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Housing Subsidy

Volume 488: debated on Thursday 26 February 2009

Motion made, and Question proposed, That this House do now adjourn.—(Mr. Watts.)

I am grateful for the opportunity to raise in the House the issue of housing subsidy. I look forward to the Minister’s response to our short debate on important issues that are of concern to my constituents, particularly those who pay rent to my local council.

Tenants in my constituency want a decent home, but at present far too many of them do not have one. I shall illustrate what I mean. Recently, I had the opportunity to visit tenants on the Chaucer estate in my constituency. Tenants on the estate, especially in Chaucer house, showed me the water coming into their flats through the windows, the electrical, plumbing and heating systems that need to be renewed, the roofs that need repairing and the poor lighting and security systems that need replacing. Tenants on the Collingwood estate, especially in Balaam house, need much of the same work done to their block. Very simply, when it rains they want the rain to stay outside and not to come into their flats.

People living on the Shanklin and Benhill estates want control of their heating costs, but above all they want new windows. The list could go on. Too many of the council homes in my constituency fail to meet the decent homes standards that we all want everyone not just to aspire to but to enjoy.

Unfortunately, my hon. Friend the Member for Carshalton and Wallington (Tom Brake) cannot be in the Chamber this evening, but he very much supports the sentiments that I am expressing. If he were here, he would want the Minister to be aware of the St. Helier estate in his constituency, where 800 box bathrooms were installed more than 40 years ago, to the delight of tenants at the time. They were meant to last only for 15 years, yet they are still there today. Furthermore, they are becoming a nightmare for the tenants, not just because they are coming away from the houses but because they are also full of asbestos, which might have been thought appropriate building material 40 years ago but, as we know, is no longer acceptable.

My purpose in seeking the debate is to ask—even beg—the Minister to do whatever he can to unlock the funds of £120 million allocated to Sutton by the Department for Communities and Local Government, and to do it now because the need is so great and so urgent—really urgent in the case of the box bathrooms. Against that background of need for investment in decent homes, council tenants find it hard to believe that so much of what they pay in rent does not stay in the borough.

A tenant in my constituency paying rent to Sutton council might reasonably expect the rent to go towards maintaining their home and providing services for themselves and their neighbours who are council tenants, as would any tenant anywhere. It should be clear to tenants who is accountable for setting the rent that they pay and who is responsible for the quality of housing and services that they receive.

Good government requires accountability, and accountability requires transparency. It should be easy for people to understand where the taxes and rents they pay go, but that is not the case with municipal rents. The current system is complex, unfair and unjust; even the language is obscure and hard to follow. Just what is a negative housing subsidy?

In hard cash terms, negative subsidy means that in the coming year tenants in my constituency and the borough of Sutton as a whole will contribute £10.5 million in rent to the Treasury. That is on top of £9.8 million in the current year. In effect, tenants in Sutton, Cheam and Worcester Park pay their rent to the Treasury from 1 April until some time in the middle of August. To put it another way, 38p in every £1 of the rent they pay goes back to the Treasury as negative subsidy.

When I meet tenants and particularly when I meet the Sutton Federation of Tenants and Residents Associations and its chair, Jean Crossby, they and she want to know where is the justice in the system. Why is their rent not spent entirely on their housing needs or on the needs of their local community?

It is no surprise that the figures for the 28 housing stock-owning Greater London boroughs have been analysed, and the Minister would expect me to rehearse the figures with him this evening. The analysis reveals that, on a per household basis, tenants in the London borough of Sutton are paying the highest negative subsidy in Greater London. Sutton tenants have been paying the Treasury for so many years that the council’s ability to provide a good management service to its tenants and properly maintain their homes has been badly compromised.

In an answer to a question that I asked the Minister recently, he said that decisions on rents are matters for each local housing authority. I do not dispute the fact that that is true in some ways, but I shall explain why it is not entirely the case. The way that the subsidy and negative subsidy system works drives local rent-setting decisions, first, because the system allows the Government to redirect what they calculate to be excess resources in one locality to areas in other parts of the country that they calculate have a shortage of resources and, secondly, because the Government’s policy of rent convergence with housing association rents has resulted in above-inflation increases in Sutton since 2001.

This coming year in Sutton, rents will increase by 6.27 per cent. on average, in accordance with the Government’s guidelines and the formulae laid down in them. That will hit families very hard. It is particularly ironic, given the Government’s determination to encourage local authorities to set the lowest council tax that they possibly can, with some success across the country, that the direction of travel on rents is the opposite.

Research by my local arm’s length management organisation—the Sutton Housing Partnership—has found that 44 per cent. of tenants do not receive housing benefit and will therefore pay full rent. One in three of those families have children under 16. The Government have a laudable and certainly well supported target of halving child poverty. Given that those families often live just above the measure of poverty that would tip them into receiving housing benefit, it is hard to understand how the Government’s rent policy and subsidy system support that goal of halving child poverty.

I appreciate that the Department has been conducting a review. Indeed, I met one of the Minister’s predecessors a couple of years ago, and we were pleased that the then Minister indicated that the review would be commenced. I understand that it might be published in April. I hope that the Minister will confirm the timetable for the publication, promulgation and implementation of its findings and recommendations, but no matter what is decided and what the Government choose to do, it will take time to have effect.

The Sutton Federation of Tenants and Residents Associations tells me that, while it waits for those decisions to be made and the changes to be implemented, there should be no further increase in the amount that tenants pay to the Treasury. That is not an unreasonable point, and on the association’s behalf I ask the Minister to say in his response whether the Government will seriously consider freezing negative housing subsidy at 2008-09 levels—if not, why not?—until the review is concluded and acted upon.

Of course, this is not just about redistributing rental income from one poorish set of tenants to an even poorer set of tenants, to benefit their area because it does not have enough resources. The Treasury is a net beneficiary of the system; it pays out less in subsidy that it gets back in negative subsidy. Indeed, in 2008-09, the Treasury pocketed £200 million of tenants’ rents. What is happening to that money? Where is the transparency that will allow us to see what is happening with it? Where is the accountability?

I am told that, by 2011, the Treasury will profit from the housing subsidy system to the tune of £400 million, and nothing in the system as currently conceived and implemented will stop that rising still further. In that sense, I agree with the Local Government Association and many others who say that the current system is not fit for purpose.

The current system leaves vital local services such as the building, repair and maintenance of council housing starved of cash. All the money in the housing system should be spent on homes and related services. The system undermines local decision making, and makes it hard to hold local councillors to account for their actions; they could argue, and with some legitimacy, that the Department has not done its bit in making sure that local need is properly met. That is why the system should be scrapped.

Local housing should be managed and funded locally in the interests of tenants and of meeting local housing needs. In my area there is not much local housing because of the right to buy. Day after day, when people come to my surgery or write to me, I am confronted with the appalling situation of having to explain how limited the ability to help is, because the supply is not there to meet their legitimate housing needs. I am sure that many hon. Members share those sentiments.

I began this debate by listing some of the problems with housing in my constituency. The Minister will know that Sutton established an arm’s length management organisation in 2005 with the aim of bidding for decent homes funding. I understand that the Department has confirmed that an allocation of £120 million has been made for that purpose, but that money is locked up and waiting for an Audit Commission inspection of the ALMO. Last year, the ALMO narrowly missed the two-star outcome required to trigger the release of the money. Since then, efforts have been redoubled to make sure that it exceeds that standard when the next inspection takes place.

Just last week, Councillor Sean Brennan, the leader of Sutton council, wrote to the Minister for Housing to urge her to exercise discretion and authorise the release of the £120 million now so that work on the borough’s decent homes programme could get started. At a time such as this, when the economy needs all the stimulus that it can get, much-needed investment could be a vital lifeline for the construction trades in my area and make an enormous difference to the quality of life of many of my constituents.

In conclusion, I am grateful to have had this opportunity to air these issues in the House this evening. Tenants in my constituency face a 6.27 per cent. rent increase this April; 38p in every £1 of their rent will go to the Treasury. There is a desperate need to invest in social housing in my area and to deliver the decent homes standards. On 25 March, tenants from the London borough of Sutton will come to Westminster to lobby for the fair deal that I have been talking about. They will deliver a petition to the Prime Minister at No. 10 Downing street.

My final request is this. Will the Minister, or the Minister for Housing, meet me, my hon. Friend the Member for Carshalton and Wallington and a small deputation—we do not want to overwhelm anyone—of our constituents, so that they can make their case personally and directly and ask the questions on their minds about the issues that I have tried to describe this evening? Better still, will the Minister accept an invitation from me to visit Sutton? He could have a look at some of the issues that I have described in words today, but are often better seen first hand in the constituency. He could talk to some of the tenants whom I have mentioned this evening, and the officials, to discuss the challenges. I hope that the Minister will be able to give a positive response to that request and meet at a time acceptable to us all.

Above all, I have raised this issue tonight on behalf of constituents who want a fair and transparent system of housing finance, a rapid end to a discredited and unfair system—and decent housing.

I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing this debate. He may be aware that we had a good debate in Westminster Hall yesterday afternoon on the matter of council housing and rents policy. Many of the points raised in yesterday’s debate have been echoed by him tonight. I agree that housing in general, the role of the local authority in providing housing, the cost of providing housing, and the rent that tenants of council housing properties pay are incredibly important issues. As the hon. Gentleman rightly said, it all comes down to decent homes. I am grateful to him for giving me the opportunity to address the points again.

Yesterday, in my opening remarks, I made clear the role of central Government in the setting of council house rents; following the hon. Gentleman’s speech, I feel that I have to do so again. He hinted that central Government somehow impose high levels of rent increases on tenants that are at odds with current levels of inflation and with what local councils want to do. I have to confirm to the House that that is emphatically not the case. Rent setting for council house tenants is a matter for each local authority. He mentioned accountability; local authorities are accountable to their electorate for rent setting. Guideline rents for local authorities form part of each year’s housing revenue account subsidy determination, for the purposes of making assumptions about a local authority’s income and its entitlement to subsidy. However, we do not, and cannot, force a local authority to set a particular increase in rents. I repeat: rent setting, particularly the matter of deciding the annual increase in rents paid by tenants, remains a matter for the local authority.

If a local housing authority were to decide that it wished to make itself accountable to its local tenants and refused to pass on the negative housing subsidy, would that be acceptable?

I will come to that. The hon. Gentleman makes an important point, which is essentially the fundamental point of the debate, about how we fund council housing.

Since the 1930s, successive Governments have used the subsidy system that the hon. Gentleman mentions to ensure that the country’s council housing stock is funded and maintained. He is aware that as matters stand the national housing revenue account redistributes revenue from councils that are deemed to have surplus income on housing to local authorities that do not have enough. The policy is that social rents should be affordable and below those of the private rented sector. We are very keen to ensure that councils do not raise their rents beyond what people can afford, although I should preface that by saying that local authorities are free to set whatever rents they like. Some councils are unable to raise locally what they need to spend on their council housing stock, so as a means of keeping all rents affordable the housing revenue account system redistributes resources from councils that make more in rental income than they spend to those that do not have enough.

I think that the hon. Gentleman would agree that in basic terms there is a logic and a rationale for having redistribution. It brings a degree of equity between councils. It protects certain tenants from high rent bills, and it helps by not adding to the burden of the general taxpayer. When discussed like that, it seems simple, straightforward and something that could possibly be welcomed. It is certainly better than the situation that occurred before 1989, whereby council house tenants’ rents were allowed to be used locally to keep the rates of more affluent residents artificially low. It is also better than the situation that we inherited in 1997—I know that this concerns the hon. Gentleman—when we had a backlog of some £19 billion in repairs and maintenance in the council housing stock. He is aware that we initiated the decent homes programme, which has transformed—revolutionised, I would suggest—the fabric and condition of social housing. In 2001, we brought in the major repairs allowance, which provided £1.5 billion: a massive injection of resources to stop long-term deterioration of the stock.

Those factors, together with allowances for management and maintenance and provision for debt, are resourced through the subsidy system—tenants’ rents and, when needed, subsidy from central Government. However, I am fully aware of the argument that the hon. Gentleman has made. I am also fully aware of the sense of despair and frustration at local examples of unfairness, and of the sheer incomprehension of many of the complexities of the situation. I do not disagree with any of those sentiments. The annual subsidy determination process has become more difficult to understand and the process more opaque and baffling to councils and council house tenants alike. The current system, with its annual subsidy determination, is too short-term in its scope. The need to make decisions on funding year on year makes it difficult for councils to plan, manage and maintain their assets over the long term. As the hon. Gentleman said—I agree with him fully on this—it is difficult, if not impossible, for tenants to see a clear link between the rents they pay and the services that are provided locally.

This lack of local transparency is a particular concern of mine, especially as the Government are absolutely determined to see decisions on services made locally and in a transparent way. In addition, the whole landscape of housing has changed over the past 20 to 25 years with the emergence of large-scale voluntary transfers, a greater number of tenants with registered social landlords and right to buy. As a result, there are increased levels of mixed tenure on estates that 20 years ago might have been purely council housing estates. Bearing all of that in mind, it is right and proper to look again at the HRA system and its rules to ensure that it operates in the fairest possible way for both tenants and council taxpayers.

The hon. Gentleman mentioned that this year we have had the added complication of the housing revenue account system moving into surplus, which then goes back to the Treasury. As he rightly said, about £200 million was generated in surplus from the HRA this year. I fully understand that that is hugely unpopular with tenants throughout the country, but we should put it into some sort of context. This year, the Treasury is pumping £5.9 billion into housing expenditure, which puts the £200 million surplus from the HRA into perspective. Secondly, since 2001, there has been a deficit in the housing revenue account system, which has been topped up by the Exchequer to the tune of about £1.3 billion. Thirdly, the national HRA was in overall surplus from 1994, the first year in which we have records, to 2001. So I plead with the hon. Gentleman that we need to have some degree of perspective and to understand that we are not looking at some unprecedented or unique feature.

We have a system of financing council housing that moves periodically from surplus to deficit and back into surplus. I hope that the hon. Gentleman appreciates that I understand people’s frustrations with the system, and I especially understand the frustration of tenants in Sutton, where the HRA system has been in surplus over the past couple of years and redistributed away from the area. That is why we have embarked upon a fundamental review of council housing finance. The review was launched last year and has as its objective the need to develop a sustainable long-term system for financing council housing while taking into account the following key principles: fairness and affordability for tenants and taxpayers; transparency to ensure, as I said earlier, a clear and accurate relationship between services provided and rents paid; agreed minimum standards of service and accommodation, ensuring that council house tenants are not hindered by poor levels of management and maintenance, a factor that the hon. Gentleman mentioned; and more certainty and less volatility in the funding of council housing. I am keen to see greater levels of efficiency and value for money, with more emphasis upon planned, as opposed to reactive, maintenance. I hope that the review will look into that.

The review is on track to report to Ministers in the spring, and thereafter we will go out to consultation to discuss the revised process. As I have said before at this Dispatch Box, given the huge importance and complexity of the process, it is not something that can be tinkered with around the edges or undertaken quickly. It needs to be considered as part of a fundamental look at how council housing should be funded. We want to make the system fairer to tenants and do not wish to take risks in a way that would hinder that objective.

Will the Minister respond to the suggestion made by many of my tenants that increases in the subsidy should be frozen while the review is going forward and being implemented? There should be no further increases in the contribution that my tenants have to make to the general pool.

I understand why tenants in Sutton would want to think that, but I would throw that question back. About 50 local authorities receive subsidy at the moment because their need for housing cannot be provided locally through the setting of rents. What do we do with those 50 local authorities? That is a fundamental point. There may be some means of having a transition period in order to move a fairer system, but to tinker with things while undertaking a fundamental review would be wrong and misplaced, so I cannot give residents in Sutton the reassurance they would wish for. However, we are fully aware of people’s concerns and want to ensure that the system is fairer and more transparent and that we fund council housing sustainably.

The hon. Gentleman said that he will be bringing a delegation of residents down—I think on 25 March. I would be more than happy to meet them to discuss the matter further. I am keen to see that his tenants and all tenants have access to decent and sustainable housing in a way that is fair to council tax payers, general taxpayers and tenants alike.

I am grateful to the Minister for the opportunity to meet him. We will be in touch to sort out the logistics, and I am sure that having read this debate tenants will appreciate the opportunity to discuss these exchanges with him. Will he address the other concern that I raised, which was the need to unlock the decent homes funding? That is the other thing that many tenants in my area want sorted out.

Again, I understand the concerns, and I believe that about £113 million could be available. The hon. Gentleman will be aware that the London borough of Sutton did not do as well as we would have hoped in the latest inspection, which could have unlocked those resources. I understand that the area will be subject to a second inspection in October, and I am sure that my Department and my officials will be keen to work with officers of the London borough of Sutton to ensure that we can unlock that money, which could be vital in helping to provide decent homes for tenants in his constituency.

I hope that I have addressed the matter in a measured way. I understand the frustrations and concerns that exist, but we cannot make knee-jerk, rapid decisions on such an important and complex matter. It needs to be examined in the round and fundamentally, because it has an impact on general taxpayers as well as on tenants. I am keen to ensure that we have a system for financing council housing that is fair and sustainable in the long term, and that council housing has a key role to play in the housing offer of this country in the 21st century.

Question put and agreed to.

House adjourned.