HL Deb 12 March 1992 vol 536 cc1479-84

6.7 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, I beg to move that the Bill be now read a third time.

Although there have been differences in the House about the scope of the Bill there is, in the main, cross-party support for the principle which underpins the Bill, that social security money intended for mortgage interest should reach the lender.

I understand that the noble Baroness, Lady Hollis, and my noble kinsman Lord Russell, wish to make a few points. I look forward to hearing them. To the extent that it is necessary I shall respond. I beg to move.

Moved, That the Bill be now read a third time.—(Lord Henley.)

Baroness Hollis of Heigham

My Lords, we on this side wish to thank the Minister for his invariably courteous, although not always invariably helpful, responses to the amendments and comments that we made. I also thank the noble Earl, Lord Russell, for his friendly verbal support from the Liberal Democrat Benches and the less verbal but no less welcome support of my noble friend Lord Carter who was always present to give helpful advice and encouragement.

Throughout the brief Bill we have been at pains to agree that mortgage payments through income support should be paid to mortgage lenders for the sake both of the householder and the lender. There is no disagreement between us. At Committee stage of the Bill we had the support of the Minister, reported in Hansard, that the Government would use their best endeavours to ensure that the Benefits Agency will pay the income support payments for mortgage payments as speedily as possible so that no arrears that accumulate will in any sense be due to administrative inefficiency or incompetence. We welcome his anxiety to expedite payment of benefit.

We regret that the Minister felt unable to meet us on what we regarded as our "bridge" amendment; that compulsion (that is, direct debit of mortgage support payments) should be restricted to those who have a track record of financial incompetence—those who are two months in arrears, and so on. We believe that that would have been a most helpful amendment.

It would have done much to remove the sense of unfairness of treatment that still remains with those who have always made their payments on time. They feel somewhat stigmatised and penalised by that policy when in no sense have they committed an offence.

Secondly, I wish to register our regret that two wider issues which we on these Benches raised on Second Reading were unable to be brought back by way of specific amendments. They proved to be beyond the remit of the Bill but it is worth flagging them now. The first was our wish to have mortgage interest payments paid in full during the first 16 weeks of income support and not merely at the rate of 50 per cent. As regards the second issue, both the noble Earl, Lord Russell, and I tried to draw attention to the implications of moving to the new 16 hours per week rule from 24 hours per week, which will take place in April. There is a need, therefore, to permit families a "better-buy" choice.

As regards the first point, I wish to quote from a letter which I received recently from the Council of Mortgage Lenders. Mr. Boléat stated: I noted also your comments about only half of mortgage interest being met by income support in the first 16 weeks of a claim. The experience of lenders is that often they receive no mortgage payments in the first 16 weeks of a claim, because in this period borrowers have to adapt suddenly to a sharp reduction in income". There is no difference between us; that is precisely the problem that we sought to register on Second Reading. At the point when there is a sharp reduction in income made worse by only half of mortgage interests payments being met, families begin to spiral into debt. That was confirmed last week by the independent Institute of Policy Studies. It showed that about 2.5 million families are in debt, that one in 100 borrowers face repossession and that one in seven borrowers is in arrears and difficulties with his mortgage repayments. The institute showed that such families are not feckless but merely poor.

I do not suggest that as a result of only half the mortgage interest being met those families will be repossessed within the first 16 weeks. That is not the case. Mr. Boléat was at pains to state that no repossession would take place in the first 16 weeks. The point that we sought to establish and to which the Minister has yet to reply was that that was the beginning of the spiral into debt out of which it was almost impossible for a family to climb. At the point when they move into 100 per cent. repayments they continue to carry a burden of arrears, which even capitalised adds significantly to their outgoings and makes it that much harder for them to stay financially afloat.

In Committee we could not return to the second issue that we raised on Second Reading. However, it is important that we flag it for the last time. I refer to the implication of reducing from April what is considered to be full-time work from 24 to 16 hours per week. That means that a member of a family who is at present working up to 24 hours per week can claim income support, obtain a modest disregard of perhaps £15 if he is a lone parent and, most importantly, because he is in receipt of income support he gets a passport to other benefits. Above all, he receives mortgage interest relief in addition to free school dinners, prescription charges and so forth. By reducing the number of hours from 24 to 16, families coming onto social security will go onto family credit instead. The people who do not have children will not be eligible for anything.

Therefore, some families coming newly onto social security will be better off under the change. Those lone parents who live in rented accommodation will benefit from being able to go onto family credit rather than income support because they do not face the problem of mortgage interest relief payments. All childless couples and virtually all owner-occupiers in receipt of income support who are in part-time work will be direct losers by moving off income support and going onto family credit if they are in low paid work. A typical example might be a husband in work whose wife works perhaps 20 hours per week as a nurse or a school dinner lady. If her husband becomes unemployed she will be beyond the reach of income support. She may claim family credit but she will lose entitlement to the mortgage relief payments that come within income support. In future a family in that situation will be plunged into debt and arrears from which it cannot recover.

In consequence, as the CAB made clear, that will encourage such people to drop work (at which point they will lose benefit entitlement) and not to take up part-time jobs. A recent anti-poverty survey carried out in Manchester showed that approximately one fifth of all jobs were in the 16 to 24 hours per week range. Those jobs will no longer carry with them a passport to mortgage relief.

It is clear that the issue of the 16-week half payment and the reduction in the number of hours from 24 to 16 must await a different Bill. We should have liked to have seen full payment from the first week. We should have liked new families coming onto social security to have the option of "better-buy"; that is, they could go onto family credit or income support plus mortgage relief as suited their circumstances better. However, both those issues must await a different Bill which we on this side of the House look forward to introducing in due course.

I suggest that without those reforms the narrow aims of this Bill will not be met. Without wider reforms—for instance, the releasing of capital receipts for building an adequate supply of socially rented housing, whether by a housing association, local authority or tenants' co-op—more vulnerable families on low incomes and with insecure jobs will be forced into owner-occupation which they cannot afford. The problem will not go away until families of modest means have a genuine choice about whether they rent or buy a decent home at a price that they can afford. We are seeing the end result of 13 years of a government removing that choice from vulnerable families and we see the wreckage around us. That issue, too, will be speedily redressed when Members on this side have the pleasure of introducing legislation to that effect.

6.17 p.m.

Earl Russell

My Lords, I thank the noble Baroness, Lady Hollis of Heigham, for her kind words. I thank her also for the enthusiasm, energy and thorough knowledge of the material that she has brought to the Bill. As always I thank my noble kinsman for his kindness, his courtesy, his care in considering arguments and his attention to detail. In respect of this Bill he has made a particular effort to understand why we have put forward our arguments. Although he has not been able to meet them all there has at least been a tentative approach towards the meeting of minds. Many of us—in particular the noble and learned Lord, Lord Simon of Glaisdale—have occasionally talked about the growing thickness of legislation. But my noble kinsman has proved that blood is thicker than legislation and I thank him for that.

I also wish to thank my right honourable friend Mr. Ashdown for the effort that he made in initiating the Bill. I am glad that it was brought forward. I look forward to seeing it on the statute book. It is undertaking a necessary job. However, in the very nature of the case—and one does not complain—it was undertaken in a hurry. When Bills are introduced in a hurry, however necessary that may be, there are inevitably some cases in which the tacking shows and parts need to be put together. It will be necessary to look at the issue in the next Parliament.

Unlike the Opposition Front Bench, I do not have the gift of divination; I have no idea which of us will be responsible for looking at it in the next Parliament. Whoever it is, there are some questions which must be addressed. I agree entirely with what the noble Baroness said about income support for the first 16 weeks. It is then that the problems occur. In Committee I listened to my noble kinsman, who seemed to be of the opinion that most people are functioning with a considerable amount of savings. That may be true on some economic levels but I do not think that is so on all levels.

I began to wonder why my noble kinsman thought that. I began to think about the way in which government records are kept, because governments necessarily look at their records. Therefore, I thought about the way in which government figures for savings are calculated. While we are repaying our mortgages, everything which we repay is counted as savings. When we pay premiums for life insurance, all that is calculated as savings. Therefore, when my noble kinsman looks at the figures for savings, I wonder whether he is getting from them a quite unrealistic figure for the amount which people actually have in the bank.

I do not know whether the Government have recorded any separate figure for money which people have in the bank and for money which they are repaying on loans and so on, which is therefore calculated as savings. Until those figures are split, we shall not know how much people have in savings. Until that is known, I remain extremely doubtful as to whether most people have sufficient savings in their possession to continue paying mortgage interest for the first 16 weeks of unemployment. In those 16 weeks, arrears build up. Of course, arrears of interest multiply. Therefore, taking over the interest after 16 weeks means that the department is taking on a bigger job than it needs to. That will need to be looked at.

The question of those who work part-time for between 16 and 24 hours must also be looked at. When that change in the rules was introduced, neither the Government nor anyone else foresaw the Bill before us now. Therefore, the two changes were introduced without reference to each other. It is not exactly a case of the right hand not letting the left hand know what it doeth, because the left hand had not done it yet. At some stage we must look at those two measures together, because that is a significant disincentive to people to take part-time work. That is against the public interest.

One thing which I note from the current size of the public sector borrowing requirement—and I do not intend to make a party point—is that a government, whoever they may be, should think not merely about the size of their spending but about maximising their revenues. The fall in revenues resulting from the recession has caused many of our present problems. I strongly believe that, if we wish to maximise our revenues, we must give people the opportunity to get back to work. In particular we must give women with children a chance to get back to work. They usually go back to work on a part-time basis, for reasons which are too obvious to need developing. In those circumstances, creating a major disincentive to work between 16 and 24 hours in a week does not seem to me to make sense. That too must be looked at.

In Committee we had a fascinating debate on the issue of compulsion. The difficulty arises from the tying of mortgage benefit to income support, because the lender, who knows the borrower is in arrears, does not know whether the borrower is on income support. It may be that we should not have the problems as regards compulsion if we changed, as we must consider doing, to a specific mortgage benefit. However, I am aware that that will involve large problems and will be difficult to do well. Whoever brings in that measure must think about it extremely carefully.

On the issue of delay, I welcome what my noble kinsman said in Committee. He understands the problem well. There is a growing burden on benefit offices of unemployment and recession. I shall say this before the election, because it must be said afterwards, that the current economic forecasts are that unemployment will continue to increase into 1994. Accordingly, the burden is likely to continue to increase. Therefore, my noble kinsman will have to put his money where his mouth is.

6.25 p.m.

Lord Henley

My Lords, I shall respond to one or two of the points made by my noble kinsman Lord Russell and the noble Baroness, Lady Hollis. I was asked whether there will be delays. I can confirm that the benefits agency will pay as speedily as possible. I accept that there may be difficulties here but certainly the agency is confident that it can cope with any problems which are likely to arise. Obviously that matter will be monitored once the Bill becomes an Act and the direct payments under the Bill begin to be made.

As regards compulsion, as I implied in Committee, I thought that the amendment in the name of the noble Baroness, Lady Hollis, was driving a coach and horses through the purpose of the Bill, which is that it should be compulsory. There are enormous administrative difficulties in making it voluntary and as my noble kinsman said, there are problems of confidentiality whichever way one goes. Therefore, my noble kinsman asked that we should look towards a specific mortgage benefit. That would bear terrific cost implications. If my noble kinsman is putting that forward, I should welcome an opportunity to argue that in the coming weeks. I do not know whether that is part of the Liberal Democrat manifesto.

The noble Baroness, Lady Hollis, called for the abolition of the 50 per cent. income support payments during the first 16 weeks. I wrote to the noble Baroness to correct the figure which I gave, but it would involve an enormous cost implication of £71 million. I repeat what I said before: that most people in the first 16 weeks, particularly after losing a job and going on to income support, have other forms of savings—for example, payments in lieu of notice or redundancy. That has not created much of a problem in the past. Certainly, the mortgage lenders said, when we made the change, that they did not envisage that it would lead to increased numbers of repossessions.

Turning to the hours rule change for income support and family credit, the noble Baroness asked whether there could be a "better buy" proposal. I cannot go further than what I said on Second Reading. I promised that there would be protection for those at the time of the change but we do not believe we can go further than that.

I am glad that the Bill has not been opposed. It will provide reassurance for many people otherwise at risk of repossession. It will also form part of a package of measures agreed with lenders which will provide relief for many people with mortgage difficulties, whether or not on benefit.

On Question, Bill read a third time.

Lord Henley

My Lords, I beg to move that the Bill do now pass.

Moved, That the Bill do now pass.—(Lord Henley.)

On Question, Bill passed.