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Lord Freeman: My Lords, I am grateful to the Minister. It spells out to your Lordships and on the record in clear terms how the matter should be interpreted. I am sure that will be welcomed by the organisations concerned. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Russell moved Amendment No. 36:
- Page 10, line 9, at end insert—
The noble Earl said: My Lords, at this stage Amendment No. 36 is only a probing amendment. But it deals with a problem which we must get right if the Bill is to have the effect we all hope that it will. It deals with the housing and council tax benefit tapers. The purport of the amendment is to ensure that deductions under those shall not be above 75 per cent. In all conscience, that is a large enough proportion of anyone's tax credit.
The housing benefit and council tax benefit tapers can be very steep on occasion. If one gives people a great deal of tax credit and then takes it all away again in reductions in housing benefit, one has simply gone in for the process which the noble Baroness, Lady Thatcher, used to describe as churning: one sent the money round in a circle and is no better at the end of it. Some of it always has to stick to the fingers of the people who have the sweat of treading out the corn. That cannot be helped.
At present I understand that the tapers for housing benefit and council tax benefit are 85 per cent which is fairly steep. That is laid down in legislation other than tax credits legislation. The Minister may well wish to raise this question. If those are to be altered, in what legislation should it be done? I should be a little disappointed if she were to say that we would have to wait for a general review of housing benefit. I know that such a thing is in contemplation. But I am inclined to say of housing benefit what Churchill said of democracy: that it is the worst system except for all the others.
Flaws in housing benefit have been talked about for a very long time. They are real and serious. But every time anyone comes up with an alternative to housing benefit, and we have a good, long, hard, serious look at it, it turns out that it is worse than the housing benefit
I understand that under the Bill the taper would be reduced so that it got only to 90 per cent of withdrawal. That would mean that one was only 10p better off for every £1 of tax credit. That is not a very magnificent result of really quite generous expenditure.
The Minister tore my amendment to pieces in Committee by saying that it would lead to a deduction rate of 125 per cent, to which I replied that I had said when I introduced it that I had never had any intention of pressing it. I say the same about this amendment. I am not certain of the exact costs of the amendment. But I have an estimate from Shelter, a source worthy of some attention, that only about 5 or 6 per cent of all the families covered by the tax credit would be tapered out of the tax credit at the same time as they were being tapered out of housing benefit and council tax benefit. If the Government could estimate the cost of the amendment, I should find that extremely helpful. We shall have to return to this issue at some stage.
It is suggested that changing tax credits every April will alter also everybody's housing benefit. The fear has been expressed that that could produce a serious bunching of work at housing benefit offices. As they are heavily worked most of the time, a massive increase in work in one week could have an unhelpful effect. I do not purport to know the answers but we must find some. If the Minister can help, I should warmly welcome it. I beg to move.
Lord Higgins: My Lords, my recollection is that we have long been promised a review of housing benefit. Perhaps the Minister can remind us of the present situation. I have previously expressed concern at the way in which housing benefit is administered, given the variety of different forms that local authorities employ. None of my attempts to encourage the Government to sort out that matter has been successful. Can the Minister say whether there is a still variety of housing benefit forms? That would clearly impact on the noble Earl's amendment because presumably local authorities would have to co-operate in any such exercise.
I heard on the radio this morning the latest report that something like one-third of housing benefit payments are not made on time. If that is so, perhaps the Minister could say so. We are envisaging the amendment against an unsatisfactory housing benefit scene.
As to the difficult issue of tapers, I am not clear about the implications of the marginal deduction rate not exceeding 75 per cent for housing benefit, council tax benefit and tax credit all taken together. My understanding is that that would mean a substantial reduction in the marginal rate, which would be imposed on the benefits individually. No doubt the
Baroness Hollis of Heigham: My Lords, I shall resist the temptation to talk about housing benefit structures generally. I take the noble Lord's criticism of housing benefit administration. He is undoubtedly right. I should be surprised if there is much difference between us in our concerns about the inadequacies of housing benefit administration in many local authorities. We have just issued a set of key performance standards for good administration, backed by a programme of inspection and active support—including help teams, which are almost like shock teams. They go into local authorities and work with them to improve their performance. We are trying to pick up on smaller items, such as mail redirects, which have been discussed on the Floor of the House more generally.
Much as it hurts me to do so, I must disappoint the noble Earl, Lord Russell. It is almost impossible to resolve the housing benefit tapers issue with the current structure of housing benefit interlocked with rent structures as they impact on other benefits. If the housing benefit structure is not changed, the choice is between steep, sharp and short tapers and long, gradual tapers in which the MDRs go much further up the income scale. That is what one is stuck with in any system based on the withdrawal of housing benefit.
There is a continuing review of housing benefit. How much of that can be completed in advance of housing rent restructuring—which in terms perhaps implies some readjustment of the housing stock—is a big and long-term question.
One of the problems of targeting benefits according to financial need is that if all the benefits are on the same taper, that produces a sharp cliff edge. If the benefits are on different tapers, that produces fluctuating MDRs according to which benefits coincide as they get withdrawn—which adds to the complexity for the recipient.
The amount of overlap between those on housing benefit and those on tax credits is much smaller than one would have expected a priori. I suspect that that is because many pensioners are not in the system and they are great users of housing benefit. Only around 5 per cent of people on tax credits will be on the housing benefit taper. To put it another way, only 10 per cent of housing benefit recipients are also on the tax credit taper. High deduction rates, although unacceptable, affect only a relatively small proportion of recipients.
The noble Earl was right that where people have tax credits withdrawn alongside housing benefit and council tax benefit, there is a marginal deduction rate of more than 90 per cent. If working tax credit were not taken into account, that would result in an MDR of 125 per cent, which is even worse.
The amendment addresses not just the tax system but also national insurance. There is a whole series of tapers. Taking the amendment at face value, reducing
Reducing the HB taper may not be particularly well focused on moving people into work. Currently, only around 50 per cent of people on the HB taper have any earnings. Those without earnings have other sources of capital or income or are in receipt of other benefits. I shall probably be shot for saying this, but because HB is such a high cost but variable benefit across the country, it is like an iceberg that keeps emerging to wreck the taper or MDR effects of a whole series of benefits. Whatever the benefit, suddenly in comes the housing benefit taper. Because it can be a high-value benefit on a regional basis, it is not one that can be played around with lightly without having serious, if not catastrophic, effects on people's ability to manage their finances or which alternatively may render them homeless.
We may be stuck on this. All that I can say is that, ultimately, most people's response to the new tax credits will not be to work out their MDRs—some may do so—but to recognise the better-buy package of going into work, compared with not being in work, and the extra money that they will get for extra hours worked, compared with not being in work.
However unhappy I am about the taper as regards housing benefit—this is where I am so proud of this benefit—what I am pleased about is that, in just the same way as working tax credits were a significant improvement on the generosity of family credit, so the new tax credits are a significant increase in generosity on the existing tax credit system. So, although high MDRs will remain—and I honestly cannot see a way through without a major overhaul of the housing benefit structure—it has to be remembered that this still affects a relatively small percentage of people, although it is difficult for them. Secondly, even so, those recipients of high MDRs will still be considerably better off than they would be under the present system. At the end of the day, I hope that that will help to reconcile them to the fact that housing benefit is an area where, certainly in this Bill, we cannot play around with the tapers.
Earl Russell: My Lords, I cannot help admitting to being disappointed, but it is no use railing at the Minister for the facts of the case. I am afraid that I found much of what she said abominably persuasive. But we cannot leave the matter there.
The point that surprised me most in her remarks was the low proportion of people on housing benefit and in receipt of the tax credit who are actually in work. But we should not assume that that will remain permanently the case. In fact, I imagine that it might have been part of the object of the Bill that it should not remain permanently the case. One should not be too fatalistic and abandon people to a perpetual life on benefit. I know that that is more the Minister's language than mine, but there are cases where it is true and valid, and this might be one of them.
It is all very well saying that we must have a review of housing benefit, but if we say that before we have any idea of what type of change we want to introduce we are putting the cart before the horse. We could well end up—as is often the case if one goes in for change just because there has to be a change—with something a great deal worse than we started with. It is the most dangerous way of undertaking political change that I know.
So perhaps the points made by the Minister that we really need to be thinking about are those relating to the housing stock. It is extremely maldistributed. The Minister talked about the danger, if this amendment were adopted and we had a gentler taper, of housing benefit creeping up the middle-class scale. But, of course, that is happening already. I am told that in the London Borough of Kingston a newly appointed police constable is on housing benefit. Whether that problem should be solved by the Home Office or by the Department for Work and Pensions is a matter on which I imagine interdepartmental exchanges may already be taking place. Certainly, something should be done about it. It is not what one expects to see. It is not the way to get the kind of police force we need.
Perhaps my most frustrating experience in the service of my party was serving on the policy working group on housing. We had many good ideas, but we could not put it all together. A real problem was created by the initial success of the policy of the sale of council houses. I remember Frank Field's book, Losing Out, published in 1989, in which he pointed out that only the people who were in effect unsuccessful were remaining in council estates—which were therefore becoming much more undesirable places to live and much harder places from which to become employed and were much greater poverty traps in themselves. So the apparent success of a policy has left a very big problem behind it. This may be one of the problems from which to start. I suppose that even on the Front Bench one must be allowed, if one is not committing anyone to anything, to think aloud sometimes.
The geographical distribution of work is another issue that we need to think about. I do not know whether the Minister was in the Chamber when my noble friend Lord Greaves raised the problem of houses in Burnley and Oldham, which are going almost literally for a song. No one can be found to buy them because there is no work anywhere near them. Then you listen to my honourable friend Mr Rendel complaining that he is not going to have the whole of
We need a general review of housing policy, not merely of housing benefit. Reviewing housing benefit without reviewing housing is a sure way to get into another set of figures. Looking at public expenditure figures on housing over the past 20 or 30 years is quite revealing. I do not have the figures to hand, but I think that that is because my hand cannot reach low enough down! If the Minister wants to tell me the figures, I shall be glad to hear them. It is certainly the area where public spending has dropped fastest. As always, economy turns out to be a very, very expensive habit. I remember one of my colleagues remarking that Charles I was not rich enough to afford economies. We are in danger of getting into that situation.
However, I shall clearly get nowhere by pursuing the amendment by itself. I hope that there will be discussions not only within the Department for Work and Pensions but also on an interdepartmental basis about how any future housing policy and any future housing benefit policy should interlock. If these matters are not worked out jointly, neither will work. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 14 [Initial decisions]:
"( ) shall provide that the rate at which tax credit is withdrawn combined with the rate at which housing benefit and council tax benefit are withdrawn shall not exceed 75 per cent of any increase in a person's relevant income"
9 p.m.
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