§
'.—In section 135 of the Social Security Contributions and Benefits Act 1992, there shall be inserted—
(1A) The applicable amount prescribed for a working families' tax credit and a disabled person's tax credit shall include an amount for prescribed housing costs".'.—[Mr. Webb.]
§ Brought up, and read the First time.
§ Mr. WebbI beg to move, That the clause be read a Second time.
The previous new clause was hailed as a victory for the hon. Member for Beckenham (Mrs. Lait). I believe that this one is about to be hailed as a victory for the hon. Member for Northavon. When I opened The Guardian on Monday morning, I saw the headline "Housing benefit to become a tax credit". That is the subject of the new clause, which says that an amount for housing costs should be 1158 included in the applicable amounts for the working families tax credit and the disabled persons tax credit. I am confident that the Minister will tell us that the Government accept the new clause and that we can move on.
In case the Minister does not accept the new clause, I should like to explain the purpose of the new clause further. I thank her for giving me access to her officials, with whom I have been able to talk through the ideas. I shall not attribute any views to those officials, but the fact that I saw the story in the newspaper some days later makes me think that my ideas were well received.
The new clause addresses two problems with the existing regime. First, there is an inequity between renters and home buyers, because whereas low-income renters can receive help with the cost of their rent, low-income home buyers receive no such help. The second problem is the overlap between the working families tax credit and housing benefit. We still have the absurd situation in which some people—admittedly fewer—can lose up to 90p in the pound through the combined withdrawal of working families tax credit and housing benefit. The Government could have minimised that absurd overlap through a new clause such as this.
We propose that an amount in the working families tax credit should relate to household size and composition, meeting some proportion of an individual's rent—or imputed rent, in the case of home buyers. It would not relate to their specific rent. There would not be all the bureaucracy of finding out precisely how much rent the person concerned was paying, or how much their mortgage was and how much it changed when interest rates changed. The aim would be to make a contribution towards the typical housing consumption of a household of a given size and composition.
That strategy has two advantages. First, it would provide a work incentive. The Government talk endlessly about welfare to work. The new clause would give unemployed home buyers an improved incentive to take a low-paid job. In my constituency, where unemployment is at only about 1.5 per cent., the only people who tell me that they cannot afford to take a job are those with mortgages, because they would lose all help with their mortgage interest. My proposal would not cover the whole mortgage. We are not trying to help people to acquire valuable assets; all that we are trying to do is meet the cost of housing services at a minimal level. The new clause would give an improved work incentive to one of the groups still in the unemployment trap. For that reason, I hope that the Government will look sympathetically at it.
Secondly, the new clause would minimise the absurd overlap with housing benefit. It is extraordinary that someone could be given the working families tax credit with one hand, but find that the council reduced their housing benefit with the other. Rent levels are already extraordinarily high. If the working families tax credit could be used to make a contribution towards rent, the housing benefit system would not have to cover that portion of the rent. That would float tens of thousands of people off housing benefit, saving on bureaucracy and making the system simpler for the claimant and for the authorities.
We probably differ from the Government in not seeing the inclusion of housing in the working families tax credit as a means of cutting overall housing benefit support. 1159 We do not want to leave people without enough money to pay their rent. We do not want to leave them having to engage in mythical shopping around for smaller rented accommodation, because for social tenants in particular there is often no opportunity to shop around. The Government might be thinking of using the proposals as a way of leaving people short on their rent assistance. That is what I infer from the newspaper reports. If that is not the case, I hope that the Minister will contradict it. We are talking about giving a slice of money, varying only according to household size and composition, to reflect the consumption of housing services and help to float some people off housing benefit.
In its briefing on the Bill, the Chartered Institute of Housing urges the Government to make clear their intentions on housing benefit. I am concerned about the rush in which the Government brought forward the Bill—a rush which we have seen from this afternoon's child care proposals and the fact that there was no mention of housing in the Bill. I am offering the Government a chance to redeem themselves and bring housing into the Bill, as the Prime Minister apparently wants. If we put the measure in this afternoon, when the Government get round to working out exactly what they want, we shall have done them a favour by giving them the provision in primary legislation, so they will be able to get on with the matter without the need for extra primary legislation. This is a long-overdue reform.
How a proposal might be paid for is always a subject close to my heart. I would not dream of making a suggestion that did not have a price tag attached. The Government are spending money through the working families tax credit on reducing the taper from 70 to 55 per cent. On the face of it, that looks good for work incentives. Surely taking a lower rate from people is good. However, as the Government know, although fewer people face 80 per cent. or so, more people face 50 or 60 per cent., which is still a substantial chunk. It is not clear that bringing more people into such marginal rates is good for incentives overall. As with so many elements of the Bill, the Government have produced no evidence to show that their proposals would be better overall. There are simulation models that could be used to assess that, but I am not aware that the Government have used them. My suggestion to pay for my proposal is to keep the taper relatively high. Putting assistance in with housing would equalise the position between tenures and would reduce the overlap with housing benefit.
The proposal is costed and we have provided the means of paying for it. It would reduce distortions and work disincentives, while doing the Government a favour, because they propose to do something similar anyway. I warmly commend the new clause to the House.
§ Mr. PicklesIt is a pleasure to follow the hon. Member for Northavon (Mr. Webb). His arguments were persuasive, although I do not think that they will affect our vote this evening.
At times, the three weeks that we spent going through the Bill felt like performing "Hamlet" without the Prince of Denmark. We cannot come to a reasonable decision about the effect of tax credits without a good understanding of how housing costs will be affected. The success of the tax credit system—the declared aim of which is to ease the gap from dependency to work—will 1160 largely depend on the relationship between housing costs, working families tax credit and disabled persons tax credit.
We are fortunate to have the guidance of the Select Committee on Social Security in its report "Tax and Benefits: Implementation of Tax Credits". We see from the report that a succession of groups pointed out that marginal tax rates are likely to be fairly limited in respect of people who claim housing benefits. The Institute for Fiscal Studies has calculated that, following the introduction of working families tax credit, people subject to tax and national insurance reductions and receiving family credit, housing benefit and council tax benefit will see their marginal tax rate reduced by only about 1.5 per cent., to around 95.3 per cent.
Under the Bill, working families tax credit will be treated as income for housing benefit and council tax benefit. As the hon. Member for Northavon said, there is no in-work benefit to help housing costs for those with mortgages, and about half of those entitled to working families tax credit will be owner-occupiers.
Professor Stephen Wilcox, of the centre for housing policy at York university, told the Select Committee that only those with a very small mortgage will be better off as a result of working families tax credit or disabled persons tax credit. He added that the great weakness of the proposed reform was that, for many households, the higher rents and confusing overlap of the different in-work benefits will remain in place. Such households, as a result, will be no more likely to take account of the potential for housing benefits to boost their in-work incomes than they are now. For high-cost households, the message will not be effective.
It is little wonder that the Select Committee thought it necessary to issue a stern warning that the Government's reform of tax and benefits would be jeopardised unless housing benefit was fully taken into account. We know from the Chancellor's statement last week that he is actively considering incorporating housing benefit into the working families tax credit to ensure that people in rented accommodation, and owner-occupiers, benefit.
The hon. Member for Northavon referred to leaks in The Guardian. He is a sensible chap, and I am sure that he ignores the Sunday newspapers. However, the leaks to which he referred were repeats of previous leaks in Sunday newspapers. The Independent on Sunday said:
Poorest families to be forced to move".The Sunday Telegraph said:Housing benefits to be axed and council rents raised".We understand that a Cabinet Committee—involving the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer and the Secretary of State for Social Security—is determined to cut the £12 billion housing benefit bill. If the Government are sufficiently ready to leak in advance their plans to national newspapers on a Sunday—and to repeat those leaks to other newspapers on a Monday—surely they should have sufficient confidence to bring those proposals to the House today so that we can assess them.Is it the Government's intention to impose a monthly limit on the amount of rent funded by the Government? Is it their intention to bring in regional levels for housing assistance? Is it their intention to ensure that all tenants contribute towards the cost of their rent? Is it their 1161 intention to force tenants out of their homes to find cheaper accommodation? That is controversial. Does that mean that widows who have lived in their homes for many years are to be forced out by the Government?
5.45 pm
Is it the Government's intention to offer cash incentives to attract younger people? It was suggested in the newspapers that nurses and young professionals could move to run-down estates. We might find the yuppies moving into a badly run Labour authority. That will not bring redemption. Is this the final break with the past and with the Labour municipal housing policies that have characterised post-war Labour Governments? The Government have a duty to explain themselves. I am giving the Financial Secretary an opportunity—I know she is a decent person—to come clean, to bare all and to tell us the truth.
§ Mrs. RocheIt is a pleasure—I use the word advisedly—to appear with the hon. Member for Brentwood and Ongar (Mr. Pickles) again. In future, appearing in Committee or a debate will, for me, be like seeing a performance of "Hamlet" without Rosencrantz and Guildenstern.
§ Mr. PicklesThey are dead.
§ Mrs. RocheOnly at the end of the play—unless one has seen the shortened version.
I am clearly going to disappoint the hon. Member for Northavon (Mr. Webb), although I think that he tabled his new clause merely to probe our intentions. He referred to a discussion with my officials on the subject. It was a useful and helpful discussion, and we thank him for coming in. We understand his expertise, and he is responsible for some of the academic work in the area.
The House will appreciate that the interaction of benefit tapers with the two tax credits produces high marginal deduction rates. That is borne out by some of the work done by the hon. Member for Northavon. However, the new tax credits do two things to help in this area. First, the more generous help that the credits give will help float more people off housing benefit—to use the words of the hon. Gentleman—as a direct result of the measures announced in the Budget. Secondly, the lower taper within the working families tax credit and the disabled persons tax credit will mean that fewer people will see high marginal deduction rates.
As the economic and fiscal strategy report made clear, the Government believe that Britain's current housing system is failing those in need. Our ambition is to modernise housing policy to make the housing market and the labour market fairer to all concerned. In his Budget statement, my right hon. Friend the Chancellor indicated that, over time, he wants the Government's better deal for work to include help with housing costs for renters and home owners going back to work.
The House will realise that personal housing support will need to be reformed gradually. The current system of housing benefit is too complicated to be integrated with the working families tax credit and the disabled persons tax credit. Even if personal housing support were 1162 simplified, the systems for administering an element for housing costs in the new tax credits would take the Inland Revenue many years to install. Furthermore, the current structure of social rent would need to be reformed before we could move in that direction.
The Government have begun working in partnership with local authorities to develop proposals for the simplification and improvement of the existing system of housing benefit. For the future, the Government are looking at options for strengthening the link between social rents and the size, location and condition of properties. The Government will consider further reforms over the coming months, and will announce details in a Green Paper on housing policy later in the year. Of course there will be extensive consultation with all concerned.
I hope that, given what I have said, the motion will be withdrawn, but if it is pressed to a vote, I ask the House to reject it.
§ Mr. WebbI am grateful to the Financial Secretary for her generous comments, but I am not convinced that she responded to what I said. I pointed out the discrepancy between renters and home buyers, and she did not suggest anything to remedy that. In fact, the Budget took mortgage tax relief away from buyers, so the Government missed an opportunity to give low-income buyers some assistance.
The Financial Secretary said nothing to reassure me about the continuing and absurd overlap between housing benefit and the working families tax credit, to which the hon. Member for Brentwood and Ongar (Mr. Pickles) referred. She said that the structure of social rents did not allow the Government to do as we suggested, because it was a mess. I accept that it is a mess, but my proposal is that not actual rents, but an average amount for a family of a particular size and composition be matched with the working families tax credit. If people were paying over the odds, the system would not have to subsidise that.
For all those reasons, my colleagues and I feel that the new clause has merit, and we want to press the motion to a vote.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 39, Noes 303.
1165| Division No. 112] | [5.51 pm |
| AYES | |
| Allan, Richard | Michie, Mrs Ray (Argyll & Bute) |
| Ashdown, Rt Hon Paddy | Moore, Michael |
| Baker, Norman | Morgan, Alasdair (Galloway) |
| Beggs, Roy | Oaten, Mark |
| Brake, Tom | Öpik, Lembit |
| Breed, Colin | Rendel, David |
| Burstow, Paul | Ross, William (E Lond'y) |
| Chidgey, David | Russell, Bob (Colchester) |
| Cotter, Brian | Sanders, Adrian |
| Donaldson, Jeffrey | Smith, Sir Robert (W Ab'd'ns) |
| Ewing, Mrs Margaret | Smyth, Rev Martin (Belfast S) |
| Fearn, Ronnie | Taylor, Rt Hon John D (Strangford) |
| Forsythe, Clifford | Taylor, Matthew (Truro) |
| Foster, Don (Bath) | Thompson, William |
| George, Andrew (St Ives) | Tonge, Dr Jenny |
| Hughes, Simon (Southwark N) | Tyler, Paul |
| Wallace, James | |
| Keetch, Paul | Webb, Steve |
| Kennedy, Charles (Ross Skye) | |
| Kirkwood, Archy | Tellers for the Ayes: |
| Livsey, Richard | Mr. Donald Gorrie and Mr. Phil Willis. |
| Maclennan, Rt Hon Robert |
| NOES | |
| Abbott, Ms Diane | Cummings, John |
| Adams, Mrs Irene (Paisley N) | Cunliffe, Lawrence |
| Ainger, Nick | Cunningham, Jim (Cov'try S) |
| Ainsworth, Robert (Cov'try NE) | Dalyell, Tam |
| Allen, Graham | Darling, Rt Hon Alistair |
| Ashton, Joe | Darvill, Keith |
| Atherton, Ms Candy | Davidson, Ian |
| Atkins, Charlotte | Davies, Rt Hon Denzil (Llanelli) |
| Austin, John | Davis, Terry (B'ham Hodge H) |
| Banks, Tony | Dawson, Hilton |
| Barnes, Harry | Dean, Mrs Janet |
| Barron, Kevin | Denham, John |
| Battle, John | Dobbin, Jim |
| Bayley, Hugh | Donohoe, Brian H |
| Beard, Nigel | Doran, Frank |
| Beckett, Rt Hon Mrs Margaret | Dowd, Jim |
| Begg, Miss Anne | Eagle, Angela (Wallasey) |
| Bell, Stuart (Middlesbrough) | Edwards, Huw |
| Benn, Rt Hon Tony | Efford, Clive |
| Bennett, Andrew F | Ellman, Mrs Louise |
| Benton, Joe | Ennis, Jeff |
| Bermingham, Gerald | Etherington, Bill |
| Berry, Roger | Fatchett, Rt Hon Derek |
| Best, Harold | Field, Rt Hon Frank |
| Betts, Clive | Fisher, Mark |
| Blackman, Liz | Fitzpatrick, Jim |
| Blears, Ms Hazel | Fitzsimons, Lorna |
| Blizzard, Bob | Flint, Caroline |
| Blunkett, Rt Hon David | Flynn, Paul |
| Borrow, David | Follett, Barbara |
| Bradley, Keith (Withington) | Foster, Rt Hon Derek |
| Bradley, Peter (The Wrekin) | Foster, Michael Jabez (Hastings) |
| Bradshaw, Ben | Foster, Michael J (Worcester) |
| Brinton, Mrs Helen | Foulkes, George |
| Brown, Rt Hon Gordon (Dunfermline E) | Fyfe, Maria |
| Galloway, George | |
| Brown, Rt Hon Nick (Newcastle E) | Gerrard, Neil |
| Brown, Russell (Dumfries) | Gibson, Dr Ian |
| Browne, Desmond | Gilroy, Mrs Linda |
| Buck, Ms Karen | Goggins, Paul |
| Burgon, Colin | Golding, Mrs Llin |
| Butler, Mrs Christine | Griffiths, Jane (Reading E) |
| Caborn, Richard | Griffiths, Nigel (Edinburgh S) |
| Campbell, Alan (Tynemouth) | Griffiths, Win (Bridgend) |
| Campbell, Mrs Anne (C'bridge) | Grocott, Bruce |
| Campbell, Ronnie (Blyth V) | Grogan, John |
| Canavan, Dennis | Hall, Patrick (Bedford) |
| Caplin, Ivor | Hanson, David |
| Casale, Roger | Healey, John |
| Caton, Martin | Henderson, Ivan (Harwich) |
| Chapman, Ben (Wirral S) | Hepburn, Stephen |
| Chaytor, David | Heppell, John |
| Chisholm, Malcolm | Hewitt, Ms Patricia |
| Clapham, Michael | Hill, Keith |
| Clark, Rt Hon Dr David (S Shields) | Hoey, Kate |
| Clark, Dr Lynda (Edinburgh Pentlands) | Home Robertson, John |
| Hoon, Geoffrey | |
| Clark, Paul (Gillingham) | Hope, Phil |
| Clarke, Rt Hon Tom (Coatbridge) | Hopkins, Kelvin |
| Clarke, Tony (Northampton S) | Howarth, George (Knowsley N) |
| Clelland, David | Hoyle, Lindsay |
| Clwyd, Ann | Hughes, Kevin (Doncaster N) |
| Coaker, Vernon | Humble, Mrs Joan |
| Coffey, Ms Ann | Hurst, Alan |
| Coleman, Iain | Iddon, Dr Brian |
| Connarty, Michael | Jackson, Ms Glenda (Hampstead) |
| Cook, Frank (Stockton N) | Jackson, Helen (Hillsborough) |
| Cooper, Yvette | Jamieson, David |
| Corbett, Robin | Jenkins, Brian |
| Corston, Ms Jean | Johnson, Alan (Hull W & Hessle) |
| Cousins, Jim | Johnson, Miss Melanie (Welwyn Hatfield) |
| Cox, Tom | |
| Cranston, Ross | Jones, Helen (Warrington N) |
| Crausby, David | Jones, Jon Owen (Cardiff C) |
| Cryer, Mrs Ann (Keighley) | Jones, Dr Lynne (Selly Oak) |
| Jones, Martyn (Clwyd S) | Pickthall, Colin |
| Kaufman, Rt Hon Gerald | Pike, Peter L |
| Keeble, Ms Sally | Plaskitt, James |
| Keen, Alan (Feltham & Heston) | Pollard, Kerry |
| Keen, Ann (Brentford & Isleworth) | Pond, Chris |
| Kelly, Ms Ruth | Powell, Sir Raymond |
| Kemp, Fraser | Prentice, Ms Bridget (Lewisham E) |
| Kennedy, Jane (Wavertree) | Prentice, Gordon (Pendle) |
| Khabra, Piara S | Prescott, Rt Hon John |
| Kidney, David | Primarolo, Dawn |
| Kilfoyle, Peter | Prosser, Gwyn |
| King, Andy (Rugby & Kenilworth) | Quin, Rt Hon Ms Joyce |
| King, Ms Oona (Bethnal Green) | Rapson, Syd |
| Kingham, Ms Tess | Raynsford, Nick |
| Ladyman, Dr Stephen | Reid, Rt Hon Dr John (Hamilton N) |
| Lawrence, Ms Jackie | Roche, Mrs Barbara |
| Laxton, Bob | Rooker, Jeff |
| Leslie, Christopher | Rooney, Terry |
| Levitt, Tom | Ross, Ernie (Dundee W) |
| Lewis, Terry (Worsley) | Roy, Frank |
| Linton, Martin | Ruane, Chris |
| Livingstone, Ken | Ruddock, Joan |
| Lloyd, Tony (Manchester C) | Russell, Ms Christine (Chester) |
| Lock, David | Savidge, Malcolm |
| Love, Andrew | Sawford, Phil |
| McAllion, John | Sedgemore, Brian |
| McAvoy, Thomas | Sheerman, Barry |
| McCabe, Steve | Sheldon, Rt Hon Robert |
| McCafferty, Ms Chris | Shipley, Ms Debra |
| McDonagh, Siobhain | Simpson, Alan (Nottingham S) |
| Macdonald, Calum | Singh, Marsha |
| McDonnell, John | Skinner, Dennis |
| McFall, John | Smith, Rt Hon Andrew (Oxford E) |
| McIsaac, Shona | Smith, Angela (Basildon) |
| McKenna, Mrs Rosemary | Smith, Miss Geraldine (Morecambe & Lunesdale) |
| McNamara, Kevin | |
| McNulty, Tony | Smith, Jacqui (Redditch) |
| MacShane, Denis | Smith, Llew (Blaenau Gwent) |
| Mactaggart, Fiona | Soley, Clive |
| McWalter, Tony | Southworth, Ms Helen |
| Mahon, Mrs Alice | Spellar, John |
| Mallaber, Judy | Squire, Ms Rachel |
| Mandelson, Rt Hon Peter | Starkey, Dr Phyllis |
| Marsden, Gordon (Blackpool S) | Steinberg, Gerry |
| Marsden, Paul (Shrewsbury) | Stevenson, George |
| Marshall, David (Shettleston) | Stewart, David (Inverness E) |
| Marshall, Jim (Leicester S) | Stewart, Ian (Eccles) |
| Marshall—Andrews, Robert | Stinchcombe, Paul |
| Martlew, Eric | Stoate, Dr Howard |
| Maxton, John | Stringer, Graham |
| Meacher, Rt Hon Michael | Stuart, Ms Gisela |
| Meale, Alan | Sutcliffe, Gerry |
| Merron, Gillian | Taylor, Rt Hon Mrs Ann (Dewsbury) |
| Michie, Bill (Shef'ld Heeley) | |
| Mitchell, Austin | Temple-Morris, Peter |
| Moonie, Dr Lewis | Thomas, Gareth (Clwyd W) |
| Moran, Ms Margaret | Thomas, Gareth R (Harrow W) |
| Morgan, Ms Julie (Cardiff N) | Timms, Stephen |
| Morgan, Rhodri (Cardiff W) | Todd, Mark |
| Morley, Elliot | Touhig, Don |
| Mountford, Kali | Trickett, Jon |
| Mullin, Chris | Turner, Dennis (Wolverh'ton SE) |
| Murphy, Denis (Wansbeck) | Turner, Dr Desmond (Kemptown) |
| Murphy, Jim (Eastwood) | Turner, Dr George (NW Norfolk) |
| Murphy, Rt Hon Paul (Torfaen) | Twigg, Derek (Halton) |
| Naysmith, Dr Doug | Vaz, Keith |
| Norris, Dan | Vis, Dr Rudi |
| O'Brien, Bill (Normanton) | Walley, Ms Joan |
| O'Brien, Mike (N Warks) | Ward, Ms Claire |
| O'Hara, Eddie | Wareing, Robert N |
| Olner, Bill | Watts, David |
| O'Neill, Martin | White, Brian |
| Organ, Mrs Diana | Wicks, Malcolm |
| Osborne, Ms Sandra | Williams, Alan W (E Carmarthen) |
| Palmer, Dr Nick | Wills, Michael |
| Pearson, Ian | Winnick, David |
| Winterton, Ms Rosie (Doncaster C) | Wyatt, Derek |
| Wood, Mike | |
| Worthington, Tony | Tellers for the Noes: |
| Wright, Anthony D (Gt Yarmouth) | Mrs. Anne McGuire and Mr. Greg Pope. |
| Wright, Dr Tony (Cannock) |
§ Question accordingly negatived.