The Housing Bill: the better part of valour

Originally posted on April 19 on Inside Edge 2, my blog for Inside Housing

It was another day, another session of watering down the Housing and Planning Bill in the Lords. Peers reached sections of the Bill including Pay to Stay and security of tenure in the latest Report stage debate on Monday.

On Pay to Stay for ‘high income’ council tenants, they inflicted three more defeats on the government and they also forced some interesting clarifications of the detail out of ministers. As the Bill now stands, local authorities will have discretion about whether to apply Pay to Stay, the thresholds will be increased to £40,000 outside London and £50,000 in London, and the taper for higher rents will be 10p.

Obviously it remains to be seen how much of this the government will look to reverse in the Commons, perhaps citing financial privilege because the money raised by the policy goes back to the Treasury.

The government version of the policy – set out in an email to peers an hour before the debate – is that it will be compulsory for councils, the thresholds will be £31,000 and £40,000 and the taper will be 20p. That means tenants would pay an extra £200 a year in rent for each £1,000 they earn above the thresholds. (It’s not clear to me why the out-of-London threshold has been increased from the previous £30,000).

As usual the opposition came from an alliance of Labour, Liberal Democrat and Crossbench peers. However, former Conservative minister Lord Horam also signalled his disquiet. ‘This is, I am afraid, an idea that probably looks good in the confines of the Treasury or in the rarefied world of special advisers in No. 10,’ he said (who can he possibly mean?). ‘In the real world outside it does not look so good.’

He went on:

‘A lot of bureaucracy will be involved, a lot of mistakes will probably be made and the returns will be quite small. Should the Government be doing something as detailed as this? Should they not leave it to local government? Frankly, this smacks of the sort of thinking that went into the bedroom tax, which I think that many people regret.’

Communities minister Baroness Williams gave a clear signal that the government will look to overturn what she described as a wrecking amendment. ‘I should be clear upfront that we cannot accept a voluntary approach for local authorities.’

However, she said that introducing the taper would reduce the money coming to the Treasury by half compared to what was set out in the Budget. She added that the government will look at cases where the policy will cost more to administer than it raises, for example places where social rents are similar to market rents.

Moving the successful amendment introducing a 10p taper, Lord Best said that the government’s 20p plan would still mean a £40 a week rent increase for a couple earning £10,000 over the threshold. He quoted the example of the work disincentives for a couple in Brighton each earning less than £20,000 when they faced a rent surcharge on top of tax and national insurance and childcare and travel costs.

During the same debate Lord Kerslake moved the successful amendment increasing the thresholds, which he said would reduce the number of households affected from 350,000 to 50,000.

And Labour’s Baroness Hollis raised a point I made in my blog about the impact assessment last year. This assumed that behavioural impacts (such as people giving up jobs or reducing their hours or exercising the Right to Buy) will wipe out all of the initial savings from the first group of tenants hit by Pay to Stay. The gains to the Treasury will only come later as a result of fiscal drag (or not uprating the thresholds in line with earnings) hitting more households.

However, she took the point much further. Once you include the government’s estimate that the taper will halve the take to the Treasury and hints that it will uprate the thresholds in line with inflation, she said the Treasury would be lucky to clear £100 million a year. As she summed it up: ‘All this spite, administration, fear, worry, hassle and stigma for £100 million a year to reduce the deficit—this is madness.’

In her defence of the policy, Baroness Williams set out the government’s basic case but also hinted at the underlying agenda:

‘The policy is about fairness, and our view is that social housing at lower rents should be provided to those households that need it most. Households that decide to remain in social housing but can pay more should be expected to do so. At the same time, the Government are making home ownership more accessible to tenants both of local authorities and of housing associations through the right to buy and shared ownership.’

She also set out some important detail that will be confirmed before Third Reading or in the regulations. Three point in particular worth noting (though some of this still will not be enough for critics) are:

• Households in receipt of universal credit as well as housing benefit will be exempt.
• The definition of income will be taxable income, which means tax credits, child benefit and DLA will not be included. (However, other benefits like the state pension and carer’s allowance are taxable).
• The definition of ‘household’ will be tightened to exclude non-dependent children unless they are named on the tenancy agreement.

Monday’s three defeats raise the obvious question of where the compromise is going to come on this. Despite the commitment of the DCLG under Greg Clark to localism, the government seems stubbornly determined to resist local discretion on Pay to Stay, so perhaps on the taper or thresholds? But that would leave local authorities with the same costs of checking the incomes of all their tenants while reducing still further the money raised. At what point does the policy become pointless?

That issue of local discretion has become fundamental to the future of the Bill. The government was defeated last week on an amendment giving local authorities more discretion over starter homes and there were attempts last night to let councils make their own decisions on fixed-term tenancies.

While there were no further defeats for the government, that was because amendments were not taken to a vote and battles on this have probably just been delayed to Third Reading if they cannot be resolved behind the scenes.

Lord Kerslake moved an amendment removing mandatory fixed-term tenancies from the Bill and quoted research by Heriot Watt University showing the impact of the existing voluntary regime on tenants. He said:

‘We are moving into a world in which people’s ability to stay in their property is driven by whether the state, in this case the Government, deems them to be deserving of continuing with that property. That is not a home.’

Labour’s Baroness Lister put it like this: ‘This measure will destroy the security that is so important to families with children, disabled people and carers, people with mental health problems and those who have experienced homelessness.’

Former Conservative housing minister Lord Young backed the proposal: ‘I think that one must look at both sides of the coin: the expectations of those who currently enjoy good social housing and those on the waiting list, who are looking for some movement in social housing to solve their problems.’

But there was also Conservative dissent. Lord Porter, the Tory leader of the Local Government Association, again raised the point about local discretion. He had tabled an amendment allowing local authorities to grant secure tenancies to families with children for as long as they are in full-time education and to tenants who are the parent or carer of someone in receipt of DLA or PIP.

He also questioned what the point was of offering a series of fixed terms to families with children when the local authority was always going to renew them:

‘If we are seriously thinking that that family could occupy that property for 30 years on a short-term tenancy, why would we want them looking over their shoulder for 30 years? They are not going to invest in the property, the garden or the community. Clearly, that is not in the interests of the family, the neighbours, the taxpayer or anybody else.’

The debate is clearly far from over on compulsory fixed-term tenancies. But concessions from the minister Baroness Evans on Monday included:

• An amendment at Third Reading extending the maximum fixed-term tenancy from five to ten years ‘in certain circumstances’ and enable councils to give longer tenancies to cover the time children are at school. She added later that ‘certain circumstances’ would include people with disabilities.
• A commitment to address concerns about women fleeing domestic violence in regulations and an amendment
• Allowing landlords the discretion to offer secure tenancies to tenants who swap home.

The Report stage continues in the Lords on Wednesday and next Monday with sections of the Bill on private renting and planning. The Third Reading is scheduled for next Wednesday.

As the Bill stands, the Lords has succeeded in inflicting a series of defeats that soften the impact of key provisions and the government has also been forced into a series of concessions. The government may have a majority in the Commons to reverse some of those votes and play parliamentary ping pong with the Lords but it is also starting to run out of parliamentary time. Watch this space for further developments.

If ministers are brave they will try to stick to as much of the original Bill as possible but at what point does discretion become the better part of valour?