Welfare Reform Bill

---

The Committee consisted of the following Members:

Chairmen: † Mr. David Amess, Mr. Jimmy Hood

† Afriyie, Adam (Windsor) (Con)

† Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)

Banks, Gordon (Ochil and South Perthshire) (Lab)

† Boswell, Mr. Tim (Daventry) (Con)

† Brown, Mr. Russell (Dumfries and Galloway) (Lab)

† David, Mr. Wayne (Caerphilly) (Lab)

† Engel, Natascha (North-East Derbyshire) (Lab)

† Heppell, Mr. John (Vice-Chamberlain of Her Majesty's Household)

† Hunt, Mr. Jeremy (South-West Surrey) (Con)

Laws, Mr. David (Yeovil) (LD)

† McGuire, Mrs. Anne (Parliamentary Under-Secretary of State for Work and Pensions)

† Mountford, Kali (Colne Valley) (Lab)

† Murphy, Mr. Jim (Minister for Employment and Welfare Reform)

† Penrose, John (Weston-super-Mare) (Con)

† Robertson, John (Glasgow, North-West) (Lab)

† Ruffley, Mr. David (Bury St. Edmunds) (Con)

Seabeck, Alison (Plymouth, Devonport) (Lab)

John Benger, Chris Shaw, Committee Clerks

† attended the Committee

Column number: 433

Standing Committee A

Thursday 2 November 2006

(Afternoon)

[Mr. David Amess in the Chair]

Welfare Reform Bill

1.30 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Mrs. Anne McGuire): On a point of order, Mr. Amess. I wish to clarify something that I said during Tuesday’s debate on amendment No. 257.

Mr. David Ruffley (Bury St. Edmunds) (Con): I remember it well.

Mrs. McGuire: The record will show that I said that certain groups of claimants are excluded from local housing allowance and pathfinder schemes and that we will replicate that provision at the national roll-out. I want to clarify what I said about charities. Claimants will be exempt from local housing allowance schemes only if care and support or supervision is provided by the charity; that replicates exactly the pathfinder position. I thank the Committee for its indulgence.

The Chairman: The Committee is most grateful that the Minister has refined her position.

The Minister for Employment and Welfare Reform (Mr. Jim Murphy): On a point of order, Mr. Amess. I shall welcome you to the Chair at a more appropriate point in our proceedings. For the avoidance of doubt, I confirm that during our conversations on Tuesday I referred to an organisation called “working links”; hon. Members will be aware that I should have called it WorkDirections. I hope that I have reassured the Committee.

The Chairman: It is entirely in order that both Ministers have tidied up the record.

Clause 27

Local housing allowance

John Penrose (Weston-super-Mare) (Con): I beg to move amendment No. 266, in page 19, line 15, at end insert—

‘( ) The regulations may provide for local variations in AMHB in the event of a shortage of suitable accommodation for disabled people.’.

The amendment is fairly straightforward. I seek to discover the Government’s approach to dealing with those who, potentially, are tremendously vulnerable—disabled people, their carers and associated family—in those parts of the country that do not have a huge supply of houses available to rent with the potential to

Column number: 434

be adjusted or improved to allow for their particular needs, or places that have already been adjusted to reflect those needs.

The Under-Secretary pointed out this morning that we do not have a national housing market but a series of local markets. It will depend on the local market as to whether there is an adequate supply of such places that can be adjusted or that have already been adjusted. Given the huge variety of adjustments that may be required for the many different conditions, it is clear that there may be no such houses in some parts of the country. That will lead to problems finding an appropriate house or somewhere at a reasonable rent that could be adjusted.

Mr. Tim Boswell (Daventry) (Con): Would my hon. Friend not agree that, by the nature of things, the sample will be rather small, and that any deductions drawn from that sample will result in a correspondingly low degree of confidence?

John Penrose: My hon. Friend is right. When discussing the single room rent restriction, we spoke of the difficulty of finding an accurate factual basis on which the rent officers could make decisions affecting various parts of the country. This is a similar example, but based on a different set of facts.

Another point will cause difficulties. Not only will the disabled have to find places that can be adjusted to meet their needs, but they have what may be classed a non-standard shape of household—for instance, the carer may or may not be a member of the family. That can give rise to an unusual type of family geometry when compared with the normal run of family types for which rent officers will be declaring local housing allowances.

The Under-Secretary may have started to prefigure her answer when summing up this morning in our debate on the single room rent restriction. However, I hope that she can explain a little more about how the Government plan to deal with the problem and that she can reassure us about the steps that they plan to ensure that this important and vulnerable group will be properly looked after when local housing allowances are decided.

Mrs. McGuire: It is good to see you in the Chair, Mr. Amess. I am pleased that the hon. Gentleman has raised the subject in his amendment. I respect the admirable intentions behind it. As he indicated, to a certain extent it follows on from comments made by the hon. Member for South-West Surrey (Mr. Hunt).

I reassure the Committee that we already have powers to make different provisions for different classes of people under section 175 of the Social Security Administration Act 1992. We can also make different provisions for different areas under section 175(6). However, more importantly, adding the qualification suggested by the amendment to the local housing allowance would undermine its main advantages of simplicity, transparency and fairness.

I hope that the Committee accepts that the majority of disabled recipients live in the social rented sector and will not be covered by the local housing allowance. As I said during a debate on a previous amendment,

Column number: 435

the discretionary housing payment scheme is also in place. That flexible system will enable the local authority to target help to those who most need it.

I turn to the relevant issue of live-in carers. If the dwelling is the carer’s normal place of residence, the carer will be included as an occupier in the housing benefit calculation; the customer will be entitled to an additional room and a non-dependant deduction will be made. We recognise the different issues; I have already mentioned the charitable and voluntary sectors. The local housing allowance has a built-in flexibility, at an individual level, through discretionary payments. I hope that, with that reassurance, the hon. Gentleman will feel free to withdraw his amendment.

John Penrose: I thank the Under-Secretary for that brisk and comprehensive response, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part ofthe Bill.

Mr. Ruffley: It is a great pleasure to see you on this moderately sunny Thursday afternoon, Mr. Amess.

I give a general welcome to the LHA and what it was trying to achieve—a simpler and fairer system. It was designed to encourage greater personal responsibility among claimants, which is a good thing. It wanted to provide tenants with a bit more choice and to reward their shopping around; that was another noble aim. It also sought to reduce administrative complexity and promote financial inclusion by encouraging a welcome trend among those who were unbanked to open bank accounts so that they had a reliable way of receiving money and paying money to landlords.

However, the devil is always in the detail. Clearly, during a pilot not everything has been nailed down and got right, and we Conservatives will not be so unreasonable as to pretend that the problem has been cracked. However, the clause concretises some of the proposals in the LHA pilots. I should like to pose a series of questions and points, on which we, along with outside groups and claimants, would like reassurance.

The first question is about why there is so little evidence from the evaluations of LHA of moves by existing claimants to more appropriate property—more appropriate in the sense that claimants might pay lower rent and be able to save some of that money under the pilot schemes.

We would really like to know how many people have been taking advantage of the cash retention built into the proposal. It is all very well saying that a lot of shopping around is going on and that lots of claimants are able to retain some of the saving by going to a less expensive property, but can the Minister quantify that? It is a great idea in theory, but is it happening in practice?

The second question relates to shortfalls. Hon. Members, on the Government and the Opposition sides, will have some interesting examples to give, but I shall return to that in a minute.

We also need some information from the Under-Secretary about the IT side of the equation. The housing benefit service in pathfinder areas seems to be doing quite a

Column number: 436

good job with the system. However, I am led to understand that IT problems, ranging from acute to minor, have been experienced. There is some suggestion that the level of resources needed to support an LHA national roll-out, which is what the clause seeks to do, has been seriously underestimated. I should be grateful if the Under-Secretary would give us her views on that. Is she entirely satisfied that the IT capability and resourcing are there to ensure that the national roll-out goes ahead smoothly?

Mr. Boswell: Would my hon. Friend not also want to bear in mind, first, that when any system is changed there are always frictional and transitional problems, and that those transferring from one system to another will be the most vulnerable to that? Secondly, there is a world of difference in scale between a pilot with a comparatively small scale, and an escalation to a nationwide system.

Mr. Ruffley: My hon. Friend makes an excellent point. Reassurance from the Under-Secretary would be most welcome.

Next, and crucially, for all of us who are involved in the welfare reform conversation, we must ask the question: what has the LHA done for work incentives, and encouraging people back into work, so far as housing benefit is concerned? The evaluation that I have seen did not disclose very much evidence of the LHA improving employment opportunities. One of the evaluation reports—forgive me; I forget which one—said:

“One officer believed that the effects of the LHA in their location was so small—affecting the better off calculation by only £5-£10—that it was of little significance in the claiming/working decision”

by a claimant.

“Others simply do not know if it is affecting such decisions.”

That is the 2006 evaluation report on the Department for Work and Pensions website.

I ask the Under-Secretary to ask herself whether that LHA pilot has done its work on work incentives. What statistical data has she been looking at before deciding to roll out the proposal nationally? Is there more that could be done after the Bill is enacted to ensure that the propositions in the pilot are tweaked so that we can get more people incentivised into work? We all know about the quite vicious withdrawal rates in housing benefit. I hasten to add that that has been true for many years under successive Governments: it is the nature of the beast that there must be sharp withdrawal rates, and it is difficult to flatten the cliff edges. Nevertheless, is there anything that can be done to look again at those pilot schemes to see whether we can do more on housing benefit, and ensure that the disincentive to work is removed or lessened?

1.45 pm

My next question relates to the retention of cash should a claimant shop around and find a lower rent. Proposed new subsection (5) provides that a claimant’s HB could exceed their rent liability, if their appropriate LHA rate is higher than their actual rent liability. The Green Paper asked for views on a proposal to cap the amount of HB that claimants can receive in excess of

Column number: 437

their rent levels. Obviously, we welcome and support that proposal, which is innovative and clever.

The Green Paper states:

“In some areas, claimants are able to receive large cash sums over and above the amount they need to pay their rent. There is a concern that this is fundamentally unfair and that it could have serious implications for work incentives”.

Will the Under-Secretary say something about the level at which the Government are going to set the cap?

Respondents to the Green Paper appreciated the need to restrict cash gains for recipients of LHA, but also expressed concern about the additional complexity that a capping regime at that level might add to the scheme. The Association of London Government has said:

“It is disappointing that the DWP is proposing to cap excess allowances”

as this

“introduces a level of complexity”.

The Government have said that they intend to implement a £15 cap on the LHA that tenants can receive above their rent level. Why was the capping figure set at £15, and will the Under-Secretary acknowledge that that could introduce complexity? Why not set the figure at more than £15? If someone has had the wit and energy to negotiate downwards, why not £20 or £10? I would be interested to hear how that £15 capping figure was arrived at.

My next point relates to the excellent work, which has been encouraged by the Government, done by Citizens Advice, Shelter and others in giving financial advice and support during the roll-out. The scheme is innovative, and it will be new to HB claimants, which is potentially very confusing, and the Government were entirely right to put in place a support and advice system in many of the pilot areas. However, this is where my concern hoves into view. Citizens Advice has been working with local authorities which have been promoting the LHA and reassuring landlords that vulnerable tenants will be provided for and will be able to make payments. It has also been developing relationships with local banks.

Citizens Advice has considered both sides of the equation. It has talked to landlords and banks about opening accounts so that housing benefit payments can go from the Department into a claimant’s account, which can be subject to a direct debit not only for the convenience of the landlord, but so the claimant can plan their finances with some confidence knowing that their housing benefit will go out on the due date and that they will not have a landlord on their case causing them grief.

That is all important support work, and I understand that much of it is done face to face to improve the financial literacy and debt-management skills of the often vulnerable people who need support and benefits, which includes not only housing benefits, but all other forms of benefit. Now, those people are getting that support with the new HB scheme.

I shall give one example how a citizens advice bureau helped a client. The client had a current account that was already seriously overdrawn. She was concerned that when the LHA was paid into her account, her bank would use it to pay off her overdraft, so she would be unable to pay the rent to the landlord because

Column number: 438

there would not be enough money in the account. She also thought that she would not be able to open another account because of her poor credit rating. The citizens advice bureau helped her to open a basic bank account for her LHA to get around that problem. I am sure that those of us who have spoken to people in pilot areas can produce many other examples of simple but effective intervention.

Despite the importance of that support network for LHA claimants in pilot areas, Citizens Advice reports that a number of bureaux have been informed that funding will be reduced and will not be supplied at the same level on roll-out. Will the Under-Secretary confirm that, and, more generally, tell us what funds will be made available for such support services throughout the country on the national roll-out? Has a figure been earmarked for such work, and can assurances be given to those who are helping to drive up financial literacy skills, such as Citizens Advice and others?

My next point relates to appeal mechanisms against LHA levels. It does not appear that there is a streamlined, simple and efficient appeal system for claimants who have a serious disagreement with a determination.

Finally—

---

Prepared 3 November 2006