Housing Benefit (Hansard, 27 February 1989)

§ Mr. Simon Burns (Chelmsford)

I am grateful for the opportunity to raise the issue of housing benefit paid to tenants of private rented accommodation and to thank my hon. Friend the Under-Secretary of State for Social Security for all the help that he has given me in this complex and unsatisfactory problem.

I should draw attention to the fact that, somewhat confusingly, my constituents Mr. and Mrs. Barrett are also constituents of my hon. Friend the Member for Saffron Walden (Mr. Haselhurst), whom I have kept informed of the problems with which they have had to contend.

Mr. and Mrs. Barrett own a property in my constituency—20 Upper Bridge road, Chelmsford—which, until fairly recently, they rented out independently to two tenants. Both tenants were in receipt of housing benefit. Tenant A moved into the property in March 1984. The first problem arose with tenant A in December 1985 when he failed to pay his rent, claiming that the borough council had not paid him his housing benefit. That statement was utterly untrue, as was shown by a letter that tenant A wrote to the Barretts on 26 January 1986, when he said that he was short of cash and that he had borrowed a few pounds from his housing benefit, which he had intended to make up, but that he had spent it on drinking and smoking too much. He still owes the Barretts £7 from that unhappy incident.

The Barretts wrote to the council about that incident, which should have alerted the council to the fact that the tenant was not totally honest in his statements and it f cd12should have borne that in mind when further problems arose in January 1987. During 1986 Mr. Barrett wrote to Chelmsford borough council three times concerning payment of rates.

The real problems began for the Barretts in July 1987. On 17 September 1987, Mr. Barrett informed Chelmsford borough council that tenant A had ceased to pay rent from 13 July 1987 although housing benefit had been paid to the tenant by the borough council. That was confirmed by Chelmsford borough council on 24 September. At the same time, tenant A had come into conflict with the landlord. Mr. Barrett wanted him and tenant B evicted because they were not ideal tenants, due to the fact that dogs were kept on the premises contrary to the agreement and motorcycles were kept in the garden, and there were other problems.

On 25 January1988, Mr. Barrett wrote to Chelmsford borough council asking it to confirm that tenant A was still in receipt of housing benefit and asking if it would be possible for housing benefit payments to be held over until the current legal proceedings were settled, as Mr. Barrett wisely observed that the arrears in rent were now going back six months and tenant A must be getting himself into financial difficulties.

Rather surprisingly, Chelmsford borough council never replied to Mr. Barrett's letter. However, the council did withhold the tenant's next benefit cheque pending an investigation. The tenant provided a signed statement informing the director of finance that he was in dispute with his landlord and that it was subject to legal action. The statement also informed the director that, on 135 solicitors' advice, the tenant was placing the rent into a savings account. In view of this information, the borough council decided to release the benefit cheque held and continue future payments to the tenant.

On 8 February 1988, Chelmsford borough council was advised that tenant B was also withholding rent. By July 1988, a county court judgment had found against tenant A and neither tenant remained at 20 Upper Bridge road. However, tenant A owed the Barretts £1,027.55 and tenant B owed the landlords £461.21 in back rent, for which they had both received housing benefit. Both ex-tenants were long-term unemployed and did not have the money to pay the Barretts. To add insult to injury, tenant A wrote to the county court on 15 July 1988 to say that he could not pay the money owed by 27 July when it was required as he did not have the money and his sole income was £33.40 per week income support. The likelihood of the Barretts ever receiving any of the money owed to them is slim.

This case raises some important issues about Chelmsford borough council's actions, and the seeming lack of rules of accountability laid down by the Government for the payment of housing benefit. First, I find it odd that Chelmsford borough council never replied directly to the Barretts' letter of 25 January 1988 informing it that tenant A had not been paying rent for which he had been receiving housing benefit for the previous six months.

Secondly, I cannot understand why the council was prepared merely to accept tenant A's word that the money was being paid into a savings account. I am surprised that the council did not ask for proof that such an account existed, and did not ask at regular intervals for further proof that it existed and contained the relevant amount of money. I accept and understand that a person can abuse the system and still show proof that an account exists, but regular checks would have shown that the housing benefit which had been paid was not in the account.

Thirdly, I do not understand why the borough council did not seek more information from the Barretts about their side of the story before so readily bringing housing benefit back into payment early in 1988. I also find that odd in view of the incident in December 1985, when it was shown beyond doubt that tenant A had lied to the Barretts in saying that he could not pay his rent that month because the borough council had not paid the housing benefit cheque, when clearly it had.

Alternatively, although, in the summer of 1987, the council would not have been able to pay the housing benefit direct to Mr. and Mrs. Barrett without the tenants' consent until the rent was 13 weeks in arrears, I am surprised that the Barretts were not made aware of that rule so that they could have applied once the 13 weeks were up. Even if it was unsuccessful, such an application would have provided an opportunity for a more thorough look at the problem and at the background to the dispute with tenant A. In any case, it transpired that the dispute was not genuine, because the county court found in the Barretts' favour.

Looking at this problem from both the borough council's and Government's point of view, I accept that one must be careful that housing benefit arrangements do not prevent tenants from withholding rent if they have good reason to do so and genuine reasons for being in dispute with their landlords. Nevertheless, I believe that 136 there is something wrong with the rules that have penalised my constituents. Why do not the Government lay down stricter rules to check up on the sums of housing benefit paid out to those in receipt of it when problems arise?

In this case, two tenants have spent £1,600 of housing benefit on anything but the purpose for which it was designed. The Government must be concerned about that. Surely something must be done to prevent that from happening in the future. What help can be given to the Barretts? It is all very well to suggest that they go to court to recover money that they should have been paid between 1987 and 1988, but if the amount from tenant A was fixed at £5 per month—not an unrealistic amount, considering that he was on income support—it would take 17 years to pay back the money owed to the Barretts, not to mention the lost interest, the inconvenience and the abuse that caused the problem.

I fear that the losers in this case are the Barretts and the taxpayer. That is unfair. Taxpayers' money has been spent to pay rent on a house, but none of the money was used to pay the rent—it was just frittered away. That is a gross abuse of public funds. The Barretts should be recompensed because they are the innocent victims of a problem about which they warned the relevant authority at the time. Even though they warned the authority in good time, nothing seems to have been done to rectify the matter. It seems almost as though the scales were weighted against them and that their pleas for help were ignored. Certainly, not enough was done diligently enough to put an early stop to the problem.

The system was clearly at fault, and I do not see why the Barretts should be penalised. I hope that my hon. Friend the Minister will be able to help the Barretts and reassure me that, as a result of this case and the Government's consideration of housing benefit during the past year, new measures will be taken, or have already been taken, to prevent such abuses from occurring in the future at the expense of individual private landlords and the taxpayer.

§ The Parliamentary Under-Secretary of State for Social Security (Mr. Peter Lloyd)

I congratulate my hon. Friend the Member for Chelmsford (Mr. Burns) on securing this debate. I listened with care to his excellent, closely argued speech and share his concern that the social security system should not operate in such a way as to allow tenants to evade their obligations to their landlords at the expense of the taxpayer. This is an important issue concerning a group of people—landlords—whose interests in the social security system we do not often have a chance to examine in the House. I am glad of this opportunity to do so.

The Government have done a great deal to ensure that local authorities have adequate powers to prevent abuse of the housing benefit scheme. The new regulations that we introduced last April contained several new measures, but before describing them it may be helpful if I began by outlining the background to this case and the action taken by the local authority. Then I shall be better able to explain how the new regulations would have helped, because—properly applied—they should ensure that an identical case cannot arise again.

In 1987, when my hon. Friend's constituents' problem first arose, the housing benefit regulations already gave local authorities certain powers to take action against 137 housing benefit claimants who failed to pay their rent. If the rent arrears amounted to 13 weeks' rent, the local authority had discretion either to pay the housing benefit direct to the landlord, or to withhold payment of benefit altogether.

As my hon. Friend said, the main events of this unhappy saga date from 17 September 1987. On that day Mr. and Mrs. Barrett wrote to Chelmsford borough council about the problems they were having with tenant A's non-payment of rent. At that time tenant A had not paid his rent since 13 July 1987, and Mr. and Mrs. Barrett asked the local authority to confirm that he was still receiving housing benefit.

A prompt reply was sent from the finance director of Chelmsford borough council on 24 September confirming that housing benefit continued to be paid, and inviting the Barretts to contact him should they have any further queries. But that letter failed to explain that, if the rent was still not being paid on 12 October, the local authority would then be able to pay housing benefit direct to the Barrett's instead of to the tenant. Clearly that would have been a great help to the Barrett's and, like my hon. Friend, I cannot imagine why the finance director did not mention it.

In the meantime the rent was still not being paid, and on 25 January 1988 the Barretts wrote to Chelmsford borough council again asking whether the housing benefit was still being paid, and pointing out that they had still received no rent. Rather belatedly perhaps, the local authority decided to act, and it suspended payment of housing benefit while it made further inquiries. The tenant gave the council a statement. It alleged that he had been in dispute with the Barretts for two years and that legal action was being taken. According to the tenant, the Barretts has stopped collecting the rent. He said that they told him to put the rent and rent book in the letter box of the property next door, which they also owned. But he had not complied with this request as he did not believe that it was a secure method of payment. His rent would be paid into his savings account instead.

I share my hon. Friend's amazement that the council did not reply to the Barrett's letter, giving them the opportunity to comment. Instead, the local authority simply put housing benefit back into payment, relying on the tenant's uncorroborated assurances. I am afraid the Barretts have not seen any rent since, even though housing benefit continued to be paid to their tenant until 5 August 1988, when he moved out.

I do not wish to be unfair to the local authority, and it is, of course, easy for us to see, with hindsight, how the Barretts' difficulties might have been so easily avoided. But I remain astonished that Chelmsford borough council, having at one stage accepted that there was a need to suspend payment, simply continued paying housing benefit right up to the tenant's departure, without giving the Barretts any further opportunity to give their version of events or to ask for benefit to be paid directly to them. They may still not have been able to recover their arrears in full, but their loss would have at least have been a little less.

I mentioned at the start the new regulations that the Government introduced in April last year. They provide for tougher rules on direct payments and give landlords in the position of Mr. and Mrs. Barrett much stronger protection. Local authorities are now required either to pay housing benefit direct to landlords or to withhold 138 payment altogether as soon as rent arrears amounted to eight weeks or more. That contrasts with the previous discretionary power to pay direct when the arrears amounted to 13 weeks or more, or to withhold payment. In the Barrett's case this means that payment would have had to be made direct to them when they first wrote to Chelmsford borough council on 17 September 1987, as their tenant was by then already eight weeks in arrears.

Alternatively, if the local authority had considered that it was not in the tenant's overriding interest for his benefit to be paid to the Barretts, it would have had to withhold payment until satisfied that it could pay direct, or that the tenant had already discharged his liability, or would do so once he received his benefit. As it was, the local authority failed to advise the Barretts that direct payment, under the old rules, could have been considered from 12 October 1987.

But what of events after April last year, when the new rules came in? I do not think that it would be unreasonable to expect someone in Chelmsford borough council with knowledge of the case to have looked at it in April 1988, in the light of the new direct payment rules, and to have inquired whether the rent was still not being paid. Action could then have been taken to ensure that the flow of public money to the tenant was redirected to its proper destination.

My Department has overall responsibility for the scope and structure of the housing benefit scheme, but, as my hon. Friend knows, Parliament has given individual local authorities full statutory responsibility for its day-to-day administration. Local authorities have other powers, as well as the duty I have already described, to pay housing benefit direct to the landlord or to withhold it altogether, if the tenant has arrears amounting to eight weeks' rent. They must pay the landlord direct or withhold the benefit if the claimant's social security local office is paying some of his income support direct to the landlord to pay off rent arrears. The local authority may pay the housing benefit direct to the landlord if the tenant has requested or agreed to this.

Local authorities may also pay the landlord if this would be in the interest of the claimant and his family, or if the tenant has moved out of the property, leaving arrears before the housing benefit is awarded. As well as having the power to withhold housing benefit, rather than pay it direct to the landlord, in any of these cases, where direct payment would not be in the interest of the claimant or his family, there is one situation where the local authority may withhold benefit but not pay direct. That is where the authority is satisfied that the claimant is not paying his rent regularly, regardless of the amount of arrears actually owed.

There are also powers for deductions to be made from a claimant's income support, which can then be paid direct to landlords towards a tenant's rent arrears. The Barretts' tenant was on supplementary benefit and income support throughout the relevant period. If the local office had known about the arrears in time, deductions could have been made.

Unfortunately, the Barretts did not know about their rights in this respect, and it was not until my hon. Friend first raised the possibility on 20 December 1988 that the local office considered making deductions. As I have explained, the tenant had by then already moved on. But under the regulations, deductions are possible only in respect of a debt owed to a current landlord.

139 The rules on direct payments represent a delicate balance. As my hon. Friend said, we have to strive to ensure that opportunities for abusing the system, whether for claimants or for landlords, are as few as possible. Unfortunately, rules which are designed to prevent abuse by one group may facilitate abuse by another. The Government recognise that the reasonable interests of private landlords are important, but so is the need to encourage those who are dependent on social security benefits to take on more responsibility for managing their affairs.

In addition, some tenants may have good reasons for wanting to withhold their rent. It was, I suppose, possible that Chelmsford borough council sincerely believed that 140 the Barretts' tenant was justified in withholding his rent. If it did, the proper course would have been for it to continue withholding his benefit.

Again, we have to be careful that our rules do not prejudice the interests of tenants in that position. That, together with the risks of abuse by some landlords, is why we do not allow housing benefit to be paid directly to landlords automatically, as some hon. Members often suggest.

Finally, I am grateful to my hon. Friend for raising his concern about landlords, as illustrated by the case of his constituents, about which he feels strongly. We believe that local authorities do now have sufficient powers to control this sort of abuse, but as this case shows, sadly they do not always use them in such a way as to achieve a fair outcome for all.