My Lords, we return again to the issue of the Government’s policy for high-income social tenants. I realise that this is an area where there are strong feelings on both sides of the House and I hope today to be able to provide some further reassurances so that the Government can move forward with their commitment to establish a fairer position on rents between the social and the private rented sector.
As noble Lords will know by now, we committed in the 2015 Budget to introduce a policy whereby social tenants who are able to pay more for their rent should be expected to do so. Social housing should be for those who are the most in need. This position was reinforced during the debates yesterday, and the other place declared its position, loud and clear, with a considerable margin of victory in resisting amendments put forward by this House. I was struck by some of the arguments my colleagues put forward on this aspect during the debate in the Commons yesterday. It is simply not right that social tenants who are no longer in housing need should take up valuable social housing when there are families in much greater need on waiting lists. If these higher-earning tenants wish to remain in their property, which is their choice, then it is right that they contribute more.
I remind the House about the significant opportunities that the Government are offering tenants on higher-than-average incomes. If they do not wish to pay a
fairer rent, many tenants will be able to explore the opportunity to buy their home under the extended right-to-buy scheme, or they may be able to take up shared ownership offers.
We have brought forward a package of amendments which significantly improves the operation of the policy by protecting work incentives and vulnerable tenants. I am very grateful to your Lordships’ House for recognising this and accepting the government amendment to enable the creation of exceptions for high-income social tenants. This power will be used to make an exception for any tenant in receipt of housing benefit or universal credit, which is clearly its most sensible use.
Lords Amendment 54, which would make the policy voluntary for local authorities, simply cannot be supported. It was rejected by the other place yesterday. Local authorities have been able to put in place a voluntary policy for some time, but have not done so, as far as we are aware. I recognise the point made in the Commons yesterday about the interest from Westminster Council and want to take a moment to respond to that. Its concern is that the cost of operating the policy may exceed the money collected. We have accepted that local authorities should be reimbursed a reasonable amount of the administrative costs, and we do not expect those to exceed the money received. However, we recognise that rents vary and are working with local authorities to look carefully at the approach in areas where market rents may be close to social rents. We will bring forward further detail in the affirmative regulations.
Remaining on the issue of a voluntary approach, I have concerns about what this would mean for tenants. We want a consistent approach for all, and it does not seem right or fair to have certain tenants subject to the policy while others are not.
Lords Amendments 55 and 55B concern the operation of the proposed taper. The Government have been clear that our preferred approach is to have a taper set at 20%, which balances fairness with work incentives. We cannot accept a rate of 10% as proposed by Amendment 55, as it is simply too low. The other place has overwhelmingly rejected this and I support its reasons for doing so.
Amendment 55B would limit this rate to the first £10,000 above the income threshold. While I recognise the intention here, there are wider considerations about the impact on local authorities of operating a two-stage taper, which I am concerned will only add to the burden and complexity for them. Instead, I propose a standard taper rate of 15%, which would apply to all incomes above the threshold. This meets noble Lords half way on this issue and I hope that we can agree to it today without the need for a vote. It will mean that tenants will contribute 15p in rent for every pound they earn above the income thresholds. It is a fair rate that protects work incentives while ensuring that higher-earning tenants make a fairer contribution.
Lords Amendment 57 sought to raise the income thresholds to £40,000 outside London and to £50,000 in London. Again, this was rejected by the other place. The Government maintain that the thresholds of £31,000 and £40,000 are the right starting point for social tenants to contribute a little more in rent. We are not
saying that these household incomes make people wealthy, but it is right that people on these incomes start to contribute a little more if they wish to remain in much-in-demand social housing. The operation of the taper, set at 15% as I have offered, would mean that a household earning above these thresholds would contribute a few pounds extra in rent each week. It is worth reinforcing that point again, as we must dispel the myth that all social tenants would see their rents raised straight to market rate.
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Finally, Lords Amendments 58 and proposed new Amendment 58A concern the uprating of the income thresholds by the consumer prices index. While this idea was rejected by the other place yesterday, I can confirm that we have been thinking carefully about the idea and the best way of implementing it. It is a good idea and one that we can support. In fact, we are willing to go further. I can make a commitment today to review and uprate the thresholds each year in line with the consumer prices index. That would mean that households with two adults each working 35 hours a week on the national living wage would be below the thresholds and, on current forecasts, they will continue to be so over the course of the Parliament. Our intention is to put this, together with the income threshold, in regulations that are subject to the affirmative procedure. I am sure that we will return to these important aspects of the policy when we have the debate on the regulations.
I hope that that has been helpful. We now have a package of measures for this policy that go far further than originally intended. I will recap the Government’s position. The income thresholds will remain at £31,000 nationally and £40,000 in London, but a taper of 15% will be applied to ensure that rents rise gradually and do not damage work incentives. These thresholds will then be reviewed every year to ensure that they are uprated in line with the CPI. We will define “income” as taxable income, which will ensure that any payments a household receives from tax credits, child benefit, disability living allowance and personal independence payments will not count towards establishing income. This will provide further protection for those households that need it.
The household will be defined as the two highest earners from the tenant, joint tenant and their spouses, partners and civil partners. Non-dependent children who are not on the tenancy will not have their incomes counted, enabling them to plan for the future. Of course, any household in receipt of housing benefit and universal credit will not be subject to the policy at all. On this basis I ask noble Lords who have tabled further amendments in relation to the taper and the proposal to uprate the thresholds not to press them. We will complete work on the regulations and return to this policy in due course. I beg to move.