Rt Hon Stephen Timms MP
Minister of State for Employment and Welfare Reform
Chartered Institute of Housing: Future of Housing Benefit
Church House
Monday 21 July 2008
I am delighted to be here – thanks to the Chartered Institute of Housing for organising this seminar and for the interest of everybody here.
Later this afternoon, as you have very likely gathered, we are launching a green paper on welfare reform. It’s called “No one written off: reforming welfare to reward responsibility”. It sets out the next steps in reforming the benefit system to promote responsibility and encourage people towards work and independence, and sets out as well the substantial progress over the past eleven years.
In 1997 there were a little over five and a half million people of working age on the out-of-work benefits: Jobseekers Allowance, incapacity benefits, lone parents on Income Support. Today that number is over a million fewer. But we think we can go further still, building on the success of the New Deals, of tax credits to make work pay, and of Pathways to Work which has started to reduce the number of people trapped on incapacity benefits after decades of inexorable increases.
But one part of the system has remained until very recently unreformed. And yet many people see it as key to explaining why such a large number of people still are trapped on benefit instead of being in work. It’s Housing Benefit, and it’s time now to work out what we are going to do with it.
So in the Budget, Alistair Darling announced a comprehensive review of Housing Benefit for working age customers. My Department will be working closely with the Treasury and with the Department for Communities and Local Government.
Housing Benefit was introduced just over 25 years ago. I had a small role in a consultancy team working for the DHSS, advising how to reimburse local authorities for the costs of administering the benefit in place of the department. This, the Silver Jubilee of Housing Benefit, is an ideal opportunity to ask fundamental questions about its purpose, about how it is delivered and whether it presents good value for money for the taxpayer. And how we can change it to support the successful reforms made elsewhere in the system. Because too often in my constituency surgery, it’s the fear of rent arrears which is the biggest barrier to people returning to work – and in some cases, perhaps following delay in sorting it out, it’s been problems with Housing Benefit which have forced people to give up a job and return to the security of benefit dependency.
Local Housing Allowance
Of course, one big change to Housing Benefit has recently been introduced. The Local Housing Allowance, rolled out nationally in April, is a very significant change for tenants in the private rented sector. It gives a clear signal of the direction we see reform moving in the future.
For the first time, the Local Housing Allowance places responsibility for paying rent and handling benefit payments firmly in the hands of the customer. For too long, Housing Benefit has made it too easy to out of responsibilities that most people have to shoulder, and which are part of normal economic participation.
Most Housing Benefit has always been paid automatically to landlords, because that was easier for all concerned. Too often, Housing Benefit entirely passed the tenant by. The tenant had no responsibility at all for paying the rent.
The new system has changed that, requiring privately renting tenants who receive Local Housing Allowance to take responsibility for their own affairs.
Eighty four per cent of customers in the LHA Pathfinder areas were able to manage their benefit payments themselves, and pay their rent reliably. Many opened bank accounts for the first time in order to do so, ending previous financial exclusion and opening up the opportunity to take advantage of financial services that most of us take for granted.
The LHA also means, for the first time, that new customers know in advance how much benefit they will receive and can make the sort of informed choices over accommodation that other families have to make. It tells people very clearly what their entitlement is likely to be, and lets them take responsibility for choosing where to live.
The LHA applies only to private rented tenants. The benefits of choice and responsibility are not available to most of the eighty per cent of Housing Benefit customers in the social sector. We need to consider how the lessons of the LHA can be transferred to them too.
It won't be easy. Tenants in the social sector suffer greater disadvantage on average than those in the private sector, and tend to need more help. Around half of working age tenants in the social sector are unemployed or inactive.
But that makes the need for reform all the more pressing. These are people furthest from the labour market. This is where worklessness is most acute. These are people needing the greatest help in moving into work and taking control of their own financial circumstances. And we are determined not to let them down.
Tackling worklessness
Today’s green paper provides some context. We inherited a welfare system that too often trapped people in dependency. It set up real barriers to returning to work, through benefits that increased with time and through the lack of support for looking for a job. We have transformed a passive system into an active one.
But we need to do more to give independence and control, so people can take advantage of the opportunities on offer when – as in this month’s employment figures – we have more people in jobs in Britain than we have ever had before.
Our ambitions: to raise employment to 80%, from 75% today; to move a million people off incapacity benefits; to help 300,000 lone parents and one million older people into work. No-one should be written off. So in the next stage of reform we will give everyone the help that they need to return to work.
We propose increasing the expectation of people on the Employment and Support Allowance who could work – and of people on Jobseekers Allowance – to take increasingly active steps towards finding a job.
And we are supporting the “Enhanced Housing Options Pilots” led by my colleagues in the Department for Communities and Local Government, offering advice on training, employment and childcare when discussing housing options with their local authority. A number of pilots will receive a DWP-funded employment package, so that Job Point kiosks and Jobseeker Direct telephones can be installed.
Delays in paying claims present huge problems – even more so for those moving into short term or irregular work. I am very encouraged with the progress we are making with the “in and out of work” pilots. By working much more collaboratively with local authorities and HM Revenue and Customs, we can respond much better to people moving in and out of work, resolving their housing benefit and tax credits more quickly and efficiently. This helps people take the first step into the labour market, boosting confidence about taking short-term work.
We have agreed with HM Revenue and Customs and the Local Government Association to roll these processes out nationally by the end of 2009. We will announce local authorities in the first phase after the summer.
What is wrong with Housing Benefit?
So what exactly are the problems we are trying to solve? The most obvious is sheer complexity – a result of the tough demands we make on the system.
We demand a lot from customers in telling us about their circumstances, how much money they have coming in and who lives in their household. But we also ask a lot of the staff in local authorities who administer the scheme. There was a good reason for all these questions, but we can only remove some of the burden by reducing the complexity.
Much complexity is so we can target help at those most in need, but I am convinced we can devise a system that cuts out unnecessary complication whilst maintaining or perhaps boosting fairness.
Performance has dramatically improved. In the five years to 2007/08, average time to process a new claim has more than halved, from 55 days to around 26. I applaud the Herculean efforts of staff in local authorities up and down the country in securing this very substantial – and very important – improvement. The six authorities in the “in and out of work” pilots initially took on average 23 days, and this was reduced through the pilots to 18.
And to those who suggest that the solution is to put the clock back 25 years and re-centralise housing support, let’s not forget that local authorities are also ideally placed to provide the support services people need, best delivered locally.
And yet, there is still too much variation in the standard of administration across the country. While the quickest local authorities process a new claim in little over a week, others are taking six weeks.
I want a much clearer focus on the key elements of good administration: efficiency, good customer service, low fraud and error, value for money for the taxpayer.
I have an open mind at this stage about the direction that reforms will take. We are prepared to look at all the options. I have no doubt you will have options to propose and I will welcome your ideas.
I also want to be clear about the impetus behind this review – clear about the purpose of Housing Benefit; about what it is that we want from the scheme.
Too few customers today receive their benefit themselves, or can exercise choice over where they live or how much of their benefit they pay in rent. Housing Benefit is passive. It doesn’t fit with our wider Welfare Reform plans we are announcing today, and it needs to.
I am convinced we can give people far more control than they have at the moment; far more responsibility for managing their own financial affairs and far more choice in finding decent, affordable, housing.
I think we can do more about equalising the way tenants in different types of tenure are treated. Customers renting privately had more choice, even before the Local Housing Allowance. But in the social rented sector, affordability plays a comparatively small role in the choice of accommodation. Large workless families in the most expensive parts of Central London can receive rates of Housing Benefit that only a tiny proportion of working families could afford. We want to promote choice, but not choice at any price.
In an active benefit system, customers need to be given greater opportunities to balance their choices with responsibilities. We want to promote mixed communities too, but we need to ask whether communities made up of the rich and of benefit recipients are really what we mean.
What is Housing Benefit for?
Housing benefit is to ensure that people on low incomes have access to decent housing. That core purpose will stay.
But beyond that, how does Housing Benefit help people into work? How does it helps them exercise choice and responsibility? Is it fair? Is its administration efficient and good value for money? The Review of Housing Benefit will look at all those questions.
Financial inclusion
A key challenge is financial inclusion. The UK has one of the largest and most sophisticated financial services sectors in the world. And yet in the area I represent in East London, within sight of some of the sector’s headquarters buildings, many people have no access to all to the services it provides – people unable to access even the most basic financial services. Many are forced to borrow from doorstep lenders charging crippling rates of interest, and pay more than they need for basic necessities like gas and electricity.
We want people to be able to take greater control, in managing money and saving for the future. Housing Benefit should be helping.
Wider benefit reform
The idea that Housing Benefit is merely a means of transferring cash from the state to the customer, with no strings attached, cannot be sustained. Welfare is no longer delivered to the individual passively by the State, without conditions.
Work is the best route out of poverty. Welfare is to help people live fulfilling and productive lives. Independence is at the heart of our ambitions for welfare reform. The welfare state was conceived to foster independence. It gives people the support they need, not so that they become dependent but precisely so that they do not. We are changing the rest of the system to work much better, but we need to make sure that Housing Benefit is consistent with these principles too.
Conclusion
So we have begun to address the most pressing problems with Housing Benefit. Administration is much better. The Local Housing Allowance promotes choice and responsibility. And yet the system overall still exhibits classic traits of old, unreformed, paternalistic welfare that has no place in the twenty first century.
There is more to do. I have outlined evident problems and some of the factors driving reform, but I am not yet offering answers. The four tests we need to apply to Housing Benefit are simple:
Those are the questions we will be applying during this review, and considering what changes we need to make to get us better answers to them than the ones we have today.
Thank you.
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