Welfare Reform Bill

My Lords, Amendment 33B is intended to ensure that help with mortgage interest will be available through the housing cost element in universal credit for claimants who are homeowners. I reassure noble Lords that assistance with eligible mortgage interest will continue to be provided for homeowners as part of the housing cost element. The illustrative draft regulations that we have sent out in recent weeks show that help will continue for homeowners as now. Therefore, I see no need to set out in the Bill specific reference to mortgage interest payments. There is a lot of history to what has been happening, which the noble Lord, Lord McKenzie, laid out accurately, in terms of how the rates have been changing. We moved to 3.6 per cent on the Bank of England average rate, which was a rather more generous rate than would have been the case under arrangements that were based on a LIBOR-related formula, which would have been a little more than 2 per cent, when we came off the emergency 6 per cent rate. The rate will increase in line with the average Bank of England mortgage rate. I shall pick up on the concern of the noble Baroness, Lady Hollis, about RPI, CPI and what happens to owner-occupiers. There is a very technical set of arguments around CPI and RPI; noble Lords might not want to go into it in depth. However, the current RPI is based on taking in interest rates. There is a peculiarity, and one of the reasons for concern about it as an index, about RPI, which we see when the Bank of England takes an anti-inflationary measure and pushes up interest rates to damp down the economy—not a position that we are in today. Bear with me while I explain it. Using RPI has the perverse effect of pushing up inflation when one takes a measure intended to reduce it. It has been very unsatisfactory. The statistical committee currently looking at CPI is conducting an exercise on incorporating more housing costs in CPI. I do not know what it will conclude, but it is likely that more housing costs will be brought into CPI. The committee’s approach is to take not interest as the primary measure of housing costs but rather what is happening in the housing market. I think that housing costs will be included, but they will be true housing costs. We should not become wound up over the impact of this rather artificial measure, nor should we commit ourselves in these provisions.