rose to move, That an humble Address be presented to Her Majesty praying that the regulations laid before the House on 8 October be annulled (SI 2007/2868).

The noble Lord said: My Lords, following the analogy that we heard when discussing the previous regulations, I make it clear that we are not trying to wave a red flag at these regulations, although we certainly wish to wave a few amber flags around, raise some questions and get some answers from the Minister.

I make it clear that we welcome the evidence from the nine pathfinder areas that direct payments have risen to 84 per cent from an average of about 45 per cent before local housing allowance was introduced. We support the Government’s ambition to encourage financial responsibility and we recognise the evidence that financial inclusion is an important step towards finding employment and getting off benefits. However, we are not convinced that the local housing allowance policy will achieve these objectives when it is rolled out nationally and that proper provisions are yet in place to protect vulnerable individuals.

The DWP Housing Benefit Local Housing Allowance Guidance Manual, for use by local authority housing benefit officers, states very clearly:

“You will not be expected to be pro-active in identifying someone as potentially an unlikely payer”.

Vulnerable individuals are therefore responsible for presenting themselves as likely rent defaulters. How can that be right for mentally impaired people, illiterate people, those who cannot speak English or those who are tackling drinking or gambling addictions? Cases can be referred also by landlords, friends or families, but these people may after all have their own agendas. As part of the purpose of the reform is to remove the stigma associated with housing benefit, how will landlords know that tenants are receiving LHA and be in a position to raise the alarm about non-payment? Cases can be referred also by advice, welfare or social services.

As my noble friend Lord Addington proposed in Committee, we should assume that these vulnerable groups will struggle to handle their financial affairs. Changes to direct payments should therefore take place only once an assessment has been made that they can cope. In its current form, payment to landlords and a case assessment are not automatically triggered until rent has fallen into eight weeks of arrears. That is a long time for money to be misspent and for relations between landlord and tenant perhaps to break down.

In some pathfinder projects, benefit officers were keen to intervene early in cases where rent went unpaid, rarely waiting for the eight weeks of arrears before triggering an investigation. Is there not a danger that sharp landlords will spot that, by alleging rent arrears, they can get their income guaranteed? Evidence from the pathfinders suggests that there is a problem with the appeal system being clogged with allegations of arrears.

Housing benefit officers are encouraged to become proactive only once direct payments have been suspended. The DWP guidance manual states:

“If you decide that direct payments are appropriate, you should set a diary date in order to conduct a review of your decision, not exceeding 12 months, to look again at the decision”.

That review process is expected to be repeated annually. For the most vulnerable individuals, for whom direct payments will never be appropriate, that can represent an annual ordeal of uncertainty. For LHA to prove effective, a more reliable and proactive system is required to identify vulnerability. The objectives of the reform may be admirable, but the assumption that direct payment is suitable in all but the most extreme cases is wildly overoptimistic.

Why do the Government assume that this change to LHA will represent a major lifting of the administrative burden? Some aspects of the reforms are genuinely simpler, such as calculating rent levels from local median estimates, for example, rather than the actual rent paid. Other parts are hideously complicated, as when HB officers are expected to take account of other income received by the tenant and the impact of other people living in the household, for example. The conclusion from the pathfinder evaluation is, I am bound to say, very carefully worded. It says:

“On balance the net effect administratively of the LHA … in the longer run … ignoring set up costs and some specific implementation difficulties, is probably positive, but it is unlikely that this constitutes a ‘substantial’ advantage to HB administration and delivery”.

That is not exactly what I would call a glowing reference.

We simply cannot make fundamental reforms of this flawed system on the cheap. Any reform of housing benefit delivery must be properly resourced and take account of large numbers of vulnerable cases requiring sensitive handling. The more complicated estimates of rent settlements, which in most cases increase income, such as the impact on others living in the house, will be overlooked—or there is a danger of it—if we do not put enough resources into reforms. The evidence by one HB officer to the pathfinder evaluation made the point well. He said:

“Dealing with claimant vulnerability has … frequently proved to be difficult, time-consuming and resource intensive, and significant efforts have had to be made to set up and maintain arrangements with other departments and agencies in order to adequately fulfil this function”.

What assessment have the Government made of the extra burdens that they are placing on our already strained advice services? The LHA guidance manual instructs local authorities to refer cases to advice services for almost any problem. If direct payment has been suspended, advice services will work with individuals so that it can be restored. If vulnerability has been identified, local authorities are instructed to refer to advice services and, if clients require a bank account to begin direct payment, they are advised to call advice services—and advice services are one of the bodies expected to identify potential vulnerability. The burden laid on them hardly bears thinking about.

The experience in pathfinder areas has been largely positive, to be fair, with local authorities and welfare and advice services working together so far. However, it is wishful thinking to presume that that will be repeated everywhere after national rollout. As Citizens Advice said in its submission to the evaluation, it is,

“worth noting that all the pathfinder authorities had made a choice to take part in this pilot, and were also well resourced and supported by DWP. They were therefore highly committed to making it work. These conditions will not be present in national roll out”.

Indeed, wider Citizens Advice and Shelter evidence on delivery across the country,

“leads us to believe that it is very unlikely that this level of activity and commitment will voluntarily be undertaken by every HB department”.

That is Citizens Advice—and if that organisation does not know what it is talking about, I do not know who does.

We on these Benches have warned the Government time and again that advice services funding is hampered by ring-fencing of funds and reliance on a plethora of different forms of funding, in some cases almost in penny packets. We have had this same problem come up under the whole question of generic debt advice and pensions. Individuals who are most likely to struggle under the LHA provisions are also most likely to need additional advice, whether on debt, disability, welfare, employment or immigration. Can the Minister assure me that increased funding for advice services will incorporate provisions for general advice as well as specific housing benefit advice?

This is a missed opportunity to reform the arbitrary unfairness experienced by people under the age of 25, as we discussed in debates on the Welfare Reform Bill. The room rates for single people, who are statistically far more likely to be in poverty already, and the most vulnerable to drugs and homelessness, are simply inadequate. The pathfinder evaluation reported that across the nation the rate at which the LHA is set is generally considered fair and adequate to meet housing needs, except the rate set for shared rooms, which is the rate to which under-25s are constrained.

Citizens Advice found that 87 per cent of single-room rent claimants have faced a shortfall between housing benefit received and the rent levels that they pay. The research says that this inevitably,

“puts young people at greater risk of social and financial exclusion, making it more difficult for them to find and sustain employment”.

How can it be right that local housing allowance fails to help young people at their most vulnerable when they are starting their careers and living away from their families? I beg to move.

Moved, That an humble Address be presented to Her Majesty praying that the regulations laid before the House on 8 October be annulled (SI 2007/2868).—(Lord Oakeshott of Seagrove Bay.)

My Lords, I am grateful to the noble Lord, Lord Oakeshott, for bringing these orders on the new local housing allowance to our attention this evening. I certainly do not agree with him, as he knows well, on the last point that he made in his introductory speech.

I noticed that all the orders were made on 2 October this year. My first question is rather technical but, given my interest in statutory instruments, it is this: we have one Explanatory Memorandum covering all four instruments. Why then were four instruments required in the first place, especially as Nos. 2868 and 2869 have exactly the same title? Surely, these and the consequential amendment regulations could have been combined. In other words, we could have had not four in one, but three plus one.

To turn to the nuts and bolts of the orders, my party's position on local housing allowance was set out in Grand Committee on the Welfare Reform Bill by my noble friend Lord Taylor of Holbeach. Pilots—I do not like the word pathfinders—were already in existence when that debate was held on 1 March and our concerns revolved around the Government's intention to allow housing benefit claimants to handle their own housing benefit rather than having it paid direct to the landlord.

We felt and still feel that, even though the pilots have shown, for a limited period anyway, that double the number of self-handlers were capable of paying rent subsidy and indeed did—rent subsidy is housing benefit—there would be those customers who, for many reasons, do not hand the benefit to the landlord. I understand that that figure is about 16 per cent of all housing benefit recipients.

At the time, I was pleased to hear the noble Baroness, Lady Morgan, say that funding to support the financial advice services had been set aside for the national rollout of local housing allowance. Set aside is one thing, but will the Minister say whether this money is now in place or whether it will be on 7 April next year? I was also reassured by her statement that regulations will ensure that payments can be made to the landlord where customers are known to have difficulty managing their financial affairs. However, as the noble Lord, Lord Oakeshott, has said, housing departments are not expected to be proactive in this matter. Indeed, they seem to be almost prohibited by the guidance. Waiting for non-payment for eight weeks will only mean that the private rented sector will dwindle more and more for housing benefit recipients—a point that I made back in March.

I was therefore alarmed to read in paragraph 7.2 of the Explanatory Memorandum:

“Unlike the current system customers will not be able to elect for payments to be made to their landlord”.

Although I accept that customer election does not preclude payments to landlords direct from the local housing authority, how does the Minister square those two statements? What authority remains to allow such direct payments? Where can I find the information in the orders—I looked, I searched and combed through them and failed to find it. Perhaps the Minister can do better for me.

My other concern about these orders lies in the apparent untoward speed with which they have been made. Prompted by the comments by your Lordships' Merits of Statutory Instruments Committee earlier this week, I looked at the department's website in general and housing benefits/LHA evaluation in particular. I was alarmed to find only remarks on how and when the evaluation was to be conducted. There was nothing about the completion of such evaluation. Eventually, with further searching, I discovered report No. 10 dated 5 October 2006, which I assume is the most recent report and is headed in part “final evaluation”. I would not describe it as an evaluation at all. It is a press release giving a rather gloomy summary, especially as it concludes with a bullet point saying the following:

“On balance the net effect, after allowing for set up costs and some specific implementation difficulties, is positive, but not considered a ‘substantial advantage to housing benefits administration and delivery’”.

Why, then, is the department rushing these regulations for a national rollout, or has something happened since October last that the department has not revealed, in which case will the Minister kindly reveal it now?

Talking of revelations, the paper Evaluating the Local Housing Allowance Pathfinders referred to an independent consortium of the universities of Birmingham, Loughborough and York, along with the National Centre for Social Research,

“being commissioned to carry out the evaluation”.

I failed to find any references to that evaluation. Has it reported and what, in essence, did it say?

We are being asked to approve these regulations on what I regard as the flimsiest of evidence. I agree with the noble Lord, Lord Oakeshott—although he did not quite put it this way—that it simply is not good enough.

My Lords, this has been another interesting debate and I will try to respond to the points raised. However, I first remind the House about the wider context for these regulations and why they are such an important step not only for housing benefit reform but more widely for transforming the way we pay social security benefits in this country.

It is clear to me that housing benefit plays a vital role in the Government’s programme of welfare. Indeed, the objectives we set out when we first floated our plans for housing benefit reform back in 2002 show that local housing allowance aims were at the very forefront of the welfare reform principles that have now become so prominent.

First, as regards promoting choice and responsibility, allowing people to have rent payments made directly to them was a rather bold prospect when we first raised it more than five years ago. We heard the fears and worries of those people who suggested that tenants would run off with their rent money rather than paying their landlords. Now, not only have we proved the pessimists wrong but the choice and responsibility objectives that we promoted are at the very heart of what this Government want to achieve. With the local housing allowance, tenants are able to see clearly in advance how much housing benefit they are likely to be entitled to. They will then be able to take responsible decisions about where they live, how much they want to pay in rent and then use that money to pay the landlord themselves.

Secondly, we said that we wanted to use housing benefit to help to support incentives to work—and again, this is very clearly at the centre of what we do. Improving the speed of housing benefit processing times in itself should help to give people the reassurance and security they need that benefit claims will be reassessed quickly when they take a job. I am convinced that treating people with respect and encouraging them to manage their financial affairs will go a long way to preparing people for the world of work.

Thirdly, we have seen the financial inclusion agenda grow quickly over the past couple of years. I am delighted that the local housing allowance plays an important role in encouraging people to use bank accounts and to become financially independent.

It is important to point out that the specifics of the regulations have been comprehensively tested. The local housing allowance evaluation is probably the largest single evaluation of a housing benefit scheme we have ever undertaken and is a true example of evidence-based policy. The findings of the evaluation have certainly been very positive, and were referred to by noble Lords.

At the outset, concerns were raised that the introduction of the local housing allowance would force landlords to leave the market. In fact, private lettings have increased overall by about 7 per cent during the course of the pathfinders. Of course, this is not all down to the local housing allowance but it shows that the fears that landlords would leave the market in droves have simply not materialised. There is a similar outcome as regards the fears raised that tenants would not pay their rent and would abscond with their benefit payments. On the contrary, the evaluation has shown that tenants in receipt of the local housing allowance were less likely to be in arrears than those on the control areas that were used during the evaluation.

Finally, it is important to point out that 84 per cent of tenants in the pathfinders received direct payments, proving conclusively that most people are quite capable of managing their own money. That is a really positive move towards financial inclusion. We have also learnt lessons from the evaluation and made changes to the scheme as a result. Many of these changes are set out in the regulations before us. For example, customers can keep any excess benefit they receive as a result of shopping around for accommodation, but only up to a maximum of £15 each week.

People should be able to take advantage of the choices available to them, but we do not want to erode their incentive to move into work. We needed to strike a balance between implementing simplicity and providing choice with the need to ensure that we are delivering one of our key housing benefit objectives to support people into work. We changed the way that the rent officers calculate local housing allowance rates by moving from a mid-point calculation to a median. In that way, we can be sure that exactly half the rental market in any area will be affordable to people receiving benefit. We have decided to roll the scheme out nationally on a slower scale, which perhaps addresses the point made by the noble Lord, Lord Oakeshott. That means that only new housing benefit claims or those people who have moved address will be assessed according to local housing allowance rules.

My Lords, how much of that £59 million will be going for money advice, or is that entirely a matter for local authorities?

My Lords, it is a matter for local authorities. I think I am right in saying that in the pilots the amount that was finally spent on money advice was less than originally anticipated. If I am wrong on that, I will write to the noble Lord. Essentially, it is up to local authorities.

The noble Lords, Lord Oakeshott and Lord Skelmersdale, focused on whether local authorities should be proactive in dealing with vulnerable people. The previous guidance said that local authorities did not need to be proactive in identifying vulnerable claimants. Noble Lords will be pleased to know that the current version removes that stricture and encourages local authorities to act in the interests of claimants. The noble Lord, Lord Skelmersdale, asked why we have four sets of regulations. There are two main sets of regulations that need to be amended. One of those relates to working-age claimants and the other to pension credit claimants. Those users need only look at one shorter set of regulations for the local housing allowance amendments instead of a single combined set, which would be twice as long.

The noble Lord, Lord Oakeshott, asked about the 12-month review of vulnerability. The new version of the guidance says that where a condition is likely to be of a long-term nature, it may be decided that it is not appropriate to set a review date. He also asked what help had been provided to support rollout and whether the national rollout would run less smoothly than the pathfinders. We have worked extremely hard with pathfinder authorities to develop and publish a range of support material for the wider national rollout. We provided a comprehensive guidance manual and implementation task sheets, which describe a range of good practices from the appointment of project managers to liaison with landlords. Those are built on the experiences of pathfinder areas. There is a comprehensive training package and communication material such as leaflets and information letters.

On the question of whether the new arrangements are more efficient, the pilots showed that processing times for the local housing allowance were on average 33 days, compared to 42 days for private sector claims under current arrangements. That is a not insignificant improvement.

The noble Lord, Lord Oakeshott, suggested that landlords would allege arrears to receive direct payments. There is no evidence of that in the pathfinders. As we have discussed, 84 per cent of customers are receiving their benefits themselves and are paying their rent reliably. Of the remaining 16 per cent, three-quarters have their benefit paid to their landlord because of discretionary safeguards that work to stop arrears getting out of hand. Only a quarter had their benefit paid to their landlord because they got into arrears of eight weeks or more.

The noble Lord, Lord Oakeshott, raised, as I had anticipated, the issue of single room rent. We are aware that sharing is common among younger people. Three-quarters of single young people without children and who are not on housing benefit live in shared accommodation. We do not think, therefore, that it is unreasonable to expect young housing benefit tenants to share accommodation. Abolishing the single room rate would mean that young tenants in receipt of housing benefit could potentially access accommodation that would be unrealistic for a large proportion of their peers. However, we acknowledge that the single room rent causes difficulties for some people for whom remaining in the family home is not an option. However, less than a fifth of customers bound by the single room rent live in shared accommodation; in fact, the majority live in self-contained accommodation.

I should say that officials have been carrying out some analysis of the single room rent and looking at the availability, accessibility and affordability of shared housing for young benefit recipients. We are particularly grateful for the help and discussions we have had with the noble Lord, Lord Best, and the noble Earl, Lord Listowel, who, unfortunately, are unable to be with us today. They have a wealth of experience in this area and will know from recent meetings that it has been determined that many people on housing benefit stop claiming after a short period. We need to understand why that is the case and where those young people end up.

I hope that I have dealt with each—

My Lords, I hope the noble Lord will forgive me, before he begins to perorate. He has told us that the private rented sector has increased in the past two years. Indeed, it has. Has it increased access for those on housing benefit? That is the key question requiring the key answer.

My Lords, I understand the point. I think that the evaluation of the pilots indicated that housing benefit claimants are not always universally welcomed by landlords, but I think that I am right in saying that the evaluation of local housing in the pathfinders produced no evidence of a further restriction on private sector landlords, but I shall write to the noble Lord to clarify that.

I hope that I have addressed the points raised. The local housing allowance that we will introduce next year, for which this package of regulations provides, will be based on the fundamental principles of choice, fairness and responsibility. Thousands of customers have benefited from the local housing allowance in the pathfinder areas and we want to extend those benefits to housing benefit customers nationwide. This is a positive step in modernising housing benefit and I look forward to national rollout building on the clear successes of the pathfinders.

My Lords, to use the word of the noble Lord, Lord Skelmersdale, you will be pleased to know that I am all perorated out. I just want to thank, first, the noble Lord, Lord Skelmersdale, for his support on certain issues. I am sorry if he felt that I was not tough enough. Perhaps we should not have been talking about flags. Perhaps on this day of national mourning we should be talking about red cards and yellow cards. I am sorry if I have not waved the yellow card strongly enough for him. I thank the Minister for his comprehensive reply. I am grateful for his clarification that the latest version of the guidance manual has taken on board the points that we were concerned about. Obviously, we will read carefully and reflect on the rest of his speech. I am sure that we will return to these issues in the near future as evidence builds up on the ground on how it is all working. Meanwhile, I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.