My Lords, I shall speak on Amendments 70B and 75B, and in support of the other amendments in the group. I apologise for not being able to be here for the debate on the first group, due to other long-standing personal commitments. I also declare my interest as chair of Peabody and president of the Local Government Association.
The amendments before us seek to address the issues of feasibility and deliverability, and propose phasing in the changes over time, starting from April 2017. They also suggest that we have a pilot scheme before we move to full operation of the policy. Of all the parts of the Bill—there are some very contested parts of it—this is without doubt the part on which I have had most correspondence. It comes not just from organisations, but from a greater number of individual tenants. These tenants are people who have typically worked hard and got on in their life, and now are
genuinely worried about their future security. This part of the Bill introduces in the name of fairness a proposition that is, in many ways, deeply unfair, bureaucratic and centralist in its nature. It departs very substantially from the original intent of the policy, developed during the coalition, which was to tackle those on very high incomes of more than £60,000, developed in response to one person: the trade union leader Bob Crow. The proposition that went in then was flexible and voluntary, and local authorities got to keep the proceeds.
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We are now talking about people who earn half the amount that was part of the previous debate. Inevitably, this draws in much wider ranges of tenants and of complexity. This is what we are now grappling with. It is also mandatory, so the ability to adjust at local level does not apply. I am struck by the contrast between the debate we had on right to buy and this debate. Indeed, I feel that the two are in complete contradiction. In that part of the debate unfairness abounds, but it is justified in the name of opportunity, so existing tenants in a housing association will receive a very substantial cash bonus—a subsidy, if you like—to enable them to purchase a property. But they can take advantage of that subsidy only if they are in a position to and have the means to proceed with a mortgage and the deposit. The cost of that subsidy will, effectively, be funded by those who need new accommodation and those opportunities will no longer be there because the bigger properties will be sold. They, effectively, are paying for the subsidy by the denied opportunity.
When I raised the one-for-one policy in the right-to-buy debate, the Minister argued for flexibility to allow for different circumstances and suggested that a one-for-one policy in the Bill would be inflexible. However, in this part of the Bill we move in an entirely opposite direction and suggest that a central, top-down approach is needed regardless of local circumstances. One or other approach must be right.
Many tenants have said to me—I believe correctly—that there is now no revenue subsidy for social housing. In fact, we moved away from a revenue-subsidised model a number of years ago, so it is misleading to suggest that the taxpayer is subsidising these tenants. What we have is a cross-subsidy model for the provision of new properties—that is to say, housing associations build and sell market properties and use the profits to cross-subsidise social rented properties. They achieve that with very low or, often, no government grants at all. This is the right way to think about subsidy because it works through individual choice rather than coercion.
In this policy, tenants who have taken up their property in good faith, with a level of rent and an expectation that that rent would rise in line with inflation, will now face a significant increase in their rents, notwithstanding the taper, which I welcome. Of course, they have already paid higher income tax, so this is in effect on top of their additional income tax. It seems to me that, even with the taper, this can and is likely to be quite significant. Therefore, the choices for them will either be to pay the higher rent, to move into market-rented properties, again at an even higher rent,
or to think about buying at a point when they are not ready to purchase the property, all of which seem poor outcomes from a policy.
I now move on to the implementation issues, which are the substance of the amendments. There are significant implementation issues here, and it is for the simple reason that neither the housing associations nor the local authorities are tax collectors: they have none of the capacity needed to get this policy right. I include housing associations here because, although this will be a voluntary policy, the Government have—as the Minister just said—made it clear that they are expected to implement this policy over time. To make this work in a way that is in any sense fair or reasonable, they will need to be in an equal position to HMRC as regards information. It seems patently unlikely that they will be in that situation.
The complexities and sums of money involved make it essential that we have an effective operating system. The consequences for individual tenants if this is not right will be severe indeed. I will give four examples of the practical implementation issues that really concern me. First is one that has already been raised in this debate: household incomes fluctuate very significantly over time, sometimes from week to week and certainly from month to month. If the policy is based on the income of a tenant the year before, it will lead to grotesque unfairnesses as their income position changes. Secondly, if the household has a young person in it who is also working, will their income add to the total assessment of income? We know that lots of young people are living at home now for the simple reason that they cannot afford the soaring rents, so what choice will we be giving that young person? There is every prospect that they will choose to stop working to remove the penalty on their family. That would be a very poor situation indeed.
Let me give two further examples, which are real-life examples drawn from the Family Resources Survey. The first is a London household of council tenants made up of four adults, at least one of whom is a pensioner and at least one of whom has a disability. The current household taxable income is £58,000, so if the taper was 10%, then their extra monthly rental charge would be £150; if it was 20%, it would be £290. These are very big sums for some very stretched people. If this feels like an outlier case, it is not. Out of the households likely to be affected that are council tenants and not currently claiming housing benefit, 37% include at least one disabled adult. We are talking about significant numbers of people here.
My final example is of a family outside London: a young couple in their 30s who live in the south-east with a current household taxable income of £40,000. A 10% taper would add £83 per month; a 20% taper would add £186 a month. It is not just a London problem: it is a problem in places that have high rental income, full stop.
Given these issues, we need to think very carefully about how this policy will be implemented and how it will take effect. To go ahead with this in a situation where we truly do not understand the full impact—where there has been no pilot, no feasibility study and no proper impact assessment—seems unwise, to put it at
its most mild. I understand and am totally sympathetic to the Minister’s predicament here, but in truth we should not proceed in the absence of clear information about the impact of this policy—vital information that would make a difference to people’s lives. Even with more detail, there are basic problems with the model, and they come from the table starting at too low an income level. That is the basic problem, and it will be bureaucratic and fraught with unintended consequences. There is a risk that, in the end, it raises so little income that it proves a worthless process in the first place. It is imperative that we do not take a leap into the dark here: we should pilot this scheme, take account of new tenants coming into it and see how it goes. My preference, quite clearly, would be to remain with the voluntary scheme that has not really had time to be tried and tested. If the Government insist on pressing ahead, however, I beg them—and I will go that far, given the impact it will have on people—to properly pilot it and to phase it in before we implement it at large. We could be heading into a terrible mistake.