That an humble Address be presented to Her Majesty praying that the order, laid before the House on 15 December 2008, be annulled (SI 2008/3156).

Relevant document: 4th Report from the Merits Committee

My Lords, in moving this Motion I again congratulate the Merits Committee on drawing this business to our attention in its fourth report. I am not sure who serves on the Merits Committee, but they deserve a special medal for their service to the House. Slicing and dicing statutory instruments as they come through and referring the toxic bits to the Floor of the House for further consideration must be a long-drawn-out affair, but they do it. This is the second or third time that I have had the benefit of their serious deliberations and reports. The House owes them a great debt for their service.

Before I turn to the order, I shall make a few quick procedural points. First, the only procedure open to the House is to seek to annul this order. It will not come as a shock to noble Lords to know that I have no intention of trying to annul it, but there is no other way of doing this. Perhaps the Procedure Committee should go away and think about how we can get a more sensitive way of addressing some of the issues involved in these things. I understand noble Lords’ reluctance to enter the list and seek to annul something when, if they succeeded in so doing, they would create even more uncertainty than there was in the first place. I hope that some thought will be given to how we can deal with, in particular, negative procedure orders. I make no special complaint about this order, but it was laid on 15 December and came into being on 5 January, which was over the Christmas Recess. I and, I suspect, the rest of the House have difficulty in trying to keep up with all these things. However, this is the only way I have of expressing my concern about this order.

A second process point is worth mentioning. In reading around the subject, I came across consternation that, at the end of last year, before they laid the orders, the Government had a consultation process that was one week long. I do not know whether that is the case; it was certainly a cursory period for professional associations and interest groups to respond to the content of the order. There are well known, established Cabinet Office rules that give minimum times for proper consultation. There may well have been uncertainty to which the Government wanted to respond urgently as a result of the majority decision in the court case, the Heffernan judgment in the House of Lords. However, the department made no friends by the way in which it carried out the consultation. We need to avoid that in future.

Finally, by way of process, if the House of Lords finds—admittedly on a majority judgment—that some things may not be what they seem at law, the Government need to be careful about how they redress the balance. I make no complaint about the constitutional propriety of the Executive making policy clear. I have no doubt that the judiciary is subservient to the Government of the day when it comes to getting policy clear, but the Government have to be careful that they do not end up treating important, weighty, serious, heavily concerned judgments in a way that gives the impression of being casual.

The Explanatory Notes at the back of the order, which are instructive as far as they go, could perfectly easily in future include a paragraph that includes the provenance of the change, the House of Lords legal judgment, to explain why the Government are doing what they are. The Explanatory Notes state at the end:

“A full impact assessment has not been published for this instrument, as it has no impact on the private or voluntary sectors”.

I am not sure that that is an uncontestable statement, because I know that a lot of people think that it does. I do not know who signed off that statement, but it does not reflect my experience of what people are saying about the order.

Anyway, having got all that off my chest, I should like to make a couple of brief points, starting by recognising that the evaluation of the 18 pilots in the local housing allowance rollout was entirely satisfactory. The experience was properly evaluated. I studied most of the reports as they came out. One related to Edinburgh, in which I have an interest. The general experience in the pilots made sense. It looked as if things were going in the right direction, so that the rollout in the rest of the country was a safe thing to do. We are now approaching 40 per cent of private tenants being covered by the new regime, which is still running in tandem with the old local reference rent system of yesteryear. We must start the debate by acknowledging that the evaluations were reasonably positive.

My Lords, I am grateful to the noble Lord, Lord Kirkwood, for using this opportunity to generate a debate on concerns about the way in which the new local housing allowance is being administered.

I begin with some positive remarks about this successor to housing benefit for tenants in the private rented sector. The local housing allowance—the LHA—was subjected to a thoroughgoing testing, as the noble Lord has said, in its 18 pathfinder areas, with a high quality assessment of the results by noted academics, including Professors Steve Wilcox and Peter Kemp from the University of York. This exercise demonstrated that the system of local housing allowances could deliver greater simplicity and transparency than the often highly complex and obscure housing benefit arrangements. Both landlords and tenants had the great advantage of knowing in advance of the letting what the level of allowance would be.

No doubt as a result, the serious problem of shortfalls for tenants—the gap between the rent paid and the benefit received—was shown to have reduced in the pathfinder areas. This is an important result, as this group of tenants are the least able to make up these shortfalls from their own meagre income from other benefits, and as delays, which have plagued the housing benefit system, were reduced through the simpler system of allowances. Moreover, expected problems from paying the allowances directly to tenants and not directly to landlords did not show up in the research on the LHA as a real issue, and the proportion of landlords who were prepared to accept those whose rent is paid for them was largely unaffected by the switch from housing benefit to the LHA. I have therefore very much supported a changeover to the new system.

We are now nine months on from the rollout from the pathfinders to national coverage for all new private sector tenants. The difficulty that has emerged and which is the subject of our discussion tonight, led by the noble Lord, Lord Kirkwood, relates to the geographical area covered by one local housing allowance. The calculation of the LHA is based on rents in the chosen area—the local reference rents. If a relatively large area is used for the calculation, in some neighbourhoods within it no properties will be let at rents that are low enough to be affordable to those who depend on the LHA. If a very large area is used, big tracts of it may be beyond the reach of all the tenants who need a housing allowance.

The Shelter study, which has been referred to—I congratulate Shelter on its production of a very helpful report—highlights the case of Cambridge and its environs in particular. I was surprised and concerned to discover that the broad rental market area is so big, and therefore includes so much property in cheaper areas outside the city, that, as Shelter concludes,

“the level at which LHA is set effectively excludes claimants from living in the city of Cambridge and its suburbs”.

I can see that setting the fixed level of allowances on the basis of covering each area of a town so that rental property in even the most expensive areas would be affordable would present problems. Those not eligible for benefits would ask why the people getting housing allowances should be helped to rent in the areas where they, hardworking citizens, cannot afford to live. It seems fair that benefit claimants should have to shop around for somewhere that is not too expensive for most other households. Excluding some high value streets—indeed, some high value neighbourhoods—in a town or city seems to be an appropriate part of the new scheme, but this is very different from excluding a whole town or a significant part of a town or city. The Cambridge example highlights the hazard of freezing out all low-income people from a large area. This polarises communities between richer and poorer, and segregating low-income families in particular places diminishes their chances of getting on in the world. If these concentrations of low rent properties are places with poor transport links and few local jobs, those in receipt of housing allowances will find it hard to move from welfare to work.

My Lords, I, too, am grateful to my noble friend Lord Kirkwood for initiating this debate, which gives the House the chance to look at some of the problems surrounding the way in which housing benefit is calculated for claimants in the private rented sector. The chance has come about by way of this order. As we have heard, it sets out how the broad rental market areas are to be constructed for the purposes of housing benefit rates for claimants in privately rented property and seeks to restore the Government’s original policy intention before the Heffernan judgment.

The Government maintain that the effect of the judgment if rolled out nationally could increase the number of localities or BRMAs across the country from 193 to 4,000, which would take several years and would increase the cost of administering the benefit. They also maintain that reducing the size of the localities, as advocated in the Heffernan judgment, would mean that customers living in poorer areas would be less able to afford their rent and vice versa. That is the Government’s side of the story. The DWP seems to be quite proud of itself for consulting on the order, but it seems to have taken absolutely no notice whatever of the result of that consultation. What was the result of the consultation? Most respondents wanted a longer consultation period, as my noble friend has said, and “several respondents” and “some local authority respondents” disagreed with the whole policy. Perhaps the Minister will tell us why the DWP bothered to consult at all. Was it just a tick-box exercise, as the British Property Federation say? It says quite bluntly that the DWP is changing housing benefit policy via the back door in sweeping aside the Heffernan judgment without taking account of the consultation process, which it calls, with some justification, “a mockery”.

I find the figure of only 193 localities, or BRMAs, throughout the whole of the British Isles an astonishingly low figure when one considers all the factors that make up a locality or, rather, what the ordinary person thinks of as a locality. The Explanatory Memorandum to the order says that if as a result of the judgment all the localities have to be amended it will take rent officers several years to do this. However, I do not think that the Government have made the case for just restoring the status quo and, much more importantly, nor did the consultees, including, as we have heard, Shelter and Citizens Advice.

With more and more people going on to housing benefit and looking for jobs, it is completely counterintuitive for regulations to have the effect in many areas of making it harder for the poorest to find somewhere to live near centres of employment. We all know that the first thing a jobseeker needs is an address in order to reach the first rung of the employment ladder. It is hard enough to find landlords who will let their property to a housing benefit claimant, such is the fear among them in some areas that the rent will not be paid now that the local housing allowance goes to the claimant.

In a place such as Greater Cambridge, which we have all mentioned tonight, only 4 per cent of advertised private housing was affordable to those on housing benefit. This means that those renting privately on benefit further out from the centre will have increased transport costs, if not increased childcare costs too. That completely undermines the Government’s objectives on housing and social policy, which are supposed to prevent homelessness and promote mixed neighbourhoods. Already, Shelter has found patterns of decreasing affordability within BRMAs in London and Manchester, leading to some areas having a far higher concentration of those on housing benefit than others.

As the country moves further into deep recession, the marginalisation from areas of employment of those on housing benefit are likely to get worse. In the Welfare Reform Bill, the Government aim to help those who are unemployed to acquire skills to make them “job ready” and to undertake “work-related activity” while looking for work. Many of those people are likely to be housing benefit claimants. Will it really help them if they are to travel a long way from where they live to attend work-focused interviews, skill sessions and so on with no guarantee of paid work at the end? That is especially true of lone mothers who may have to pick up children from school or who have childcare costs.

By constructing BRMAs in such a way as to price unemployed or low-paid workers on housing benefit out of the private rented housing sector, the Government risk creating a causational link from being inadequately housed to being precariously employed. There is already evidence to show that if work is not seen to pay, people are very reluctant to move off benefits. The further people have to travel for low-paid jobs, the more work will not seem to be worth it. All we can do at this stage is urge the Government to review the regulations that are being used to set larger broad rental market areas without taking into account all the factors that make up the locality. They should listen to Shelter and Citizens Advice, which advocate amending the regulations and have shown exactly how to provide that there is a reasonable percentage of accommodation within the local housing allowance rate across every local authority area. That may take some time, but with good will from all sides, that is surely better than leaving things as they are with all the problems that have been highlighted today.

My Lords, the noble Lord, Lord Kirkwood, has tonight raised the thorny problem of the local housing allowance, which was highlighted by my noble friend Lady Gardner of Parkes in her Question of 20 January, although from precisely the opposite end of the spectrum. The Minister will remember that my noble friend was worried about what she saw as the exorbitant amounts of housing subsidy being paid in certain circumstances in London. The noble Lord, Lord Kirkwood, is, however, worried about the fairness of the way in which local housing allowance is calculated. He has addressed this subject with what I might describe as a “softly, softly, catchee monkey” approach and clearly has no intention, for which I am glad, of dividing the House this evening.

As the noble Lord, Lord Best, has said, the calculations are made by reference to broad rental market areas. These are very large, and your Lordships sitting judicially in the Heffernan case determined that not only were they very large, they were “too large”. The importance of the size of these BRMAs, as they are known—how I hate acronyms, but I suppose they have their uses— is that, within those areas, private local rented accommodation rates are set by taking the average of available rents in the area as evidenced by advertisements in local estate agents and the local press.

This brings me to my first question. Many private landlords refuse to let their properties to benefit recipients. The National Landlords Association undertook a survey of its members in December last and discovered that just under half of them were not prepared to let their properties to benefit recipients. My question, therefore, is this: does the calculation of the local housing allowance include the results of advertisements for all properties in the area or are those that will not accept DHSS, as it is called, excluded from the rent officers’ survey? This is not a new subject for me. The Minister will remember me talking about the problem of advertisements stating “No DHSS” or the equivalent phraseology, so if the rents advertised in such advertisements are included, that will obviously skew the result in one direction or the other, depending on their percentage in a BRMA. The Benefits Information Guide states that local housing allowance represents,

“broadly average rents in an area”.

How does the Minister define “broadly” in this context? I accept that, unlike housing benefit, LHA is never linked to individual rents, and that, like housing benefit, there are rules about who is permitted what accommodation, and indeed it is right that that should be so.

I am the first to deplore overhousing in the supported rented sector, whether public or private. What people do with their own money is a matter for them, but I cannot see why pensioners who had four children and maybe four or five bedrooms to house them in should remain on the same amount of benefit when their children leave home. That said, I do not believe that the same pensioners should never be entitled to an allowance for more than one bedroom. I hope that the Minister will recall in this connection correspondence I sent to him following my noble friend’s Oral Question on 20 January to back up my then supplementary question. It was from a pensioner couple in the Teignbridge area of Devon who had been put on to local housing allowance because of needing to move house. This is because any change in one’s circumstances results in being automatically transferred from housing benefit. One of the couple is seriously ill and requires a separate bedroom. The rules however, do not allow for that. There should be a way that a GP’s certification would entitle such a couple to an extra bedroom.

My Lords, this has been an interesting debate. Before I move on to the particular points raised, perhaps I may start by setting out the amendments that we have made to this order, thus putting the discussion into some context.

I thank the noble Lord, Lord Kirkwood, for explaining why he has used this procedure to get a debate. The rent officers order is the statutory framework which sets out the functions of the three national rent services in respect of their duties in supporting the housing benefit scheme. Rent officers in England, Wales and Scotland play a vital role in the delivery of housing benefit to tenants living in the private rented sector. Before April 2008, rent officers helped to determine individual claims to housing benefit by providing a rental valuation service for local authorities. Since April, they now have the responsibility for the setting of local housing allowance rates for different-sized properties in each area.

Rent officers are also responsible for setting the boundaries of areas within which housing benefit rates are set. Their role here is to determine a geographical area which reflects the area in which people live and enjoy services, and the rental values within those areas. These areas—or broad rental market areas, as they are now known—are set by rent officers, who must use their professional judgment to arrive at their decisions and follow the legislative framework set down in the order. It is this subjective judgment that is subject to legal challenge.

Most recently, as has been expressed, Mr Heffernan brought his judicial review to this House on the basis that the local area used to determine his housing benefit in the Sheffield region was too large. By a majority decision the House of Lords agreed with Mr Heffernan’s contention. This meant that the Rent Service in England had to redetermine the immediate Sheffield area and the local authority had then to make any reassessments to Mr Heffernan’s benefit accordingly. Subsequently there had to be reconsideration of how the judgment would affect the setting of boundaries on a national basis and any knock-on impact on our customers.

Following the conclusion of the case the ministerial team in the DWP seriously deliberated on the implications of the judgment. Clearly we needed to reflect fully on the content of the judgment; and critically, we wanted to ensure that we had a stable basis on which the order could operate. We have been perfectly clear about our policy intentions in respect of setting local housing benefit areas. Prior to the amendments, we had two definitions for these HB areas: locality for pre-LHA cases and broad rental market area for LHA cases. It was always our intention that these boundaries should remain the same for both, and it was always our intention that these would be larger areas that could provide customers with more choices in their accommodation.

Assessing housing benefit according to larger areas tends to benefit those living in poorer areas. That is why it is essential that we provide rent officers with the flexibility to arrive at broad rental market areas that accurately reflect the housing market within those areas. We have therefore made changes to the order which seek merely to clarify our policy intention. The main amendments seek to provide a largely unified definition of broad rental market areas; to remove doubt that the old localities and the new broad rental market areas should ever have different boundaries; and to provide an increased emphasis on setting boundaries that will accurately reflect the areas in which a person can reasonably be expected to live. Rent officers look at the range of services: health, education, recreation, banking and shopping—the HERBS factor.

My Lords, do they not look at employment in the area?

My Lords, they currently do not; that has never been one of the considerations. I will come on to address that point in a moment.

The central point I need to make is that the amendments we have made to this order are not as a result of a policy change; we are merely ensuring that this legislation reflects our policy intention. I accept the House of Lords’ judgment that we did not get the legislation quite right, but I firmly believe that we have made the right decision in laying these amendments. It is right that we should seek to stabilise the order to enable rent officers to continue with their role effectively.

I shall now try to deal with the range of questions that were posed to me. The noble Lord, Lord Kirkwood, and the noble Baroness, Lady Thomas, each made reference to the shortened consultation period. I know that the consultation period we undertook in advance of laying the amendments was not as long as we would normally commit to but, of course, the department does not have a statutory obligation to consult on amendments to orders, although we recognise the importance of working closely with our key stakeholders. As I said, we wanted to stabilise the order as soon as possible, and the consultation we undertook was to ensure that we had the right wording to reflect our intentions, not because we were making a change of policy.

All noble Lords who have spoken made reference to the Shelter report and the question of a review. We will be conducting a full evaluation of the LHA against the original policy objectives and examining the experience of fairness, choice, personal responsibility, improved administration and reduced barriers to work. This will include the analyses of rent officer data and trends in LHA rates. It will also consider the experiences of a range of stakeholders—claimants, landlords and voluntary groups—in its operation.

The noble Lords, Lord Kirkwood and Lord Skelmersdale, raised the issue of employment. As they will know, we are currently conducting a radical and far-reaching review of housing benefit. This review provides us with an opportunity to consider all aspects of the LHA. We will be consulting more widely on the review later in the spring.

The noble Lord, Lord Kirkwood, asked about conducting an analysis of the Rent Service database to evaluate fully the extent of problems with affordability experienced by claimants. I think the expression was, “Are we sweating the database?”. We are analysing Rent Service data and monitoring closely trends in LHA rates as part of the evaluation of the first two years of the LHA’s full rollout.

The noble Lord asked about identifying neighbourhoods, localities and local authorities with particularly high or low rents of affordability for LHA claimants and putting into practice suitable ways of mitigating this. He referred to working more closely with local authorities, landlords and advice agencies as part of the formal review of BRMAs. It is part of the Rent Service’s usual business to keep these areas under review. We are aware of a number of areas, such as Cambridge—every noble Lord who spoke referred to Cambridge—where there are concerns about access to affordable accommodation. The Rent Service has already engaged with Cambridge City Council and other local authorities in the BRMA to review the area used.

The noble Lord, Lord Best, referred to the Shelter research. We are already aware of the concerns about the effect of the BRMA for Cambridge, which is why we are engaging. I stress that the assertion that broad areas are inevitably bad should be contested. Obviously, the higher rent areas that are included in the area bring up the median for rents in the poorer areas, which means that there is more support for poorer people in those areas. It is not just an issue of excluding people. I of course reject the reference to ghettos with regard to local housing allowance claimants.

Reluctance to let people who are in receipt of LHA have lettings is an important issue. We believe that the research was not comprehensive, and the views of landlords varied according to the area. We do not have data available at this stage but, as I said, we are reviewing the LHA over the first two years of its operation.

Employment has already been touched on. Because the definitions are trying to reflect the housing market, employment has never historically been included in that equation. As part of our full-blooded review of housing benefit, we have an opportunity to consider that more fully.

The noble Lord, Lord Best, was kind in his remarks about the effort that went into introducing the LHA, the pathfinder project, the evaluation and the associated transparency. In response to his request, of course I am happy to meet with him and colleagues, together with my honourable friend Kitty Ussher, who is the Minister with more direct responsibility for this issue. We will certainly contact his office to set that up.

The noble Lord also touched on large areas and small areas, as did other noble Lords. The areas need to be large enough to reflect the generality of the market, including a variety of tenures, property types and sizes, while allowing access to facilities for shopping, banking, health and education. Setting very small areas could increase the rates of allowance in some parts, while reducing them in others. Small areas may not reflect the size of the local housing market. Moving back to smaller areas would have a detrimental impact, we believe, on poorer areas.

The noble Lord referred to rent officer inconsistency. We believe that rent officers are professionals, working for not only the Rent Service but also the Welsh and Scottish devolved Administrations. It is important to have a consistent and even approach, and we need to ensure that that is the case.

The noble Lord, Lord Skelmersdale, asked whether all advertised properties in an area are included in the database. Rent officers gather a wide range of evidence, not only from advertisements but from actual letting detail as well. We believe that they have a solid base for their judgments.

My Lords, I am sorry to cross-question the Minister again, but will he use his good offices to discover whether the neo-DSS advertisement offers are included or not? I should be delighted to be proved wrong, but I have a nasty suspicion that I am right.

My Lords, I shall double-check that point and revert to the noble Lord so that we are clear about it. The noble Lord also made reference to an exchange that we had when his noble friend raised a Question a couple of weeks ago. He instanced a situation where a pensioner couple of whom he was aware were allocated only a single room because they had moved on to the new basis. It is right that some local authorities operated discretion under the old system in terms of the number of bedrooms that they assumed couples would need. Local authorities possess a discretionary allowance which they can allocate to people in particular circumstances. The noble Lord may wish to discuss that and take it back to his noble friend.

My Lords, I was aware of that but, unfortunately, in most local authorities, it does not go on for very long. It is time-limited. The reason for this may be to enable the lessees to find more suitable and cheaper property, but that is not always possible in every area of the country.

My Lords, my understanding is that they are annual allocations to local authorities. It is up to them how they use their discretion in the period over which they are applied.

The noble Lord referred to the administration of LHAs. Processing has improved substantially and new-claims clearance times have halved during the past few years. Performance is still variable, and the department works closely with those local authorities whose performance most needs to improve.

There will shortly be an opportunity to consider the fundamental policy issues raised in this debate. As we announced when we published our White Paper, Raising Expectations and Increasing Support: Reforming Welfare for the Future, we will shortly publish a consultation document on housing benefit reform.

It is clear that the functional administration of this order plays an important part in the delivery of housing benefit and supporting people on low incomes. That is why it is important to introduce these amendments and to provide a stable basis for rent officers to continue their work. Accordingly, I ask the noble Lord not to press his Motion—indeed, I think that he has already helpfully indicated that he does not intend to do so.

My Lords, I am grateful, as I am sure my colleagues in other parts of the House are, for the Minister’s full reply, which we shall study with care. I sense a reticence, which I do not understand, about the Government’s consideration of this new area of policy—which is unfinished business and a work in progress. I would be much happier with more explicit consideration of some of the problems that we have aired this evening than with an internal evaluation by the department. I take that to mean that outside bodies which have an interest can start actively engaging with the department. If there is no other way of doing it, that is the best that we can hope for. If we are given that, plus the meetings which were helpfully suggested by the noble Lord, Lord Best, we can continue to tease this policy out. It is in everyone’s interest that we get it right, as I am sure the Minister recognises. I am grateful to colleagues who have taken part in the debate. I beg leave to withdraw the Motion.

Motion withdrawn.