentive to saving and costly to administer. Nevertheless, I welcome what the previous Government did. I still think, however, that in a civilised society it is a mark of shame that reflects on all of us that there are still 2 million pensioners living in poverty, given that we are the fifth richest country in the world. It behoves all parties to tackle this issue. The question has been asked time and time again: how should we do it? For me the answer is straightforward, and expresses an argument that we have been putting forward since the foundation of the Labour party-fairer taxation and redistribution of wealth.

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I have listened to the debate on moving from RPI to CPI. We can all marshal different battalions on the field of this debate-quotes from the Institute for Fiscal Studies, the Office for National Statistics, and so on. Most Members will have received through the post this week an assessment of the Government's welfare reform policies by the Social Policy Association. I concur with the chapter in the report by Alan Walker of the University of Sheffield, who states:

To some extent, we can dance angels on the head of a pin on this subject. As someone who has studied some statistics in the past, I have gone into the debates on the difference between the geometric mean and the arithmetic mean. From that, I conclude that CPI is 0.5% minimum off the calculation compared with RPI. However, there are concerns that the use of CPI will result in a reduction. As my right hon. Friend the Member for East Ham (Stephen Timms) asked, if that was not the case, why would the Government need to try to protect pensions this year? As my hon. Friend the Member for Aberdeen South said, the reduction from 4.6% to 3.1% is nearly one third of people's overall increase. That is significant, so I am pleased that the Government are protecting the increase for this year, but the pensioners in my constituency will be worried about the introduction of CPI for future years.

I remain unconvinced about housing costs, partly because of some the arguments that have been presented about the 7% of people-that still represents a sizeable number not to be taken into account-who will be affected, who do have housing costs. As my right hon. Friend said, there is an ageing profile of people who are taking on mortgages later in life, so housing costs will become a more significant factor.

In addition, one of the burdens that many pensioners feel in particular is increased council tax. I do not believe that that element is covered by the CPI calculation as it was with RPI.

The hon. Member for Sittingbourne-

Gordon Henderson: And Sheppey.

John McDonnell: I would not want to miss out Sheppey. Let us take the common-sense approach of the hon. Member for Sittingbourne and Sheppey (Gordon Henderson) and ask, "What do pensioners feel like at the moment?" I think that they feel that they are under significant pressure as a result of inflation. The researchers' evidence shows that inflationary pressures hit pensioners harder than the average household.

I am concerned about the shift, which I oppose. It is a momentous shift: it represents one third off an increase. I say to the Minister that this should have been properly debated before the election if it was to be a long-term shift. I can understand, though I do not believe, the argument that when the Government came to power they opened the books and found that they had to introduce emergency measures. However, that is not being argued. It is being argued that this proposal, per se, is the beneficial or right thing to do. If that were the
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case, it should have been outlined before the election with examples of the implications for pensions and benefits overall. To make this change at this time casts doubt on the motivation for the change from RPI to CPI. We should have been more honest in the debate before the election.

As for the knock-on effects on occupational pensions, I chair the PCS trade union parliamentary group, and we have circulated fairly detailed evidence of the implications for public sector workers. It looks as though, on average, there will be a loss of between £500 and £700 a year. The cumulative effect of that in the long term is significant, and I am grateful that other Members have read its implications into the record.

My right hon. Friend quoted the Hutton report. I take those concerns seriously-a 15% cut, and possibly a consequential cut of up to 25% in the long term. I firmly believe that those are accrued rights-we have had that debate on the civil service compensation scheme-and that people have planned their lives on the basis of what they thought they could expect as a pension in the long term. To undermine those accrued rights is not only wrong and immoral but legally dubious, and there may be challenges to that effect.

The effects spread far beyond that. The right hon. Member for Uxbridge and South Ruislip (Mr Randall) and I have constituents who work at Heathrow airport for British Airways and are members of the British Airways pension scheme. They work for a former nationalised industry, so their pensions shadow what happens in the public sector. We have had letters demonstrating the potential consequences in terms of cuts in their pensions in the long term. Again, the problem came upon them relatively suddenly, and should have been properly explained and discussed before the general election.

My concern now is that the change will have an immediate detrimental effect over the next few years. Like most London Members, and many others, I deal in my constituency surgery with people living in poverty and on the margins of dignity. Any cut, in the short or long term, in their pensions or benefits will push some of them over the edge into virtual destitution. That is why I am anxious about anything that will decrease their incomes. On that basis, I cannot support this order. I understand why some of my hon. Friends do not wish to participate in a vote, but I want to put my opposition on record, because the change will have an impact on my constituents. It will also add to poverty and deprivation in our society-something that any Government should tackle.

We should, collectively, be ashamed of the way in which we have treated pensioners over decades. Our pension is now 16% of average earnings, whereas in France it is 60% and in the Netherlands 82%. Over time and incrementally, we have allowed our pensioners to lose their right to a decent pension, and therefore to a decent quality of life. This order will add to that incremental undermining of the quality of life of my constituents, and on that basis I will seek a Division on it.

3.41 pm

Mike Freer (Finchley and Golders Green) (Con): I wish to correct the hon. Member for Edinburgh East (Sheila Gilmore), who talked about mortgages in retirement.
17 Feb 2011 : Column 1205
I come from a financial services background-indeed, I have the scars on my back from being regulated by the Financial Services Authority-and I can tell her that it is virtually impossible to sell a mortgage to someone beyond retirement age. The regulator simply will not allow it.

I compliment the Minister, because it is a pleasure to see a Minister with such a grip on his portfolio. Indeed, it is almost scary to see a Minister in such charge of the detail. I welcome his clarity about the net effect of the triple lock on the lower pension indexation, which means that our pensioners will be better off both today and in the long term.

A key issue is the long-term viability of public sector pension schemes. I tried to press the right hon. Member for East Ham (Stephen Timms) on that point, but I was unable to get a firm response. I hope that the Minister will address the point when he winds up. I admit that my knowledge of pension fund management is a little rusty, as I stepped down as a pension fund trustee some 18 months ago, but one of the key issues facing the public sector is not necessarily the pensioners but the fact that most public sector pensions are structurally non-viable. The contributions simply do not meet the future liabilities. For example, the local government pension scheme for London-and for many of the bodies that are attached to it-is running at 75% to 80% of contributions to future liabilities. That is not sustainable.

I may be wrong, but one of the long-term benefits of the move from RPI to CPI is surely that it would address that structural imbalance between contributions and future liabilities. You cannot run a pension scheme with a 20% gap between liabilities and contributions. You can plug that gap only by reducing the pensions drawn down or increasing the contributions from the employer-in London that means the council tax payer or the taxpayer in some other form-or from the employee. There is no money tree on which the Government can draw to plug the gap in public sector pension schemes. The money can come only from the taxpayer or from the employee. We must address that structural deficit.

Can the Minister confirm that one underlying reason for the change is to address that structural gap between contributions and viability? May I gently ask him to stray beyond his brief and say whether the Government will consider closing the existing defined benefit schemes for the public sector and moving to defined contribution schemes, not only to increase portability but to increase the transparency of what people are getting for their money and, most importantly, increase the affordability of those pension schemes for the public purse?

3.45 pm

Katy Clark (North Ayrshire and Arran) (Lab): My contribution will be brief, but I want to speak because we are taking a momentous decision today. It is very sad, on the day when we are passing legislation that will reinstate the link between earnings and pensions-for which I and many Labour Members have campaigned over many years, and which Government Members have been able to get their Ministers to deliver on-that we are also probably going to pass legislation that will make a very significant, and probably a very long-term, change to the way in which we uprate pensions and benefits.

17 Feb 2011 : Column 1206

Today's debate has made it very clear that these proposals are being made not just because of the current economic situation or because of the Government's policy of deficit reduction, but because of the belief on the Government Benches that this is a more appropriate means of uprating. I have always taken the view-the trade union view-that pensions are deferred pay. It is very important that people have certainty in arrangements for their retirement. The decision we are making today will have implications for many of the lowest-income people, who are dependent on benefits, and some of the poorest pensioners.

I have been lobbied by a considerable number of constituents on this issue, but that number is a very small fraction of the number of people who will be affected by these changes and, I suspect, will be very angry when they realise the impact that the changes will have on them. I have also been lobbied by several of the trade unions that represent the affected individuals.

My hon. Friend the Member for Aberdeen South (Dame Anne Begg) mentioned women in the local government pension scheme, who have an average pension of approximately £2,600 per annum and will be worse off by £40 this year if the changes go ahead. They would have been £40 better off if the RPI link had been maintained. According to the trade union Unison, the average person who receives a pension from the local government pension scheme receives £4,100 per annum, and they will be £62 worse off in the coming year if the change goes ahead. A woman who works in the national health service receives, on average, a pension of £3,500; these are not people on high incomes, by any stretch of the imagination, and they will be £53 worse off this year if the change goes ahead.

If we pass the order today, it is likely that next year a similar order will be proposed, and the same approach will be taken for decades. The cumulative effect on the pensions of individuals will be very substantial indeed. Reference was made to figures released by the PCS trade union showing the impact that it thinks the change will have on its members.

These are very considerable public policy issues, about the extent to which we feel it is important as a society-

Jane Ellison: I must press the hon. Lady. She refers to the impact on pensioners, but does she give regard to the impact for the taxpayer of an aspect mentioned by my hon. Friend the Member for Finchley and Golders Green (Mike Freer)-the long-term lack of viability of major pension funds in the public sector?

Katy Clark: The matter under discussion has long-term and considerable public policy implications. Indeed, the Fire Brigades Union informs me that part of Lord Hutton's interim report states that pay freezes and work force reductions will reduce future pension costs. Further, the gross cost of paying unfunded public service pensions is expected to fall from 1.9% of GDP in 2011 to 1.4% of GDP by 2060. If the long-term effect is that we pay less as a society towards pension funds, that will have significant implications for the individuals concerned, who will have less income, but also for the public purse. If people do not have adequate pension provision for their retirement, the state will have to pick up the cost, perhaps in greater benefit bills.

17 Feb 2011 : Column 1207

If public policy does not develop in such a way that people employed in the private and public sectors have pensions constructed and funded to be their main source of income in retirement, that will have substantial implications. If the changes go ahead, constituents of Members on both sides of the House will be worse off. No Member should take that lightly, given that inflation is rising and people are facing difficulties. I say to the hon. Lady and to other Members who support the decision that we as a society need to find the funds collectively. We need a public policy that encourages individuals to save for their retirement, but that also puts provision in place to ensure that they have adequate pensions in retirement.

In the emergency Budget in June last year, the Chancellor announced that the change would result in a saving of more than £6 billion a year by the end of this Parliament. There is no doubt, therefore, that the proposal is cost driven. My submission is that, as an ageing society, we need to find ways, collectively and individually, to put more aside for our retirement. We need pensions that are at a reasonable level for people to live on in retirement. If the change goes ahead, fewer people will have pensions that allow them an adequate standard of living in retirement.

3.53 pm

The Minister of State, Department for Work and Pensions (Steve Webb): We have had a worthwhile debate, with some thoughtful and well-informed contributions. I compliment all Members who have taken part, as the issue is important to our constituents. All Members will have received representations on the matter, and Members who are here on the final Thursday afternoon before a recess show their sense of priorities.

I enjoyed the accusation from the right hon. Member for East Ham (Stephen Timms), whom I think of as my right hon. Friend, that the policy is ideologically driven. I have never heard the use of the geometric mean described as ideologically driven. Intriguingly, his position seemed to be that it would be bad to make such a proposal on a point of principle, but that he could support it if it was a temporary expedient because of a financial mess. That is not the position of the Government, whose judgment is that CPI is a better measure of inflation, not a temporary fix. I am grateful that he appeared to be saying that he would support us for three years on grounds of expediency.

Stephen Timms: If CPI uprating is right in principle, why are the Government not doing it this year?

Steve Webb: We are doing it this year for pretty much every benefit in the entire uprating order, which runs to many pages. The ones we are not doing it for are the basic pension and the pension credit. We are not doing it for the basic pension because the budget we inherited provided for a larger increase and we did not want to pay a smaller increase than was planned. If the right hon. Gentleman thinks we should have done so, I will take that advice, but he probably welcomes the fact that we did not follow it.

The Chair of the Select Committee, the hon. Member for Aberdeen South (Dame Anne Begg), indicated that unfortunately she could not be in the Chamber for the
17 Feb 2011 : Column 1208
wind-ups. She asked why we had chosen a different figure for the pension credit. As I think I explained in my opening remarks, as we were putting the basic state pension up by about £4.50 a week, we did not want the increase in pension credit to be less than that, because the poorest pensioners would not have the full benefit of the pension rise. That was the basis for the increase in pension credit.

The right hon. Member for East Ham asked about the impact assessment on occupational pensions, and I am happy to say a few words about that. In December, we published an impact assessment suggesting a £76 billion impact from the reduction in revaluation and indexation. To respond to a point made by my hon. Friend the Member for Finchley and Golders Green (Mike Freer), one way of looking at that is to see £76 billion less in pensions, but another way is to see a £76 billion boost for British business. We are trying to reduce the regulatory burden on British business, so an advantage of the change-albeit not the purpose-is that major British firms will make a saving, and they and their pension funds will be in a stronger position as a result. Many pension schemes and companies have welcomed the change for that reason.

We discovered an error. We made a mistake, for which I apologise. As soon as we found it, we decided to give the House a revised estimate. In addition, we were asked by the Regulatory Policy Committee to revise the way we calculate net present values; I know that the right hon. Gentleman takes a close interest in such matters, and if he is not careful I shall tell him what it was. To draw the threads together, we reissued the figures last week, ahead of this debate, with an £83 billion estimate. That is a further interim estimate. We then undertook field research, as I mentioned, to ask companies how they will respond to CPI/RPI. We have early results; it would be premature to say what the impact will be, but early indications are that fewer pension funds will take advantage of CPI than we had thought. Such things are complex and there could be factors that move them in the other direction, but my sense is that the final version of the figures is more likely to be lower than the one we have already published, but we thought we should give the latest estimate as soon as we had it.

The right hon. Gentleman raised the important issue of accrued rights. It is a fundamental point and it relates to my pre-election remarks about a pension promise made being a pension promise kept. What is the accrued right of someone in a public sector pension scheme, or any pension scheme? The first point is that everything accrued to date-all the revaluations to date, based on RPI-stand; we are not going back and saying that all the revaluations to date have to be reworked according to CPI. The provision is prospective, not retrospective.

The question then is what future expectation people legitimately have. If they are in a company scheme that has RPI in the rules, we actively chose not to override that. If that was their expectation, because it was in the rules, that is what they will get. However, people in the public sector are members of a scheme whose rules are tied by statute to what we do to SERPS. That is the accrued right they have always had, and we are not changing it. We shall go on indexing their pensions in line with what we do to SERPS each year. That was the pension promise they were made; that is the pension
17 Feb 2011 : Column 1209
promise we are keeping. We are indexing SERPS by CPI. I accept that, and I also accept that on average that will be lower than RPI, typically by about 0.8% a year. I do not dispute that. The accrued right is the one we are honouring.

The right hon. Gentleman said in parenthesis that pensioner inflation is typically higher than general inflation. I do not know whether he actually believes that; it was never something his Government took into account when setting pensions. They never uprated pensions differently because of pensioner inflation. There are certainly periods when pensioner inflation is higher when, as the right hon. Gentleman said, the costs of fuel and food are rising faster than the norm, but there are other periods when it is lower. I have asked officials to look at the matter and there is no evidence over a 20-year run that pensioners buy goods that have that inflation time bomb ticking away inside them. There are times when inflation is higher, which may include recently, and times when it is lower, but over the long run there is no evidence for that proposition.

My hon. Friend the Member for Cardiff Central (Jenny Willott) welcomed the restoration of the earnings link, and the triple lock. I am grateful for her support. She quite properly put me on the spot about the future of the pension system. I accept her analysis; we need a pension system fit for the future. If we are to auto-enrol 10 million of our fellow citizens, we need to be confident that it pays to save, and that they will be better off. I assure her that that is absolutely central to our thinking about long-term pension reform. We are making good progress on that project.

The Chair of the Select Committee asked a number of questions. I will respond to one or two on the record, although she has explained why she is not here to hear the response. She kept making the point that the basic state pension is not the only part of a pensioner's income. Of course it is not.

I thought that the hon. Member for North Ayrshire and Arran (Katy Clark) made some sincere comments. She raised the issue of people with relatively modest occupational pensions who will get less under CPI. The state pension is bigger than all of those figures. Every one of the figures she quoted is less than the basic state pension. The package of Government policy on pension indexation is for an earnings link on the basic and a CPI link on the additional. The basic pension of every person she is concerned about is bigger than their additional pension, the earnings link in the long run is worth 2% more than prices and CPI is 0.8% less than RPI. The people she is most concerned about will overwhelmingly benefit from our package of policies. Therefore, I can assure her on that point. Taking the package as a whole, they will be better off, not worse off.

My hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) made an important contribution and pointed out that Age UK, which is very much an independent organisation, was delighted by the triple lock, because it is a historic move to give pensioners the best of earnings, prices, plus 2.5%. I wish only that we were able to do this in a normal year-in 16 of the past 20 years, earnings were greater than prices. People would then start to see the benefit of the earnings link and the triple lock, and in time they will.

The hon. Member for Arfon (Hywel Williams) quoted some civil service pension figures. I make the same
17 Feb 2011 : Column 1210
point to him. All the figures he quoted, based on average civil service pensions, prove my point. If we take them in isolation, CPI is lower than RPI, but people do not just get their civil service pension-they also get their state pension. We are putting more in through the state pension than we are taking away typically through the additional pension because of the relative sizes and the difference between the various indices. Our constituents write to us and raise the bit they see, but overall the state pension will more than make up for that for the vast majority of people, although not for people with very large pensions.

On the ratchet, I simply accept the hon. Gentleman's rebuke for fiscal irresponsibility. I will take it on the chin and pass it on to the Chancellor for him.

I enjoyed the contribution of my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) and his account of his conversation with Jack Jones. I am delighted to say that both coalition partners supported that. We needed the Chancellor on board for that one. I regard it as being to the credit of both coalition partners that we have been able finally to restore the earnings link. I am grateful to my hon. Friend for raising the case of his constituent. As he was describing it, I was thinking that I was sure I signed a letter on that the other day, and I gather he has now received it. I apologise to his constituent for the mistake that was made and I hope that that has now been resolved.

The hon. Member for Hayes and Harlington (John McDonnell) perfectly properly says that he will not support the order and that he is against mass means-testing and so am I. A pension system that allows too many people to retire poor and means that they have to be swept up by a leaky safety net is not a good, sustainable long-term pension system. I have set it as my goal to do something about that. We may not agree about these orders but we have common cause on that principle.

John McDonnell: Did the Minister ever consider a quadruple lock so that, earnings or inflation, CPI or RPI, whichever was the higher, would be used?

Steve Webb: We did look at that. Either one could say that what one is trying to do with pensions and benefits is protect pensioners' spending power-that would be a price measure-or one could protect people's position relative to the rest of society, which is an earnings measure. One wants to avoid silly small figures such as 75p, which is where the 2.5% comes from. To say, "But we will measure inflation according to different measures and we will pick the biggest" conceptually does not work for me. We could have done that, but in our judgment the point of revaluation is to maintain spending power fairly for the group in question. Our judgment is that CPI is the answer to that question.

There is a separate question about whether pensions should be higher or lower. In a way, the hon. Gentleman and the hon. Member for North Ayrshire and Arran are saying that we should be paying bigger pensions. It seems to me that that is an entirely separate debate from how we should correct for inflation. That is where CPI comes in.

John McDonnell: There is a point of principle that the Minister and I have argued over the past 13 years at least, which is that, whatever measure is introduced,
17 Feb 2011 : Column 1211
there should not be a loss. Having that quadruple lock would convince people that this is at least a way forward, because people would be protected against years such as those five out of the past 20 where CPI was higher than RPI.

Steve Webb: I come back to my point that as the basic state pension is a big part of pensioners' income, particularly for the most vulnerable, we are protecting their living standards overall-they will get bigger increases under this package of indexation than they would have on the basis of a straightforward RPI level alone. I believe we are doing the right thing.

I am grateful to my hon. Friend the Member for Finchley and Golders Green (Mike Freer) for his kind comments and I appreciate the expertise he brings to the debate. He was absolutely right that the idea that large numbers of pensioners will have large mortgages is quite implausible. It is true that 7% have some mortgage interest at the moment, but even those who face mortgage interest will typically have lower average amounts because they will be towards the end of their mortgage terms. Basing an inflation measure on an index that includes mortgage interest seems to me to be quite inappropriate for pensioners. As my hon. Friend pointed out, one consequence of CPI schemes such as the local government pension scheme is that it will help to put pensioners on a more even keel. As he also rightly said, this money has to come from somewhere-somebody has to find it-and this order will have the consequence of getting the systems on to a more sustainable basis. My hon. Friend tempts me on public sector pension reform, but I obviously must not pre-empt what Lord Hutton will say. He will be saying what he is going to say within the next few weeks, so we do not have much longer to wait.

Drawing the threads together, this debate has provided a worthwhile exploration of the issues. Our fundamental point is that the principal order will cost the Government £4.3 billion to protect and enhance the benefits for the people who need them the most. I am proud to commend these provisions to the House.

Question put,

The House divided: Ayes 247, Noes 19.
Division No. 212]
[4.6 pm


Alexander, rh Danny
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Norman
Baldry, Tony
Barclay, Stephen
Barker, Gregory
Barwell, Gavin
Bebb, Guto
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Binley, Mr Brian
Birtwistle, Gordon
Blackman, Bob
Blunt, Mr Crispin
Boles, Nick
Bradley, Karen
Brady, Mr Graham
Brake, Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Mr Steve
Brokenshire, James
Browne, Mr Jeremy
Bruce, Fiona
Bruce, rh Malcolm
Buckland, Mr Robert
Burley, Mr Aidan
Burns, Conor
Burns, rh Mr Simon
Burstow, Paul
Byles, Dan
Cairns, Alun
Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair
Carswell, Mr Douglas
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clark, rh Greg
Clarke, rh Mr Kenneth
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Cox, Mr Geoffrey
Crabb, Stephen
Davies, David T. C. (Monmouth)
Davies, Glyn
Davies, Philip
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Doyle-Price, Jackie
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Featherstone, Lynne
Field, Mr Mark
Foster, rh Mr Don
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Fuller, Richard
Garnier, Mr Edward
Gauke, Mr David
George, Andrew
Gibb, Mr Nick
Gilbert, Stephen
Gillan, rh Mrs Cheryl
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Grant, Mrs Helen
Grayling, rh Chris
Green, Damian
Greening, Justine
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Halfon, Robert
Hames, Duncan
Hammond, rh Mr Philip
Hancock, Matthew
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Haselhurst, rh Sir Alan
Heald, Mr Oliver
Heath, Mr David
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Hendry, Charles
Herbert, rh Nick
Hinds, Damian
Hollingbery, George
Hollobone, Mr Philip
Hopkins, Kris
Horwood, Martin
Howell, John
Hughes, rh Simon
Huhne, rh Chris
Huppert, Dr Julian
James, Margot
Javid, Sajid
Jenkin, Mr Bernard
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kirby, Simon
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lamb, Norman
Lancaster, Mark
Latham, Pauline
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Lefroy, Jeremy
Leigh, Mr Edward
Leslie, Charlotte
Lewis, Brandon
Lewis, Dr Julian
Lidington, rh Mr David
Lilley, rh Mr Peter
Lloyd, Stephen
Lopresti, Jack
Loughton, Tim
Lumley, Karen
Macleod, Mary
Maude, rh Mr Francis
Maynard, Paul
McCartney, Jason
McCartney, Karl
McVey, Esther
Menzies, Mark
Metcalfe, Stephen
Miller, Maria
Milton, Anne
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Morris, David
Morris, James
Mosley, Stephen
Mowat, David
Mulholland, Greg
Munt, Tessa
Murray, Sheryll
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Newton, Sarah
Nokes, Caroline
Nuttall, Mr David
O'Brien, Mr Stephen
Ollerenshaw, Eric

Opperman, Guy
Patel, Priti
Pawsey, Mark
Penning, Mike
Percy, Andrew
Phillips, Stephen
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pritchard, Mark
Pugh, John
Reckless, Mark
Rees-Mogg, Jacob
Reid, Mr Alan
Robertson, Mr Laurence
Rogerson, Dan
Rudd, Amber
Russell, Bob
Rutley, David
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Sharma, Alok
Shelbrooke, Alec
Simmonds, Mark
Skidmore, Chris
Smith, Henry
Smith, Julian
Soames, Nicholas
Soubry, Anna
Spencer, Mr Mark
Stephenson, Andrew
Stewart, Bob
Stewart, Iain
Stride, Mel
Stunell, Andrew
Sturdy, Julian
Swales, Ian
Swinson, Jo
Syms, Mr Robert
Teather, Sarah
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Truss, Elizabeth
Turner, Mr Andrew
Uppal, Paul
Vara, Mr Shailesh
Villiers, rh Mrs Theresa
Walker, Mr Charles
Walker, Mr Robin
Ward, Mr David
Weatherley, Mike
Webb, Steve
Wharton, James
Wheeler, Heather
White, Chris
Wiggin, Bill
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wright, Jeremy
Wright, Simon
Yeo, Mr Tim
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Ayes:

Miss Chloe Smith and
Angela Watkinson

Clark, Katy
Cruddas, Jon
Donaldson, rh Mr Jeffrey M.
Flynn, Paul
Hopkins, Kelvin
Hosie, Stewart
Jackson, Glenda
Long, Naomi
McDonnell, John
Owen, Albert
Pearce, Teresa
Robertson, Angus
Rotheram, Steve
Skinner, Mr Dennis
Smith, rh Mr Andrew
Weir, Mr Mike
Whiteford, Dr Eilidh
Williams, Hywel
Wishart, Pete
Tellers for the Noes:

Jonathan Edwards and
Jeremy Corbyn
Question accordingly agreed to.
17 Feb 2011 : Column 1212

17 Feb 2011 : Column 1213

Resolved ,



17 Feb 2011 : Column 1214


Funding for English for Speakers of other Languages Courses

4.18 pm

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): I wish to present a petition on behalf of the tutors and students of English for speakers of other languages-ESOL-in Liverpool. The petitioners believe that the proposed changes will have a devastating effect on ESOL provision, ESOL teachers' jobs and ESOL students, particularly those on low wages or on no wage at all.

I am grateful for the support of my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), who is unfortunately unable to be here owing to parliamentary business in Westminster Hall, but is also a supporter of the petition. There are 322 signatures.

The petition states:


Protection of Kingswood Green Belt (South Gloucestershire)

4.20 pm

Chris Skidmore (Kingswood) (Con): I wish to present the petition of the residents of Longwell Green, Hanham, Mangotsfield, Emersons Green, North Common, Oldland Common, Warmley, Siston, Bridgeyate, Bitton, Willsbridge, and Kingswood.

The petition states:


17 Feb 2011 : Column 1215

Housing Benefit

Motion made, and Question proposed, That this House do now adjourn.- (Miss Chloe Smith.)

4.22 pm

Jon Cruddas (Dagenham and Rainham) (Lab): I think that I now have two hours and eight minutes in which to speak on the single room rate-only joking. This debate dovetails with the last debate on benefits uprating, as often happens with Adjournment debates, purely by accident. Today, we have also seen one of the most dramatic overhauls of welfare reform in this country. I want to make a few comments on the likely consequences of changes to the shared room rate, sometimes known as the single room rate, proposed by the Government. I do not do so simply to make party political points, but because I am concerned about specific, substantive consequences that might emerge for many young people in this country. My comments echo those contained in a letter dated 2 November to the Minister for Housing and Local Government from 16 of the country's leading organisations providing housing and support services to homeless people.

Today we have seen a significant change in the Government's proposed housing benefit reforms, with the removal, supposedly, of the 10% reduction for those on housing benefit after one year on jobseeker's allowance. I suggest to the Minister that he might like to signal another change on the proposed benefit regulations. I doubt that that will happen, but I know that he will give thorough consideration to my points.

The shared room rate currently applies to single people under 25 on housing benefit in the private rented sector. Local housing allowance claimants who are single, under 25 and without dependants are currently eligible only for sufficient LHA to cover the rent of a single room in a shared house, rather than self-contained accommodation. Under measures announced in the comprehensive spending review, the threshold for the shared room rate will be increased to 35 years of age from April 2012. All single, childless adults under 35 will see their LHA cut from the current one-bedroom rate to the SRR. The Government estimate that 88,000 people will be affected by this change.

The Department for Work and Pensions housing benefit statistics show, however, that in August 2010 120,000 single people aged 25 to 35 years old were claiming LHA. The Minister might want to comment on that in his response, because it means that if the proposal goes ahead an additional 120,000 people will be competing for shared accommodation. That will be an issue not just in inner London, as we often hear in the House during debates about housing benefit changes, or even in outer London; the evidence suggests that it will affect tens of thousands of young-actually, not that young-people up to the age of 35 across the length and breadth of this country.

We know that the SRR causes considerable problems for young people, with many unable to secure or sustain affordable accommodation and left facing shortfalls, arrears and homelessness under the current regime. According to the housing charity, Crisis, the average loss will be £47 per week, with some people seeing their benefit entitlement literally halved.

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Even at current LHA rates, the difference between the one-bedroom rate and the SRR rate can be substantial. For example, according to Shelter, the shared room rate stands at £71 per week on average, while the rate for a one-bedroom flat is £137 per week. In the east Thames valley, it is £88 versus £150 per week; in inner east London, it is £103 compared with an average of £235; and in Oxford, the figures are £80 and £150. In more than half of all areas, shared accommodation rates are about one third or more lower than one-bedroom LHA rates.

Everyone will admit that those are very high losses from a very low baseline. Currently, the maximum award of local housing allowance-housing benefit in the private rented sector-is only £107 per week for a one-bedroom property, and that falls to just £69 for SRR claimants. Obviously, that is before other cuts to housing benefits kick in, which will reduce those rates even further. LHA rates will drop from the 50th to the 30th percentile of local market rents from April, and many 25 to 34-year-olds will therefore suffer a double wave of cuts and, arguably, have no other choice but to move.

For example, a 33-year-old on the Wirral is currently eligible for the one-bedroom rate and will receive £91 a week in LHA. The LHA cut will bring the one-bedroom rate down to £86 per week, but from that point they will be eligible only for the SRR, which is expected to be £56 a week, meaning a accumulative overall cut in the local housing allowance of some £35 a week. Cuts at that level will be replicated throughout the country and leave single adult households with unaffordable shortfalls in their rent. Many will have no choice but to move to cheaper accommodation. Crucially, however, owing to a lack of shared accommodation, many will be unable to find a single room and be forced to remain in more expensive self-contained accommodation, creating further shortfalls, the risk of eviction and, possibly, homelessness.

Steve Rotheram (Liverpool, Walton) (Lab): Does my hon. Friend agree that the proposed changes will have a subsequent impact, increasing homelessness especially in areas where people already find it difficult to get accommodation?

Jon Cruddas: That is one of the points that I want to address in the long time that I have to develop my arguments.

Some 75,000 people claim SRR, so the change will more than double the number of claimants, placing significant further pressure on the limited existing pool of shared properties. According to housing charities that deal with the homeless, the vast majority of people affected by the change will lose their current accommodation; and they will have to go somewhere. It is unlikely that landlords will accept such significant reductions in rent, or that someone on a limited income will be able to make up such shortfalls. To confirm what my colleague just said, tens of thousands of people currently in self-contained flats will therefore be forced to seek shared accommodation, or they will arguably become homeless.

There is simply not enough shared accommodation available. Current claimants already struggle to find an affordable property, with DWP figures showing that some 67% face a shortfall between their benefit and their rent, averaging out at £29 per week, compared
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with 49% of all LHA claimants. On anyone's account, that is a significant amount for people on a low income, and it will cause problems such as debt, arrears and homelessness, which all MPs will undoubtedly witness every week.

This change, as my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) said, is likely to cause more homelessness, including, in the worst instances, rough sleeping. Apart from the impact on individuals, it is extremely costly to the public purse. Crisis estimates that the annual cost of homelessness per person is between £9,000 and £41,000 per year.

For vulnerable people who have been homeless or are leaving supported accommodation, care or prison, sharing is particularly inappropriate and can be extremely detrimental to their well-being. Currently, the only exemptions from the SRR are young care leavers aged under 22 and those who receive the middle or higher-rate care component of disability living allowance for people who are severely disabled and need a carer. Other people with serious disabilities or illnesses, mental health or behavioural problems, or who are vulnerable in other ways, will not be exempt and will be expected to share accommodation-a situation which, in many instances, will be inappropriate, as professional advisers argue.

As regards homeless people and those leaving an institution, 20 to 35-year-olds are already disproportionately likely to end up sleeping on the streets, while 27% of rough sleepers in London are aged between 26 and 35, and 36% of Crisis's clients are in the age group affected by this change. The change will place significant barriers in the way of breaking out of the cycle of homelessness and undo progress that has been made by formerly homeless people who have now secured private accommodation. Charities working with young homeless people are often unable to move them into appropriate accommodation because of the SRR, and this problem must increase, all else being equal, as more people are restricted to the lower rate. A Crisis survey of schemes that help people to find private rented accommodation found that the low level of the SRR was the biggest policy concern.

There are consequences for hostels, too, as costly beds will become blocked with people unable to move on. For offenders leaving prison, sharing can be particularly inappropriate. There is already a problem with individuals under 25 bed-blocking probation hostel places because of the SRR, and that problem is likely to increase under the current proposals. It should also be noted that those convicted of serious offences are disproportionately likely to be in the same cohort of those aged about 25 to 34, and for many, sharing with others poses particular risks. Reoffending costs the economy £13.5 billion annually, but stable accommodation reduces the risk of reoffending by some 20%.

What about people with mental and physical health problems or dependency issues? For these groups, sharing can cause particular problems, as they may have particular needs in relation to the type of accommodation that they can occupy or find it very difficult to get on with other people. There are fears that other difficulties such as bullying could result. People with dependency problems may have a negative effect on others in a shared property.

Moreover, we should consider parents or expectant mothers. Non-resident parents who want to maintain a good relationship with their children can have them to
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stay in a self-contained flat, but this is unlikely to be possible or appropriate in shared accommodation. When parents live some distance away, that could mean that they are unable to maintain contact with their children. Pregnant single women may have to return to a shared property with their newborn, precisely at the point when moving can be financially and physically unrealistic.

At a time of rising youth unemployment, this change risks penalising young people even further. Those under 25 already face a lower rate of jobseeker's allowance and are therefore likely to struggle to make up even small shortfalls between the benefit and their rent. Competing with older tenants will make it even more difficult for them to secure affordable accommodation.

What about the impact on communities and houses in multiple occupation? This policy may increase the number of HMOs in deprived areas at a time when some local authorities are using recently introduced powers actively to tackle the prevalence of HMOs, which are often poor-quality properties run by unscrupulous landlords.

We should also consider the problems facing benefit recipients when searching for housing. Claimants can struggle to access shared accommodation, even where it does exist. Adverts for shared property are the most likely explicitly to bar benefit claimants. Research by Shelter suggests that as few as 7% of tenants in shared accommodation would let a spare room to a benefit claimant. Many house-shares are reluctant to let to benefit claimants because of real or perceived problems with the benefits system, such as delays in processing payments and the practice of paying benefit in arrears when rent is payable in advance.

The arguments that I have put forward have been technical, but it is useful to demonstrate the possible consequences in human terms, so I will report a number of case studies of single, homeless men that have been brought to my attention this week by various housing charities. The first is the case of a man with trust and gambling issues who moved from supported accommodation to a self-contained flat:

Another case study is of

He, too, moved from supported accommodation to a self-contained flat and is supported by a tenancy sustainment team. The case study continues:

That is the advice of the professionals.

Another case is that of a young man who was moved on from supported accommodation:

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Another case is that of a 24-year-old who has had one custodial sentence for a sexual offence and has breached his licence on more than one occasion:

Another case brought to me this week is of a 27-year-old client who is a sex offender. He has been living in a probation hostel and is ready to move on. He is vulnerable and requires ongoing, floating support. He needs self-contained accommodation because of sharing issues, particularly if females live at the property, visit it or stay with other tenants.

Another client has bipolar disorder and suffers from periods of extreme depression and paranoia. He is very concerned. He has been sectioned a few times and is worried about it happening again. He is being discharged and is having to return to a shared house. He finds others knowing about his condition very uncomfortable because there is still prejudice and misunderstanding about mental health issues. All those cases are concrete examples of the consequences of the reform that have been brought to my attention in just the last few days.

What is the Government's rationale for the change? I will anticipate the Minister's response slightly by offering a few reasons that he is likely to give. First, there appears to be an argument that many young people share houses and that, everything else being equal, many benefit recipients should therefore also share houses-thus the change to the single room rate. The Government will also argue that the age of the first-time buyer has risen. Although that may well be the case, it is not true that large numbers of people share properties. In fact, 2% of people share properties with someone who is not a relative or a partner. If the changes come in, 17% of those on local housing allowance will be in shared accommodation.

People who are not on housing benefit and who do share, such as young professionals in this city, do so largely out of choice so that they can live in a better location, live with friends or have more disposable income to save for a deposit to get into the housing market. It is simply not the case that the same characteristics apply for housing benefit recipients. What is more, people who are not on housing benefit have access to a much greater pool of properties because, as I have said, many landlords will not let to benefit claimants. People who are not on housing benefit generally have a choice about who they live with, which is rarely available to people on lower incomes.

Many who share accommodation by choice in the private rented sector will do so with one or two others. Largely, that will be more expensive, and so unaffordable on the SRR, claimants of which are therefore likely to have to share with larger numbers of people, with a higher turnover of tenants, and with little or no choice over with whom to share. Unlike students or young professionals, who tend to share with people whom they know or who have similar backgrounds, people on housing benefit often share with strangers, which can
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lead to inappropriate sharing situations, and suitability and security problems, and it can affect the sustainability of a tenancy. Supportive evidence is provided by the Joseph Rowntree Foundation, which has analysed the SRR and the views of claimants. It says that


I tentatively suppose that the Minister will put forward a second argument: that landlords will lower their rents or people can be supported by discretionary housing payments. The Government have argued that people might be able to renegotiate rents, but, given such significant losses in entitlements-some could be halved-that hardly seems likely. With our housing department, I have done a survey of letting agencies and the current state of the housing market in our local borough. In the cheapest housing market in Greater London, there is no evidence of a lack of demand for such properties, and therefore no evidence of a downward flexibility in rents in our communities. I tentatively suggest that that is probably the case around the country.

The Government also make the case that they have increased the discretionary housing payments budget to help local authorities to give additional support where they consider it is needed. However, the amounts are insignificant. Our borough is, I believe, the fastest-changing community in Britain because of the dynamics of the city's housing market. It is the lowest-cost housing market in Greater London, with the lowest rents, but it has taken the strain of the city's demographic shifts in past 10 years. In total, I believe that we will receive some £120,000 of that discretionary money, but I tentatively suggest that that will not quite be enough because of the extraordinary flows of people caused by the broader housing benefit changes proposed by the Government.

I therefore suggest that the argument that the discretionary housing payments are significant enough to allow for the system to bed in does not stack up. Indeed, over a four-year period, the total DHP pot is £190 million. That is intended to help both those who currently experience a shortfall and those affected by all of the changes to the housing benefit system. To put that in context, the Budget announced £1.8 billion of cuts to housing benefit, and estimated a further £215 million saving from changes to the SRR.

The third argument that the Minister might come up with goes something like this: some LHA claimants chose to live in shared accommodation, so there cannot be that much of a shortage. Indeed, some housing benefit claimants do choose to share when they are in fact entitled to live in self-contained accommodation. For some people in some areas, sharing is appropriate, particularly if they have friends they can share with or if they were in a shared property before needing recourse to housing benefit. However, it is quite a different proposition to ask 120,000 to leave their current accommodation and try to find a shared property.

In conclusion, I urge the Government to rethink raising the SRR threshold, or at the very least to delay the measure to give local authorities time to ensure that there is sufficient housing stock to meet the increased demand for shared accommodation. I urge
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the Minister to reflect on what Centrepoint says when he considers the consequences of some of the changes that I have outlined:

While achieving savings in the short term, the proposed changes could lead to greater costs to the taxpayer in the medium to longer term. I urge the Government to rethink.

4.44 pm

The Minister of State, Department for Work and Pensions (Steve Webb): I congratulate the hon. Member for Dagenham and Rainham (Jon Cruddas) on securing this debate. It is the second debate of his to which I have responded in the House, and he raised his issues in a thoughtful and measured way. I think that the House appreciates that.

This is a welcome opportunity to consider the shared accommodation rate. Many of the other aspects of housing benefit reform have been aired quite extensively, but this one has perhaps been a bit overlooked. It is important to focus on that and the potential implications. I want to reflect on the proposition: what is now known as the SAR currently applies to under-25s in the private rented sector, and is based on rent levels for accommodation where at least one room-for instance, a kitchen or a bathroom-is shared. The spending review has announced that, from April 2012, it will be extended to under-35s. Furthermore, as the hon. Gentleman acknowledged, there are exemptions for those in certain vulnerable situations. There is also the issue of discretionary housing payments, to which I will return, because he raised some important questions.

Clearly, one reason for introducing this measure is to reduce the budget deficit. It is worth noting, therefore, that it will save £130 million in housing benefits in 2012, rising to £225 million in 2013. There are two ways of looking at that: it is a lot of people, but it is also a significant amount of money for the Exchequer. It is not done lightly, but it is an important contribution to the Department's efforts to rein in the budget deficit.

On the number of people affected, the hon. Gentleman mentioned the figure of 120,000, but that is the answer to a slightly different question. We think that the figure will be in the order of 80,000 to 90,000. Those are the sorts of numbers we are talking about. He is right that the shortfalls, particularly in London, will be significant. Whereas with some of the caps-certainly the 30th percentile -in some cases the shortfall will typically be £10 a week or less, such shortfalls will be very different. The sorts of examples and figures that he gave are available on the internet. Other than in exceptional cases, it is unlikely that people will make up the shortfall from their spare cash. I take his point entirely that the shortfalls will be significant and that, although there might be occasions on which tenants can renegotiate their rents, that will probably be the exception rather than the rule. Although he kindly tried to write my speech for me-I was writing furiously all the good points he made-I am not going to say, "We don't need to worry, because landlords will just slash their rents", because that is not realistic.

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Why are we introducing this measure? As the hon. Gentleman said, the thinking behind the under-25s rate is to save money and have a level playing field for young people on benefits and other young people on low-paid jobs who commonly will share accommodation. For the under-25s, the figure is about 45%. That means that about 45% of single, non-student-students would obviously bump up the figures-childless people who are under 25 and not on benefits are in shared accommodation. That is our control group. He might ask what the figure is for 25 to 34-year-olds. The answer is 40%. He used a figure of 2%, and I have seen that number, because when I saw the crisis briefing, I thought, "Oh my goodness, 2%". However, it turns out that 2% is the answer to a totally different question-it includes all tenure types and all ages. The appropriate benchmark is that roughly two in five of the sort of folk we are talking about, and who are not on benefits, are sharing. The question is: what is the appropriate level of support from the taxpayer? Should the taxpayer pay the full cost of a self-contained flat for a 29-year-old, when many of their contemporaries would be living in shared accommodation? That is the thinking behind this.

If, therefore, this measure leads to shortfalls, and if renegotiation of rents is a limited option, what alternatives are available? I have mentioned the limited exemptions, particularly for vulnerable people. The hon. Gentleman downplayed the role of discretionary housing payments rather more than I would, so let me explain why. The discretionary housing benefit budget is increasing nationally from £20 million this year, to £30 million next year and to £60 million in each of the following three years. It is being trebled compared with the year just ending. However, we will not spread the money incredibly thinly across the whole country, but focus it where it is most needed, and the impact of the SAR is one of the things that will dictate where the money goes. I cannot forecast what his local authority will get beyond next year, but clearly London authorities as a whole will get a significant proportion of that increase-I strongly suspect that it will be more than the national average increase.

There is a case for saying that discretionary housing payments are the right approach, whereas using broad categories of people probably is not. The hon. Gentleman mentioned a whole set of people, but what was striking about his individual examples was how individual they were. We do not necessarily want to say that every ex-offender should have support, but to consider particular situations. Clearly, we need some block exemptions for the most vulnerable-we have that-but discretionary funding should be used in specific circumstances to ease some of the examples that the hon. Gentleman gave.

Discretionary housing payments are clearly a top-up, which are not meant to meet the whole rent. Housing benefit is already doing much of that, and discretionary housing payments cover the shortfall. The hon. Gentleman says that £120,000 is not much. Off the top of my head, a shortfall of £20 a week means a £1,000 a year, so the sum covers 120 people. It does not sound like a huge amount, but it will treble across the country and can help some of the vulnerable groups that he mentioned.

There is a question about the options for young people. The hon. Gentleman pre-empted one of my points, but I shall make it again anyway. He rightly pointed out that quite a few young people have chosen-some have freely chosen but others may have felt constrained
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because of availability-to live in shared accommodation. Even though they are over 25 and the benefits system would pay for a self-contained flat, they have chosen shared accommodation.

We think that nearly half the local housing allowance cases that are currently assessed under the shared accommodation rate would be entitled to higher rates if they lived in separate accommodation. Nearly half the people to whom we pay the shared accommodation rate-that is what they get if they are in shared accommodation-do not need to be in shared accommodation because of the benefits system, but are there anyway. I must admit that that surprised me. Clearly, that is not all about choice. It is partly about availability, but it again suggests that what we ask is not quite as unreasonable as perhaps it might seem at first sight.

When considering that group's characteristics, there is a question about how soon they can support themselves and not be on benefit. Clearly, a shortfall of £30 or £40 is difficult but manageable for a short period for many people, if they have been working, but difficult to sustain for a long time. That group tends to have relatively short jobseeker's allowance durations. If we consider the 25 to 49-year-olds, for which data are readily available, we estimate that around 60% of that group have been on JSA for less than six months. Clearly, after six months of a shortfall, someone is well out of pocket. However, although there might be a shortfall at a point in time for quite a few of those people, many might have a reasonable expectation of getting back into work and then being able to afford their rent in self-contained accommodation.

There is a question about what their options are if they decide not to carry on in free-standing accommodation. One option for some will be living with mum, dad or family. The hon. Gentleman and I both well know that it is not a perfect solution or something that works for people who have irreparable family breakdown. It is not a blanket solution. However, in general, that age group-I think they are called the boomerang generation-are doing precisely that. Many 28-year-olds and 31-year-olds are back with mum and dad or family. Perhaps they are saving for a house, and they have made the decision to stay with family because it is cheaper and they can put money by. Should we ask the taxpayer to pay for some 29-year-olds and 31-year-olds to have a flat of their own, rent fully paid, when others have to live with mum and dad and save the money? Again, it is a balance of fairness. Living at home with the family is not an option for all, but it will be for some. The hon. Gentleman talked about bonds with family and their breaking down-I do not know what living with your mum and dad at the age of 31 does to you, but it will be an option for some. At a time when money is tight, it is not an unreasonable thing to ask young people to include in the range of options that they consider.

There is also an important issue, which is underestimated, about being a lodger. Again, I take the hon. Gentleman's point about individuals with particular needs. Her Majesty's Revenue and Customs runs a special scheme called Rent a Room. It was introduced in 1992 to boost the private rented sector and was designed specifically to encourage individuals to offer spare accommodation in
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their homes as affordable rents to low-income groups such as nurses and students. Under the scheme, home owners and tenants who let furnished accommodation in their own homes are exempt from income tax on rental income of up to £4,250 a year. They receive relief on the rent and tax relief on meals, goods and services, such as cleaning and laundry. As people who get less than that amount do not have to tell HMRC, we do not know exactly how many people benefit from the scheme. However, we have survey data from the family resources survey, and roughly 130,000 landlords do not pay tax on their rental income under the scheme.

The situation is very dynamic, and as young people start to realise that they cannot get benefit for a flat on their own and start to look for lodgings, another family who may have lost income through redundancy or loss of overtime in these difficult economic circumstances might wish to let out their spare rooms. So the availability changes over time. There are tentative signs of a new supply of shared accommodation. Indeed, in east London, there is some suggestion that the housing benefit cap will mean that larger family homes will be converted into shared accommodation. I take the hon. Gentleman's point about HMOs, and I will come back to that in a minute. Clearly it does not solve the problem for those families, but in the context of this debate it could mean three or four new single rooms will be available for young people. The situation is dynamic and changing.

The hon. Gentleman raised the issue of delay or cancellation. Although the change starts in April 2012-on current plans-it would kick in on the anniversary of a claim. So someone who starts a claim in November 2011 would have it renewed in November 2012. The position will not change all at once on a single day so that everyone turns up at the local hostel saying, "I'm homeless." There will be a gradual change and people will start to explore other opportunities. They will know that the change is coming-we are talking here in late 2010-11-and there will be a chance for new supply to come on stream so that people can think about their options. We are keen not to do these things suddenly because we recognise that people will need time to adjust.

The hon. Gentleman mentioned some of the problems of HMOs, and the Government recognise that those need to be handled carefully. He will know better than most that HMO licensing is mandatory for houses of more than three storeys housing five or more persons. Local authorities also have discretionary powers to extend licensing to small HMOs where they have identified problems with management or property condition. This is known as additional HMO licensing. Local authorities will be able to impose conditions on those licences, such as requirements for occupation by a set maximum number of people or the provision of adequate amenities. Fines of up to £5,000 can be imposed for breach of a licence and letting a property without a licence is a criminal offence subject to a fine of up to £20,000. That is not to suggest that everything is perfect, but the Government are aware of the problems.

Since April last year, there has been a general consent for local authorities to introduce this additional HMO licensing and they do not need permission from central Government to do it. If councils think it necessary in their area-such as the hon. Gentleman's area-they have those additional powers to crack down on rogue
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landlords. It is important to point out that sharing a house with a few other people is not synonymous with slum accommodation and rogue landlords. Both versions are out there, and we want to encourage the provision of good shared accommodation and drive the bad guys out.

The Department has always planned to monitor the impact of these changes, but when the other place considered the housing regulations it was agreed, after discussions with Lord Best, that there would be full independent monitoring and evaluation of the housing benefit reforms. I assure the hon. Gentleman that we are committed to comprehensive review of the changes to housing benefit, some of which will come into effect from this April. That will include independent, comprehensive primary research that looks at the effects on different types of households in a range of areas including London. The evaluation will cover a whole list of things, including homelessness and moves; the shared room rate and HMOs; the impact on Greater London; black and minority ethnic households; landlords; the housing market; and the labour market. To update the House, we have just completed an expression-of-interest exercise for potential contractors for the research, and
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we are drafting a specification for the monitoring. The idea is that the results will be published.

We recognise that these are significant changes, and that there will be people who are adversely affected; that is why we have trebled the discretionary housing payment budget. The hon. Gentleman was absolutely right to raise his concerns about that group, and it is something that we are looking at carefully. I thank him for bringing the matter to the attention of the House and reassure him that we take seriously the points that he raises.

Question put and agreed to.

5 pm

House adjourned.


Official Report, 16 February 2011: In col. 1111, after "McKinnell, Catherine" insert "McLoughlin, rh Mr Patrick"

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