HC Deb 16 January 1975 vol 884 cc883-92

1.26 a.m.

Mr. R. C. Mitchell (Southampton, Itchen)

The motion as printed on the Order Paper refers to the subject of the deduction of supplementary benefit from pensioners who take in students". I readily concede, however, that the argument applies not only to students but to lodgers taken in by people on supplementary benefit. I have referred in the motion to students because this is how the case which caused the initiation of this debate came to my notice.

This is a particular problem in my constituency, in which we have a university, a college of technology, a technical college and a college of education. Added together, they contain a very large number of students and there is considerable difficulty in obtaining sufficient accommodation for them. Some of the accommodation is provided by what are familiarly called "student landladies". It is not necessarily the most popular type of accommodation among students, who would prefer to have their own self- contained flats or other accommodation. But such accommodation is very expensive.

For many years student landladies have been the pillar of student accommodation in university towns. Many of them are elderly people or widows whose families have grown up and left home and who therefore have spare accommodation. I go so far as to say that most of the student landladies fall into this category. Young married couples with children often do not have accommodation for students, but widows or elderly couples whose families have grown up and left home take in students to provide extra income to augment their meagre pensions. Many of them are in receipt of supplementary benefit.

I come to the main argument that I wish to make. The objection is to the rule operated by the Supplementary Benefits Commission that one-third of whatever a student or lodger pays should be regarded as profit or as, in the official terminology, due reward for services rendered for the student.

I should like to cite an example from my constituency, although I am sure that it is common throughout the country. A lady, who wishes to remain anonymous, took in two students who paid the normal lodging fee of £8 a week each for bed, breakfast, evening meal and full board at weekends. Therefore, she received the grand total of £16 a week. As she was on supplementary benefit—this is not an isolated case; there are many in my constituency and throughout the country—one-third of that £16, namely, £5.33, was regarded as profit. Consequently her pension was reduced, allowing for the disregard of £2, by £2.33.

I have spoken to my wife about this matter. Her reaction was quite angry. She immediately said, "The people in Whitehall do not know what they are talking about. They do not know how the other half of the world lives." She added some very caustic comments which I will not repeat.

I have asked many people how much profit they would make from two students by providing a room, bed, breakfast, evening meal and full board at weekends. I have asked whether they could do that on £5.33 a week. No one has yet said that it: could be done.

No doubt the Minister, like the chairman of the Supplementary Benefits Commission in a letter to me, will say that help will be given shortly when the disregard goes up from £2 to £4. I accept that will be useful to pensioners, but it is the principle of the thing that I want to argue tonight. The disregard is irrelevant. If a pensioner or a widow were to do a light job—for example, to patrol a school crossing—and earn a small sum in that way, that would take out the disregard.

My argument is that the rule that one-third of what the lodger or student pays should be regarded as profit is completely ridiculous in modern conditions. It may have been true 10 years ago, but it is certainly not true today.

When I inquired where the one-third rule came from, I received a letter from Lord Collison, the chairman of the Supplementary Benefits Commission, in which he said: I understand that the average expenditure on food per head of the population of working age is less than £4 a week. I am told that that figure is accurate. I am amazed, because people of "working age" excludes children. The argument is that we spend less than £4 a week on average on food. When I consider my own budget and the budgets of some of my friends, I can only conclude that if that figure is right many people are going very hungry in this country today. I have not met anyone who would agree that a person can be fed for less than £4 a week. For a man who has a wife and three or four children it might be possible, but it is not possible in the context that I am postulating of a landlady catering for two students. I defy anyone to do it for less than £4 a week.

The letter goes on: The cost of providing for boarders does, of course, involve other things than food alone, such as additional heating and laundry, but I doubt if this amounts to as much as £1 a head. I am surprised at that, too. I wonder whether Lord Collison or any of his Supplementary Benefit Commission colleagues have looked at laundry and heating costs recently. A student may be in his room only in the evening, but he still requires heat and laundry.

The result of all this is that in this category many landladies of students are beginning to say "It is not worth my while to take in students if my supplementary benefit is to be cut in this way." Let me quote from the annual report of the University of Southampton for 1973–74: For their part, more and more landladies decided it was uneconomic to provide an evening meal, so that the majority of lodgings were offered with breakfast only on weekdays and full board on Sundays. The report stresses how difficult it is to find sufficient accommodation.

What is likely to be the result of landladies having their supplementary benefit cut and deciding that perhaps it is not worth taking in students after all? I suggest three possibilities.

First, there would have to be a very substantially increased payment by the university or college of technology, which would increase substantially the education budget. Secondly, very many more places would have to be provided in student halls and other types of student accommodation, which would be very much more expensive than the £8 a week about which I am talking. The provision of resident student accommodation is a very expensive business.

Thirdly, a, number of students—some by choice, I admit; this is happening now—would prefer to share a flat with three or four others. That has very difficult consequences for a university town because where four or five students share a flat and pay about £5 a week each, the landlord can get £20 a week or more. The consequence of that is that many ordinary families with one or two children are priced out of the accommodation market completely. We have experienced that in Southampton, and the same applies in other university towns.

The rule that one-third of the amount paid by a student or other lodger is technically regarded as profit and therefore deducted from supplementary benefit does not take account of the rising cost of food, heating, laundry and everything else. It is years out of date. I ask the Minister to have urgent consultations with the commission to see whether this rule can be reviewed.

1.38 a.m.

The Under-Secretary of State for Health and Social Security (Mr. Alec Jones)

I am genuinely grateful to my hon. Friend the Member for Southampton, Itchen (Mr. Mitchell) for raising this question. I say to him quite sincerely that an Adjournment debate is a far better method of dealing with it—despite the late or early hour, depending upon one's point of view—than by a completely unsatisfactory Question and Answer session, which we have tried previously. This is a better method because it has enabled my hon. Friend to explain how he sees the so-called one-third profit rule and how it affects the availability of suitable lodgings for students. It also enables me not only to give some sort of explanation—which my hon. Friend may not necessarily accept—but also to give fuller consideration to the difficulties my hon. Friend envisages.

There are two aspects of this problem. There is the undoubted difficulty that university and college authorities have in finding suitable lodgings for students. Few of us—certainly not those of us who have had anything to do with education—are not aware of these difficulties. My hon. Friend, with his experience in the student world, is certainly aware of the problem. I start from the premise, therefore, that none of us would wish to exacerbate the situation, which is already difficult.

But then there is the other aspect, the social security aspect—namely, how the Supplementary Benefits Commission treats boarders in households of recipients of supplementary benefit. I should like, first, to place on record the present position.

The Supplementary Benefit Act under which the Commission work provides that in assessing benefit it must set a claimant's resources against his requirements. It also says that in assessing requirements the amount allowed for rent should be reduced by any proceeds of subletting, and that when a person other than a subtenant shares the accommodation the rent allowed to the claimant may be reduced by an amount attributable to that person.

The Act does not specify how the payments from a commercial boarder should be treated and this is therefore left to the Commission to decide. For some years before 1973 the Commission operated a system which was found to be completely unsatisfactory as it affected the "multiple boarder" cases, which were where the landlady operated a business enterprise. This was rather different from the type of person to whom my hon. Friend referred.

In 1973 the Commission decided no longer to regard boarders as it had previously as making a contribution to the rent but to assess the proceeds from them solely on an earnings basis. This would mean that owing to the incidence of the earnings disregard a landlady with only one boarder would usually have her benefit hardly affected at all instead of, as had happened up to then, losing half her addition for rent.

The system which my hon. Friend criticised was an improvement on the previous one, though certainly not going as far as my hon. Friend would wish. It would be impracticable to assess in each case the actual cost of providing for the boarder, so the Commission was compelled to adopt a formula which could be applied generally across the board. Under the formula the Commission regards two-thirds of what was paid by the boarder as covering the cost of his keep and the remaining one-third as being the landlady's recompense for the work involved in looking after the boarder. I realise that this is the crux of the argument and the major difficulty outlined by my hon. Friend.

However, it is a formula which has the advantage of being self-adjusting as boarding charges increase and is comparatively easy to administer. When it is necessary to have regard for the difficulties of assessing actual charges these factors cannot be ignored. In addition, the new system could be applied whether full board and lodging for a whole week was provided or something less, in which case proportionately less might be expected to be charged and therefore less taken into account as profit.

The Commission was aware that the same formula applied to all boarders would be more generous in cases with many boarders than where there were only one or two because economies of scale can be expected when catering for a number. Nevertheless it considered that it would not be unfair to the person with one or two boarders especially since the earnings disregard would ensure that the reduction in the claimant's supplementary benefit would often be less than the amount of rent that had previously been attributed to the boarder.

The amount of the earnings disregard, now at £2 a week, which is the level it has been at since 1966, has been overtaken by inflation and the Government are taking steps to restore the position by increasing it to £4 a week as soon as we can. I realise that my hon. Friend said that in certain cases the disregard was irrelevant, and I accept his view on that. But in a good many cases, far from being irrelevant, the disregard is not only useful but positively to the advantage of a large number of landladies.

Mr. Mitchell

I did not describe the benefit gained by the landlady as irrelevant. I used the word in connection with the argument I was pursuing about the proportion of one third.

Mr. Jones

I believe that the disregard is a material factor in the general situation. I shall use the case to which my hon. Friend referred to illustrate the point. I do not even know the lady concerned so there is no question of my disclosing anything which should not be disclosed.

My hon. Friend referred to a pensioner with two student boarders each paying £8 a week. The one-third which is now regarded as earnings come to £5.33 of the total of £16. As the disregard is today only £2, that leaves £3.33 to be taken into account, so that the claimant's entitlement to a possible supplementary pension of £2.95 is more than wiped out. But under our present proposal to raise the disregard to £4 only £1.33 is left to be taken into account, leaving the claimant entitled to at least £1.60 a week in the case which my hon. Friend described.

I am not saying that this is the perfect solution, but the landlady about whom my hon. Friend was so concerned will receive at least some help. The doubling of the disregard of earnings is in legislation going through the House. My hon. Friend will be pleased to know that we finished the Committee stage this morning, and we hope to implement the legislation later this year. The doubling of the disregard gives help except where there are multiple boarders, where land- ladies are running a business rather than the type of case my hon. Friend described.

Under the revised disregard of £4, the supplementary benefit will be almost unaffected by anyone taking in one boarder, unless that boarder pays more than £12 a week. I will not bore my hon. Friend with the details, but I took the trouble to obtain information from the universities of London, Bristol, Brighton, Guildford, Reading and Liverpool. In all those places a landlady taking in one student would have nothing deducted from her supplementary benefit. Those with two students would have an appreciable improvement over the present situation. Only the lateness of the hour prevents me from discussing the figures. I am prepared to give them to my hon. Friend.

It is easier to speak of a specific case rather than the generality of cases. In the case about which my hon. Friend has told the House the Commission would regard £5.33 of the £8 which each boarder would pay as covering the cost, and the remaining £2.66 would be counted as the claimant's earnings, her recompense for the work involved in catering for her boarder.

My hon. Friend's argument is that the £5.33 is an underestimate of the cost of providing for a boarder, and that therefore the amount assessed as earnings is too high. It is difficult to arrive at the exact cost of providing for a boarder under the different circumstances which prevail. I can well understand my hon. Friend's wife's dilemma when he posed the problem. I do not think that it was very chivalrous of him to put the problem to her.

It is unfortunately true that the cost of food has been increasing. My hon. Friend suggested that the figure of £4 for food was not accurate. But it is not something that we or the Commission conjured up. It came from the National Food Survey figures for wholly adult households, which shows that in the third quarter of 1974 £3.74 a week was paid for food for each person. I have made that statement to show that we did not pluck the figure out of the air. It is based on the best calculation that we could make.

The cost of providing for boarders does, of course, include other things such as heating, laundry, and so on, about which we all know. The Commission considers that £1 a head per week throughout the year covers those costs. If we take that figure of £1—which I know my hon. Friend is questioning—and the £4, one sees that the figure of £5.33 covers the basic cost of providing for a boarder, though I agree that there is very little to spare even on these figures.

If a claimant is not satisfied with the assessment in her case she is entitled to appeal against the Commission's decision and, in considering the case, the local appeal tribunal would not be bound to agree to the Commission's method of assessing profits if it thought it gave an unreasonable result. I say that because there may be those who feel that there is no right of appeal.

In conclusion, I should like to make two statements. First, the Supplementary Benefits Commission is obliged to take account of the earnings element in boarding charges. Supplementary benefit is a topping up of existing resources, and it would be unreasonable to pretend that we can continue the system and ignore boarding charges and the earnings element. They must continue to be taken into account where there is a genuine earnings element.

Secondly—and I think that my hon. Friend conceded this—the Commission cannot possibly treat landladies of student boarders any differently from the way in which it treats landladies of other boarders.

Because of the fears which my hon. Friend has expressed, but chiefly because of the possibility that there may be a disincentive to landladies to take in student and other boarders and bearing in mind the problems of homelessness and associated difficulties, I assure my hon. Friend that I shall accept his suggestion and consult the Supplementary Benefits Commission about the level of charge that is assessed as income for those who claim benefit. I shall ensure that we take a fresh look at the whole problem, because I think my hon. Friend is right in drawing attention to this problem as he sees it, even at this late hour.

Question put and agreed to.

Adjourned accordingly at seven minutes to Two o'clock.