HC Deb 14 July 1997 vol 298 cc168-76

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

12.54 am
Mrs. Jackie Ballard (Taunton)

I am grateful for the chance, even at this late hour—or perhaps early hour—to draw the attention of the House and the Minister to some of the issues relating to housing benefit that concern me and other hon. Members. The subject of the debate is technical and may not sound exciting enough to keep many hon. Members in the Chamber this morning, but behind the academic arguments, statistics and fiscal calculations are the human problems of homelessness and poverty, which I know are of concern to most, if not all, hon. Members—although I notice that no Conservative Members share that concern.

As many hon. Members will know, housing benefit is paid to people who pay rent and are on low incomes, whether they are in work, unemployed or retired. It is paid by local authorities, but the rules and regulations are determined nationally. There are two main issues that I should like to raise: first, the single room rent rule for tenants in the private sector; and, secondly, the level of housing subsidy repaid to local authorities.

The single room rent rule was introduced by the previous Government in October 1996. It means that young people aged under 25 no longer receive a level of housing benefit that enables them to afford suitable accommodation. Instead, housing benefit is limited for them to the average cost of shared accommodation in the area. That usually means living in houses of multiple occupation, or HMOs, and having to share facilities such as kitchens or bathrooms with other tenants. That change has had a terrible effect on the young: homelessness has increased, while those who are not homeless face increasing poverty as they try to eke out their benefit or low wages to pay the extra rent.

The emphasis on HMOs as the preferred option for young people is, quite frankly, daft and possibly dangerous. In a 1991 Joseph Rowntree Foundation survey, 40 per cent. of HMOs were found to be unfit for human habitation. The survey also revealed that residents in HMOs were 28 times more likely to die in a fire than those in self-contained accommodation. In addition, HMOs do not yet have to be registered. Yet that is the form of accommodation promoted by the housing benefit rules for young people. It is also true that many parts of the country do not have an adequate supply of that type of dwelling. How are young people supposed to live in HMOs if there is none? The previous Government would have said, "The market will respond," but the private housing market is a slow beast and responding to such changes in demand would take many years.

The effects of the single room rent regulation in my own constituency have reflected national trends. Two recent reports by the south-western citizens advice bureaux and the Somerset Social Policy Group have highlighted the effects. The average cost of shared housing in Somerset is estimated to be £5 to £15 higher per week than the local single room rent assessment; and the cost of self-contained one-bed accommodation is £35 to £45 a week higher. One survey found that, in my constituency, three out of four landlords imposed further charges in addition to rent—as much as £100 in some cases, for administration.

Young tenants therefore have four choices if they cannot find a well-paid job. They can find new lodgings; pay for their rent out of their income or benefit; build up arrears and face expulsion; or try to negotiate a lower rent. Let me deal with each of those options in turn. The chances of finding new lodgings while on benefit are very slim. Landlords are distinctly reluctant to take on new tenants who are on housing benefit and those who do take on such tenants often provide the worst sort of accommodation. The option of paying the extra rent out of income can lead to tenants living at below subsistence level. After paying the rent, one client of the south-west citizens advice bureaux had only £8.86 left a week to pay for food and other items. Obviously, building up arrears is not a long-term option. Finally, bargaining with one's landlord to lower the rent proves unsuccessful in the vast majority of cases.

The effect has been to push young people out of reasonable accommodation into homelessness or unsuitable and substandard dwellings. Some might argue—indeed, many members of the previous Conservative Government did argue—that they should live with their parents, but in an age of increasing family breakdown, that is wishful thinking. It does not take into account the location of any parental home or serious family disputes or even abuse. It also does not take into account the natural desire of many people over 18 to leave home and live independently—sometimes the only way to ensure a continuing happy relationship with parents.

The consequences have been economic as well as personal. As the right hon. Member for Islington, South and Finsbury (Mr. Smith) predicted in a debate in the House in February 1996, the change acted as a disincentive to taking up work, for fear that any job might not last, so housing benefit would be lower once the person reclaimed. At the time, that change in the regulations was opposed by the Liberal Democrats and Labour.

I welcome the fact that the Government have acted swiftly to halt the extension of the rule to those aged 25 to 60. I also welcome the announcement by the Secretary of State of a review of housing policy and housing benefit. However, the new Government have taken no action to help young people on housing benefit—and remember, this is not only people who are out of work and might benefit from the welfare-to-work scheme, but people in low-paid jobs. They will continue to suffer under the proposals introduced by the previous Government.

I shall now discuss subsidy on local authority rent accounts. As hon. Members must know, the housing subsidy paid to local authorities consists of several elements, including rent rebates. During the past few years, the calculation has resulted in a subsidy payment to local councils that is significantly less than the rent rebates or housing benefit that they pay out. As local authorities are providers of social housing, inevitably a high proportion of their tenants will be either in low-paid jobs or out of work and therefore claiming housing benefit.

As the housing benefit bill increased in the late 1980s and early 1990s, the Conservative Government searched for ways to keep it down. One way is to make council tenants who are not on benefits effectively subsidise those who are, by withdrawing rent account subsidy. In 1996, the Government introduced a limit to local authority rent increases, with increasingly heavy penalties for any rent increases in excess of the guideline figure. For my local authority of Taunton Deane, the guideline increase in 1996–97 was 67p per week, or 1.82 per cent. If the council had imposed a rent increase greater than the guideline, tenants not on rebate would have had to pay a progressively greater amount to offset the loss of subsidy. As hon. Members will be well aware, 1.82 per cent. is well below the rate of inflation now, and indeed that projected for the autumn.

The cost of housing benefit for local authority tenants in Taunton Deane this year is £7.3 million, of which the Government will repay only £3.1 million—less than 50 per cent. rebate, whereas housing associations are repaid 95 per cent.

It is estimated that, between 1990 and 1997, £6 billion will have been siphoned off from rent payments in local authorities to meet benefit bills. Figures from the Local Government Association's housing finance survey in England for this year show that local authorities will contribute more than £1.2 billion to the cost of rent rebates. Even allowing for the positive subsidy paid to 27 authorities, the Government are making a profit of £640 million from council house tenants this year alone.

To try to keep the national housing benefit bill down, local council tenants have for years been subsidising other tenants, both in taxation, as we all are, and in their rent. Now councils cannot afford to maintain their housing stock because they are not allowed to levy rent increases above inflation. Tenants rightly believe that their rent payments should be for landlord services, not for welfare payments to other tenants. If that £6 billion had been spent on repairing and maintaining council houses, how much better maintained would local authority stock be now? Fewer councils might then feel the need to sell off their stock to housing associations.

I contrast the treatment of local authorities and housing associations. The latter are repaid 95 per cent. of their housing benefit bill and are allowed to increase their rents above the inflation rate. That punitive regime was in place under a Government who were clearly hostile to local authority housing. The Labour Government profess not to be. In the debate on the Local Government Finance (Supplementary Credit Approvals) Bill, the Minister for London and Construction told me: After 18 years when local authorities have been denigrated and run down by the Conservatives, I can assure her that the Government will support them and see them having a strong and positive role in this area."—[Official Report, 17 June 1997; Vol. 296, c. 209.] Finally, I wish briefly to discuss the Budget and associated changes in benefit. The most significant change is to non-dependant deductions, to be introduced next April. Non-dependant deductions create work disincentives, cause friction within families, and can result in rent arrears and even homelessness. Between 1993 and 1996, the top rate of non-dependant deductions increased from £21 to £32—a rise of 52 per cent. There have also been serious problems in the administration of non-dependant deductions. The claimant must find out the income of the non-dependant, who receives no notification of the implementation of the deduction from the claimant's housing benefit.

The most worrying part of the Budget was the announcement of a change to the period of backdating permitted from October 1998. It had been one year; the Tories reduced it to three months; and we now hear that it is to be only one month. Moreover, that is in the context of severe problems in local government finances.

Because of the 18 to 25 single room rent rule, homelessness among young people has increased throughout the country. Because of the withdrawal of subsidy paid to councils and controls on their rents, poor tenants subsidise even poorer tenants and councils cannot afford properly to maintain their housing stock. A Government who say that they are committed to the relief of poverty and to social justice cannot allow that to continue. I await with interest the Minister's response to the issues that I have raised.

1.6 am

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley)

I listened carefully to what the hon. Member for Taunton (Mrs. Ballard) said, and I congratulate her on obtaining this wide-ranging debate. In the brief time available, I will try to cover the points that she raised, but she will appreciate that some of them are not the direct responsibility of the Department of Social Security. Those matters which would have been more appropriate for the Department of the Environment, Transport and the Regions will be looked into and we shall write to the hon. Lady on those in due course.

I am pleased to be able to make clear to the House two preliminary points. First, single room rents for the under-25s have been in place since October 1996. That was part of our inheritance from the previous Administration. We are now beginning to gather information about the effects of those arrangements on young people. Secondly, the other part of our inheritance on single room rents was the provision which extended them still further, to single people aged 25 to 59, which was due to come into effect from October this year. As the hon. Lady acknowledged, we have already acted decisively to ensure that that will not happen.

Dr. Peter Brand (Isle of Wight)

Will the Minister, as a matter of urgency, take on board the need to look at the effects of the single room rent for people who need supportive lodgings, especially people with learning difficulties who live in the community and people recovering from mental illness? They may not be formally in the care of social services departments and may not receive 24 hours per day care, but they need support, which is extremely difficult to provide at the low rates currently applicable to the under-25s.

Mr. Bradley

I am grateful to the hon. Gentleman for his intervention. I was about to deal with that point. Time is extremely short and, with permission, I hope that I can get on and make some points in the time available. I will expand on them if necessary by writing to hon. Members.

I re-emphasise the fact that we shall always listen to what other hon. Members have to say about these crucial matters. We want to work with outside organisations that have an interest in social security matters, and we are keen to utilise their valuable expertise. That is the approach that I took in opposition, and 1 have no intention of changing it in government.

The best thing that we can do for young unemployed people is help them back to work. That is why we are introducing the new deal that will provide work, education and other opportunities to young people aged 18 to 24 who have been unemployed for more than six months. We have set out clearly the choices that will be available to them.

As I stated at the outset, we inherited a package of social security measures from the last Government, with the attendant expenditure implications, and we had to make hard choices—including the changes that we have made to non-dependant deductions.

Last October, the previous Government introduced single room rents for under-25s in order to restrict the amount of housing benefit paid to young people living in the private rented sector, and so control the cost to the taxpayer. The last Government justified that move by saying that housing benefit should not pay for accommodation that is more expensive than that which people would expect to occupy if they had to meet the rent from their own resources.

The report to which the hon. Member for Taunton referred entitled "Housing Benefit—The Unkindest Cut", which was produced by citizens advice bureaux in the western region, is of real interest to us. It will be valuable in building a national picture, which we need in order to understand the real effects. Only then will we be in a position to take prudent and fully considered decisions.

I am well aware of the concerns that were expressed at the time of introduction and, in order to address them, we are collecting information from a sample of local authorities about the number of young people affected and the level of housing benefit restriction. Analysis of that information has begun, but we need to know more. Meanwhile, we have already decided to exempt severely disabled people under age 25, and single young people with non-dependants residing with them, from the application of the single room rent. That change will be effective from October 1997.

I reminded the House earlier that we acted swiftly and decisively shortly after taking office when we decided to revoke regulations laid just before the election by the previous Administration. Those regulations would have extended the application of single room rents beyond the under-25s to most single people aged 25 to 59. In taking that decision, we considered carefully the view of the Social Security Advisory Committee—that the Government should not extend the existing single room rent rules for the under-25s without thoroughly reviewing their effects. We also took careful account of the views of hon. Members and local authority associations—in other words, we listened to them and acted accordingly.

Single room rents for the under-25s reflect the market rent for non-self-contained accommodation, without board, in the locality in which claimants live. Single room rents are determined by the independent rent officer service. Some people aged under 25 are already exempt from single room rents. They include local authority tenants, tenants of registered social landlords, and tenants in accommodation provided by county councils, housing associations, registered charities and voluntary organisations which provide care, support or supervision. Young people coming out of local authority care are also exempt until they reach the age of 22.

We have instituted a series of visits to local authorities, advice agencies and rent officers so that we can obtain direct information both about the impact of these changes on young individuals and about whether there are significant problems obtaining accommodation at rents at or below single room rents.

We have commissioned a survey to obtain information on housing benefit and the private rented sector. The results are expected next summer. We are also looking critically at our monitoring arrangements to see whether other steps can be taken to ensure that the measures introduced for the under-25s are properly monitored and their effects properly translated into any policy changes that may be appropriate.

I can tell the House that we have already received representations from a number of organisations about this measure, and there is some evidence of hard cases, as the hon. Lady identified, particularly where young people leave board and lodging and supported accommodation.

Supported accommodation and how it should be funded is the subject of a separate interdepartmental review, and we hope to introduce proposals on that in the near future.

It has to be said, however, that the evidence of hard cases is mixed and is of differing quality around the country. That is one very good reason why we want to make a better assessment of the overall position before we make any policy changes. As I said earlier, we shall continue to listen to organisations such as the National Association of Citizens Advice Bureaux, which are starting to provide the information, as evidenced by the report in the south-west. Similar reports have come from other parts of the country, and one has recently been produced in my own area, the north-west.

Meanwhile, it is worth reminding the House that there is provision for local authorities to give extra help. Local authorities have a discretionary power to provide additional help to people in the private rented sector whose rents exceed the general level of rents for similar property in their area—the local reference rent, on which the level of housing benefit is based. That discretionary power was extended to cover people affected by the introduction of the single room rent for people under 25.

Briefly, local authorities have discretion to increase housing benefit up to the level of the contractual rent—less, of course, any charges which are not eligible for housing benefit—where they decide that exceptional hardship would otherwise result. The term "exceptional hardship" is not defined in regulations. It is a matter to be determined in each individual case by the local authority, which is well placed to decide on the merits of each case.

The discretionary power replaced the earlier provision of additional help to prescribed groups—pensioners, families and disabled people. Additional help used to be available to anyone in those groups, irrespective of individual circumstances. The discretionary scheme, on the other hand, was designed to be more focused on individual circumstances.

Local authorities do not have unlimited discretion in this area: the extent to which they can exercise discretion is subject to an annual limit. The total for 1997–98 is about £47 million. Central Government's contribution to that is £18.25 million. We are looking at how the scheme is working, as part of our exercise to gather evidence on the impact of the rules for the under-25s. We will give all the results and information that hon. Members wish to give to our considerations full weight as the policy is properly analysed.

Single room rents for single people under 25 are only one of a whole range of social security provisions that we inherited on coming to office.

On the matter raised by the hon. Lady about rent rebates, local authority tenants come under the housing revenue account, which is set by the Department of the Environment, Transport and the Regions, as it is now called. Guideline rents were set to ensure that rents were kept in check. As I said, this matter is determined by that Department and her comments on it are best referred for further consideration, through the debate, to that Department.

Housing association rents have the 95 per cent. subsidy, but the Department of the Environment, Transport and the Regions is about to consult on rent increases for housing authority tenants. Matters which need further consideration have been raised tonight and we shall look at them.

We have already made some important changes, which the hon. Lady has acknowledged, but the task that lies ahead in terms of an overall review of housing benefit in the context of housing policy is a huge one after 18 years of the previous Administration. We shall work with other Government Departments to develop our housing policies. We want to ensure that with those developments we do not continue to trap people in benefit. We want to generate, as much as possible, a hand up and not a hand out, which will generate personal responsibility.

We recognise that the consequences of many of the changes that we have inherited have forced people into difficult situations. The single room rent, which has been the focus of the debate, is clearly one of them. We recognise that the hard choices that we have to make on non-dependant deductions are not without pain themselves. Given the commitment that we gave in our manifesto to remain within spending limits within Departments, hard choices had to be made. At the same time, we want to monitor the impact of the changes that we shall be making to ascertain what the effect on families will be and to ensure that there are not continuing disincentives between those on benefit who are trying to get into work and those on low incomes who want to stay in work.

As the hon. Lady is well aware, single room rent applies only on new tenancies or renewals. A person on low income in a property will not be affected unless he or she has to make a fresh claim for housing benefit.

The hon. Lady made some excellent points, which we have noted. Our overall objective, however, is to modernise the social security system, and in the process to tackle poverty and welfare dependency while promoting work incentives. We want to develop a system which supports work, savings and honesty. Within that approach, we want to be vigilant in tackling fraud and ensuring value for taxpayers' money. As the House knows, we are committed to a complete review of the social security system, and housing benefit will clearly form a crucial part of that.

The hon. Lady will be well aware that the housing budget has escalated to about £3 billion-worth of expenditure as a result of policies that we inherited from the previous Administration. Tackling that bill and introducing a phased release of capital receipts so that we can start to rebuild and repair housing, while introducing new rented accommodation at a price that people can afford, are Government priorities. We shall set about the task in the fundamental reviews to which I have referred.

That is not to say that the issues that the hon. Lady has raised are not of fundamental importance. We must recognise the damage that has been done to communities by the previous Government's policies. We intend to tackle the issues as vigorously as we can to ensure that we have a decent society for everyone along with an affordable house.

I thank the hon. Lady for initiating the debate. I will ensure that she receives a reply in due course on those matters to which I have not been able to respond tonight.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes past One o'clock.