Housing Benefit

HC Deb 17 October 2002 vol 390 cc478-91 1.15 pm

The Secretary of State for Work and Pensions (Mr. Andrew Smith)

With permission, Mr. Speaker, I would like to make a statement on the reform of housing benefit.

I am today publishing a prospectus, "Building Choice and Responsibility: a radical agenda for Housing Benefit", which sets out our proposals. The system that we have inherited is complicated, costly to administer, vulnerable to fraud and difficult for tenants to understand. For too many people, it means endless form filling and delays in payment. It is often a factor that prevents people from making the move from welfare into work.

Currently, we expect local authorities to reassess 4 million individual claims every year, whether they have changed or not. Nearly 2 million pensioners whose circumstances rarely change are expected to fill in a 40-page form every year just to renew their housing benefit. Local councils are compelled to deal with a bewildering array of overlapping rules for tenants in the private rented sector. That cannot be right. We need a system that puts real choice and responsibility in tenants' hands—one that supports work and cuts the risk of fraud. The Work and Pensions Committee and the Audit Commission have highlighted the need for change, as have many outside observers. It is time to get on with this reform.

It is clear that we need to break fundamentally with the past and bring in a fairer, simpler system, so we propose to introduce standard local housing allowances for private rentals, initially in 10 pathfinder areas. The allowance will be flat rate and based on area and family size. The amount paid will, as now, be income related. It will be paid directly to the tenant, except where vulnerable tenants are unable to manage their own affairs or where substantial arrears have built up. No one will be worse off when those pathfinder schemes start next year. In fact, tenants who find a suitable home with a rent less than the standard allowance will be able to keep the difference. That puts the decision and responsibility in their hands.

The reforms will build on the steps that we have already taken to improve administration and to begin the process of restructuring rents in the social rented sector. It is our intention to roll out reforms nationally and to develop ways of bringing in the social housing sector. That will be carefully informed by our assessment of the initial pathfinder areas, where we will work closely with local authorities, landlords, tenants associations and advice agencies.

Consultation will be led by the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Croydon, North (Malcolm Wicks), for whose work on these proposals I am very grateful. The reformed system will offer greater simplicity and certainty for tenants and landlords, extend tenant choice and responsibility, dramatically cut delays and support our wider aims of improving public services, tackling poverty and extending opportunity.

As they are simpler, standard local allowances will speed up the claims process, which will reduce the uncertainties that people face as their circumstances change and will make trying a job a more attractive option. Furthermore, later this month, throughout the country we will start to introduce a rapid reclaim facility for when a job does not work out. We will also remove the need to make a new claim when someone gets a job. Housing benefit will simply run on until the in-work rate is calculated.

We are taking other steps to improve the service for everyone. Jobcentre Plus clients will be able to make claims over the telephone, and from next autumn pensioners will no longer have to fill out a new housing benefit form every year.

We are committed to working in partnership with councils to improve performance through clearer standards and increased accountability. We are already seeing progress. In March, we set out clear standards for housing benefit performance. We will build on that by providing £200 million for training and modernisation over the next three years to help councils that are committed to improvement. We shall also challenge poor performance and stand ready to intervene where local authorities fail to deliver an acceptable service.

It is also crucial that we crack down on fraud. This package of reforms will do just that. First, it will simplify the housing benefit system in order to free resources for the fight against fraud. Secondly, the perverse incentive for corrupt landlords to collude with tenants to set high rents will be removed. Thirdly, we are providing £60 million to support the tighter checking of claims, stopping fraud getting into the system in the first place.

The Government are committed to taking action against rogue landlords who abuse the system. As soon as parliamentary time allows, my right hon. Friend the Deputy Prime Minister intends to legislate to tackle the minority of rogue landlords and boost our drive against poor conditions. It is also important that tenants understand their obligations to behave in a neighbourly way.

As we made clear following the introduction of the private Member's Bill promoted by my right hon. Friend the Member for Birkenhead (Mr. Field), the Government are considering housing benefit sanctions as part of our wider strategy to tackle nuisance neighbours through stricter tenancy agreements and improved antisocial behaviour orders. By making tenants responsible for payment of their rent, the reforms that I am announcing today reinforce the link between rights and responsibilities.

In conclusion, reform of housing benefit is essential. The proposals combine simplicity and streamlined procedures with greater individual choice. They offer a better deal for tenants, landlords and local authorities. We must now work together to make them a success.

Mr. David Willetts (Havant)

Housing benefit does indeed need to be reformed. Successive Governments have promised to do it but none has really succeeded. The dilemma is whether to pay benefit for actual rent or make a standard payment of a rent allowance. Sixty years ago, Beveridge devoted an entire chapter of his great report to precisely that dilemma and revealingly entitled it "The problem of rent". He concluded that it would be better to make a standard payment, provided that rents in different areas had already moved close together. I think that he was right, and that is clearly the basis on which the Secretary of State is proceeding.

Let me ask the Secretary of State about the scale of his proposals. This Government have all too often proposed welfare reform, only to fail to deliver. About 4 million people are claiming housing benefit. How many claimants does he expect to receive housing benefit in the new way, after he has implemented the pathfinders? Is he committing himself now to proceeding straightforwardly to a complete national scheme after the pathfinders have been implemented, or is there to be a small number of pilots, after which the evidence will be scrutinised before a decision is made on what to do next? We need to know whether the gap between hype and reality that has so frequently dogged the Government's commitment to welfare reform is going to be in evidence yet again on housing benefit.

I should like also to ask the Secretary of State about the detail of the pathfinders. Will he assure the House that they will cover different parts of England? As he well knows, what might work in low-rent areas of the north may not necessarily work in parts of the southeast, where rents are much higher. Is there a danger of going back to the old days of two different housing benefit regimes—one for social housing tenants and another for private tenancies? His proposals currently appear to cover only private tenancies. Will he try to drive down rents in the private sector while those in the social housing sector continue to increase? How will he fix rents for existing tenants, especially if he says that none of them is to lose?

Perhaps most important of all, what about the serious problem of people trapped in dependency because of the incredibly high rates of combined withdrawal of housing benefit and income support that they now face? Will the right hon. Gentleman look at those very high tapers—sometimes over 90 per cent.—which trap thousands of people in benefits, or will the tapers be off-limits?

The Secretary of State went on to speak about the linking of housing benefit to behaviour. Hon. Members on both sides of the House must salute the imagination of the right hon. Member for Birkenhead (Mr. Field), the author of that idea. We approached it in a constructive spirit when his private Member's Bill went into Committee—perhaps the Liberal Democrats did not, but my hon. Friends certainly did—and we will approach it in a constructive spirit again. But that was the proposal from the right hon. Member for Birkenhead. What has happened to the original proposal that was made by the Prime Minister, which linked child benefit to behaviour? Is that still on the agenda, or has it been dropped? Has the Secretary of State for Work and Pensions come to the House in order to drop an idea proposed by the Prime Minister, and instead to support an idea proposed by the former Minister for Welfare Reform, who was removed from his post? Has the Secretary of State decided that the right hon. Member for Birkenhead is right and the Prime Minister is wrong? We would like him to make that clear.

While we debate these ideas for the future, there is an immediate crisis in our housing benefit system in many parts of the country, especially in London, where it is close to collapse. Does the Secretary of State accept that there are people who are homeless on the streets, having been evicted from their houses by councils whose own failure to pay housing benefit is the source of the problem? We welcome practical proposals, including those made by him today, to tackle that problem, but the Secretary of State did not refer to one of the reasons why housing benefit administration is close to collapse. Ministers have produced more than 400 housing benefit circulars since the Government took office in 1997 and local authorities simply cannot keep up with them.

May I take this opportunity to urge the Secretary of State to consider our straightforward and practical proposal simply to change the regulations once or twice a year, so that local authorities do not face a stream of changes? We have also suggested that the Benefits Agency should, in the last resort, take over responsibility for housing benefit from local authorities that are clearly not up to the job. I hope that the Secretary of State will also consider those practical proposals to tackle an immediate crisis.

Mr. Smith

The hon. Gentleman implied that we were the first Government to try to get to grips with the problem since Beveridge. He might have given us some credit for grasping the nettle. I listened in vain throughout his remarks for a basic comment about whether the Conservative party thinks that our proposals are the right direction for reform or the wrong direction. I should have thought that the Opposition would welcome the move towards greater personal responsibility and choice for tenants; the tenants who will benefit from our reforms will certainly do so.

The hon. Gentleman asked a number of questions. As I said in my statement, we propose initially to roll out the proposals in 10 pathfinder areas. We wish to extend the approach nationally, but clearly we must learn from the experience of the pathfinders in so doing.

As regards the number and the proportion of recipients of housing benefits who are affected, there are 4 million claims and about 20 per cent. of those—800,000—are in the private sector. We hope to roll the scheme out to between 5 and 10 per cent. of that case load through the pathfinders, so the hon. Gentleman can see that the number of people affected will be substantial. He asked whether those are pathfinders or pilots. We want to get on with rolling out the scheme.

In selecting the areas to be the pathfinders, yes, we want to ensure that not only the various regions of England, but areas in Scotland and Wales have the opportunity to try the new approach. The criteria that we will apply in selecting pathfinders is that they include a mix of high-cost, low-cost and medium-cost areas; we want to include substantial rural areas as well as urban areas; we want them to be in different parts of the country, and they need to be areas with a substantial case load of private rentals. We shall approach a number of authorities as soon as we can to see whether they are able to take part.

With regard to the Government's performance on housing benefit, I cannot help but refer to the utter shambles that we inherited and the Opposition's failure to take responsibility for the awful mess that they bequeathed us. We have invested in tougher action against fraud in the form of the benefit fraud inspectorate, we have sent help teams around the country and we have intervened in a number of local authorities—for example, we have substantially addressed the backlog in Hackney. Moreover, the ombudsman's recent report noted that complaints to him about housing benefit administration were down by a quarter.

I do not deny that a great deal more needs to be done to improve the efficiency of administration and to crack down on fraud, but our proposals will help us to achieve that end. We are putting resources and investment behind our commitment to efficiency and modernisation. Not only have we allocated £200 million from next year to modernise IT and to train staff, but £60 million has been explicitly dedicated to measures to combat fraud.

The key point is that these proposals will help. They make the system clearer and more straightforward and they remove the perverse incentive for corrupt landlords to collude with tenants in setting high rents. This is a big step forward towards tenants in the private sector who are dependent on housing benefit having some of the same rights and responsibilities that the rest of us take for granted.

Mr. Frank Field (Birkenhead)

I thank the Secretary of State and the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Croydon, North (Malcolm Wicks), for the work they have put in behind today's statement, and I congratulate my right hon. Friend on the courage and determination that he is now showing in reforming housing benefit. Had some of that been shown five years ago, he might have been announcing the completion of the reform rather than its commencement.

Does my right hon. Friend accept that when his statement is reviewed it will be seen as the abolition of the last vestiges of serfdom in our welfare system, and that instead of directing how claimants spend their money it will give them the freedom to spend it themselves?

Will my right hon. Friend give us some assurance about how the reform will be rolled out in the pilot areas? Will all claimants in the private sector be brought into the scheme, or will they become part of the scheme only if they wish to move or have to move?

Mr. Smith

I thank my right hon. Friend for his welcome for the measures. With regard to the timing of their implementation, earlier steps were taken on modernisation and tackling fraud and rent restructuring measures are now under way for the social rented sector, but we are now getting on with these measures as quickly as we can.

With regard to how the reform will be rolled out in each of the pathfinder areas, our intention is that all private rentals where tenants receive housing benefit will be part of the pathfinder, except, as I said, where people are vulnerable and unable to manage their affairs or where there are substantial rent arrears. Another protection that the House will be interested in is that it makes sense for the initial payment to be made directly to the landlord, but thereafter it will be the responsibility of the tenant.

I am not sure whether I would describe the measures in exactly the same terms as my right hon. Friend did, as the abolition of serfdom—I would be proud to have played a leading role in such a cause—but they certainly extend rights, responsibilities and opportunities to tenants in the private rented sector that they have been denied in the past and that the rest of us take for granted.

Mr. Steve Webb (Northavon)

I thank the Secretary of State for his statement and for grasping a nettle that his two immediate predecessors signally failed to grasp. It is all the more welcome that he has brought forward the proposals today. The aims that he set out are entirely laudable and many of the proposals, such as pensioners not having to reclaim within five years, are entirely sensible, and we shall welcome and support them. However, I have two fundamental concerns.

First, a political party recently said that it was proposing to complete the Thatcherite agenda. I had assumed that that was the Conservative party, but I hear that the right hon. Gentleman proposes to use housing benefit sanctions for antisocial tenants, which sounds good, macho and as though the Government are on the side of the decent against the antisocial, but in practice the consequence will be to move the problem around rather than to deal with it. Would not the money that these measures will cost be better spent on the many schemes around Britain that are working now to tackle the causes of antisocial behaviour? These measures will simply move the problem around when it has already occurred.

I have some serious concerns about rent restructuring. I get the impression that the Secretary of State lives in a world in which tenants are faced with a wide array of choice properties at decent prices, and that they pick and choose, then haggle to set a decent rent with the landlord. Well, it ain't like that, and I think that, deep down, the right hon. Gentleman knows that. Many tenants are price takers, and have little choice. They have to take what they are offered or they have to lump it. The Department's own research shows that shopping-around incentives have been a complete failure; they simply do not work. Tenants are not free choosers among a range of choice properties. Does the Secretary of State not agree that tenants will be forced to live in the cheap rent, ghetto part of town because they will not be able to afford to live in the decent part?

If the right hon. Gentleman's proposal is for the standard allowance to be set at the reference rent—effectively, the maximum rent—how will the pilot schemes tell us anything? Half the people will be paying less and have some free money—and will say thank you very much—while the other half will get what they are getting now. So what will the pilots actually teach us? With rents as they are, there is a real danger attached to the flat-rate payments. Rents still vary far too much, and people will be forced to move because their housing benefit does not cover their rent. That will mean children leaving their schools, and people moving away from members of their family who can provide child care. It will also disrupt employment. If the measures do not have the effect of causing people to choose different properties, what is the point of them? If they do, will they not "ghettoise" and distort people's lives?

Mr. Smith

It is clear that the Liberal Democrats are no part of the reformed agenda. That was an hysterically negative response to our radical proposals. I would caution the hon. Gentleman against lecturing me on the world I live in. My home in my constituency is on an estate where people are sick and tired of neighbours from hell making their lives a misery, day in and day out. This Government can take pride in linking rights with responsibilities, and if housing benefit has a part to play in the wider measures to tackle antisocial behaviour, so much the better.

On the hon. Gentleman's speculation about people being worse off, I said in my statement that no one will be worse off as a consequence of these proposals. Indeed, those whose rent is below the reference rent level will be better off. In resisting these proposals, the hon. Gentleman would condemn those people to the unfairness of having less money for their housing costs, just because they live in a cheap area. There is nothing liberal or democratic in his remarks if he would prefer to leave poor people ensnared in an incomprehensible state bureaucracy, rather than putting some power in their hands. I believe in empowering poor people, and that is what these proposals will do.

Mrs. Louise Ellman (Liverpool, Riverside)

Will the Secretary of State explain a little more about how his proposals will deal with private landlords who exploit the current system by not maintaining their properties, which, in effect, encourages antisocial behaviour and, as a result, accelerates neighbourhood decline?

Mr. Smith

I share my hon. Friend's commitment to tackling not only rogue landlords but the wider syndrome of degeneration, especially in some of our urban neighbourhoods. As I said, I believe that these proposals make a contribution to tackling those problems because they put more power in the hands of tenants and less in the hands of the bad landlords. They will make the situation clearer for tenants and landlords than it is at present. At the moment, when a tenant is deciding which property to live in, they are effectively shopping in the dark without knowing how much money they have in their purse. Under these proposals, they will know how much money they will be taking to get the best deal. It is right that we should extend to them the opportunity to express a choice in these situations. Of course, there is a much wider agenda here, and, as I said in my statement, the Office of the Deputy Prime Minister is consulting on wider measures to tackle antisocial landlords. We look forward to those measures being introduced as soon as parliamentary time allows.

Mr. Gary Streeter (South-West Devon)

I welcome the broad thrust of the Secretary of State's proposals and I look forward to reading the detail of the consultation paper. I especially welcome his desire to crack down on both rogue landlords and neighbours from hell. He will understand the healthy scepticism on Conservative Benches about the claim that the Government will introduce fewer bureaucratic measures than their predecessors. If they can achieve that, we would warmly welcome it and wish them well.

In my experience, many software systems that local authorities use to oversee the housing benefit system often break down and fail to deliver. Will the Secretary of State give guidance and advice to local authorities on the computer systems that they should use to ensure that they deliver the right result and that tenants can interact with them quickly and carefully?

Mr. Smith

I thank the hon. Gentleman for his welcome for our proposals. He made an important point: IT software often leaves a great deal to be desired. A working group is examining the matter in partnership with local authorities. The roll-out of the pathfinders and their experience will provide important lessons about the way in which we can ensure that the system works properly and delivers the standards of service that we all expect.

The system is simpler because it makes poking around every nook and cranny of the assessment of every rent unnecessary. It should therefore be simpler for IT.

Mr. Harry Barnes (North-East Derbyshire)

My right hon. Friend referred to overcoming the complexity of claiming housing benefit under the current arrangements. Perhaps he could expand on the way in which the new measures would achieve that. Does not Jobcentre Plus operate as a method of assisting claimants by drawing people together who are seeking both benefits and employment? Will it assist matters to close jobcentres such as that in Eckington in my constituency? My right hon. Friend saved it in the past and may consider the position again. How will people in those circumstances find it easier to gain access to the provisions that we are considering?

Mr. Smith

As I said, the simpler system will be more user friendly and make it easier for people to claim their entitlements. The wider proposals to which I referred involve replacing approximately four forms that people must currently complete with one form. We will enable and encourage making claims by telephone. Jobcentre Plus will be able to handle those claims. As the scheme is rolled out across the country, it will become a genuine one-stop service for those who are seeking work as well as benefits.

My hon. Friend referred to a specific jobcentre. My ministerial team and I will be pleased to talk to him further about its future.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

The development is welcome from the point of view of the Social Security Committee, as it was. The hurdle of housing benefit prevented people from getting off benefit and into work, and it was one of the biggest items of unfinished business since the Government were elected in 1997. This morning's announcement constitutes a significant step forward, which I welcome.

I hope that the Secretary of State will acknowledge that hon. Members would be wise to consider the detail carefully because it will make all the difference to whether the proposals are successful and fulfil the aspirations that he set out.

I want to make two brief points. First, I am slightly disappointed that the public sector has not been used for any of the pilots. I understand that the Labour party made a manifesto commitment to deal with private before public, but I hope that that does not mean that public is off the agenda for the rest of the Parliament. I would have been happier if the pathfinders had included some public sector research.

Secondly, when the Government introduced pension credit, they sensibly made it clear that the interface between housing benefit and pension credit would prejudice no one. Will the Secretary of State comment on the second phase of the tax credit reform that will be introduced next spring and how it will interface with the proposals that he announced this morning?

Mr. Smith

I am grateful for the hon. Gentleman's welcome and for the work that his Select Committee does in this important area.

In response to the hon. Gentleman's first question, I too am keen to be able to include the social sector. Clearly we must have progress on rent restructuring. Given that that is predicated on an element of tenant choice, that too needs to be reflected in the social housing sector if the benefits are to be realised. As we roll out the pathfinders, we shall actively be looking for opportunities to involve the public sector. Far from that sector being off the agenda, it is very much on it in terms of the national roll-out of such reform.

The hon. Gentleman's second question was about tax credits coming in next April. We shall be examining carefully the interaction between the two factors that he identified, and we are mindful of the work that local authorities have to accomplish next year on housing benefit systems. It is especially important that there is careful consultation with the authorities that we are minded to approach as pathfinders to ensure that they are enthusiastic about taking on the job.

Ms Karen Buck (Regent's Park and Kensington, North)

Beveridge decided not to proceed with fundamental housing benefit reform because of cost differentials in different parts of the country, which of course have increased dramatically over recent years. Will my right hon. Friend ensure that the scheme works effectively in high-cost areas such as London? The number of properties in the private rented sector that are available to people on housing benefit has halved in five years. One of my constituents was told that to look for a property while on housing benefit, it would be necessary to go to Dartford, Billericay or Brentwood, 40 miles from central London. The choice agenda is critical.

Will my right hon. Friend ensure also that poverty is addressed? The shortfalls between the housing benefit that is payable and actual rents in the Greater London area are a major cause of poverty, and in turn drive households into homelessness and into public sector housing. In the application of the policy, will my right hon. Friend advise me how it will increase choice by increasing supply in the private rented sector, how it will reduce poverty and how it will reduce the flow of households, especially families from the private rented sector, into homelessness?

Mr. Smith

I am certainly mindful of the particular problems that affect high-cost areas; indeed, according to outside-London terms, my constituency is a high-cost area. I am sensitive to the particular challenge facing people and authorities in London. That is one of the reasons why we want to ensure that pathfinder areas include a London authority.

As for poverty, through these proposals no one will be worse off, and a significant proportion of tenants will be better off. There is a wider challenge facing us on housing supply, and that is one of the reasons why the Government have already substantially increased investment in social housing. As a consequence of the spending review, we are accelerating that investment still further.

I agree with my hon. Friend that we need to keep these matters closely under review and to examine what are the future options to ensure that the problems that she has identified, arising from a diminishing range of properties available to those in housing need in London, are effectively addressed.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. I have time limited main business to protect this afternoon, in which many hon. Members wish to take part. I do not think that I will be able to call every Member who is trying to catch my eye on the statement. Brief questions and brief answers would help.

Mr. Andrew Turner (Isle of Wight)

I was struck by the explanation that the Minister gave to the Liberal Democrats, which was that an individual cannot be an intelligent purchaser unless he or she knows how much they have to spend. When the right hon. Gentleman is selecting the pathfinders, will he make particular efforts to cover an area where rents are variable geographically or seasonally? Will he take account of the need to cover effectively those whose incomes vary substantially during the year, such as seasonal workers or those who do not receive all the money that they should through the Child Support Agency?

Mr. Smith

I thank the hon. Gentleman for welcoming my comment. It is not the first time that we have made common cause against the Liberal Democrats.

We will address the variable geography and incomes to which the hon. Gentleman refers. Rent reference areas try to take account of that and we will work on the basis of existing areas. I agree that there are big issues to consider for the future and that we will have to learn from the pathfinders. I will try to address his concern when we select the pathfinders.

Glenda Jackson (Hampstead and Highgate)

The problem with housing benefit in my constituency, which is an area of high and rising rents and a diminishing number of properties, is not the speed in processing claims—my borough of Camden has two charter marks for excellence in that—but the gap between the level of rent set by the local rent officer and the rent set by the private landlord. What formula will be used to define a standard rent allowance? Many of my constituents who suffer most grievously are single people. How will they be helped?

Mr. Smith

I echo my hon. Friend's comments about the performance of her local authority. As well as castigating those that do poorly, it is important to praise those that make a difficult system work effectively.

The reference rent will be set on the basis of the present system, disregarding outliers and taking an intermediate level between the highest and lowest rents in the area. By putting the money in the hands of the tenants and, as I said, by removing the perverse incentive for corrupt landlords to collude with tenants in raising rents, it is likely that the reform will exercise some downward pressure on rents. That will help, although I do not want to overemphasise the effect.

Hywel Williams (Caernarfon)

The statement says that the allowance will be flat rate, based on area and family size. However, we need to address the particular housing costs experienced by people with disabilities, given that those are unrelated to area and family size. That was the subject of an Adjournment debate secured by my hon. Friend the Member for Ceredigion (Mr. Thomas), which was given a sympathetic hearing by the Minister.

Mr. Smith

It is very important that the needs of disabled people are properly addressed. The reform will not alter the premiums and the support that they get from the disability living allowance. I shall keep an eye on the operation of pathfinders to ensure that disabled people's needs are properly reflected. There is no need whatever why disabled people should be denied the same choice and opportunity that is available to others. Indeed, they should enjoy it to the full.

Jeremy Corbyn (Islington, North)

Can the Secretary of State assure my constituents, who live in a high-housing cost, high-demand area, that they will continue to get a reasonable supply of private rented accommodation under the system? Many of us are concerned about that. In addition, will he intervene on local authorities that have proved themselves completely incompetent to deliver housing benefit? Islington council, which is run by the Liberal Democrats, has bizarrely signed a continuation contract with a company called ITNET, which over the past five years has proven itself incapable of delivering housing benefit safely and securely to anyone in my borough, so causing immense hardship.

Mr. Smith

Many landlords are also put off by the complexities and delays in the present system. The reform should help those who want to make their properties available.

We stand ready, however, to intervene. The directions that we have issued have had an effect and are in addition to the measures that we are taking on the help teams and in addition to the extra investment. In the final analysis, if the people who run an authority are incompetent, we can take it off them and get someone else to run it.

Andrew Selous (South-West Bedfordshire)

Will the Secretary of State assure the House that his Department will examine the practice of some local housing authorities that stop the payment of housing benefit while they investigate tenants? That presumes guilt before the investigation is concluded and greatly worries many tenants.

I thank the right hon. Gentleman for his support for the Bill promoted by the right hon. Member for Birkenhead (Mr. Field) and remind the House that every Conservative and Labour Member supported its proposals in Committee.

Mr. Smith

I thank the hon. Gentleman for his remarks and for welcoming the reforms. I shall certainly look into the instances that he describes. We take the advice of the benefit fraud inspectorate on these matters and I shall make it my business to get a report from the inspectorate on the issue.

Andrew Bennett (Denton and Reddish)

I welcome the Secretary of State's announcement in so far as it reforms bureaucracy, but I should like to ask him about the underlying principle. Over the past 20 years, less and less subsidy has gone into building low-cost housing and more and more has gone into the housing benefit system, resulting in bureaucracy and the poverty trap. A large amount of it has gone to unscrupulous landlords. Is it not about time that we put money back into low-cost house building as that would do a great deal to reduce the chronic hardship being suffered by so many people in this country who cannot get decent accommodation?

Mr. Smith

It is not an either/or as I am sure my hon. Friend would agree. We need to increase supply and establish a fair and efficient system for supporting those who cannot afford their rent. The proposals are dedicated specifically to my hon. Friend's second point, and as I said, I think that they will encourage more landlords.

My right hon. Friend the Deputy Prime Minister has announced substantial increases in social housing investment to address the first point that my hon. Friend raised.

Mr. Adrian Sanders (Torbay)

Will the proposals reflect differentials in seaside resorts where tenancies are often for six months and where accommodation is at a premium during the summer months, but plentiful during the winter months? How will choice be increased? Will the proposals do anything to help landlords to find tenants who abscond owing rent that they are never able to recover and housing benefit, which those landlords then have to repay to local authorities?

Mr. Smith

On the second point, when arrears build up—eight weeks of arrears is normally the yardstick—we would reinstate direct payments, so there is that measure of safeguard for landlords. Variability of rents in seaside or other areas should be reflected in the way in which the reference rent is calculated. At the moment the proposals do not alter that, but in pathfinder areas those whose present rent is below the reference rent level and in that sense are penalised for living in a cheaper area will get the allowance up to the full reference level and will be better off as a consequence.

Mr. David Lepper (Brighton, Pavilion)

May I echo the comments of my hon. Friend the. Member for Regent's Park and Kensington, North (Ms Buck) and ask my right hon. Friend to say something about how he sees the new measures helping in particular young people under 25 in a high-housing cost area such as mine in Brighton and Hove? Under the current system, many young people are being priced out of the town in which they were born and brought up.

Mr. Smith

It is important that we address the wider questions of housing supply. The Government have already amended the single room assessment basis for housing benefit, which has made some measure of improvement to the situation and we will continue to keep these matters under review.

Mr. Neil Gerrard (Walthamstow)

If we are to move to a system of flat rates, based in some way on current local reference rents, how will we overcome the problem that has already been referred to in high-cost areas such as London of the big and growing gaps which exist between the reference rents and the real level of rents that people are being charged? On the question of choice, as that is what the statement is about, how many landlords, once they know exactly what the standard rate is, are likely to charge less than that figure? Will it not mean that low rents will go up unless we deal with landlords who let properties in poor condition, by refusing to let them into the system?

Mr. Smith

It is very important that decent housing standards are enforced more generally through the legislative protection of those standards and the work of environmental health departments. The reference rents system works by taking a middle point between high and low rents in an area and that should address the relevant problems over time, but as I said in an earlier reply, I acknowledge that there is a particular problem in high-cost areas and we will pay close attention to it in future.

Mr. Peter Lilley (Hitchin and Harpenden)

I apologise to the Secretary of State for missing the first 60 seconds of his statement. I also apologise in advance lest by saying that I broadly welcome the proposals I undermine support for them.

The proposals seem to be the logical and foreseen development of the rent reference system that I introduced. Action could not be taken immediately because the possible divergence of rents meant that the cost might be high. What cost does the Secretary of State envisage in extra benefit? Will he also assure us that local authorities will retain the discretion to pay above the standard allowance if that is necessary, for instance to enable an elderly mother to live near her family in what may be high-rent accommodation, but thereby avoiding the need to enter residential accommodation?

Mr. Smith

Obviously the cost will depend partly on the impact of the reforms on rent levels over time, but the extra amount that we anticipate for the pathfinders is around £20 million.

I can confirm that we do not intend to limit the discretion of local authorities that currently have that discretion, although we expect the basis of payment to come from the tenant except when there is good reason for that not to happen.

Mr. Tony McWalter (Hemel Hempstead)

Is there any scope for giving benefit to some who currently do not receive it, particularly in high-cost areas such as the one I represent? In my area an ex-council house can cost £850 a month, and a two-bedroomed flat in Apsley can cost £1,000 a month. As a result, the disposable incomes of some people such as starter teachers are extremely low. Giving such people housing benefit would increase incentives to work.

Mr. Smith

It is no part of these proposals to extend eligibility for housing benefit. As I said in my statement, benefit will be income-related as it is now. We will of course keep such matters as tapers under review, but the short answer to my hon. Friend's question is no, we do not anticipate including more people as a consequence of the report.

Angela Eagle (Wallasey)

I congratulate my right hon. Friend on tackling a complex but crucial area. Does he agree that tackling bad landlords requires work to license them, which I know is being done in another Department? Does he also agree that ensuring that direct payments are made to tenants is crucial to enforcing the rights and responsibilities agenda and empowering tenants? Should that not apply to social housing as well as private tenants?

Mr. Smith

I agree on both counts. As I said, my right hon. Friend the Deputy Prime Minister is to present proposals for tackling bad landlords. I am acutely aware of the awful situation facing many low-demand areas, and of the possible scope for effective licensing.

As for the philosophy underpinning the reform, I entirely agree with my hon. Friend. It is very important for us to put power in the hands of poorer people. That is what the reform will do: such people will have more choice and, as my hon. Friend says, will be able to take more responsibility. As I have said, for the same reasons we should extend that approach to the social housing sector as soon as we can, and I am sure that the benefits will be just as great.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. We must now move on.