Official Report 452KB pdf
Our next item is an evidence session on the Welfare Reform Bill as it relates to housing in Scotland. As certain provisions in the bill relate to both devolved and reserved matters, the Scottish Parliament is expected to be asked to consider a legislative consent motion, seeking its agreement that the provisions be extended to Scotland. The Parliamentary Bureau has agreed to refer the LCM, when lodged, to the Health and Sport Committee as the lead committee, with the Infrastructure and Capital Investment Committee and the Local Government and Regeneration Committee designated as secondary committees. The LCM has not yet been lodged but taking evidence on the relevant proposals in the bill will mean that, when it is, the committee will be in a position to report quickly to the Health and Sport Committee. Members will also be aware of a late submission from the Cabinet Secretary for Infrastructure and Capital Investment, setting out the Government’s view on the bill. That submission has also been circulated to our witnesses.
First of all, I thank the committee for the invitation to give evidence on this very important issue. As a crucial element of the housing safety net, housing benefit is a major priority for Shelter not only in its campaigning and policy work but in its front-line services.
To be concise, I agree with everything that Rosemary Brotchie has just said. We commend to the committee the Scottish campaign on welfare reform’s “A Manifesto for Change”, which was published before last year’s UK general election. We support and have signed up to its statement of the fundamental principles that should underpin a fair and decent welfare reform system that treats the individual with respect and dignity. We feel that some of the bill’s proposals do not do the same.
Of course we all want a better administered, more efficient and more relevant welfare system. The problem, however, is the pace at which the UK Government is moving forward with this. The homework has not been done and the detail has not been examined. Indeed, in meetings that I have had with UK ministers, I have found it very difficult to get answers to questions about the pace at which all this is moving and the damage that the bill might cause. As a result, we must be extremely guarded in any welcome that we give to these reforms. We welcome anything that makes the system more efficient but we must also ensure that we protect those who will be very vulnerable to the excesses in some of these welfare reforms.
One of the biggest deterrents to people taking up paid employment is the rate of withdrawal: the so-called taper. We were quite supportive of a modification to the welfare benefits system that reduced the rate of withdrawal and made it more worth while for people to take up paid employment. The initial model proposed by the centre for social justice had a withdrawal rate of 55p in the pound, but it appears that the heavy hand of the Treasury has been brought to bear and the rate of withdrawal will now be 65p, which is not much better than the situation at the moment. That is very disappointing.
Most of the questions will probably be on the specific issues because, as has been said, the devil is in the detail. It would be useful at the beginning, however, to get an overall view of the potential impact on particular groups: that is, tenants, landlords and housing providers. The other overall impact that particularly interests me is the effect that the changes might have on the achievement of the 2012 housing objective in Scotland.
We must seriously consider the consequences for the 2012 target. There is a great worry that one aspect of welfare reform will be the direct payment of housing benefit to the claimant and not the landlord. I am sure that we would all associate ourselves with the idea that it is important to give people as much responsibility for their own affairs as possible, but some people are extremely vulnerable and are not necessarily capable of managing their financial affairs in the way that we would want them to. The consequences of such a change could be rent arrears, leading to increased eviction rates and more services being required from local authorities at a time when demographic changes and the economic cuts that are being imposed mean that we do not have the resources to deal with that situation. The big worry, I think, is that we could see situations in which local authorities lose a major income stream, which could have severe consequences for the services that we are trying to provide.
I echo that. We will not just lose income, but gain the overheads associated with managing arrears cases and collecting money from people who are not in a position to pay it or who have spent it on other commitments. We will not only lose revenue, but have to spend on services money that, at present, we do not have to spend. That overhead might well impact on the levels of rent that need to be set.
Currently, 96 per cent of housing association and co-op tenants choose—the word “choose” is important—to have the rent paid direct to their landlord. That is no different from any of us around the room choosing a direct debit system to pay our mortgages or rent. There is one difference, however. If you had a direct debit and were on a low income that would mean that there would be a chance that the money might not be in the bank. If the money was not in the bank, not only would the debt not be paid but you would incur a charge. If the landlord chose to try to claim the money twice, which they are entitled to do, you would incur another charge. By the end of the month, you would still not have paid the rent, you would have incurred an astronomical bank charge and you would have next month’s rent to find. That can only lead to spiralling rent arrears, spiralling operating costs for landlords and increased homelessness at a time when, as we have just discussed, the Scottish Government faces challenges in providing new supply. It is frightening.
When we consider what impact the welfare reform changes and the cuts, in particular, will have on homelessness and the 2012 commitment, we look both at the capacity of local authorities to respond to homelessness and their options for doing so, and at the propensity of people to find themselves in housing difficulty. Housing benefit is a significant part of the housing safety net. Let us not forget that housing benefit is not only for people who are unable to work in the long term or people on low incomes; it is there to top up people’s incomes or provide income for people in such circumstances. It is also for people who find themselves in difficulties, such as those who suddenly lose their job and need a temporary safety net. The various cuts and eligibility changes that will be brought in by the Welfare Reform Bill and absorbed into the universal credit, and the issues to do with how the payments will be made that my colleagues talked about, are all coming together to make things much more difficult for people who need to rely on housing benefit and more difficult for local authorities, which are there to provide for and help people in such situations.
That is a helpful reply. I am trying to aggregate the issues, which is difficult; we will go on to discuss the specific issues. Another way of putting the question might be to ask how many more people will become homeless because of the changes. I know that you cannot say precisely what the figure will be. The comment by Shelter Scotland at the end of the previous evidence session was interesting. How many people will not be able to be placed in settled accommodation because of the changes? Obviously, single-room rent was the specific example that was given. Is it possible to give ball-park figures for the increase in those who will be homeless and for the number of people who will simply become more difficult to place, as there will be nowhere to put them under the new housing benefit regime?
It is difficult to provide estimates of those figures with any degree of certainty. The Scottish Government has conducted quite a considerable impact analysis in which the existing data were looked at, and it came up with a range of figures for some specifics, but it is almost impossible to aggregate everything and consider the cumulative impacts. Off the top of my head, I can give a figure that relates to the impact of the first two changes. It has been predicted that there will be 3,000 additional homeless applications as a result of the cap on the rates and the removal of the £15 excess for a local housing allowance.
One of our biggest concerns is about the changes relating to underoccupancy. The Government says that if somebody has a spare bedroom—
We will ask about that shortly. Although we are discussing generalities at the moment, we will discuss details later.
Given the wide-ranging nature of the Welfare Reform Bill and that the devil is in the detail—that has already been stated—what are your views on the UK Government’s level of consultation and engagement on the bill’s provisions with the Scottish Government and Scottish stakeholders?
That has been a huge concern of ours; indeed, it is probably an overriding concern. Earlier this year, we wrote to the Westminster Parliament’s Scottish Affairs Committee to express our concern about the difficulty that people up here face in engaging in the debate. As an example, we said that we were keen to give oral evidence at the committee stage at Westminster, but we were not given a slot. We were told that that was because not enough time had been allowed to give us a slot. No other Scottish organisation—or Welsh or Northern Irish organisation, for that matter—was invited to give evidence to that committee. All the organisations were England based. We got around the matter by asking our sister federation to draw attention to our evidence. The chief executive of the National Housing Federation, David Orr, did that, and we thanked him for it, but we should not have to rely on such methods to get engagement on a bill that is important throughout the country.
I agree with everything that Maureen Watson said about the consultation in Scotland. I am sure that the committee is aware that, as well as operating in Scotland, Shelter is a UK organisation, so I have had the opportunity to talk to colleagues in London about my specific concerns about the bill’s possible Scottish impacts and they have likewise been fed in to the process to an extent. Again, from talking to colleagues, I know that Shelter as a whole is experiencing continued frustration with the consultation and the lack of detail in the bill. We have asked for clarification, particularly on our concerns about practical matters such as what would count as a bedroom in the definition of underoccupation. Officials have told us that they are still working through the policy details and that the regulations on which most of the bill’s detail will be based are still being worked out. We have now seen a draft of them, albeit very late in the bill’s process.
Harry McGuigan has already said that he has had engagement on the bill, but does he want to add anything?
I did not say that I had had engagement. We have attempted to have engagement, convener, but it has not been easy to realise the engagement in the way that we would want. Our first engagement was early on with one of the ministers, Chris Grayling. I was with Alex Neil and Keith Brown for that meeting. We talked mainly about housing matters, but I raised my concern about welfare reform and asked for details about what the impact of that would be in Scotland and so on. I was greeted with the response that if I continued to try to press questions on that matter, the meeting would be called off. That was not very instructive or helpful.
Does Adam Ingram have a question about universal credit?
Yes. We have covered a number of issues with regard to the introduction of universal credit and it being paid directly to tenants, particularly the likely increase in rent arrears and possibly in evictions and homelessness, and the operating costs for landlords. Perhaps the witnesses could tease out the possible impact on investment in social housing, which was obviously a major concern for the witnesses in the previous evidence session. How do we mitigate the impact of the bill if it is introduced? Presumably, you are trying hard to prevent it from being introduced in the first place. What is the likelihood of that and, if the bill is introduced, how can we mitigate its impact?
We are pursuing a twin-track approach to the bill. On one track we are trying to prevent things that would have the worst impacts from appearing in the bill in the first place, but we are having little success in that.
If Neil Findlay could ask his question, that might move things along a bit.
We have moved on from the payment direct to tenants, but I want to go back to it. You might want to take a point from Harry McGuigan first.
No. On you go.
I worked as a front-line housing officer for 10 years and saw some of this in action—usually when a council made a mistake and sent the cheque to the tenant instead of to the landlord. I cannot emphasise enough that, if the tenant does not want it to happen, the proposal is grossly irresponsible. It is dangerous and it is inevitable that people will lose their homes, and a lot more than that. It is really dangerous and I cannot get to grips with the logic of it. What is the Government’s logic? Is it the great belief in personal responsibility or some contrived nonsense like that?
Iain Duncan Smith has said on a number of occasions that he would like a monthly payment of welfare benefit to individuals, so that they are in the same situation as they would be in if they got a wage. When you get a wage, the employer does not hive off some money to send to your landlord and some to send to a fuel company, or whatever. Iain Duncan Smith feels that a monthly payment would remove a barrier to work, because he believes that people become institutionalised by having all their decisions made for them. When people are given the opportunity to take up employment, the need to budget for themselves is a deterrent. That is what we are told. That is the logic behind the proposal.
To come back on that—
I am not trying to defend that position, by the way.
No. I make the comment that, for anyone who has been unemployed and had to claim housing benefit—as I have in the past—the one thing that you want at that time in your life is certainty that you will have a roof over your head. That certainty will be taken away, which is grossly irresponsible.
It is difficult to anticipate what we can do to mitigate problems until we see the detail of the proposals. Local authorities throughout Scotland are now, alongside partner organisations, looking at ways and means of identifying measures that need to be taken as early as possible. It is important that we get the message out to people about the vulnerable position that they could place themselves in if the Government goes down the route of making direct payments to the claimant as opposed to the landlord. A toolkit needs to be designed to maximise the support and advice that we can give. There also needs to be an early trigger in situations in which people are accumulating arrears, so that direct payment to the landlord would resume. We will certainly make representations on that. In other words, if there are signs that rent arrears are kicking in and the situation goes on for four or five weeks, the system would revert to direct payment to the landlord.
Can I make two further points, convener?
Can you ask your questions as well, please?
They are part of my question, although they are on the detail and are slightly different.
We are running short of time.
First, is it assumed that people will have bank accounts? Many people do not, and free banking is becoming less available. Secondly, reverting to direct payment to the landlord is fine, but previously—changes to benefits move on quickly—someone could apply for a direct payment through a benefit cheque of a small amount to chip away at rent arrears. Will that option still be available? If not, all that we will do is go full circle.
I will chip in with an answer on the first point. When the local housing allowance was introduced three or four years ago, it changed the arrangement for private sector tenants so that the payment was made to the individual. It was a major undertaking for local authorities to enable people to open bank accounts. Quite a lot of banks did not want that type of clientele, as they did not see any investment potential in somebody getting a payment in one day and lifting it all out the next day.
Peter Meehan has talked about the justification of personal responsibility, but there is a significant practical difficulty with disentangling the housing benefit element of universal credit from the overall payment. That difficulty will underlie some of the problems that we have in relation to direct payments.
Neil, do you want to come back in?
No. I just want to burst into tears.
Okay. Jamie, do you want to ask your question?
Yes. I have similar detailed questions. I did have a question on the cap on total benefits, but I think that Rosemary Brotchie has usefully answered it.
There are many cuts to local housing allowance. We have the reduction from setting rates at the midway point, or the median, to setting them at the 30th percentile of rents, and we have the move away from uprating each year using the retail prices index to using the consumer prices index. Although there is a bit of parity between the two rates at the moment, over the longer term that change will reduce the value of the local housing allowance.
That is a pretty stark warning. Does anyone else want to comment?
As you know, the local housing allowance relates to the private rented sector. Our biggest fear is that the indirect impact of all the changes that are being formulated and those which are happening already is that people will be forced out of that sector and on to our waiting lists. We have already discussed this morning how challenging that might be.
Shelter and the CIH have done research on the situation particularly in England and Wales, where the rent information is available. It shows that, over time, uprating benefits according to the CPI rather than retaining the link with actual housing costs will exacerbate significantly the shortfalls between the LHA levels and rent levels.
Notwithstanding the reasonable point that you make about not having much detail at this stage, given that there is a correlation between the local housing allowance and rental costs, which areas of Scotland will be affected most starkly?
Areas where rents are traditionally high. At the moment, the local housing allowance is set by broad rental market areas. There are certain areas where people on housing benefit or LHA cannot afford accommodation.
Are we talking about urban centres such as Glasgow and Edinburgh?
Yes—urban centres or centres where employment opportunities are high. However, we must not forget that in remote or rural areas, where less accommodation is available and where shared accommodation and the underoccupation cuts are factors, we need to find alternatives for people who are in social rented housing to move into. Scottish Government analysis has shown that, in some remote or rural areas where accommodation is scarce, people will find themselves getting into rent arrears with no options as they have no opportunity to find somewhere else to live.
All the bill’s reforms seem to be focused on people of working age, but I have concerns about their impact on children and young people.
Local authorities do not have any detail on the impact that the proposals could have.
The Child Poverty Action Group is concerned that, if claimants have a shortfall in the rent that is not covered by the housing element of universal credit, they may well have to meet it using money that they would otherwise spend on their children, and that the bill will therefore have an effect on child poverty. It may well also affect families’ ability to heat their house, so it will add to fuel poverty. The knock-on effect of someone suddenly having to meet such a shortfall goes wider than just paying the rent. All the expenditure incurred by that household could take a hit.
For me the bill works in diametric opposition to Scottish Government policy on income maximisation for families and the like. Maureen Watson, do you agree?
I was nodding vigorously because that is, indeed, our major concern. The reforms related to housing cost cut across the Scottish Government’s housing and social policies, and no time has been taken to consider the specific impacts of that.
Do you wish to ask a question, Jackson?
On reflection and bearing in mind the responses that we have received to earlier questions and throughout this session, I think that I have the answers to the two questions that I was going to ask. I do not think that the committee would benefit from the repetition.
Thank you very much.
We are very concerned about the prospect of a dual benefits system. It is going to cause absolute chaos with regard to the inquiries that will have to be carried out and the advice that will be required. That advice will no longer be available from local authority services, although we will still have to ensure that we mitigate any consequences of the moves.
Absolutely. As Harry McGuigan has pointed out, the new universal credit procedure will require claimants to claim online, although Lord Freud has suggested that there will be limited call centre back-up and, perhaps, the possibility of face-to-face meetings. Our plea is to recognise that Scottish local authorities, which already administer housing benefit, are ideally placed to be the point of claim for housing benefit and, indeed, universal credit.
I look forward to reading the Official Report and marrying it to all your written evidence. Your responses have been very helpful and I thank you all very much for attending.