Welsh Affairs Committee - Minutes of EvidenceHC 159

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Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 14 May 2013

Members present:

David T. C. Davies (Chair)

Guto Bebb

Geraint Davies

Glyn Davies

Stephen Doughty

Jonathan Edwards

Simon Hart

Jessica Morden

Mr Mark Williams

________________

Examination of Witnesses

Witnesses: Lord Freud, Minister for Welfare Reform, Geoff Scammell, Head of Housing Strategy, and Martin King, Assistant Private Secretary, Department for Work and Pensions, gave evidence.

Chair: Good morning. Lord Freud, thank you very much indeed for coming along this morning. I am David Davies, the Chair of the Select Committee. We are looking forward to a good and constructive session on this issue, which has been the source of a certain amount of controversy.

May I start by asking Geraint Davies to ask the first of our questions?

Q196 Geraint Davies: Lord Freud, the cost of housing benefit, as you know, has more than doubled, which is one of the main drivers for these changes. Do you appreciate that 70% of that increase in cost comes from the private rented sector, due to higher rents? Would it not be a better strategy just to increase the number of new social houses?

Lord Freud: May I first introduce my colleagues? Martin King is my private secretary; his job is to make sure that my papers are in order. Geoff Scammell is a senior member of the Department’s housing policy team, so I might get him to do various technical bits and pieces.

As for the breakdown of the growth in the housing benefit bill, it has gone up; it has roughly doubled-£6 billion1. The breakdown is that, of the extra £12.6 billion, roughly half is inflation.

Q197 Geraint Davies: We have been told that 70% of it is mainly growth from private sector growth. My concern is this. In Swansea, for example, if we move someone from a three-bedroom social house to a two-bedroom private sector house, the rent will increase by 49%, so the housing benefit will go up, not down. Would it not be better to cap rents?

Lord Freud: If you look at it simply on the basis of the one-off transfer, clearly you are absolutely correct that it goes up. It tends to be a bit higher in the private sector than in the social sector, but you have to look at the whole picture.

If we take someone who is single and on their own out of a three-bedroom place and put them in a one-bedroom place, we then free up that three-bedroom place, perhaps for someone whom we had to put in temporary accommodation or in the private sector, so when you look at the whole transaction there is a saving.

Q198 Geraint Davies: If I may, I shall pursue this point. I appreciate that, but, historically, 70% of the rise is from the private rented sector. We have not built enough houses.

A woman came to me last week and said that she had been on the waiting list for 11 years to move from a two-bedroom flat to a one-bedroom flat, but she could not move, simply because there are no one-bedroom flats. In fact there are only 400 in Wales, and three local authorities do not have any at all. She is now facing the bedroom tax. Do you think that that is fair?

Lord Freud: Our latest figures show that roughly 25% of the social housing stock in Wales is one-bedroom housing.

Q199 Geraint Davies: They are not available. They are occupied, aren’t they?

Lord Freud: They may be occupied, but people can clearly switch.

Q200 Geraint Davies: They are full. Who is going to switch from a one-bedroom flat?

Lord Freud: There are some people who are overcrowded. Our figures for overcrowding across the whole of Great Britain show that about a quarter of a million people are overcrowded. In Wales that is 10,000 households. There are some people wanting to go into larger accommodation, and they could switch around. The biggest growth in Wales in this area is in private housing, which has proved to be more flexible than social housing.

Q201 Geraint Davies: Minister, the level of under-occupancy in the social sector in the UK is 10%, in the private rented sector it is 15%, and in the owner-occupied sector it is 49%, so it is not really a problem. We have been building two and three-bedroom houses for people with children, and when they grow up and their parents die we recycle the houses in the social housing sector, so there is not so much of a problem. You are now forcing local authorities to try to build one-bedroom houses for single people, but at the moment they do not exist, and people are being penalised because they cannot move into them even if they wanted to.

Lord Freud: They are building one-bedroom homes, and 25% of the stock is one-bedroom-

Q202 Geraint Davies: They are full.

Lord Freud: You say that they are not building, but they are building them: 25% are being built.

Q203 Jonathan Edwards: We are projecting that the housing benefit bill is going to increase substantially despite the benefit cap, despite the real-terms cut in annual uprating and despite the under-occupancy charge. The reason for that, of course, is that there is more inflation in the private rented sector than in the public sector. That is now going to be fuelled by the second home subsidy announced in the Budget. Would it not be better to introduce a policy of capping rents in the private sector, as they do very successfully in places like New York and the Republic of Ireland, rather than punitively attacking those in receipt of housing benefit?

Lord Freud: Our projections for housing benefit currently stand at £24 billion. Without a series of measures in both the private and the social area. Our prediction is that it will go up in two years’ time to £26 billion, and our measures are basically going to contain it. We are not talking about huge cuts. We are talking about containment; it is a £2 billion cut.

The problem with running a capping policy is that you cut off the supply. One of the things that has been most valuable to this country since the recession is that the private sector has proved so flexible. We have had an enormous increase in provision where people needed that support. One would have to look very carefully at any policies that undermined that provision. Since we began the LHA controls-the process was completed last December-private sector provision in Wales has gone up by 9%, despite us getting some control over those figures.

Q204 Stephen Doughty: Lord Freud, a moment ago you talked about the ease with which you felt that people could switch, and about overcrowding and under-occupancy, and suggested that, if there was some sort of magic switch-around, the allocative inefficiency in the system could be removed.

I have spoken to a number of social landlords in my constituency, and gone through with them in great detail the methods by which they are trying to move tenants around to ensure the most efficient use of their properties, and in the end the figures just do not add up. There are not the properties for people to move into-they cannot move around-yet they are going to be hit by the bedroom tax. They are using everything-Facebook groups, and housing officers actively going out and saying, "Would you move from here to there?"-but the reality is that there are just not the right number of right-sized properties to go round for their tenants. What do you have to say to housing associations like that, which are doing everything in their power to remove the inefficiencies?

Lord Freud: We are monitoring this very closely indeed around the country. We are currently talking intensively to 80 different authorities, just to get a flavour of what is happening.

Q205 Stephen Doughty: What are they saying to you?

Lord Freud: I have not assembled it yet, but we are currently working on it. I shall keep what we are gathering until we have it in a state to publish it.

Q206 Stephen Doughty: Would you write to us and perhaps give us the responses from the associations in Wales?

Lord Freud: I shall look into that.

Q207 Jessica Morden: I agree with my colleague that all the evidence that we have had so far in this inquiry is that there is a chronic lack of smaller properties in Wales. For somewhere like London the problem would be a lack of family properties, but in Wales the opposite is the case. Do you accept that this will have a huge impact in Wales? If people cannot get into smaller properties they will end up going into the private rented sector, which, as we heard from my colleague earlier, will end up costing a lot more?

Lord Freud: As I was trying to say, it will not cost a lot more because we are using the private sector in order to have a more efficient overall allocation. When you look at the whole of the transaction-in other words, filling a larger place with people who might have been in very expensive larger private accommodation-that is correct. The costs should not run away.

Q208 Jessica Morden: Some of the evidence that we have had from housing associations is that all the private housing accommodation was more expensive than the social rented accommodation in their local authority areas-all of it.

Lord Freud: Yes, but that is not the point that I am trying to make. I am trying to say that, if you move someone currently living in three-bedroom accommodation to one-bedroom private accommodation, which is more expensive, you can take a family on the waiting list out of three-bedroom private housing and put them in three-bedroom social housing. You save on the overall transaction.

Q209 Chair: Do you have figures for what you think will be saved overall?

Lord Freud: Yes. Our estimate is that we will save approximately £500 million in each of the two years.

Q210 Glyn Davies: Good morning, Lord Freud. There are two general objectives of the changes in housing benefit. One is to save some money. The other is a more efficient use of the housing stock. You only save money, of course, if people stay where they are. If there is a more efficient use of housing stock, that is very good but it will not save any money. You will have done research on what will happen. What financial savings do you hope to achieve in Wales by what you predict will be the overall movement resulting from these changes?

Lord Freud: I am not utterly convinced it is broken down into; I can have a look for it and write to you. I am not even sure whether we have broken it down generally to that level. I shall write to you, but I may not be able to provide the precise figures.

Q211 Glyn Davies: Some of our witnesses have said that there may be a more efficient way of getting better use of the housing stock. Persuading people to move could involve some financial help with things like removal costs and legal costs associated with a move. Do you think that that might be a more effective way?

Lord Freud: We would support that very much. Indeed, that is the thinking behind the substantial increase in discretionary housing payments, a substantial amount of which we would expect to go to transition costs as opposed to long-term support. Some people will need long-term support, but over this spending review period we have increased DHPs across the country to £360 million. Payments this year are £150 million. Payments in Wales will be just short of £6 million in the current year.

Q212 Glyn Davies: Do you see the changes in housing benefit leading to behavioural change in people in the rented sector? At the moment there is often an assumption that, when people move into a social rented house, that is their house for life. That is particularly so if people in the social housing sector feel that, although they have a larger house than is needed for a young family with one child, the number of children may increase, and they want to avoid another move. Are we looking for a behavioural change whereby people accept that they are going to have to move, depending on the size of their family, throughout their lives?

Lord Freud: What we are really saying is that there is a differential in treatment between the people we support in the private rented sector and those in the social rented sector, in that we pay people in the private sector according to their family size, but we have not been doing that with the social sector. We are trying to bring that treatment much closer together. In practice, people who are not dependent on the state have to make decisions about where they can afford to live. It is one of the most key sets of decisions for individuals to balance their aspirations with what they can afford, and people spend a lot of time worrying about that. We are looking to have the same sets of ways of thinking in the social sector for people who are benefit recipients.

Q213 Glyn Davies: The issue of behavioural change is interesting. We have seen the presentation of this issue, certainly on the media in Wales I have seen it three or four times, with a widow living in a large house who has always lived there. Her husband has died. What right do we have to persuade this woman to move from her three-bedroom house where she has always lived? This issue is going to be difficult to challenge in terms of what people are to do in that situation-although it is accepted that behavioural change is needed, and that there probably will be moves whereby people adapt to their position as life goes on.

Lord Freud: One of the key factors is that we are making this change only for those of working age, not for pensioners-because it is actually quite tough to ask older people to make these kinds of adjustments. It is important that we make these adjustments-behavioural adjustments, if you like-at a time when people can make them and actually handle them. That is why we are doing it for those of working age. Basically, everyone would like the biggest, nicest possible house that they could have, but there is an affordability issue. For the state there is a definite affordability issue at the moment, because we are still struggling with the most enormous deficit.

Q214 Glyn Davies: Just one small point: why are the figures for under-occupancy in Wales higher than in the rest of the United Kingdom? Do you have any idea why that would be the case?

Lord Freud: You are asking about the fact that 46% of people are affected.

Glyn Davies: Yes.

Lord Freud: I suspect that this is demographics. What we are seeing in the main is that the people affected are clearly people who are single, not people with families. When you look at the age-related groups, 360,000 of those affected-well over half-are between 45 and the state pension age. It is an age thing, and that is probably because of the demographics of Wales relative to the rest of the country.

Q215 Jessica Morden: Could you clarify your response to Glyn Davies earlier? I did not quite understand it. Your own impact assessment says that you will only reach the projected savings if people, effectively, stay put and pay up. How is that consistent with the fact that you want this policy to lead to the more effective use of your housing stock overall?

Lord Freud: There have been various surveys done on how many people will want to move. The best estimate that has come out of those is that roughly 25% will want to move. A reasonable proportion will find funding, either going to work or having the resources, and some will look for other ways, like taking a lodger or sharing-something like that. There is a range of responses that surveys have indicated will emerge.

Q216 Mr Williams: I want to turn to some of the specifics, which I suspect all colleagues are hearing about in their surgeries from certain groups in society. In particular, there is the issue of young children sharing bedrooms, and the appropriateness of that for the children. I shall quote from the National Housing Federation on its concerns about bedroom sizes and suitability for sharing. It says, "Some bedrooms will be able to accommodate two 15-year-old boys, for example, but some will not. A three-bedroom house with three large bedrooms might be appropriate for a couple and four children. But a three-bedroom house with one large double room and two small bedrooms suitable only for single occupancy might be appropriate only for a couple and two children."

It strikes me that some of the requirements are very blunt instruments indeed for some of the families that we are concerned about. In one of my towns I found myself in the invidious position of going around with a measuring stick trying to work out whether a boxroom could be a bedroom, let alone one for two 15-year-old boys. What guidelines are there for landlords and tenants on the appropriate size of bedrooms, given the rules that we have now put in place?

Lord Freud: We have deliberately not gone in with a set of criteria, because in the end that would be an incredible administrative burden. There may well be some apartments or houses that, when looked at closely, can be redesignated. You may find that the local authority or the social housing landlord may look at a boxroom and say that the house is possibly not a three-bedder but is really a two-bedder. We are expecting to see some redesignation on a very specific scale, but we are not expecting it on a mass scale; we would not encourage that to be played around with, but it can be. We would not expect it to be gamed, but we would expect some apartments to be looked at again. Where the configuration is not suitable for a particular family, again that is where one can look at exchanges, to make sure that you get the right configuration. It is very much the responsibility of the family, when they get an offer, to look at something that works for their family size and context.

Q217 Mr Williams: I respectfully suggest that in a rural area-a subject that we will come to later-the problem with that is the availability of that accommodation, or, quite frankly, of any accommodation.

I turn now to provision for disabled tenants. Housing associations have told us that they cannot afford to adapt accommodation for disabled tenants if they have to move, as they have already spent money on the original property. Again, we can all cite examples from our constituencies of extensive work and adaptations made for people. I appreciate what the Government have said about extra provision and allowing an extra room to be utilised for a carer who stays overnight, but many disabled constituents, for various reasons-a partner might need to sleep in a separate room, or it might be the nature of their illness-require an extra room. So far, that does not seem to have been factored in to what the Government are saying.

Lord Freud: What we have factored in is what happens where there are significantly adapted homes. We have put £25 million in this year, and by assumption thereafter, so that those people can be supported in those adapted homes, because it simply does not make sense to take someone out of a home and then put in all those adaptations somewhere else. Our figure for the whole of the country is that about 35,000 people are in that category.

Q218 Mr Williams: But you would accept that £25 million is a small sum given the enormity of the problem. At the time when that announcement was made, the characterisation was that disabled people per se would be in a position to be helped. That is not going to help many people with disability adaptations, is it? It is only a small proportion. Admittedly it is a decision for the local authority, but it is still a drop in the ocean of what is required, even for housing with adaptations.

Lord Freud: The support was specifically for housing with significant adaptations.

Q219 Mr Williams: Would you define "significant adaptations"-or is that the duty of the local authority?

Lord Freud: In some cases, with some adaptations, it is a question of having movable ramps and things like that that, so you can move those-but we are talking about significant adaptations, particularly where bathrooms and kitchens have been adapted for wheelchair use.

Q220 Mr Williams: Would it be more helpful if the guidance to local authorities were a bit more prescriptive? I hesitate to say that as a Liberal who believes in devolution of these responsibilities, but it would help the debate if the guidelines from the DWP had been a lot clearer about what the expectations should be. I think that this should be much wider than the Government suggest, but it is very unclear what the responsibility is. Some local authorities have not even created the guidelines in their own area yet, so there is a lot of worry.

Lord Freud: On the point that you raised about adaptations, our figures are that roughly 35,000 people across the country in this category have significant adaptations, and we have made specific provision of £25 million to allow those people to stay.

Geoff, do you want to add anything on the guidelines?

Geoff Scammell: Just to say that we are trying not to issue guidance around the use of discretionary payments. They are obviously, by their nature, discretionary. We want local authorities to utilise the money according to the demand in their areas and the particular problems of individual people. We have shied away from trying to be prescriptive, because it is very difficult for us at the centre to say, "This money must be spent in this way," if that does not accord with local needs.

Q221 Mr Williams: The problem is that that does not give much reassurance to many of our constituents.

I have one quick final question. You mentioned the monitoring that has been undertaken so far, and you say that you are going to look at the results. What is that monitoring a prelude to? Is the potential for a reaffirmation of Government policy in this area, or-because some concessions have been made, over armed forces personnel and foster carers-is it a possible prelude to large Government changes on this? I know that you are not yet going to publish the outcome of the pilots, but it would be interesting to know what direction of travel the Government are operating under.

Lord Freud: We are monitoring the introduction of this very closely ourselves, as I said. We are also running a major independent study over two years to look at the actual outcomes and results of this move. It is not a prelude to anything, except that we are determined to be absolutely on top of what is happening.

Q222 Jessica Morden: The Government have argued that this measure is about bringing the social rented sector into line with the private rented sector. But can you confirm that, when the size criteria were applied to the private rented sector, that was for new tenancies and not for existing tenancies, and that it was not implemented as fast as this?

Lord Freud: Private tenancies tend to roll over every year and are renewed. The LHA came in during 2008 under the last Government; it was as people fell out of their existing tenancies and went into the LHA when they renewed. I think that there is a residue left under the old system, but most people have switched over.

Q223 Jessica Morden: So it was not for existing tenants.

Lord Freud: It went as they switched over.

Q224 Jessica Morden: You talked earlier about the possibility of people taking in tenants. Do you appreciate that for a family with small children this may not be an acceptable thing to do?

Lord Freud: Yes, but the number of families with children affected is a relatively small proportion of the total-70,000 couples with children.

Q225 Jessica Morden: That is quite a large number.

Lord Freud: Then we have 150,000 lone parents. That is the proportion. I am trying to supply the figures, but the bulk are singles or people without children. Of single people under 60, there are 320,000, of couples without children there are 80,000, and there are another 50,000 aged over 60.

Q226 Jessica Morden: The question was whether, for what I would argue is a rather large group of people, it may not be acceptable to take in lodgers.

Lord Freud: It may not be, but there are other solutions. That is just one option, which may suit some people. I am not saying that it is a blanket solution. It is not; it is one solution that may suit some people.

Q227 Jessica Morden: What would the solutions be for families with small children?

Lord Freud: To earn money. It may be that one needs to look at finding more suitable accommodation, and there might be a switch in categories where there is a plentiful supply. By definition they need more than one bedroom, and the shortage is in one-bedroom accommodation, so there may be some switching that can be done there.

Q228 Jessica Morden: Money-could you elaborate on the money?

Lord Freud: People could go out to work.

Q229 Jessica Morden: You said earlier that this would be a tough policy to bring in for, say, pensioners. Do you appreciate that it might be tough for families with small children, who might have their children settled in school with family support networks around them, and that it will be very difficult if they cannot find the extra £12 a week? Many of the low-income families in my constituency are going to find that quite hard. To uproot and move out would be extremely tough as well.

Lord Freud: I am not necessarily talking about uprooting. There may be switching within their locality, and that indeed is what a lot of social housing landlords are arranging.

Q230 Jessica Morden: We talked earlier about the chronic shortage in Wales of smaller accommodation, and there is a real problem with people being able to do that.

Lord Freud: On the numbers of different bedroom sizes in Wales, I do not have a fuller breakdown than that. I do not have the two and three-bedroom breakdown.

Q231 Jessica Morden: Do you accept that this is an extremely harrowing policy for families and for the disabled people that we mentioned earlier, and that it will have a real personal human impact on people?

Lord Freud: What we are looking at here is a policy designed to get control of spending, which has been out of control, which will bring to the social sector the same kind of decisions as are taken by people who are in the private sector, or who are not receiving benefits.

Q232 Chair: I see that colleagues are desperate to ask some quick questions, but may I chuck one in now-perhaps a slightly more helpful one?

Do you not think it entirely wrong that, until now, many local authorities have apparently had a policy of just handing out large houses to people who do not even have a family, or perhaps have only one child, on the basis that one day they may well have some? Surely we should be expecting everyone, whether on benefits or in work, to live by the same disciplines as those of us who are in work. When I was young I had a small house; it got a bit bigger as my family got bigger, and, when I retire and the children leave home, I might have to downsize again. Surely it is rather discriminatory to expect people on benefits to live in a different world-one without those constraints.

Lord Freud: In practice, that is what has been happening. In some cases there has been a failure to address the fact that household sizes in this country have been getting smaller, and we have not really adapted our building patterns. That is something that this policy may start to address, getting people to start thinking about making provision that matches the kind of society that we are and have become. Bluntly, with housing being so expensive in this country, we cannot afford the overprovision of going on without adapting to how people want to live.

Chair: There may now be some slightly less friendly questions from my colleagues.

Q233 Stephen Doughty: This is a small practical question. In a number of your answers so far, Lord Freud, you do not appear to have the specific figures relating to Wales. As you are before the Welsh Affairs Committee, I would have expected you to have them. These are huge decisions that you are making, and obviously there are some very particular circumstances in Wales. Could you provide us later with an understanding of these detailed figures, on which you are making the quite grand assumptions that underpin this policy? I am a bit worried that you do not appear to have a grasp of the detail on some of these questions.

Lord Freud: I rather resentfully refute that. I have provided a lot of very specific Welsh particulars. When I have not been able to, it is because they do not exist.

Q234 Stephen Doughty: Surely they should exist.

Lord Freud: There was only one instance when I could not give a figure. I have a breakdown between one bedroom and more, but I do not have a breakdown between two and three bedrooms for Wales. I do not think that the figures exist.

Q235 Geraint Davies: The Welsh Assembly spends about £15.7 billion, and you say that you are looking to save £6 million. How can you justify the level of trauma for thousands of families that Jessica Morden mentioned-young families, people with disabilities and the rest of it-for this very small saving? In Swansea we have spent hundreds of millions on the local authorities. It is a very small saving for a massive disruption of some of the most vulnerable people in our society. How can you justify that?

Lord Freud: The £6 million figure is the amount of DHP; £5.8 million is the amount of DHPs this year that-

Q236 Geraint Davies: What will we save from this in Wales-or do you not know?

Lord Freud: That is the DHPs; the saving out of the total-I shall see whether I can satisfy Mr Doughty on that.

Chair: While you think about that, Lord Freud, and consider it carefully, I shall bring in Simon Hart to ask another question. We shall go back to the answer to the previous question once inspiration has been provided.

Q237 Simon Hart: We have heard quite a lot of examples of the negative impact of these policies, with individual examples and comments from Members around the room. However, have you made an estimate-is there an estimate-as to the number of families that will benefit from this? To pick up on the use of the word "trauma", some people will go from the trauma of being in desperately overcrowded accommodation to being in less closely packed accommodation. What estimate have you made of those in Wales who might benefit from all this?

Lord Freud: I think that there are 10,000 families in overcrowded accommodation today, and the waiting list in Wales, from memory, is running at 100,000, but I can get a precise figure. Those are the groups that are likely to be helped by this.

Q238 Simon Hart: It would be useful to get some idea that there are some winners as well as some losers. At the moment we are looking at the losing figures rather intensely-quite rightly, too-and we all know of examples where this seems not to work too well, but I would like to see your figures and the research about where it will relieve pressure on families, and the extent to which it will do so.

Lord Freud: We have some waiting list figures-those are the figures that show the people who are going to benefit-that I can make available.

Q239 Simon Hart: That would be very helpful. Presumably they would benefit provided that there was a property into which they could go. Sitting on a waiting list is hardly a benefit.

Lord Freud: That is the problem. Across the country there are 1.8 million people sitting on social housing waiting lists. I correct myself: there are 90,000 people-families-on the waiting list in Wales, not 100,000. Those are the beneficiaries. I have a much more precise set of figures that have been broken down. Cardiff, for instance, has 12,000 on the waiting list, and Swansea has 5,000. Those are the beneficiaries. As I said, there are 10,000 people in overcrowded accommodation in the social rented sector-more than 5% of people in that sector. Those are the potential beneficiaries.

We have put out some new figures today on how many spare rooms we estimate there are. Across the country there are 1.5 million spare bedrooms; in Wales there are 100,000 spare bedrooms. A proportion of those is what we are trying to unlock.

Q240 Simon Hart: Forgive this quick add-on question. Those bedrooms are genuinely spare, are they?

Lord Freud: We think that a proportion of those will be released as people downsize. As we say, the best guesstimates or surveys suggest that about 25% of people will want to downsize.

Q241 Simon Hart: I want to ask an additional question, following on from some Welsh Assembly evidence that we took a while ago about the availability of housing, particularly in the part of the world that I am familiar with, where, with the best will in the world, there is a problem with the Assembly’s failure to meet its building projects. Some pretty unhelpful planning obstacles are also being put in the way, particularly, in my area, by the national park planning authorities. In your assessment of the success of this project, have you factored in some of the local obstacles that prevent the availability figure from improving at the rate necessary to minimise its adverse effect?

Lord Freud: That is clearly not my Department’s responsibility.

Q242 Simon Hart: It may not be, but the consequences probably are.

Lord Freud: I can say that we are very worried about slow building in this country. The Government, as you know, have put in a series of measures to boost the construction of homes, both social and private. In Wales the social housing grant was used to build homes, and in 2011-12, the latest year for which we have figures, the social housing movement built just short of 2,000 homes. We are hoping and expecting that the measures that have now come in to boost building will work.

Q243 Simon Hart: That is fantastic, but the house building programme has a pretty long lifespan. The proposals that you are introducing in terms of housing benefit-which I support, by the way-are immediate. I am just concerned that you are rather crossing your fingers and closing your eyes and hoping that it is all going to get better in the housing market. But I can tell you that in the Pembrokeshire Coast national park you haven’t got a dog’s chance of building anything like the number of properties needed to absorb the impact of the policy that is already in place now. That is the problem. It is no good me turning round and saying, "It will all be all right in 10 years," because it probably will not be.

That leads me to my last question. Both my local authorities in west Wales manfully do a pretty good job in implementing this policy, but they both say that the one thing they do not understand is why the Government did not introduce some kind of transition period, as previous Governments have done with every other major change to housing benefit and housing-related matters over the generations. A transition period, even of six months to a year, would have enabled us to circumvent some of the problems that members have put forward.

Lord Freud: I agree with some of that thinking, and we have tried to address that through the discretionary housing payment route. Basically, money is available, and quite large sums. The total that we have transferred this year is £150 million, with £5.8 million for Wales, to try to handle that transition and smooth it. That is what it is for, and that is how we aim to handle it.

I neglected to answer an earlier question from Geraint Davies. The total effect of all the measures, including this one, is that we are looking to see savings of £100 million per annum against a total spend of £1 billion.

Q244 Geraint Davies: The latest revised figure for the UK is £400 million. Are you saying that a quarter of that is going to be saved in Wales?

Lord Freud: Two billion is the total across the country.

Q245 Geraint Davies: Two billion? You said £500 million earlier. I am talking about the bedroom tax.

Lord Freud: I am sorry; I gave you the figure for the total savings-

Q246 Geraint Davies: The bedroom tax in Wales?

Lord Freud: No, the total savings of all of the measures, LHA and social housing.

Q247 Geraint Davies: What is the saving from the bedroom tax in Wales? Do you know?

Lord Freud: I shall have to write to you.

Q248 Glyn Davies: I have a quick point following on from the point that Simon Hart was making. I have looked at the figures in the Library for social house building for the last 20 years, and over the last three years they have fallen significantly in Wales. It seems to be at the root of your ambition to resolve this issue. Unless we find a way of building a lot more houses in Wales-removing some of the planning obstacles and some of the extra costs required to get permission, such as bat surveys, flood surveys and everything-else-under-the-sun surveys, and the extra costs of building regulations and so on- the houses just will not be built. The figures have dropped from an average of 10,000-plus down to about 5,500. The trajectory seems to show that we are building less and less houses to satisfy the need.

Lord Freud: Clearly that is a concern, and there are measures in place to boost the numbers. I am not personally aware of the specific measures needed for Wales. I am way off my-

Glyn Davies: I knew that, but I wanted to say it.

Q249 Guto Bebb: I start with a general question: what exactly is the point of discretionary housing payments? Secondly, you have talked about an increase in Wales of £5.8 million, and I have previously seen a figure of about £6.2 million, but whichever it is, how did the Department reach that figure? What is the general purpose, and how did you get to that figure?

Lord Freud: The total figure is broken down into four elements. One is baseline funding, and then there are the figures for LHA reform. I can give you exact figures of how the DHP is broken down. Just short of £1 million is the normal core funding that we have run through; just over £1.5 million comes out of the LHA changes; the spare room subsidy figure is again £1.5 million; and the benefit cap support is just short of £2 million. That £5.9 million, rounded, is how the DHP has been built up.

Q250 Guto Bebb: In my local authority area the increase is about £300,000, almost a doubling of the money being made available. One of the concerns that have been expressed locally is whether that sort of support will be ongoing, or whether it is a one-off. Your comments on that will be quite interesting. In terms of how the money is used, planning will obviously be important.

Lord Freud: I clearly have to choose my words very carefully, as you will understand, because I cannot commit into the next spending review. We have spending committed for this year and next year, and the total for the country is set to be £120 million next year, but that has not yet been broken down. There are elements that it is fair enough to presume any Government would want to maintain, particularly around the spare room subsidy, which is designed particularly to help disabled people with adaptations. That is the best that I can do. There are transitional elements and elements that are likely to be maintained.

Q251 Guto Bebb: My final question is this. A lot of concern has been expressed in a Welsh context about the lack of rules coming from the centre. Personally I find that very strange, because, generally speaking, the Welsh Assembly goes for more power, yet on this issue it wants the decisions to be made in London. Do you find it odd that the responsibility given at the local level on this issue is creating such a response from local authorities and the Welsh Government?

Lord Freud: One of the Government’s big policy moves is to localise support for people who are more vulnerable. Last month we transferred important elements of the social fund so that localities can create a welfare support system. We have transferred these areas of support, with discretionary housing payments, and I am looking to creating a local support service framework in different localities in the context of universal credit, so that we look after people who need support by giving them the right support for them, which can be determined only on a local basis. It is hopeless when central Government try to lay down specifics; at the centre, we just do not know enough about what is required on the ground.

Q252 Mr Williams: I said that I would come back to rural areas. I do not wish to denigrate the efforts of my colleagues from urban constituencies, but I want to ask about social disruption. The concern that has been raised is that, if there is accommodation available, people face the prospect of having to move from their communities. I represent about 147 villages in my constituency, and, although I appreciate the earlier comments about people aspiring to bigger houses and possibly downsizing, there is a lot to be said for social cohesion and stability in rural communities. I am thinking about children prospering in their schools without having to move, of accessible travel distances to work in areas where there is no public transport, and, of course, of the importance of family networks. How much consideration was given to that dimension to this debate, first with the emergence of these proposals and now the legislation?

Lord Freud: That is one of a number of issues that we looked at closely, and it is one of the issues that we are monitoring very closely at the current time.

Q253 Mr Williams: This really is critical. I shall cite one example. If a village school with 25 children is fighting for school numbers to keep the school open in the community, with all the roles that the school performs, the prospect of two or three families with two or three children each having to move elsewhere will have a real impact on the viability of that school. The ramifications go much wider than the arguments that we have heard today.

Lord Freud: I hear that point, obviously. We are watching the rural situation closely, but I have to point out that the main impact of this is not on families with children, who if anything are usually a bit short of space-that is where the overcrowding comes from. It is on people whose children have moved out, and on older people. You can see that from the statistics that I gave. However, there may be some particular examples, and, in a particular circumstance where a family happens to be affected and nothing can be done, we would expect the local authority to act. That is exactly where a local authority’s knowledge of the situation can be brought to bear sensibly. That is why we have localised.

Q254 Chair: Lord Freud, I am rather more sympathetic than some of my colleagues to what you are trying to achieve, but the one thing that really worries me is the issue of direct payments. In fact, I took the matter up with Iain Duncan Smith, who tells me that it will be absolutely fine and that it will teach everyone budgeting skills. Do you buy that argument?

Lord Freud: Everything that Iain Duncan Smith says I support absolutely-but let me amplify what he was referring to. What we are looking at here is moving the norm over to people being responsible for their own payments. We are introducing UC, which is aimed at making sure that it always pays to work, and that it is easy to move in and out of work, if you are unlucky enough to have had to move out. We can do all that, but, if you then have to change all your arrangements to pay rent at the moment when you move back into work, there is still a big artificial barrier to that smooth interface, and we want to move it.

We know that this is a big change, and we are going to do it carefully. We are doing the housing demonstration projects-one, the Torfaen project, is in Wales-to find out how best to do this. The emerging structure that we are looking at is that clearly we need to keep the people who really cannot handle it off the system, so they will remain on managed payments. There will be a large group of people who will remain on managed payments.

Q255 Chair: A large group, Lord Freud?

Lord Freud: Yes, a large group.

Q256 Chair: The impression I had from an earlier evidence session was that only a very small number of people would be kept off.

Lord Freud: Let me give you an impressionistic indication. In the private rented sector, which is on local housing allowance, we currently have 24% of people on managed payments. That is the kind of proportion, but you might expect social housing to have rather more. There will be a proportion.

Let me explain how we will arrive at that figure, because this is vital. We have found that there are four categories of people who really need an awful lot of support to manage, so we have measured what we call the support points required. Most people need one or two, or maybe three. There are four groups that need 12 to 14, and they are people with learning difficulties, people with mental health problems, the homeless and those with addiction problems. We are likely to keep the bulk of those off the system.

Then we are looking at a system-this is what the housing demonstration projects are finding out-in which, when someone who we thought could manage, and whom we provide with support to manage, has built up a period of arrears or an amount of arrears, we will switch them back into managed payments and recoup the money reasonably rapidly to go back to the landlord. We are trying to establish through these projects what the right level of arrears for this would be, and we are now getting pretty close to a view. The one commitment that we have made is that we will not undermine the financeability of social landlords. That is the kind of system that we are looking at currently.

Q257 Jonathan Edwards: In the initial stages, who is going to be responsible for identifying that vulnerable group-the 24%? Is it going to be the Department or the social landlords?

Lord Freud: The final decision will be made by the DWP, by a decision maker, but we will be taking input from relevant authorities; that includes the social landlord, who will have an important input.

Q258 Geraint Davies: I understand that the number of people receiving payday loans in Wales has increased from 17,000 in 2011 to 30,000 in 2012. Prior to that the number was not measured because it was so small. That is an enormous escalation. Do you really think that if people who can barely cope are given the money we will not end up with massive rent arrears because they cannot manage their affairs properly?

Lord Freud: The group that is already in arrears or severe debt is another group that we need to worry about. We are looking for a range of support for people when we move them over. A lot of people will need support and advice on how to manage, and they should have the right kind of accounts so that they can use direct debits; we are also looking at budgeting accounts. We are trying to boost the credit union movement, and we have just put out £38 million to them so that they can grow.

Geraint Davies: Why not just pay the money directly to the landlord?

Chair: That is two questions, Mr Davies, and I have to bring in Stephen Doughty, your colleague, to ask his question.

Q259 Stephen Doughty: It is not often that the Chair and I agree, but I share his deep concerns about this, and how it will impact in practical terms. We have obviously heard a lot of evidence from social landlords in Wales, and we also have the example of the Bron Afon project and the other pilot areas. What is coming out from those is that the bedroom tax and the direct payments will increase rent arrears quite significantly. That is going to have a significant impact on landlords’ financial viability and their ability to provide services, including to some of those vulnerable tenants whom you mentioned. What is your reading of the evidence from that pilot project and the other pilot projects?

Lord Freud: My reading is that it is very valuable. The structure that we are looking at will end up with a minimal financial impact on them. That is what I aim to design.

Some figures are coming out later this week. I had better not refer to them as they have not yet been published, but they will be out soon, and will be in your evidence base. The most recently published figures show that the average has been 7%, but that is before you look at switching people back into managed payments if they cannot handle it and then getting the arrears back to the landlord. When you net it down, if you introduce a system like that, the actual arrears and write-downs will be very small indeed.

Q260 Stephen Doughty: I have to say that that figure does not quite tally with what I have been told by some social landlords locally. One was telling me that it was as high as 11%, based on some very careful financial modelling, including taking account of many of the issues that you mentioned. Do you think that you need to look at this again?

Lord Freud: There is only one place in Wales where it is happening, and I can tell you that the figure there is not 11%.

Q261 Stephen Doughty: This is information that I have had directly from social landlords. That is beyond the pilot project.

Lord Freud: All I can say is that we are working on a structure. I have made a commitment that direct payments will not undermine the financeability of social landlords, and we are working on a structure to make sure that we can combine moving a lot of people into direct payments, helping them to handle that, and not undermining social landlords.

Q262 Stephen Doughty: Are you willing to step in to bail them out if they get into financial difficulties?

Lord Freud: I am going to make sure that there is a system whereby they do not get into financial difficulties because of this.

Q263 Stephen Doughty: Is that support going to be provided by the DWP?

Lord Freud: No, it is not support; it is the structure of how this is going to work. There will be support in the sense that we will help get the arrears back, and we will do the switchover. That is where we will provide support.

Q264 Stephen Doughty: Given that it costs about £4,000 to support and rehouse evicted tenants, do you not accept that this whole situation is potentially transferring fiscal liability to the Welsh Government and local authorities, and to social landlords themselves, if the DWP is not there to back up those who do not cope with these changes?

Lord Freud: What I am saying is that the system we are developing will provide financial support to social landlords. It will not undermine their financeability.

Q265 Stephen Doughty: Have you surveyed all the social landlords in Wales? Are you aware of what they think so far of the changes, and of what their own financial assessments are?

Lord Freud: As I say, we are talking all the time to social landlords and local authorities right round the country, but they are not in a position to comment yet on a structure that we have not released.

Q266 Stephen Doughty: Okay, but do you not think that you should be checking that structure with them? They have obviously already done financial modelling themselves, and clearly you are thinking of changes that you say will mitigate the effects, but ought you not to be testing that out with them to see if that fits with the reality as they see it on the ground?

Lord Freud: We are doing the most elaborate work with these six demonstration projects to find out exactly what matters. It would be crazy to leap in with a conclusion and a structure before we have all the learnings out of that, so we are gathering the learnings, pulling it all together and coming out with a structure. Clearly people will be commenting on that structure. That is work in progress; indeed, I can tell you that it is work in very active progress.

Q267 Stephen Doughty: Were you surprised by the figure from the Bron Afon housing association? Were you surprised by the extent of the problems that it was facing and the increasing rent arrears?

Lord Freud: Interestingly-I think that I can say this-Bron Afon is one of the better performers.

Q268 Stephen Doughty: But it has still seen a significant increase in arrears.

Lord Freud: Well, it is one of the better performers. The arrears go down as you switch people who cannot manage into managed payments. That is your protection mechanism. At the beginning, when you have a somewhat indiscriminate number of people going into direct payments, you may start off with a large figure. It then shrinks as you move those people out and recoup the money.

The trick with the whole system is to make sure that the people who are likely to be a problem do not go into it in the first place, or not without a lot of specific support, which we can do steadily. We learn both those things-who goes in and what the switch-back mechanism should be-from the housing demonstration projects. That is the point of this learning.

Q269 Jonathan Edwards: Broadband services can be particularly poor in rural areas. What consideration did the Department give to that underlying fact in terms of infrastructure problems when you initiated your policy of being able to claim only via online services?

Lord Freud: It would not be sensible in the 21st century to build a new service that was not digitally based. We build it, and it can be adapted in the years to come. I am expecting us to be relying on this for many years-decades. We relied on the last one for about 60 years. Clearly broadband connections will improve in the years to come. We are looking at getting 4G in reasonably soon, and planning out 5G. Getting it on people’s phones is clearly something that we can do. Where there really is no digital availability, we will still have the phone. We are tiered down. Effectively, we are looking at four services-a digital service, a digital service where you can talk to someone on the phone at the same time to help you when you need it, a phone service and-the most expensive-a face-to-face service. That is how we are tiering it, but the service itself will be digital. In other words, the intermediary or adviser will be able to see in digital terms what is happening at the same time as the claimant.

Q270 Jonathan Edwards: Over the weekend, news broke about the death of Stephanie Bottrill from Solihull. What has been the response of the Department to that tragic event?

Lord Freud: It is a desperately sad and tragic event, as you say, and I and my colleagues send condolences to the family. However, I am not in a position to make any further comment. The relevant authorities clearly need to investigate what actually happened, and we do not know yet.

Q271 Chair: Lord Freud, one or two people want to ask some very quick questions. May I start by going back to the point I made earlier and ask why it was decided to devolve in Northern Ireland, and to have a system whereby people continue to have their rent paid directly to the landlord rather than doing what we are doing in the rest of the UK?

Lord Freud: Social security is devolved in Northern Ireland, so it is up to them to build the system that they want. I suspect that, in practice, the system that they run will not be that different in a lot of ways from the one that we have elsewhere.

Q272 Geraint Davies: You said that you were going to move those who could not cope back into direct payments. I wondered whether you thought that this was acceptable, given the cost and the trauma to those individuals. These people may be dysfunctional and may have various problems, and they will have very little money, but you will be allowing them to drift into arrears and anxiety before eventually concluding that they cannot cope, and then move them back. Will you reinstate them? These people really cannot cope. It would have been better to put them on direct payments in the first instance, would it not?

Lord Freud: Our aim will be to put people who cannot cope on what we call managed payments, which means payments straight to the landlord; there is so much confusion over the term "direct payments". Our aim is to do exactly that for people who really cannot cope. We aim to keep them off that system at least until we can really provide support that will gradually get them over.

Q273 Geraint Davies: I have a second completely different question. Do you anticipate a level of migration of people from England into Wales? Have you done forecasts? Have you pictured the demography, given that there are different levels of under-occupancy in Wales and England? Are we looking forward to an influx of people from England into social housing?

Lord Freud: We are not expecting that. One of the forecasts under the LHA was that there would be mass displacement of people. We simply have not seen that as a result of the LHA, and we are not anticipating it as a result of any change in social housing.

Q274 Jessica Morden: Let us go back to when we were talking about people making up the shortfall and the extra payments for housing benefit. You said that they could go out and make some money; those may not be your exact words, but we can look them up later. Do you think it important to remember that a significant number of housing benefit recipients are in work but on low wages, and that at a time when wages are stagnant it is a way of helping them out?

Lord Freud: Yes. Some of the people are in work, and clearly many of them are used to making partial payments of their housing benefit themselves.

Q275 Jessica Morden: What would be the proportion in Wales of people in work claiming housing benefit?

Lord Freud: I shall have to write on that precise point.

Q276 Jessica Morden: I have one last point, which was not covered earlier, on the issue of separated parents. We have seen in evidence that they are strongly affected by this. How do you feel about this? I have certainly seen fathers who are used to having their children over at the weekend but who are now not going to be able to do that. How do you feel that that will affect parents’ access to their children?

Lord Freud: We estimate that roughly 60,000 people are non-resident parents who have some contact with their children, both in the private rented sector and in the social rented sector. In the private rented sector the extra bedrooms go to the person who has the child benefit, so we are basically bringing it into line. The cost of giving one extra bedroom to those people would be £50 million a year. It really is a cost.

Q277 Jessica Morden: Do you worry about fathers getting access to their children at the weekend and being able to have that kind of relationship with them?

Lord Freud: I do worry about it. These are clearly measures about costs. Family breakup, as we all know, is one of the most enormously expensive things, both for the individual and for society, but the issue is: how much of that cost can the state afford to bear?

Q278 Chair: This is not meant to be in any way a controversial question, although I can feel that it might turn into one. If people are having their children over and the children do not permanently reside in that house, is there any reason why temporary arrangements, such as the use of sofa beds and so on, cannot be made? Is there anything to stop people from sleeping in their front rooms if they have to, just as we all might do from time to time if we have guests?

Lord Freud: I remember that, when I had one bedroom, my most reliable asset was a sofa bed.

Q279 Chair: I am very familiar with one myself. There is nothing to say that local authorities are stopping people using sofa beds, is there?

Lord Freud: There is a range of things here. Some people may find that it is worth while spending the extra £12 a week to have that facility. Others will use a sofa bed. The issue is that dual provision of bedrooms is expensive. Basically, you are giving a child a bedroom in two places. It is a very expensive thing for the state to do, and currently we cannot afford it.

Chair: I thought that that question might generate a bit more interest.

Q280 Geraint Davies: On that point, in terms of the numbers that we are talking about, I have had someone coming to me and saying that, if they have £20 a week to spend on food and clothing after paying their utility bills and bus fares, their income may go down to £12 a week. At a time when we are seeing food and energy prices and so on going up, do you not think it a bit harsh that, in order to save, say, £7.50 a week by not having to pay the bedroom tax, they are effectively denied access to their child? Are we not penny pinching in inflicting such awful trauma on the poorest in our communities?

Lord Freud: You are adding two things that, by definition, you would not add; either they have moved and they cannot see them, or they have not moved and they have accessibility.

Q281 Geraint Davies: I am saying that they have to make the choice between the £7.50 and seeing their child.

Lord Freud: Seeing their child? Clearly you can see your child, but, when I say 60,000 have some contact, that does not necessarily mean that children stay overnight. It is 60,000 with "some contact". The numbers who stay over are clearly going to be a lot lower than that.

Q282 Stephen Doughty: Moving house is obviously one of the most stressful events in anyone’s life, and I am sure we have all been through it. Whether it helps some families or causes problems for others, it is clearly a stressful event, and there are other consequences such as people moving away from communities, neighbours and other people that they know. What conversations have you and the Department had with the Samaritans, Mind and the other organisations that deal with people in acute distress or depression? Anecdotally, I have come across a lot of constituents for whom even the fear of it, whether or not they will be affected, is causing a lot of distress. I wonder what sort of evidential assessment you have made of increased stress, depression and other concerns of that nature.

Lord Freud: It is very hard to get a strategy on mental health. This country is not very good on mental health strategies, so it is pretty hard to get an assessment of the impact. One of the reasons why we have gone on this localised route is that this has to be handled on a local basis.

Q283 Stephen Doughty: Have you asked them, in terms of the feedback that they are getting from their calls, whether the bedroom tax is coming up as an issue in people’s lives, along with the wider changes that you are making to the welfare system, perhaps pushing some people over the edge? Anecdotally, it is pushing a number of people I have been dealing with into very difficult circumstances. Have you spoken to these organisations?

Lord Freud: We do speak to them. Geoff, are you aware of any particular conversations?

Geoff Scammell: No.

Lord Freud: I am not aware of anything that we have had specifically on that.

Chair: I believe that Geraint has one last question.

Q284 Geraint Davies: This is a financial question, about the impact on the Department. First, what assessment has been made of the on-costs to the NHS, which is obviously part of the public purse, of the mental health problems that have just been referred to? Secondly, you said that you would ensure that you would not undermine the financeability of housing associations. Can you elaborate on that? It seems to me that, if there are escalating debts and arrears, you are saying that you will pay those debts in order that they can borrow money-or are you not saying that, in which case you are not guaranteeing that you will not undermine the financeability? I am talking about the NHS and about housing association lending.

Lord Freud: Let me deal with the second question first. We clearly need a structure whereby rating agencies and banks do not feel that it adds to the burden of arrears and debt, and the housing associations are still viable functioning bodies. We are making sure that that will happen.

Q285 Geraint Davies: You will not underwrite the debt.

Lord Freud: That will not be necessary under our structure. In practice, the way that we manage payment fallback is in reality a state income guarantee scheme. That is the structure that we are looking at.

Q286 Geraint Davies: They have downgraded the debt, so they already pay a higher interest rate, do they not, because of your policy?

Lord Freud: They did not downgrade it because of anything that we are doing.

Q287 Jessica Morden: I just want to go back to your point about the localised route and discretionary housing payments.

In Monmouthshire, part of which is in my constituency, the amount is £121,000 for the 700 families and people affected. It seems that the answer to every problem to do with housing benefit changes is to apply for discretionary housing payments. It is clearly not enough, given those figures. Do you accept the argument that you have put up insufficient money for discretionary housing payments and that you are now hiding behind that money and directing every problem to it, when the money is clearly insufficient?

Lord Freud: No. We have put this money out for these particular purposes; it is to help local authorities handle the problems, many of which will be dealt with by giving transitional support to get families into housing on a reliable basis.

Q288 Jessica Morden: However, £121,000 for the 700 affected families is quite a small amount of money.

Lord Freud: It clearly will not allow local authorities simply to go on paying all those families that amount. That is not what it was designed for. It was designed to help handle particular problems, maybe on a long-term basis for people with adapted houses and so on, to help people in temporary accommodation, and also to help with the transition costs in other cases and to manage hard cases longer term. That is what the local authority needs to do with that money.

Chair: This has been a very good session. Thank you, Lord Freud, for coming along. We have enjoyed it very much.