HC Deb 06 February 1984 vol 53 cc612-9

4.1 pm

The Secretary of State for Social Services (Mr. Norman Fowler)

With permission, Mr. Speaker, I should like to make a statement about the housing benefit scheme.

I announced on 17 November last year that the Government proposed to make some changes to the housing benefit scheme with a view to containing the rapidly escalating cost of the benefit. As is required by the 1980 Social Security Act, I submitted drafts of the regulations giving effect to those changes to the Social Security Advisory Committee. I am today publishing the committee's report, together with the Government's response to it. I am also laying before the House amended regulations that take account not only of the views expressed by the committee and local authorities, but also of the debate in this House last month.

Before moving on to describe the Government's new proposals, I should like to take this opportunity to pay tribute to Sir Arthur Armitage, chairman of the committee since its inception, whose death very sadly occurred last week.

In its report, the Social Security Advisory Committee was particularly concerned about the effect of the proposals on lower income beneficiaries, and the possible cumulative impact of the proposals on a minority of families. It suggested a number of amendments to the proposals designed to alleviate these effects. At the same time, it conceded that there were some aspects of the housing benefit scheme that extend financial help further up the income ladder than anywhere else in the social security system, and that, if cuts in social security spending are essential, it might be reasonable to take resources from there rather than from the means-tested safety net.

I have considered very carefully the committee's report and all the representations that have been made. Clearly it is essential for the Government to maintain firm control of public expenditure, and in the last 10 years cash expenditure on the former rent and rate rebates scheme has increased tenfold, an increase of 140 per cent. in real terms. It is also reasonable to propose that, where a non-dependant is living in the house of someone claiming housing benefit, that non-dependant should be expected to make a contribution to housing costs, and that the housing benefit paid to a claimant should be reduced accordingly.

Nevertheless, in view of the representations made, the Government have decided to modify the proposed changes with three principal objectives: to lessen the scale of any reductions in benefit to be faced by individual families; to minimise the impact of the changes on those on lower incomes, including pensioners, and to simplify the changes which will have to be made. The revised proposals take full account of the administrative problems involved in the changes.

The Government now propose to make only two changes to the housing benefit scheme in April. First, the tapers for assistance with rents will increase from 21 per cent. to 26 per cent., instead of 31 per cent., as originally proposed, and for rates from 7 per cent. to 9 per cent. This will have the effect of halving the losses resulting from taper changes in assistance with rent. Secondly, the deductions made for non-dependants aged 18 or over will be increased, as originally proposed, but the qualifying period for modification of those deductions will be reduced from 90 days to 56 days, as proposed by the advisory committee. In addition, the proposed changes on the supplementary benefit non-householders housing contribution will go ahead. Other changes that were to have been made in housing benefit in April have been either postponed or dropped. This will allow time for families and for local authorities to adjust to those of the changes which still have to be made.

The remainder of the proposals therefore provide that there now will be no change in the minimum payments for the poorest claimants—those with income levels below their needs allowance. Increases in the minimum payment levels for other claimants will not take effect until November 1984, and the minimum payment for rent assistance will be set at 50p instead of £1 as originally proposed. The requirement for 16 to 17-year-olds not on supplementary benefit or youth training schemes to make a contribution to housing costs will not come into effect until November 1984, and will not apply to those in receipt of non-contributory invalidity pension. The modification to the criteria for eligibility for high rent schemes will also be postponed to November 1984, when current authorisations expire. The rent tapers will be increased in November, but only from 26 per cent. to 29 per cent., not 31 per cent., as originally proposed.

The restructuring of the proposals that I have outlined will reduce significantly the savings that can be made, particularly in 1984–85. I have therefore had to postpone the real increase in the housing benefit children's needs allowance that I had announced would be introduced from April. The allowance was to have been increased from £11.90 to £12.90. That cannot now be achieved in April. But I am glad to say that it will still be possible to implement an increase of 50p in November 1984, and a further increase of £1 will be made in April 1985. The children's needs allowance will then have been increased by £1.50 in real terms, compared with the increase of £1 originally proposed.

Taken together, these modifications will help about 1,300,000 households, and will mean that about 300,000 families will not now lose entitlement to benefit in April. Moreover, I propose to discuss with the local authorities how a limit on individual losses from the taper and high rent scheme changes can be brought into effect in November. All these changes will be accommodated within the Government's existing expenditure plans. But the enormous growth of housing benefit expenditure and the income levels at which it is paid require further consideration. Equally, the continuing difficulties which some local authorities are still experiencing in handling claims and payments is causing anxiety for individual families.

The Government feel, therefore, that a review of the scheme and its operation is required. Its main objectives will be to examine the structure and scope of the scheme to ensure it is as simple as possible, and that help is concentrated on those most in need, and to improve its administration by local authorities.

I shall be appointing a small review team under independent chairmanship to report to me so that I may consider urgently what action needs to be taken. I shall also ask the review team to consider the issues which the advisory committee identified as requiring further consideration.

The revised proposals I have described today will soon be debated. Nevertheless, I thought it right that, prior to that debate, I should describe in a statement to the House the changes that are being proposed. I believe that they represent a reasonable balance between the protection of individual benefit recipients and the need to bring under control expenditure on housing benefit which is now running at almost £4 billion a year.

Mr. Michael Meacher (Oldham, West)

Is the Secretary of State aware that these minor ameliorations to yet another Government attack on the poor will still leave pensioners and some of the lowest income families in our society about £150 million worse off this April, and about £190 million worse off next November? Will he confirm that the cutbacks are still as large as that, even after the changes that he has brought to the House today? Will the Minister say what justification there is, even after these changes, for cutting the standard of living of pensioners by up to £2.50 a week, and for poor families by more than £3 a week, when in successive Budgets the Government have given huge tax reliefs to the rich who are on more than £30,000 a year, which, according to a recent parliamentary answer I received, now leaves them no less than a staggering £62 a week better off than in 1979? Will he confirm that low-paid workers, even after the changes that he has mentioned today, will still be in a deeper poverty trap than before, and will still be liable to a marginal tax rate of more than 70 per cent., when even the richest businessman in the country never pays tax above 60 per cent?

Since the Government are merely postponing, instead of dropping, some of the most offensive aspects of this scheme—for example, the non-dependant reductions of £3.10 a week—will he acknowledge that, when this is reinstituted in November, it will in effect be a tax on school leavers finding jobs, it will force up the benefit loss for many families to more than £6 a week and, contrary to the way the Prime Minister and many other Ministers have repeatedly misled the country, it will mean major cuts for thousands of families on supplementary benefit?

Is the Secretary of State also aware that there is abundant evidence throughout the country—10 months after the introduction of this half-baked folly — of unprecedented muddle, confusion and bungling? Is he further aware that thousands of beneficiaries have been deprived of fuel direct payments because of a switch to the scheme; that the scheme is too complex to deal with the comings and goings of non-dependants such as students; that even where substantial administration errors have been admitted, councils are still loth to waive charges wrongly made, and there has been no guidance from the Secretary of State about that; and that thousands are losing benefit to which they are entitled because local authorities —for example, Sunderland—have not the staff or the time to send out the necessary rebate forms?

Is the right hon. Gentleman aware that in Liverpool, to take one wholly characteristic example, people are still waiting for benefit after an eight-month delay—even in February 1984, 10 months after the scheme began? Is the right hon. Gentleman further aware that in Newcastle a man who was told last April that his rent would be paid direct, and was not told that he was still liable for non-dependant deduction, just a week ago received an arrears claim for £749, together with a threat of eviction?

In view of the continuing administrative chaos, does the right hon. Gentleman accept that as there are already—before the changes that he mentioned — up to 3.9 million standard cases in the pipeline due for individual review this April, further changes simply cannot be implemented before 1 April without an even greater shambles?

Will the right hon. Gentleman therefore now completely withdraw the changes and carry out the full-scale review that is manifestly needed before proceeding with what is a fundamentally unjust and inept measure?

Mr. Fowler

That is an absurd response from the hon. Gentleman. He does not even have the courage to welcome the review for which he has been calling.

I shall take the hon. Gentleman's points in turn. On administrative problems, only two major changes are going ahead in April—the change in tapers and in non-dependant deductions. The other structural changes have been postponed until November. Our advice is that those limited changes can be implemented by local authorities. Indeed, the changes in the third order— which is the most substantial order, and which will be laid before the House—are at the request of the local authorities. If they do not want that to go forward, clearly we shall listen to what they say. But my advice is that that is what they have asked us to do.

On losses, 4.5 million beneficiaries will not be affected by taper and minima changes. Of those who will be affected, more than 50 per cent. of all claimants, and 60 per cent. of pensioners, lose less than 50p, and 81 per cent. of all claimants, and 87 per cent. of pensioners, lose less than £1.

The hon. Gentleman asked about non-dependant deductions. He must decide whether he is in favour of the principle that a non-dependant in work, rather than the taxpayer, should make a contribution to rent. I regard that proposition as unassailable.

What we have in mind for the inquiry is a small review team under an independent chairman. The hon. Gentleman mentioned the position of local authorities. One of the jobs of the inquiry will be to determine whether local authorities — perhaps the local authority that he mentioned — have been responsible for any of the problems with the housing benefit scheme. The hon. Gentleman should not prejudge the issue.

On the principle of housing benefit, the hon. Gentleman ignores the fact that the previous arrangements were widely criticised, were recognised as unsatisfactory and that the principle of this change has substantial support in all parts of the country.

Several Hon. Members


Mr. Speaker

Order. The House will have heard the Secretary of State say that there is to be a debate soon on this important matter. I have a duty to protect the subsequent business of the House—the motion to be moved by the Official Unionist party. I propose to allow questions to continue until 4.30 pm.

Mrs. Jill Knight (Birmingham, Edgbaston)

I assure my right hon. Friend that there will be a very wide welcome for what he has said this afternoon, not only from the Social Security Advisory Committee — to whose advice he has listened so carefully and sympathetically —but from his many colleagues who are concerned that the poorest people might be disadvantaged by the previous arrangements.

My right hon. Friend said that something would be done about administration. Will he say a little more about that? Many of us feel that one of the great failures of the scheme was in that area, and that many poor people were badly disadvantaged by the length of time — in Birmingham and in other areas—that it took to sort out housing benefits.

Mr. Fowler

I am grateful for my hon. Friend's support for my proposals. I assure her that we are seeking to protect the interests of claimants, especially pensioners on low incomes.

Birmingham has had particular problems, some of which were related to the recent strike at the DHSS offices. That was one reason for some of the administration failures there. We want the inquiry to study how the scheme is being administered and to make proposals on how local authorities can improve the service for the public and for recipients.

Mr. Simon Hughes (Southwark and Bermondsey)

Does the Secretary of State now admit that the scheme was hastily and badly conceived? It is no good blaming the increase in housing benefit need on anything other than the Government's economic policies, which have occasioned the need to give assistance to the poor elements in the community. Does he accept that the demand, both inside and outside the House from all parties will not be satisfactorily met by a concession to delay certain cuts in return for postponement of the children's needs allowance, and that the needs of the poorest in our community will not be met until tax credits and benefits are integrated into a proper scheme which will be simple and which will work both efficiently and fairly?

Mr. Fowler

I hear what the hon. Gentleman says. Before he goes too far down that road, he will have to tell us what the cost of the changes will be and how they will be afforded and financed. My advice on what he is proposing is that it would add substantially to the social security bill, which currently stands at £37 billion.

There will be a real increase in the children's needs allowance in November, and in April 1985 it will rise again beyond the point that we had originally proposed.

On the reasons for housing benefit, I remind the hon. Gentleman that in 1979 it was estimated that, under the old scheme, there were 300,000 people who would have been better off if they had transferred. I cannot believe that that was a justifiable position. I do not understand why the hon. Gentleman is defending it.

Sir Geoffrey Finsberg (Hampstead and Highgate)

I thank my right hon. Friend for such clear proof that he has been flexible in accordance with the commitments that he gave to the House. Will he give us one further spot of information? It was estimated that a large number of people under the original scheme stood to lose up to £3 a week. Can he give an estimate of what the new figure will be?

Mr. Fowler

A small number of people will lose more than £3 a week. The figure has been cut substantially. From memory, I do not think that there will be any losses of more than £3 a week in April. For other recipients, only 1 per cent. of the beneficiaries will be in that position.

Mr. Brynmor-John (Pontypridd)

The Secretary of State has twice spoken of advice received about the implementation of this scheme on 1 April. Has he sought and received an assurance from the local authorities that they can implement on 1 April the changes he mentioned this afternoon?

Secondly, the Secretary of State says that he has scrapped the changes in non-dependant allowance in the case of those on non-contributory invalidity pension. Will those receiving invalidity benefit still be expected to pay the increase in non-dependant allowance?

Mr. Fowler

We have taken advice on the administrative problems from our own administrative consultants, a private company called Logica. Those consultants see no reason why the limited changes that we are introducing should not be implemented on 1 April. The Minister for Social Security will discuss the matter with the local authorities within the next few hours.

The answer to the hon. Gentleman's second question is, "Yes".

Mr. Andrew Bowden (Brighton, Kemptown)

I welcome my right hon. Friend's statement as far as it goes. I particularly welcome the announcement of a full review of the housing benefit scheme. However, the statement requires careful study. Is it not true that over a million pensioners will still have their housing benefit reduced?

On the operation of the scheme through the local authorities, there are still 3,000 people in the borough of Brighton who are not receiving their full entitlement and whose cases have not yet been dealt with. That being so, I cannot say what my attitude will be when we debate the proposals.

Mr. Fowler

My hon. Friend has been entirely frank and consistent throughout the discussion of these measures. I thought it right to announce the proposed changes in a statement to the House. All the relevant papers will now be available to my hon. Friend, and by the time of the debate I hope that I shall have persuaded him that the changes will substantially meet his objections.

Mr. Chris Smith (Islington, South and Finsbury)

For all his talk of amelioration, will the Minister confirm that a pensioner with a small occupational pension, paying average rent and rates, will still be considerably worse off after these changes, although not as badly off as he would otherwise have been? Is it not true that a family with a low income and with dependents living in the household will also be worse off after April?

Mr. Fowler

The effect of the changes that I have announced is to reduce the losses that will be suffered. That will be the effect of the modification to the change in April, and of the reduction in rent taper from 31 to 26 per cent. Clearly we have not eliminated the losses for all groups, although 4,500,000 beneficiaries are unaffected by taper and minima changes.

At the moment, one in three households receives housing benefit. That is a very high figure, and we believe that this is one part of the social security budget that can and should be contained.

Mr. Charles Morrison (Devizes)

We are grateful to my right hon. Friend for taking account of the points made in the recent debate, and trying to meet them. I do not wish to appear ungrateful, but I and some of my hon. Friends are somewhat surprised by his statement that the changes can now be made within Government expenditure plans. In that case, why was all the hassle necessary?

How long will it be before the committee reports, and will the committee consider not only housing benefit but also simplification of the social security system in general and the possibility of a tax credit system?

Mr. Fowler

The effect of the changes announced today is that the savings derived from housing benefit will be reduced. There will have to be other offsetting savings, and part of the finance will have to come from the contingency reserve.

I confirm that one of the aims of the inquiry will be to consider ways in which the scheme can be simplified. The Government would like to be able to simplify housing benefit, just as I should like to see a major simplification of the entire social security benefit system.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

When the Secretary of State describes today's changes as a "reasonable balance" the complete hollowness of that statement is perfectly apprarent. The changes announced in housing benefit and the concessions granted to certain categories of beneficiaries have been purchased by the Government at the expense of the housing benefit needs allowance for children. It is a sad epitaph on the attitude of the Government that progress in one area—made necessary as a result of pressure applied to the Government —is achieved only at the expense of another area. The elderly are benefiting at the expense of the children.

Mr. Fowler

If the hon. Gentleman listened to my reply to my hon. Friend the Member for Devizes (Mr. Morrison), he has got it wrong and wrapped it round his neck. The introduction of the real increase in children's needs allowance will be postponed until November, but in April 1985 it will be increased to £1.50, which is more than we proposed previously. I reject what the hon. Gentleman has said.

Mr. Robert McCrindle (Brentwood and Ongar)

Having listened to the concern expressed by some of my hon. Friends about the implications of the original scheme, the Secretary of State has done his best to improve and modify it. We appreciate what he has done. Will he recommend the same code of conduct to some of his Cabinet colleagues?

Can my right hon. Friend confirm that as a result of the changes he has announced this afternoon, no one below the needs allowance level will be now affected by the taper and minima changes? If he can, that is a substantial improvement.

Mr. Fowler

I am grateful for my hon. Friend's comments. I can confirm that there will be no change for those below the needs allowance. That concession will benefit 40,000 people—mostly pensioners—who will now not lose at all.

Mr. D. N. Campbell-Savours (Workington)

The Government are to save £190 million by October on the backs of the poor. There are people in my constituency living in one room, who cannot afford to live, and it is those people who will pay the price. This £190 million is being taken away from the poor to fund concessions on capital gains tax and capital transfer tax, and concessions to the higher paid. That is a disgrace, and will further divide our society.

Mr. Fowler


Mr. Campbell-Savours

Tell the truth.

Mr. Fowler

The hon. Gentleman should calm down and look at the proposals. He will see that 4,500,000 beneficiaries are not affected by them.

Mr. Campbell-Savours

It is a sham.

Mr. Fowler

The people to whom the hon. Gentleman refers will not be affected.

The hon. Gentleman must also understand that—I do not run away from the figures of the reduction in public spending — one in three households receives housing benefit, and the total cost is almost £4 billion. We propose a reduction of only about 4 per cent. in that total.

Mr. John Maples (Lewisham, West)

As one of those who has had serious misgivings about the proposed increase in tapers, I find what my right hon. Friend has said today most welcome. If he ever finds himself in the position of having to find savings in this area again will he agree to seek them by increasing the non-dependants deduction, and not by increasing tapers? It seems not at all unreasonable that a working non-dependant should contribute about £9 a week. In fact, it should be much more.

Mr. Fowler

I am grateful for what my hon. Friend said. The principle that a non-dependant in work, rather than the taxpayer, should contribute to the rent is unassailable, although apparently the Opposition do not think so. Clearly, we shall bear in mind what my hon. Friend says.

Mr. Meacher

The Secretary of State keeps saying that his justification for the proposal is that housing benefit goes to one third of all households. Is he aware that that is solely because the Government have deliberately forced up rents by so much? The Secretary of State has been extremely coy about the figures. He has given us the number of families who are not affected. Will he tell us the number of families that are affected, the number of pensioners who will be affected and the number that will lose more than £2 a week? Secondly, how many low-income families will be affected next November and how many will lose more than £2 a week? Will he explicitly tell the House what will be the total cut next November? Is it or is it not £190 million to £200 million?

Mr. Fowler

I confirm what the hon. Gentleman says about the size of the cuts. The proposals will now save between £190 million and £200 million. There is no secret about that. With regard to the losses, there are about 6.5 million people in receipt of housing benefit at the moment. There are 4.5 million people who will not be affected. That means that something over 2 million will be affected. Of those, 53 per cent. of all claimants and 60 per cent. of pensioners will lose under 50p, and 81 per cent. of all claimants and 87 per cent. of pensioners will lose under £1 in April as a result of the proposals.