My noble friend is not the only one in danger of losing his train of thought as the Bill goes on and on and on.
Last Monday, I asked the Minister a question about affordability. I cited the case of the son of a friend living in Hackney on a modest income. He has since been in touch with me again and emailed the Minister—I do not know whether she has received that or whether it is lost in the deluge of emails that may be descending on her as the Bill goes forward. His case exemplified the problems occasioned by the proposed pay-to-stay provisions. He and his partner live in a three-bed council house in London Fields in Hackney. They have a nine year-old child. He also has two children by a previous marriage—I was in error in saying that there was only one; actually there are two—who are in the house from time to time. He is financially supporting them. The current rent is £720 a month, whereas the cheapest equivalent private rented property would cost about £2,300 a month, with the average costing about £2,500. He earns roughly £21,500 per year before tax and his partner earns £19,000, so they would be just over the limit. Clearly, they could not afford the private sector accommodation. He says,
“the thought of renting in the private sector in and around London with a family and being on a fairly low income is scary. The current housing situation … is scary. The fact that we are lucky enough to have a council house and pay a truly affordable rent is the reason we can survive”.
He points out that because of the pay-to-stay dynamics he would be in a position of not wanting a pay rise, and perhaps even asking for a reduction of hours.
In fairness, that was before what we are beginning to hear about the taper had come to light. The noble Lord, Lord Best, earlier referred to a letter, which he implied had information about the level of taper and how it might apply. Neither my noble friend nor I—nor, as far as I am aware, my colleagues on these Benches—have yet received that letter. Maybe it was just directed to the noble Lord, or maybe the letter is in the post—it would be helpful to see something in writing—but when the Minister replies it would be helpful if she could explain how she envisages the scheme working on the basis that there would be a taper.
Originally, London councils estimated that 28,000 households would be affected, with rents rising more than threefold. That now seems to be unlikely in terms of the level of increase given that there is to be a taper, but perhaps the Minister could give an indication—again, it may not be immediately available—as to how many households would be affected in London, where I guess the pressure is likely to be most acute, on the basis of the new taper.
Interestingly, reference has already been made by, I believe, the noble Lord, Lord Foster, to the DCLG’s consultation in 2012 on a pay-to-stay proposal. Then the threshold was going to be £60,000—actually, they started off looking at £100,000 a year income triggering this. So I ask the Minister, on what basis was the revised figure of £60,000 reduced to the proposed £40,000 in London and £30,000 elsewhere, assuming that in the letter that we have not yet seen, those basic figures remain the same? I take it that it is the taper that is the subject of clarification, rather than the starting point.
The Chartered Institute of Housing in its response to that consultation warned of the risk of perverse outcomes of the policy, including tipping households on the margins into housing benefit, discouraging tenants from working or increasing their earnings, making communities less balanced—the point made repeatedly by Members and recently by my noble friend Lord Campbell-Savours—as low to middle-income families move out, and causing major problems in costs to councils and housing association in administering the scheme. The institute asserted that it thought that the income levels were too low—they may have been raised but the implication at the moment is that they have not. It points to the different treatment of local councils and housing associations, which has been mentioned—the former will have to pay income recovered to the Treasury, while housing associations will be allowed to keep the increased rents to invest in new homes. That anomaly needs some explanation.
The institute suggested a household earning threshold of £50,000 per year, annually uprated. It pointed out that with the £30,000 threshold outside London, two adults with two children in a three-bed house in the more expensive parts of the country would be eligible for housing benefit, as matters stand, in 53% of council areas, rising to 96% for those paying an affordable rent, and 100% paying the market rent. So there is a distinct impact even on that lower threshold of families still in receipt of benefit. As for the definition of household income which does not require HMRC to disclose information for non-dependent adults—we will be looking at the HMRC role in a subsequent group—if the HMRC is not enabled to make that information available, there is a question about how robust the information will be in assessing the household income where there are such non-dependent adults.
Overall, the institute predicted that the poverty trap would widen and a couple with two children paying £75 in rent per week would effectively face a marginal rate of tax of 90%. Presumably that would vary now because of the taper, so the effect would not perhaps be as drastic as it suggested, but it is still likely to be significant. The LGA research showed that on the initial basis 214,000 households would be affected and
it thought—but again this is probably overtaken by the taper—that 60,000 families would probably have to leave their homes. It would be interesting to see whether the Government have made any estimate of the situation, as it now appears to be shaping up, compared to what the LGA had thought would be the case, both in terms of the total number of households and those who might have to leave their homes. I assume that some work has been done on that. Of course, nothing of this kind is shown in the impact assessment.
In my own authority of Newcastle, a small sample indicated—again, this may be lessened by the introduction of the taper—rent rises of between £45 and £69 per week for as many as 1,500 houses. I am not clear about how the taper will operate over the period of time. If it is to be a flat 10% increase, that is one thing, but if it is to go up by 10% per year cumulatively over time there will still potentially be a significant number. Again, it may not be possible for the Minister to clarify that tonight, but that would be helpful.
Amendment 71, which is in my name and that of my noble friend, would insert a requirement for regulations to take into account affordability. Amendment 72 adds the need to promote socially cohesive and mixed communities—the very matter referred to by my noble friend Lord Campbell-Savours. Crucially, at the time, Amendment 73 would introduce a taper relating to income and rent charged. Now we know that the taper will come in, and so to that extent Amendment 73 becomes redundant—or, to put it another way, the Government are accepting that and we await the detail.
There has been much speculation about this taper and until last Wednesday it was all rumour—it had been in the previous weekend’s press. Last Wednesday night, in the hours before Thursday’s sitting, the noble Baroness wrote to Members indicating that the taper would be introduced and she enclosed a consultation document, which comprised all of five pages of text and the Government’s response of equal length. However, the effect of the latter was merely to report that a taper would be applied; no details of the scheme were available at all. Perhaps there has now been a subsequent letter, which we now await with interest. This comes five months after the consultation closed; it could hardly have been a very elaborate consultation on the basis of the five pages that were sent to interested parties. One has to ask what on what on earth took so long to produce a response that is so empty of content. This looks to me rather like legislation on instalment plan. It has certainly taken a very long time. Even now, most of us are not aware of what is pending.
Moreover—I need to refer to this matter because it is constantly being iterated in the media—the Minister’s letter repeats the entirely incorrect claim that there are 40,000 households of incomes of more than £50,000 a year receiving a taxpayer subsidy to remain. There is no taxpayer subsidy. On the other hand, the taxpayer is subsidising private landlords charging ever-higher rents through the ever-higher rise in housing benefit. Nothing at all is being done about rents in the private sector—as opposed to what is happening in the public sector, where they are going to be pushed up. It seems to me a remarkably strange position for the Government to get into, even on purely financial grounds.
Amendments 78 and 79 flesh out the proposals for a taper and require high income to be set by reference to incomes in the area as opposed to a national figure and defined as income in the top quartile of that area rather than some one-size fits-all formula applied to severally to London and the rest of England. Amendment 79 prevents high income being set at a level lower than median incomes, as my noble friend said.
These and other amendments seek to provide flexibility and a realistic scheme under which people on what can only be described as modest incomes are not hit by unreasonably large increases, especially when it suits the Government to cut rents for all council and housing association tenants with adverse consequences in both sectors for investment in their stock. That is incompatible with everything that has been said about improving the stock and the need for new and better housing.
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