Welfare Reform Bill

My Lords, experience leads us to conclude that the most appropriate approach is for tenants to have the choice as to how housing support is to be paid: to the tenant or to the landlord. I say that notwithstanding that the Minister will doubtless remind us that we introduced the local housing allowance and the arrangements which have generated a number of problems. Incidentally, a parallel issue arises in respect of support for mortgage interest, which we discussed at our previous two meetings. Will the Minister confirm how this is to be paid: to the lender, as now, or to the borrower? Currently a variety of arrangements are possible: for tenants who have not yet moved on to the local housing allowance, there is a choice of direct or to-the-tenant payments; for those on the local housing allowance, it is generally to the tenant but with safeguards for vulnerable tenants; for local authority tenants, there is a credit into their rent accounts; and for RSLs there are direct payments. We know that the Minister intends that, under the universal credit, the default position for tenants in the private rented sector and those living in social housing will be that support for working-age claimants will be paid to the tenant. Incidentally—a couple of noble Lords referred to this—the Minister did experiment or is experimenting with direct payments in the private rented sector in exchange for lower rents. Perhaps he would update us on how that is all working and on the parameters of those arrangements. It is understood that the plans for existing pensioners who will receive housing support are that there will be direct payments, although this will involve a change of sorts for local authority tenants. New pensioners will have the choice of direct payment to the landlord or to receive their payments directly. The difficulties with what is proposed have been articulated in this debate. They centre on the risks of rent arrears, with the associated problems of increased personal debt; more evictions and the rise in homelessness; an increased reluctance of private-sector landlords to let to tenants who would rely on benefit; potentially increased financing costs for RSLs where their benefit income stream may be less secure—I think the noble Lord, Lord Best, put that figure at £500 million, a staggering figure. There would be increased transaction costs for local authorities in moving away from the direct-crediting system. The NHF modelling suggests something like £100 million in additional transaction costs across the sector. As the noble Lord, Lord Stoneham, said, more than 15 per cent of local authority tenants and 13 per cent of housing association tenants do not have bank accounts and could not, at least initially, pay by direct debit. What is the Government’s position on rent arrears? Shelter’s research indicated that the introduction of the local housing allowance and payments to tenants has led to increased arrears. Do the Government accept that analysis, or what is their contrary evidence? For vulnerable, poor people and those with limited financial flexibility, is it not the case that there will sometimes be a temptation to dip into the housing support funds for a family emergency, a cooker on its last legs, new shoes for the kids and so on? With the intolerable pressure of juggling inadequate resources, made worse by this Government’s benefit cuts and staying away from loan sharks and pay-day lenders, who would not be tempted? Of course, direct payments do not solve the inadequacy of resources but they prioritise the security of the home, and tenants should have the choice to do this. The Minister will be aware that the Localism Bill is abolishing the housing revenue account subsidy scheme. We support that approach and up-front settlement of debt, the sustainability of which is based on a 30-year business plan. Obviously such plans have to take account of voids, rent levels, rent arrears and bad debts. To what extent has the DWP been engaged in discussion with CLG about the possible consequences of changing the benefit arrangements? It is a fact that for RSLs the payment of benefit direct has been a crucial component in securing private finance for new build. This is even more important when reliance is being placed on intermediate rents to fund new housing development. What assessment has been made of the market’s reaction to the universal credit proposals? In a speech to the National Housing Federation annual conference in September, the Minister said that he was determined about the introduction of universal credit and that direct payment to tenants did not undermine the financial stability of the housing sector. He said that he remained utterly convinced that there were mechanisms available that would allow the Government to introduce a single universal payment that includes housing costs while also providing protection for the sector. Perhaps the Minister will take the opportunity to share with us the work that is currently being undertaken and what he sees as the key features of the solution. It is understood that those include prioritised direct debits and escrow accounts. What sort of priority would these arrangements give landlords over other creditors of the tenants, especially the banks? Other noble Lords have raised that issue. Current arrangements to ensure that particularly vulnerable tenants in the private rented sector have their benefit paid direct to the landlord—some 11 per cent of claimants—result from determinations made locally. How will that work within a centralised universal credit system? If special arrangements are to be made to support vulnerable individuals, how will such individuals, if not self selecting, be identified? Finally, we know that the Government argue that payment to tenants is about promoting financial responsibility and breaking welfare dependency. But why is the choice of a tenant to have their housing support paid directly to landlords not a financially responsible decision?