HL Deb 18 December 1986 vol 483 cc281-9

11.28 a.m.

Baroness Trumpington rose to move, That the draft order laid before the House on 10th December be approved. [5th Report from the Joint Committee.]

The noble Baroness said: My Lords, I beg to move that the Supplementary Benefit (Housing Requirements and Resources) Amendment Regulations 1986 be approved.

As I announced to the House last Wednesday, these regulations are the product of a long period of consultation. They were referred in draft to the Social Security Advisory Committee last May. The Committee's report was received in August and it was laid before your Lordships' House last Wednesday, 10th December, with the Government's response, when I announced the decisions we had reached. There are three main reasons why the Government think it is right to alter the present arrangements.

First, we wish to strike a fair and reasonable balance between borrower, lender and taxpayer. The present arrangements do not achieve this since they enable all of a claimant's mortgage interest payments to be met by benefit immediately, no matter how short the period on benefit turns out to be. This puts too much responsibility on the taxpayer and not enough on individuals or on building societies and other lenders. As the noble Lord, Lord Houghton of Sowerby, reminded us last week, lenders do have an important responsibility in this matter.

Secondly, it is right that those who are being helped to acquire a substantial capital asset should meet a proportion of their mortgage interest charges for a limited period. A reasonable and proper role for social security is to concentrate help on those whose needs are longer-term.

Thirdly, it is important to establish equity between those in and out of work on similar incomes. Mortgage interest tax relief is available to all low-income families whether in or out of work. But social security help is only available to low income families out of work. The changes will help reduce this imbalance.

As your Lordships already know, the Government have been flexible in responding to the concerns expressed by the advisory committee. Two important modifications have been made to the original proposals. The restriction period has been reduced from six months to 16 weeks, lessening the impact on individuals and concentrating the change rather more so than previously on shorter-term claimants. We have also accepted entirely the advisory committee's recommendation that action should be taken to avoid creating a "mortgage interest trap". The regulations provide for this, thus helping claimants who might otherwise not have been able to qualify for benefit at all. All the other proposed changes which were referred to the advisory committee and were supported by them are being carried forward.

It is estimated that these modified proposals will reduce the savings from £30 million to £23 million a year. An estimated 75,000 claimants will be affected at any one time. In the average case, up to £170 less benefit will be paid to a claimant whose claim runs for the full 16 weeks. Of course, many claims do not last this long—about half of those who claim as unemployed leave the register within three months. It is not expected that the effects on individuals will be harsh. I must emphasise that the 16-week restriction will not apply to anyone aged 60 or over. Those who are affected will of course be eligible for help with their full mortgage interest payments after 16 weeks. And, any extra interest due on arrears arising from the restriction will also be eligible for payment. In addition, a new eight-week linking rule will ensure that people are not discouraged from taking up a job; and a special disregard of income from mortgage protection policies will allow claimants to benefit from such policies, and thus to cover their mortgage interest payments fully.

I am sure your Lordships will welcome the view expressed by the advisory committee in their report that the changes, in their original unmodified form, would not create significant financial hardship for the majority of claimants. Moreover, the Building Societies Association's press statement last week said that they "saw no reason to expect that people will lose their homes as a result of this measure". These are important assurances, which put the changes into proper perspective. And, of course, during the long miners' strike, building societies and other lenders did not foreclose or seek repossession on properties on which arrears had built up to very much higher levels than might result from the Government's proposals.

I should draw the attention of the House to five other changes incorporated in the regulations. Firstly, we do not propose to carry forward the present practice whereby interest on a loan for business purposes, which in secured on the home, can be paid for up to six months. In future, help with mortgage interest will be restricted to housing-related loans only. Secondly, where a home includes a business, for example a guest house, interest will be met only on the part of the home used for living accommodation, where the home is treated as a mixed hereditament for rating purposes.

The third change is that powers are being taken to allow the adjudication officer to restrict benefit where the home is unreasonably expensive in relation to other suitable accommodation in the area. Benefit can be restricted already where a house is in an unreasonably expensive area or is unnecessarily large. This additional power will bring supplementary benefit into line with housing benefit practice.

Powers are also being taken to enable a second or subsequent loan to be treated in the same way as the loan it replaces. This readmits people with replacement loans to benefit following a commissioner's decision to the contrary. The four changes I have just mentioned were also referred to the Social Security Advisory Committee and were supported by them. The committee also agreed that the fifth change need not be referred to them for consultation as it was entirely beneficial. This will enable foster children to be taken into account when an adjudication officer decides whether a home is too large.

In conclusion, my Lords, these draft regulations represent a fair and reasonable package of limited measures. They will have a limited effect and, in the case of the main changes, for a limited period only. I commend the regulations to your Lordships' House.

Moved, That the draft order laid before the House on 10th December be approved. [5th Report from the Joint Committee]—(Baroness Trumpington.)

Baroness Jeger

My Lords, the Minister may commend these regulations to your Lordships' House. However, to myself and to many of my noble friends, it seems typical of the mean spirit of this Government that on the last day before we rise for the Christmas Recess, at a time of giving, of generosity and of goodwill, they should seek to pass through this House regulations which will take £23 million away from unemployed families. What a Christmas present that is for the Government to give to these people!

On the noble Baroness's own figures, she expects 75,000 people to be deprived of differing amounts through these regulations. It was quite clear recently in another place that members of all parties were concerned, anxious and worried. Some even felt that they could not vote for the Government on the matter. I must make it absolutely clear that we on this side of the House are totally opposed to these mean changes. We cannot think why a government who profess to encourage home ownership should have brought in this disincentive to home ownership, for that is what it is.

I cannot agree with the noble Baroness—whom I respect very much at some times and not at others—that there is likely to be some consideration given by the building societies so that hardship is not unnecessarily induced. What is the evidence for that? I have the figures from the Social Security Commission. I hope that the noble Baroness the Minister is not going to say that they are unreliable.

I see from the figures that in 1979, some 2,530 homes were taken into repossession for mortgage default. In 1985, the figure was 16,590. Surely the Government are not being very businesslike or efficient to presume that the trend will suddenly go down. There is no evidence of that. Moreover, we have merely the figures—or, at least, I have merely those figures because I look only at official figures—for default where this has happened through building societies. But I understand—and perhaps the Minister can give me figures on this—that many people are in this position because local authority mortgages have been repossessed.

Under the right to buy, there is increasing compulsion not only on people to try to buy but on the local authorities to create mortgages. My understanding is that the local authorities are not particularly generous in some cases in helping people who are in default, even if only for a fairly short time.

And then there is the question of people who are on a second mortgage and people who owe money to the banks. Is the Minister telling us that somehow the banks are going to get the Christmas spirit that the Government have not got, that they will become kind and generous and that they will allow people to have some longer time to collect their finances together?

Moreover, when the Minister talks about saving £23 million taken out of the pockets of the unemployed, she does not seem to be taking into account the enormous cost of homelessness. We know—again from official figures—that 10 per cent. of all households officially accepted as homeless are in that position as a result of mortgage default. That information is on page 13 of the Social Security Advisory Committee Report.

I do not know whether the Government care about how much it costs to put these homeless families into bed and breakfast accommodation, which is not only expensive but is socially intolerable for the families concerned. Then there are the many people who do not officially qualify as homeless because of the restrictions under the legislation and so do not get even that minimal accommodation. That accounts to a large extent for the number of people who will be sleeping rough in London and other cities tonight, and which makes it essential for charities such as Crisis at Christmas to step in and try to assist. I know there are many Members on all sides of the House who try to do something to relieve this terrible situation.

It seems to us that the Government are going to increase homelessness and cause a great deal of distress and poverty, because these people are going to have to find this £23 million out of the unemployment benefit which—goodness knows!—for many families makes their budget restricted enough without the extra impost. So it is with great regret that we have this order before us today, and I very much hope that it will not be long before we can alter it.

Lord Banks

My Lords, I should like to thank the noble Baroness, Lady Trumpington, for explaining the content and purpose of these regulations, but I am bound to say that we on these Benches remain unhappy about the principal proposal contained in them. It is after all a straightforward cut in benefit. The original proposal, it is true, has been modified. It is now to be for four months instead of six, this representing the elimination of the possibility of a mortgage trap; but still it remains a cut in benefit, and one must look to see what the effects will be.

The noble Baroness has told us that the Social Security Advisory Committee have said that for the majority of claimants the proposals should not bring significant financial hardship. They do not say they will not bring financial hardship but they say they will not bring significant financial hardship. Future claimants of course will lose out as against current claimants but the hardship will not be significant. However, the Social Security Advisory Committee go on to say: But the young family with a new mortgage and high monthly repayments may quickly get into difficulties, especially if communication with the lender is poor. That must be a matter of serious concern.

They add: The deserted wife may find that there were arrears on the mortgage before she came on to benefit and her lender is unwilling to allow further arrears to accumulate". Finally, the Social Security Advisory Committee say: We remain concerned that particular groups of claimants will suffer as a result of the changes. The impact of the change has been mitigated by the cut from six months to four months, but the dangers to which the Social Security Advisory Committee referred cannot have been eliminated. When we remember the increase in evictions and homelessness which has taken place in recent years and to which the noble Baroness, Lady Jeger, has referred, surely we would not wish to embark on a proposal which might increase those problems, however marginally, unless there were overwhelming reasons and a strong popular demand for it.

With regard to popular demand, a survey conducted by NOP Market Research Limited in May 1986 showed that 72 per cent. of adults thought the original proposal to abolish interest payments for mortgages altogether during the first six months of unemployment was a bad idea and only 13 per cent. considered it a good idea. That may have altered to some extent in the light of the reduction from 100 per cent. to 50 per cent. and from six months to four months; but certainly there is no evidence of public demand for this particular change.

On the point about overwhelming reasons, the Government have put forward four such reasons. They have drawn attention to the increase in expenditure on supplementary benefit payments to meet mortgage interest, and they have stated that the achievement of equity between borrower, lender and taxpayer requires the change. They have said that the change will provide incentives to work. Finally, they have pointed to the saving of £23 million.

The Social Security Advisory Committee have examined all those arguments and they do not deny that there will be a saving, but they reject the other three arguments. The increase in expenditure they regard as only natural in view of the Government's success in increasing home ownership and their failure in preventing the rise in unemployment. The committee are not convinced by the argument relating to equity between the owner-occupiers on benefit and those in low-pay work. They regard the problem of equity between tenants and owner-occupiers on benefit as equally relevant to the issue. And in relation to incentives they believe that the effects of the proposal will be mixed, improving incentives in some cases and worsening them in others.

That leaves the saving of £23 million. Bearing in mind that if mortgage interest relief were restricted to the standard rate some £320 million would be saved, one is bound to ask whether, in view of the reservations expressed by the Social Security Advisory Committee about the whole proposal, it is right to look to supplementary benefit as a source of saving.

To sum up, the regulations represent a cut in benefit from which those 75,000 claimants, as we have heard, will suffer. This may cause no significant hardship but, according to the advisory committee, for some there may well be serious hardship. The arguments in favour of the cut are shown by the committee to be dubious. The Government are seeking a saving of £23 million from supplementary benefit but other more obvious sources not affecting the poorest, are available. Those are the reasons we remain totally dissatisfied with this proposal.

11.45 a.m.

Baroness Trumpington

My Lords, the noble Baroness, Lady Jeger, whom I nearly always respect, is not fair in her assumptions. Picture a young married couple with an average mortgage: the husband works overtime for a few hours to pay the bills and the wife may work part time for a few luxuries. Then, as so often happens, a baby arrives. Also, perhaps there may not be so much overtime around for the husband to take advantage of. What do they do if they cannot meet the mortgage payments? They have to go to a building society or a bank to try to make some sort of arrangement. Is it fair that a family in a similar situation but receiving supplementary benefit, perhaps not much below the wages in my example, should be cushioned for the relatively short period they are on benefit? The working family would certainly not think it fair.

The Government have listened to the advice that has been offered and have shown flexibility in modifying their original proposals. The noble Baroness, Lady Jeger, suggested that these measures will act as a disincentive to home ownership. I would say that people wanting to buy their own houses will still have mortgage interest tax relief. The Government will continue to help tenants to buy their homes with discounted prices and the right-to-buy legislation. One million people have been helped with home ownership in this way since 1979. We really must keep this whole matter in perspective. The effect is for 16 weeks only. Half interest payments will be met with full payment after 16 weeks plus extra benefit in higher interest. Finally, 50 per cent. of the unemployed will cease to claim within three months of registering.

With regard to the increase in homelessness mentioned by the noble Baroness, Lady Jeger, again I would say that we must see the changes in perspective. Repossession still accounts for less than one-third of 1 per cent. of those with mortgages. Building societies do not expect that people will lose their homes as a result of this measure.

The noble Baroness asked whether other lenders were consulted. As well as detailed discussions with the Building Societies Association, the department's officials met with representatives from local authorities. Banks were also invited to comment but did not respond. The proposals were referred formally to the Social Security Advisory Committee for consultation. The committee received comments from a wide range of bodies including building societies, local authorities and the National Westminster Bank. The noble Lord, Lord Banks, referred to the words "significant" in connection with financial hardship as used by SSAC. May I remind the noble Lord that SSAC said this in the context of the original proposals. The restriction period was then 26 weeks. It is now 16 weeks, which is a significant reduction—

Lord Banks

My Lords, I am most grateful to the noble Baroness for giving way. Will she agree that I did in fact refer to that point in the course of making the allusion to which she has referred?

Baroness Trumpington

Yes, my Lords. If I may continue, 16 weeks is a significant reduction and a much lesser impact on individuals will result. The noble Lord, Lord Banks, suggested that the proposals would worsen work incentives. We acknowledge that the proposals will marginally reduce the incentive to return to work for those on benefits for more than four months, but many people do not stay on benefit that long. The changes should improve short-term incentives and incentives to remain in low paid work. And the eight week linking rule should encourage people to work without affecting their benefit if the job turns out to be unsuitable.

As regards the particular position of lone parents and the sick and disabled who were also mentioned, I would say, in reply to that angle of the debate, that the Government's decision to reduce the restriction period from six to four months and avoid the mortgage trap will lessen the impact on all claimants. Those whose claims may be long term such as lone parents and the sick and disabled will have their full interest met after four months. They will also be eligible for any extra interest attributable to capitalised arrears. It is very important that all claimants should contact their lender at an early stage. The arrangement for the department with the claimant's consent to notify lenders that benefit is being paid will greatly assist this.

Finally, with regard to the remarks made by the noble Baroness, Lady Jeger, who said that the changes are not worth the £23 million which will be saved, I must say that I reject that entirely. The Government must look after the millions if they are to find the billions that are paid out. Many very desirable measures cost less than £23 million. For example, as part of the social security reforms, we are proposing to double the present £3,000 savings limit to £6,000 and to give extra help to severely disabled people living independently in the community. The cost of both those measures is around £10 million. That is the sort of priority that we shall be freer to deal with through saving sums of this order.

Lord Sefton of Garston

My Lords, I find it appalling that the noble Baroness can come along here and try to justify what is a cut in benefits to the people who are hardest hit by our economic position, and to compare poor people with other poor people. If the Government are so keen on saving £23 million of expenditure, why not compare the poor people with those affluent people who are receiving many millions more through mortgage relief and who can well afford to pay all the mortgage? Why should the comparison be made between the poor and those people who are just above the poverty line? I find that repugnant.

I do not believe for one moment that the noble Baroness is really sincere when she says that the effect of these regulations will be only minimal. Only minimal on whom? Is it minimal on the total budget in regard to this matter, or minimal in the effect it will have upon individuals who have just been made unemployed?

I do not suppose for one minute that there is a chance of persuading the Government to change their mind. Somebody who is a slave to statistics has produced these regulations. Somebody had made up his mind that he will do a certain thing, so he brings forward a proposal that is ultimately recognised as not fit to be considered. Then, having heard that, this person goes back and then brings forward another proposal which is somewhat less in degree. But it does not alter the wickedness of the original proposal; that all the burdens of cuts should be visited upon the poorer people. The Government do that and then use the change as a justification for taking the second measure.

May I put this simply point to Members of this House and, in particular, to the noble Baroness? People who experience the pain of being unemployed for the first time, after perhaps being employed and paying their way for 30 years, are helped to get over the immediate shock by the fact that there is a system which helps them to get over it. While they are settling down and looking for another job, they know that their mortgage will be paid and that they will not suffer. But the Government now intend, right at the very beginning when these people have already suffered the traumatic shock of losing their employment, to punish them still further. It would have been much better if the Government had left until later the cuts that they intended to make, allowing the people concerned a chance to settle down.

I find these regulations and the amendment so appalling that I think the noble Baroness should have another look at them. But this time she should not look at them using a brief provided by people who play only with statistics and not with human beings. Then she would find how uneasily she slept at night, knowing that on the question of mortgages many affluent people who do not need it are receiving money from the Government and from the public purse, and knowing that her regulations have imposed these cuts.

I have a note here which says, "You are technically speaking before the noble Lady sits down". I do not care how I am technically speaking. One of the problems with this House is that too much emphasis is placed on technicalities. What I am trying to convey to noble Lords opposite, in particular, is that when such regulations are produced in a little smoky, back room, they are talking about human beings. That is what they should be considering.

I do not know whether I am technically in order or out of order, and I could not care less. What I am saying is that these regulations should not be approved and that we should vote against them. I do not know whether or not we shall, but we should vote against them. They should not be approved, because they are doing the worst possible thing. They are hitting a man when he is down.

Baroness Trumpington

My Lords, I am probably technically out of order even in replying. But I cannot resist doing so because the noble Lord, Lord Sefton, seems to feel that he has the monopoly of compassion. I tell him that even those who compile statistics have compassion and know, understand and realise in many cases what it is like for people to lose their job and to be out of work. It is slightly offensive of the noble Lord, although I respect his very deep feelings on this subject, to suggest otherwise.

I shall answer one question, which I think is damned decent of me, and that is on the need to distinguish between help given to encourage home ownership and help given through the benefit system to avoid financial hardship. The Government strongly support the extension of home ownership. The current proportion of households in owner-occupation is the highest ever at 63 per cent. Tax relief is of help to 8 million households many of whom are on relatively modest incomes. It is reasonable to expect people who come on to benefit to do more to help themselves in the early stages of a claim and for building societies to do more to help them. On that note I wish you all a very happy Christmas.

12 noon

The Deputy Speaker (The Earl of Listowel)

The Question is that this Motion be agreed to? As many as are of that opinion will say, "Content"; to the contrary, "Not-Content". I think the Contents have it. Clear the Bar.

My Lords, tellers for the Not-Contents have not been appointed pursuant to Standing Order No. 51. A Division therefore cannot take place. I declare that the Contents have it.

On Question, Motion agreed to.